G.R. No. 171101. November 22, 2011.

* 1 “Jose Julio Zuniga” in some parts of the records.

HACIENDA LUISITA, INCORPORATED, petitioner, 526
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL
COMMERCIAL BANKING CORPORATION, petitioners-in- 526 SUPREME
intervention, vs. PRESIDENTIAL AGRARIAN REFORM COURT REPORTS
COUNCIL; SECRETARY NASSER PANGANDAMAN OF ANNOTATED
THE DEPARTMENT OF AGRARIAN REFORM; Hacienda Luisita,
ALYANSA NG MGA MANGGAGAWANG BUKID NG Incorporated vs. Presidential
HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, Agrarian Reform Council
and JULIO SUNIGA1 and his SUPERVISORY GROUP OF prior to its being declared as unconstitutional by the courts, is
THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, valid and must be complied with.
respondents. Same; Same; The term “executive act” is broad enough to
encompass decisions of administrative bodies and agencies under
Constitutional Law; Words and Phrases; “Operative Fact” the executive department which are subsequently revoked by the
Doctrine; The operative fact doctrine does not only apply to laws agency in question or nullified by the Court.—For one, neither
subsequently declared unconstitutional or unlawful as it also applies the De Agbayani case nor the Municipality of Malabang case
to executive acts subsequently declared as invalid.—Contrary to the elaborates what “executive act” mean. Moreover, while orders, rules
stance of respondents, the operative fact doctrine does not only apply and regulations issued by the President or the executive branch have
to laws subsequently declared unconstitutional or unlawful, as it also fixed definitions and meaning in the Administrative Code and
applies to executive acts subsequently declared as invalid. As We jurisprudence, the phrase “executive act” does not have such specific
have discussed in Our July 5, 2011 Decision: That the operative fact definition under existing laws. It should be noted that in the cases
doctrine squarely applies to executive acts––in this case, the approval cited by the minority, nowhere can it be found that the term
by PARC of the HLI proposal for stock distribution––is well-settled “executive act” is confined to the foregoing. Contrarily, the term
in our jurisprudence. In Chavez v. National Housing Authority, We “executive act” is broad enough to encompass decisions of
held: Petitioner postulates that the “operative fact” doctrine is administrative bodies and agencies under the executive department
inapplicable to the present case because it is an equitable doctrine which are subsequently revoked by the agency in question or
which could not be used to countenance an inequitable result that is nullified by the Court.
contrary to its proper office. On the other hand, the petitioner Same; Operative Fact Doctrine; The operative fact doctrine is
Solicitor General argues that the existence of the various agreements not confined to statutes and rules and regulations issued by the
implementing the SMDRP is an operative fact that can no longer be executive department that are accorded the same status as that of a
disturbed or simply ignored, citing Rieta v. People of the Philippines. statute or those which are quasi-legislative in nature.—The
The argument of the Solicitor General is meritorious. The “operative operative fact doctrine is not confined to statutes and rules and
fact” doctrine is embodied in De Agbayani v. Court of Appeals, regulations issued by the executive department that are accorded the
wherein it is stated that a legislative or executive act,
_______________
same status as that of a statute or those which are quasi-legislative in
* EN BANC. nature.

1|Page
 Same; Same; The operative fact doctrine is a rule of equity; It officers and stockholders is not enough justification to pierce the veil
is applied only in the absence of statutory law and never in of corporate fiction as in the instant case.
contravention of said law.—The operative fact doctrine is a rule of Agrarian Reform Law; Expropriation; Just Compensation;
equity. As a complement of legal jurisdiction, equity “seeks to reach Department of Agrarian Reform’s (DAR’s) land valuation is only
and complete justice where courts of law, through the inflexibility of preliminary and is not, by any means, final and conclusive upon the
their rules and want of power to adapt their judgments to the special landowner; The court has the right to review with finality the
circumstances of cases, are incompetent to do so. Equity regards the determination in the exercise of what is admittedly a judicial
spirit and not the letter, the intent and not the form, the substance function.—The foregoing notwithstanding, it bears stressing that the
rather than the circumstance, as it is variously expressed by different DAR’s land valuation is only preliminary and is not, by any means,
courts.” Remarkably, it is applied only in the absence of statutory final and conclusive upon the landowner. The landowner can file an
law and never in contravention of said law. original action with the RTC acting as a special agrarian court to
Corporation Law; Piercing the Veil of Corporate Fiction; determine just compensation. The court has the right to review with
Absent any allegation or proof of fraud or other public policy finality the determination in the exercise of what is admittedly a
considerations, judicial function.
527 Same; Same; Same; Comprehensive Agrarian Reform Program
(CARP); The reckoning point is the issuance of the emancipation
VOL. 660, 527 patent (EP) or certificate of land ownership award (CLOA) and not
NOVEMBER 22, the placing of the agricultural lands under the Comprehensive
2011 Agrarian Reform Program (CARP) coverage.—Under RA 6657 and
Hacienda Luisita, DAO 1, the awarded lands may only be transferred or conveyed after
ten (10) years from the issuance and registration of the
Incorporated vs. Presidential
emancipation patent (EP) or certificate of land ownership award
Agrarian Reform Council (CLOA). Considering that the EPs or CLOAs have not yet been
the existence of interlocking directors, officers and issued to the qualified FWBs in the instant case, the 10-year
stockholders is not enough justification to pierce the veil of prohibitive period has not even started. Significantly, the reckoning
corporate fiction.—In the third place, by arguing that the companies point is the issuance of
involved in the transfers of the 300-hectare portion of Hacienda 528
Luisita have interlocking directors and, thus, knowledge of one may
already be imputed upon all the other companies, AMBALA and 528 SUPREME
Rene Galang, in effect, want this Court to pierce the veil of corporate COURT REPORTS
fiction. However, piercing the veil of corporate fiction is warranted ANNOTATED
“only in cases when the separate legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, such that
Hacienda Luisita,
in the case of two corporations, the law will regard the corporations Incorporated vs. Presidential
as merged into one.” Absent any allegation or proof of fraud or other Agrarian Reform Council
public policy considerations, the existence of interlocking directors, the EP or CLOA, and not the placing of the agricultural
lands under CARP coverage.

2|Page
 CORONA,  C.J., Concurring and Dissenting Opinion: VOL. 660, 529
Constitutional Law; Judicial Review; Where a provision of a NOVEMBER 22,
statute goes against the fundamental law, specially if it impairs basic
rights and constitutional values, the Court should not hesitate to
2011
strike it down as unconstitutional.—Where a provision of a statute Hacienda Luisita,
goes against the fundamental law, specially if it impairs basic rights Incorporated vs. Presidential
and constitutional values, the Court should not hesitate to strike it Agrarian Reform Council
down as unconstitutional. In such a case, refusal to address the issue also has the duty to render decisions that ensure constitutional
of constitutionality squarely is neither prudence nor restraint but rights are preserved and safeguarded, not diminished or modified.
evasion of judicial duty and abdication of the Court’s authority. Same; Same; The requirement of lis mota and the mootness
Same; Same; The requirement of lis mota does not apply where doctrine are not constitutional requirements but simply prudential
the question of constitutionality was raised by the parties and doctrines of justiciability fashioned by the Court in the exercise of
addressing such question is unavoidable.—The Court should not judicial restraint.—The requirement of lis mota and the mootness
decline to test the constitutional validity of Section 31 of RA 6657 on doctrine are not constitutional requirements but simply prudential
the basis of either the requirement of lis mota or the doctrine of doctrines of justiciability fashioned by the Court in the exercise of
mootness. The requirement of lis mota does not apply where the judicial restraint. For if the said grounds have been imposed by the
question of constitutionality was raised by the parties and addressing Constitution itself, no exception could have been carved by courts
such question is unavoidable. It cannot be disputed that the parties- (for either ground) as courts only apply and interpret the Constitution
in-interest to this case presented the question of constitutionality. and do not modify it.
Also, any discussion of the stock distribution plan of petitioner Same; Same; The Court may not be hampered in the perfor-
Hacienda Luisita, Inc. (HLI) necessarily and inescapably involves a mance of its essential function to uphold the Constitution by
discussion of its legal basis, Section 31 of RA 6657. While the said prudential doctrines of justiciability.—Judicial review is particularly
provision enjoys the presumption of constitutionality, that important in enjoining and redressing constitutional violations
presumption has precisely been challenged. Its inconsistency with inflicted by all levels of government and government officers. Thus,
the fundamental law was raised specifically as an issue. this Court may not be hampered in the performance of its essential
Same; Same; If the Court has the authority to promulgate rules function to uphold the Constitution by prudential doctrines of
that protect and enforce constitutional rights, it also has the duty to justiciability.
render decisions that ensure constitutional rights are preserved and Agrarian Reform Law; Under the Constitution, actual land
safeguarded, not diminished or modified.—The Constitution distribution to qualified agrarian reform beneficiaries is mandatory.
recognizes the primacy of the right of farmers and farmworkers to —I maintain my stance that Section 31 of RA 6657 is invalid.
directly or collectively own the lands they till. Any artificial or Agrarian reform’s underlying principle is the recognition of the
superficial substitute such as the stock distribution plan diminishes rights of farmers and farmworkers who are landless to own, directly
the right and debases the constitutional intent. If this Court has the or collectively, the lands they till. Under the Constitution, actual
authority to promulgate rules that protect and enforce constitutional land distribution to qualified agrarian reform beneficiaries is
rights, it mandatory. Anything that promises something other than land must
529 be struck down for being unconstitutional.

3|Page
 Same; Under Section 31 of RA 6657, the corporate landowner operate on the concept of collective control of the land by the
retains ownership of the agricultural land while the farmworker- qualified farmer and farmworkers.
beneficiaries become stockholders but remain landless.—Section 31 Same; Just Compensation; The just compensation shall be
of RA 6657 as implemented under the stock distribution option based on the market value as of November 21, 1989 of the entire
agreement merely entitles farmworker-beneficiaries of petitioner HLI portion that may be determined by the Department of Agrarian
to certificates of stocks which represent equity or interest in the Reform (DAR) as subject to coverage of land reform.—Section 4,
corporate landowner, petitioner HLI, not in the land itself. Under Article XIII of the Constitution requires that the landowner be given
Section 31 of RA 6657, the corporate landowner retains ownership just compensation. For this purpose, the DAR shall determine the
of the agricultural land while the farmworker-beneficiaries become just compensation payable by each farmworker-beneficiary to
stockholders but remain landless. While farmworker-beneficiaries petitioner HLI as it has jurisdiction in matters involving the
hold a administrative implementation and enforcement of agrarian reform
530 laws. The just compensation shall be based on the market value as of
November 21, 1989 of the entire portion that may be determined by
530 SUPREME the DAR as subject to the coverage of land reform. The portion of
COURT REPORTS the proceeds of the portion sold to LIPCO and RCBC as well as the
ANNOTATED proceeds of the portion expropriated for the SCTEX may be the
Hacienda Luisita, subject of legal compensation or set off for purposes of the payment
of just compensation.
Incorporated vs. Presidential
BRION,  J., Separate Concurring and Dissenting Opinion:
Agrarian Reform Council Constitutional Law; Words and Phrases; Operative Fact
piece of paper that represents interest in the corporation that has Doctrine; The doctrine is applicable only in considering the effects
owned and still owns the land, that paper actually deprives them of of a
their rightful claim which is ownership of the land they till. Thus, 531
Section 31 unduly prevents the farmworker-beneficiaries from
enjoying the promise of Section 4, Article XIII of the Constitution VOL. 660, 531
for them to own directly or collectively the lands they till. NOVEMBER 22,
Same; Collective ownership of land under the agrarian reform 2011
provisions of the Constitution must operate on the concept of
collective control of the land by the qualified farmer and
Hacienda Luisita,
farmworkers.—Corporate ownership by the corporate landowner Incorporated vs. Presidential
under Section 31 does not satisfy the collective ownership Agrarian Reform Council
envisioned under Section 4, Article XIII of the Constitution. Where declaration of unconstitutionality of a law (a generic term that
the farmworker-beneficiaries are neither the collective naked owners includes statutes, rules and regulations issued by the executive
nor the collective beneficial owners of the land they till, there can be department and are accorded the same status as a statute).—
no valid compliance with the Constitution’s objective of collective The ponencia misapplies the operative fact doctrine. I maintain
ownership by farmers and farmworkers. Collective ownership of the view that the doctrine is applicable only in considering the effects
land under the agrarian reform provisions of the Constitution must of a declaration of unconstitutionality of a law (a generic term that

4|Page
includes statutes, rules and regulations issued by the executive ANNOTATED
department and are accorded the same status as a statute). The Hacienda Luisita,
doctrine’s limited application is apparent from a review of its origins.
Agrarian Reform Law; Just Compensation; In several cases, Incorporated vs. Presidential
the Court awarded interests when there is delay in the payment of Agrarian Reform Council
just compensation.—In several cases, the Court awarded interests to the owner—that which approximates the market value.—The
when there is delay in the payment of just compensation. The taking of private lands under the agrarian reform program partakes of
underlying rationale for the award is to compensate the landowner the nature of an expropriation proceeding. For purposes of taking
not simply for the delay, but for the income the landowner would under the agrarian reform program, the framers of the Constitution
have received from the land had there been no immediate taking expressly made its intention known that the owners of the land
thereof by the government. should not receive less than the market value for their
BERSAMIN,  J., Concurring and Dissenting Opinion: expropriated properties and drew parallelisms with the ordinary
Agrarian Reform Law; Just Compensation; The factual issue of understanding of just compensation in non-land reform
when the taking had taken place as to the affected agricultural lands expropriation. Indeed, the matter of just compensation was never
should not be separated from the determination of just compensation meant to involve a severe diminution of what the land owner gets.
by Department of Agrarian Reform (DAR), Land Bank and Special The aim of just compensation in terms of expropriation, even in
Agrarian Court (SAC).—It is my humble submission, therefore, that agrarian reform, should be just to the owner—that which
the factual issue of when the taking had taken place as to the affected approximates the market value.
agricultural lands should not be separated from the determination of Same; Same; Same; In computing the just compensation for
just compensation by DAR, Land Bank and SAC. Accordingly, I expropriation proceedings, it is the value of the land at the time of
urge that the Court should leave the matter of the reckoning date to the taking, not at the time of the rendition of judgment, which should
be hereafter determined by the DAR and Land Bank pursuant to be taken into consideration; The “time of taking” is the moment
Section 18 of Republic Act No. 6657. Should the parties disagree when landowners are deprived of the use and benefit of the property.
thereon, the proper SAC will then resolve their disagreement as an —Just compensation in cases of expropriation is ordinarily to be
integral part of a petition for determination of just compensation ascertained as of the time of the taking. In computing the just
made pursuant to Section 57 of Republic Act No. 6657 compensation for expropriation proceedings, it is the value of the
SERENO,  J., Concurring and Dissenting Opinion: land at the time of the taking, not at the time of the rendition of
Agrarian Reform; Expropriation; Just Compensation; The judgment, which should be taken into consideration. Hence, in
taking of private lands under the agrarian reform program partakes determining the value of the land for the payment of just
of the nature of an expropriation proceeding; The aim of just compensation, the time of taking should be the basis. The concept of
compensation in terms of expropriation, even in agrarian reform, taking in both land reform and non-land reform expropriations is
should be just well-settled. There is taking of private property by the State in
532 expropriation proceedings when the owner is ousted from his
property and deprived of his beneficial enjoyment thereof. The “time
532 SUPREME of taking” is the moment when landowners are deprived of the use
COURT REPORTS and benefit of the property.

5|Page
 Same; Same; Same; The valuation be made based on the lands. In computing capitalized net income under the DAR formula,
current fair market value in accordance with established laws, rules one should use the average gross production of the latest available 12
and jurisprudence, or more specifically at the time that petitioner months immediately preceding the date of notice of coverage, in case
Hacienda Luisita, Incorporated (HLI) was issued a Notice of of compulsory acquisition, and the average selling price of the latest
Coverage on 02 January 2006 (date of Notice of Coverage).—Three available 12 months prior to the date of receipt of the claim folder by
reckoning periods are for consideration of the Court. First, Justice the Land Bank of the Philippines for processing.
Velasco, who is now joined by Justice Brion, proposes that the Constitutional Law; The pronouncement of unconstitutionality
amount of just compensation to be paid should be based on the date by the Court retroacts to all acts undertaken between the effectivity
that the PARC approved the SDOA, or on 21 November 1989 (date of the law and the declaration of its invalidity.—The general rule is
of the PARC that an unconstitutional law has no force and effect—it produces no
533 rights, imposes no duties and affords no protection. Hence, the
pronouncement of unconstitutionality by the Court retroacts to all
VOL. 660, 533 acts undertaken between the effectivity of the law and the declaration
NOVEMBER 22, of its invalidity.
2011 Same; Operative Facts Doctrine; The doctrine can only come
Hacienda Luisita, into play as a rule of equity in cases where there is a vacuum in the
law created by the subsequent declaration of nullity by the Court.—
Incorporated vs. Presidential
The operative facts doctrine can only come into play as a rule
Agrarian Reform Council of equity in cases where there is a vacuum in the law created by the
approval). Second, the date the SDOA was signed, 18 May subsequent declaration of nullity by the Court. In those instances
1989, (date of the SDOA) was also considered as a reckoning point where the operative facts doctrine was used (i.e., debt moratorium
of the valuation period. Lastly, I submit that the valuation be made 534
based on the current fair market value in accordance with established
laws, rules and jurisprudence; or more specifically, at the time that 534 SUPREME
petitioner HLI was issued a Notice of Coverage on 02 January 2006 COURT REPORTS
(date of Notice of Coverage). With all due respect to my colleagues, ANNOTATED
the third reckoning period alone satisfies the constitutional directive
to give real, substantial, full and ample compensation to the
Hacienda Luisita,
landowner in recognition of the latter’s right to property and of the Incorporated vs. Presidential
express limitation on the State’s power of expropriation. Agrarian Reform Council
Same; Same; Same; The notice of coverage commences the cases), the unraveling of the effects of the declaration of
process of acquiring private agricultural lands covered by the unconstitutionality resorted to a dearth in the law and the need for the
Comprehensive Agrarian Reform Program (CARP).—Under the courts to provide guidance as to its retroactive application. In this
uniform rulings of this Court, the notice of coverage commences the case, no such vacuum exists, as in fact the CARL itself provides
process of acquiring private agricultural lands covered by the CARP. for the ultimate consequence when a stock distribution plan or
The date of the notice of coverage is therefore determinative of the option is eventually invalidated—direct land distribution. The
just compensation petitioner HLI is entitled to for its expropriated Court therefore need not exercise its equity jurisdiction.

6|Page
MOTION for Clarification and Partial Reconsideration of a VELASCO, JR., J.:
decision of the Supreme Court; MOTION for Partial For resolution are the (1) Motion for Clarification and
Reconsideration of a decision of the Supreme Court; and Partial Reconsideration dated July 21, 2011 filed by petitioner
MOTIONS for Reconsideration of a decision of the Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Supreme Court. Reconsideration dated July 20, 2011 filed by public
   The facts are stated in the resolution of the Court. respondents Presidential Agrarian Reform Council (PARC) and
  Gener E. Asuncion, Antonio A. Merelos and Maria Department of Agrarian Reform (DAR); (3) Motion for
Estelita B. Arles for petitioner. Reconsideration dated July 19, 2011 filed by private
  Jorge Cesar M. Sandiego for petitioner-intervenor. respondent Alyansa ng mga Manggagawang Bukid sa
  Romeo T. Capulong, Rachel F. Pastores, Amylyn B. Hacienda Luisita (AMBALA); (4) Motion for
Sato and Sandra Jill S. Santos lead counsel for respondent R. Reconsideration dated July 21, 2011 filed by respondent-
Galang and collaborating counsel for respondent AMBALA. intervenor Farmworkers Agrarian Reform Movement, Inc.
  Jorbert Ilarde Pahilga and David D. Erro  for respondent (FARM); (5) Motion for Reconsideration dated July 21, 2011
AMBALA and Rene Galang. filed by private respondents Noel Mallari, Julio Suniga,
  Carmelito M. Santoyo  for Alyansa ng mga Supervisory Group of Hacienda Luisita, Inc. (Supervisory
Manggagawang Bukid ng Hacienda Luisita/Noel Group) and Windsor Andaya (collectively referred to as
Mallari/United Luisita Workers/Eldifonso Pingol/Supervisory “Mallari, et al.”); and (6) Motion for Reconsideration dated
Group of the Hacienda Luisita, Inc. and Windsor Andaya. July 22, 2011 filed by private respondents Rene Galang and
  Christian S. Monsod, Marlon J. Manuel, Magistrado A. AMBALA.2
Mendoza, Jr., Joeven D. Dellosa, Edgar DL. Bernal and Mary On July 5, 2011, this Court promulgated a Decision3 in the
Claire A. Demaisip  for Farm Peace Foundation, Inc. above-captioned case, denying the petition filed by HLI and
  Anacleto M. Diaz and Maria Rosario Z. Del affirming Presidential Agrarian Reform Council (PARC)
Rosario  collaborating counsel for petitioner-intervenor RCBC. Resolution No. 2005-32-01 dated December 22, 2005 and
  Mario Luza Bautista and Brigitte M. Da Costa for PARC Resolution No. 2006-34-01 dated May 3, 2006 with the
petitioner-intervenor Luisita Industrial Park Corporation. modification that the original 6,296 qualified farmworker-
beneficiaries of Hacienda Luisita (FWBs) shall have the option
535
to remain as stockholders of HLI.
VOL. 660, 535 _______________
NOVEMBER 22, 2011 2 The Motion for Reconsideration dated July 22, 2011 was filed by private
Hacienda Luisita, respondents Rene Galang and AMBALA, through Atty. Romeo T. Capulong of
the Public Interest Law Center, as lead counsel for Rene Galang and as
Incorporated vs. Presidential collaborating counsel of Atty. Jobert Pahilga of SENTRA for AMBALA.
Agrarian Reform Council 3 G.R. No. 171101, July 5, 2011; hereinafter referred to as “July 5, 2011
Decision.”
RESOLUTION

7|Page
 536 SANTIAGO, APPROVED THE STOCK DISTRIBUTION PLAN
536 SUPREME COURT (SDP) PROPOSED BY TADECO/HLI, BECAUSE:
REPORTS (1) THAT PARC RESOLUTION NO. 89-12-2 DATED
ANNOTATED NOVEMBER 21, 1989 WAS NOT THE “ACTUAL TAKING” OF
THE TADECO’s/HLI’s AGRICULTURAL LAND;
Hacienda Luisita, (2) THE RECALL OR REVOCATION UNDER RESOLUTION
Incorporated vs. Presidential NO. 2005-32-01 OF THAT SDP BY THE NEW PARC UNDER
Agrarian Reform Council THE CHAIRMANSHIP OF DAR SECRETARY NASSER
In its Motion for Clarification and Partial PANGANDA-
537
Reconsideration dated July 21, 2011, HLI raises the following
issues for Our consideration: VOL. 660, 537
A NOVEMBER 22, 2011
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO
DISTRIBUTE TO THE ORIGINAL FWBs OF 6,296 THE Hacienda Luisita,
UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF Incorporated vs. Presidential
THE SALE OF THE 500 HECTARES AND 80.51 HECTARES OF Agrarian Reform Council
THE HLI LAND, BECAUSE: MAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN
(1) THE PROCEEDS OF THE SALE BELONG TO THE THE SDP WAS APPROVED DID NOT RESULT IN “ACTUAL
CORPORATION, HLI, AS CORPORATE CAPITAL AND TAKING” ON NOVEMBER 21, 1989;
ASSETS IN SUBSTITUTION FOR THE PORTIONS OF ITS (3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER
LAND ASSET WHICH WERE SOLD TO THIRD PARTY; 21, 1989 OR 22 YEARS BACK WOULD BE ARBITRARY,
(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE UNJUST, AND OPPRESSIVE, CONSIDERING THE
PORTIONS OF THE LAND ASSET TO THE FWBs, WHO ARE IMPROVEMENTS, EXPENSES IN THE MAINTENANCE AND
STOCKHOLDERS OF HLI, IS TO DISSOLVE THE PRESERVATION OF THE LAND, AND RISE IN LAND PRICES
CORPORATION AND DISTRIBUTE THE PROCEEDS AS OR VALUE OF THE PROPERTY.
LIQUIDATING DIVIDENDS WITHOUT EVEN PAYING THE
CREDITORS OF THE CORPORATION; On the other hand, PARC and DAR, through the Office of
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE the Solicitor General (OSG), raise the following issues in
STRINGENT PROVISIONS OF THE CORPORATION CODE their Motion for Partial Reconsideration dated July 20, 2011:
AND CORPORATE PRACTICE. THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO
B THIS CASE FOR THE FOLLOWING REASONS:
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO I
RECKON THE PAYMENT OF JUST COMPENSATION FROM THERE IS NO LAW OR RULE WHICH HAS BEEN
NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE INVALIDATED ON THE GROUND OF
CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR- UNCONSTITUTIONALITY; AND
II

8|Page
THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE THE MAJORITY OF THE MEMBERS OF THE HONORABLE
APPLIED ONLY IN THE ABSENCE OF A LAW. IN THIS CASE, COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT
THERE IS A POSITIVE LAW WHICH MANDATES THE IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT
DISTRIBUTION OF THE LAND AS A RESULT OF THE AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE
REVOCATION OF THE STOCK DISTRIBUTION PLAN (SDP). SDP AND AN IMPERATIVE IMPOSITION BY [RA 6657] AND
DEPARTMENT OF AGRARIAN REFORM ADMINISTRATIVE
For its part, AMBALA poses the following issues in ORDER NO. 10 (DAO 10).
its Motion for Reconsideration dated July 19, 2011: V
I THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN
THE MAJORITY OF THE MEMBERS OF THE HONORABLE HOLDING THAT THE CONVERSION OF THE
COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT AGRICULTURAL LANDS DID NOT VIOLATE THE
SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS CONDITIONS OF RA 6657 AND DAO 10.
CONSTITUTIONAL. VI
II THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN
THE MAJORITY OF THE MEMBERS OF THE HONORABLE HOLDING THAT PETITIONER IS ENTITLED TO PAYMENT
COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT OF JUST COMPENSATION. SHOULD THE HONORABLE
538 COURT AFFIRM THE ENTITLEMENT OF THE PETITIONER
TO JUST COMPENSATION, THE SAME SHOULD BE PEGGED
538 SUPREME COURT
TO FORTY THOUSAND PESOS (PhP 40,000.00) PER HECTARE.
REPORTS VII
ANNOTATED THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN
Hacienda Luisita, HOLDING THAT LUISITA INDUSTRIAL PARK CORP. (LIPCO)
Incorporated vs. Presidential AND RIZAL COMMERCIAL BANKING CORPORATION
(RCBC) ARE INNOCENT PURCHASERS FOR VALUE.
Agrarian Reform Council
ONLY THE [PARC’S] APPROVAL OF HLI’s PROPOSAL FOR 539
STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE VOL. 660, 539
REVOKED AND NOT THE STOCK DISTRIBUTION OPTION NOVEMBER 22, 2011
AGREEMENT (SDOA).
III Hacienda Luisita,
THE MAJORITY OF THE MEMBERS OF THE HONORABLE Incorporated vs. Presidential
COURT, WITH DUE RESPECT, ERRED IN APPLYING THE Agrarian Reform Council
DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE In its Motion for Reconsideration dated July 21, 2011,
[FWBs] CHOOSE TO OPT FOR ACTUAL LAND FARM similarly puts forth the following issues:
DISTRIBUTION OR TO REMAIN AS STOCKHOLDERS OF I
[HLI]. THE HONORABLE SUPREME COURT SHOULD HAVE
IV STRUCK DOWN SECTION 31 OF [RA 6657] FOR BEING

9|Page
UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE REPORTS
THAT WAS RAISED BY THE RESPONDENTS-INTERVENORS ANNOTATED
IS THE LIS MOTA OF THE CASE.
II Hacienda Luisita,
THE HONORABLE SUPREME COURT SHOULD NOT HAVE Incorporated vs. Presidential
APPLIED THE DOCTRINE OF “OPERATIVE FACT” TO THE Agrarian Reform Council
CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN ORIGINAL [FWBs]. HENCE, WE RESPECTFULLY SUBMIT
AS STOCKHOLDERS OF HACIENDA LUISITA IS THAT SINCE THE SHARES WERE GIVEN TO THE SAME
EQUIVALENT TO AN OPTION FOR HACIENDA LUISITA TO “FAMILY BENEFICIARY”, THIS SHOULD BE DEEMED AS
RETAIN LAND IN DIRECT VIOLATION OF THE SUBSTANTIAL COMPLIANCE WITH THE PROVISIONS OF
COMPREHENSIVE AGRARIAN REFORM LAW. THE SECTION 4 OF DAO 10.
DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK (3)  THERE HAS BEEN NO VIOLATION OF THE 3-MONTH
DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, PERIOD TO IMPLEMENT THE [SDP] AS PROVIDED FOR BY
ESPECIALLY AFTER THE SUPREME COURT HAS AFFIRMED SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE READ
ITS REVOCATION. IN LIGHT OF SECTION 10 OF EXECUTIVE ORDER NO. 229,
III THE PERTINENT PORTION OF WHICH READS, “THE
THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPROVAL BY THE PARC OF A PLAN FOR SUCH STOCK
CONSIDERED [LIPCO] AND [RCBC] AS INNOCENT DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION,
PURCHASERS FOR VALUE IN THE INSTANT CASE. SHALL BE DEEMED COMPLIANCE WITH THE LAND
DISTRIBUTION REQUIREMENT OF THE CARP.”
Mallari, et al., on the other hand, advance the following (4)  THE VALUATION OF THE LAND CANNOT BE BASED
grounds in support of their Motion for Reconsideration dated AS OF NOVEMBER 21, 1989, THE DATE OF APPROVAL OF
July 21, 2011: THE STOCK DISTRIBUTION OPTION. INSTEAD, WE
(1)  THE HOMELOTS REQUIRED TO BE DISTRIBUTED RESPECTFULLY SUBMIT THAT THE “TIME OF TAKING”
HAVE ALL BEEN DISTRIBUTED PURSUANT TO THE FOR VALUATION PURPOSES IS A FACTUAL ISSUE BEST
MEMORANDUM OF AGREEMENT. WHAT REMAINS LEFT FOR THE TRIAL COURTS TO DECIDE.
MERELY IS THE RELEASE OF TITLE FROM THE REGISTER (5)  TO THOSE WHO WILL CHOOSE LAND, THEY MUST
OF DEEDS. RETURN WHAT WAS GIVEN TO THEM UNDER THE SDP. IT
(2)  THERE HAS BEEN NO DILUTION OF SHARES. WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE
CORPORATE RECORDS WOULD SHOW THAT IF EVER NOT LAND AND AT THE SAME TIME HOLD ON TO THE
ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE BENEFITS THEY RECEIVED PURSUANT TO THE SDP IN THE
ACTUAL ORIGINAL FARMWORKER BENEFICIARY, THE SAME WAY AS THOSE WHO WILL CHOOSE TO STAY WITH
RECIPIENT OF THE DIFFERENCE IS THE NEXT OF KIN OR THE SDO.
CHILDREN OF SAID
540 Lastly, Rene Galang and AMBALA, through the Public
Interest Law Center (PILC), submit the following grounds in
540 SUPREME COURT

10 | P a g e
support of their Motion for Reconsideration dated July 22, acquisition; (4) just compensation; (5) sale to third parties; (6)
2011: the violations of HLI; and (7) control over agricultural lands.
I We shall discuss these issues accordingly.
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY I. Applicability of the Operative Fact Doctrine
ERRED IN ORDERING THE HOLDING OF A VOTING OPTION In their motion for partial reconsideration, DAR and PARC
INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT argue that the doctrine of operative fact does not apply to the
LANDS TO [FWBs] in [HLI].541 instant case since: (1) there is no law or rule which has been
VOL. 660, 541 invalidated on the ground of unconstitutionality; 4 (2) the
NOVEMBER 22, 2011 doctrine of operative fact is a rule of equity which may be
applied only in the absence of a law, and in this case, they
Hacienda Luisita,
maintain that there is a positive law which mandates the
Incorporated vs. Presidential distribution
Agrarian Reform Council _______________
A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL 4 PARC/DAR Motion for Reconsideration (MR), p. 7.
BASIS. THE REVOCATION OF THE [SDP] CARRIES WITH IT
542
THE REVOCATION OF THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO REMAIN AS 542 SUPREME COURT
STOCKHOLDERS OF HLI WITHOUT MAKING THE REPORTS
NECESSARY CHANGES IN THE CORPORATE STRUCTURE ANNOTATED
WOULD ONLY SUBJECT THEM TO FURTHER Hacienda Luisita,
MANIPULATION AND HARDSHIP.
Incorporated vs. Presidential
C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE
[SDOA] AND PERTINENT LAWS JUSTIFY TOTAL LAND Agrarian Reform Council
REDISTRIBUTION OF HACIENDA LUISITA. of the land as a result of the revocation of the stock distribution
II plan (SDP).5
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY Echoing the stance of DAR and PARC, AMBALA submits
ERRED IN HOLDING THAT THE [RCBC] AND [LIPCO] ARE that the operative fact doctrine should only be made to apply in
INNOCENT PURCHASERS FOR VALUE OF THE 300- the extreme case in which equity demands it, which allegedly is
HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS not in the instant case.6 It further argues that there would be no
SOLD TO THEM PRIOR TO THE INCEPTION OF THE undue harshness or injury to HLI in case lands are actually
PRESENT CONTROVERSY.
distributed to the farmworkers, and that the decision which
Ultimately, the issues for Our consideration are the orders the farmworkers to choose whether to remain as
following: (1) applicability of the operative fact doctrine; (2) stockholders of HLI or to opt for land distribution would result
constitutionality of Sec. 31 of RA 6657 or the Comprehensive in inequity and prejudice to the farmworkers. 7 The foregoing
Agrarian Reform Law of 1988; (3) coverage of compulsory views are also similarly shared by Rene Galang and

11 | P a g e
AMBALA, through the PILC.8 In addition, FARM posits that The “operative fact” doctrine is embodied in De Agbayani
the option given to the FWBs is equivalent to an option for HLI v. Court of Appeals, wherein it is stated that a legislative
to retain land in direct violation of RA 6657.9 or executive act, prior to its being declared as unconstitutional
(a) Operative Fact Doctrine Not Limited to by the courts, is valid and must be complied with, thus:
xxx  xxx  xxx
Invalid or Unconstitutional Laws
This doctrine was reiterated in the more recent case
Contrary to the stance of respondents, the operative fact of City of Makati v. Civil Service Commission, wherein we
doctrine does not only apply to laws subsequently declared ruled that:
unconstitutional or unlawful, as it also applies to executive acts Moreover, we certainly cannot nullify the City
subsequently declared as invalid. As We have discussed in Our Government’s order of suspension, as we have no reason to do
July 5, 2011 Decision: so, much less retroactively apply such nullification to deprive
“That the operative fact doctrine squarely applies to executive private respondent of a compelling and valid reason for not
acts––in this case, the approval by PARC of the HLI proposal for filing the leave application. For as we have held, a void act
stock distribution––is well-settled in our jurisprudence. In Chavez v. though in law a mere scrap of paper nonetheless confers
National Housing Authority, We held: legitimacy upon past acts or omissions done in reliance
Petitioner postulates that the “operative fact” doctrine is thereof. Consequently, the existence of a statute or executive
inapplicable to the present case because it is an equitable doc- order prior to its being adjudged void is an operative fact to
_______________ which legal consequences are attached. It would indeed be
5 PARC/DAR MR, p. 16.
6 AMBALA MR, p. 51.
ghastly unfair to prevent private respondent from relying upon
7 AMBALA MR, pp. 55-60. the order of suspension in lieu of a formal leave application.
8 Rene Galang and AMBALA MR, pp. 11-13. The applicability of the operative fact doctrine to executive acts
9 FARM MR, p. 47. was further explicated by this Court in Rieta v. People, thus:
543 Petitioner contends that his arrest by virtue of Arrest
Search and Seizure Order (ASSO) No. 4754 was invalid, as
VOL. 660, 543 the law upon which it was predicated—General Order No. 60,
NOVEMBER 22, 2011 issued by then President Ferdinand E. Marcos—was
subsequently declared by the Court, in Tañada v. Tuvera, 33
Hacienda Luisita, to have no force and effect. Thus, he asserts, any evidence
Incorporated vs. Presidential obtained pursuant thereto is inadmissible in evidence. 544
Agrarian Reform Council
trine which could not be used to countenance an inequitable 544 SUPREME COURT
result that is contrary to its proper office. REPORTS
On the other hand, the petitioner Solicitor General argues ANNOTATED
that the existence of the various agreements implementing the Hacienda Luisita,
SMDRP is an operative fact that can no longer be disturbed or
simply ignored, citing Rieta v. People of the Philippines. Incorporated vs. Presidential
The argument of the Solicitor General is meritorious. Agrarian Reform Council
12 | P a g e
 We do not agree. In Tañada, the Court addressed the possible VOL. 660, 545
effects of its declaration of the invalidity of various presidential NOVEMBER 22, 2011
issuances. Discussing therein how such a declaration might affect
acts done on a presumption of their validity, the Court said: Hacienda Luisita,
“. . . . In similar situations in the past this Court had taken Incorporated vs. Presidential
the pragmatic and realistic course set forth in Chicot County Agrarian Reform Council
Drainage District vs. Baxter Bank to wit: an all-inclusive statement of a principle of absolute retroactive
‘The courts below have proceeded on the theory that the invalidity cannot be justified.’ ”
Act of Congress, having been found to be unconstitutional, The Chicot doctrine cited in Tañada advocates that, prior to the
was not a law; that it was inoperative, conferring no rights and nullification of a statute, there is an imperative necessity of taking
imposing no duties, and hence affording no basis for the into account its actual existence as an operative fact negating the
challenged decree. . . . It is quite clear, however, that such acceptance of “a principle of absolute retroactive invalidity.”
broad statements as to the effect of a determination of Whatever was done while the legislative or the executive act was in
unconstitutionality must be taken with qualifications. The operation should be duly recognized and presumed to be valid in all
actual existence of a statute, prior to [the determination of its respects. The ASSO that was issued in 1979 under General Order
invalidity], is an operative fact and may have consequences No. 60—long before our Decision in Tañada and the arrest of
which cannot justly be ignored. The past cannot always be petitioner—is an operative fact that can no longer be disturbed
erased by a new judicial declaration. The effect of the or simply ignored.” (Citations omitted; emphasis in the original.)
subsequent ruling as to invalidity may have to be considered
in various aspects—with respect to particular conduct, private Bearing in mind that PARC Resolution No. 89-12-2 10—an
and official. Questions of rights claimed to have become executive act—was declared invalid in the instant case, the
vested, of status, of prior determinations deemed to have operative fact doctrine is clearly applicable.
finality and acted upon accordingly, of public policy in the Nonetheless, the minority is of the persistent view that the
light of the nature both of the statute and of its previous applicability of the operative fact doctrine should be limited to
application, demand examination. These questions are among statutes and rules and regulations issued by the executive
the most difficult of those which have engaged the attention of department that are accorded the same status as that of a statute
courts, state and federal, and it is manifest from numerous or those which are quasi-legislative in nature. Thus, the
decisions that an all-inclusive statement of a principle of
minority concludes that the phrase “executive act” used in the
absolute retroactive invalidity cannot be justified.’
xxx  xxx  xxx
case of De Agbayani v. Philippine National Bank11 refers only
“Similarly, the implementation/enforcement of presidential to acts, orders, and rules and regulations that have the force and
decrees prior to their publication in the Official Gazette is ‘an effect of law. The minority also made mention of the
operative fact which may have consequences which cannot be Concurring Opinion of Justice Enrique Fernando
justly ignored. The past cannot always be erased by a new in Municipality of Malabang v. Benito,12 where it was
judicial declaration . . . that supposedly made explicit that the operative fact doctrine
545

13 | P a g e
applies to executive acts, which are ultimately quasi-legislative offices is in violation of Section 7, par. 2, Article IX-B of the
in nature. 1987 Constitution, since these are incompatible offices.
_______________ Notably, the appointment of Elma as Chairman of the PCGG
10 Under PARC Resolution No. 89-12-2 dated November 21, 1989, then
Secretary Miriam Defensor-Santiago approved the SDP of HLI/Tarlac
and as CPLC is, without a question, an executive act. Prior to
Development Corporation (Tadeco). the declaration of unconstitutionality of the said executive act,
11 G.R. No. L-23127, April 29, 1971, 38 SCRA 429. certain acts or transactions were made in good faith and in
12 G.R. No. L-28113, March 28, 1969, 27 SCRA 533. reliance of the appointment of Elma which cannot just be set
546 aside or invalidated by its subsequent invalidation.
546 SUPREME COURT In Tan v. Barrios,14 this Court, in applying the operative fact
REPORTS doctrine, held that despite the invalidity of the jurisdiction of
ANNOTATED the military courts over civilians, certain operative facts must
be acknowledged to have existed so as not to trample upon the
Hacienda Luisita, rights of the accused therein. Relevant thereto,
Incorporated vs. Presidential _______________
Agrarian Reform Council 13 G.R. No. 138965, June 30, 2006, 494 SCRA 53.
14 G.R. Nos. 85481-82, October 18, 1990, 190 SCRA 686.
We disagree. For one, neither the De Agbayani case nor
the Municipality of Malabang case elaborates what “executive 547
act” mean. Moreover, while orders, rules and regulations issued VOL. 660, 547
by the President or the executive branch have fixed definitions NOVEMBER 22, 2011
and meaning in the Administrative Code and jurisprudence, the Hacienda Luisita,
phrase “executive act” does not have such specific definition Incorporated vs. Presidential
under existing laws. It should be noted that in the cases cited by
Agrarian Reform Council
the minority, nowhere can it be found that the term “executive
in Olaguer v. Military Commission No. 34,15 it was ruled that
act” is confined to the foregoing. Contrarily, the term
“military tribunals pertain to the Executive Department of the
“executive act” is broad enough to encompass decisions of
Government and are simply instrumentalities of the executive
administrative bodies and agencies under the executive
power, provided by the legislature for the President as
department which are subsequently revoked by the agency in
Commander-in-Chief to aid him in properly commanding the
question or nullified by the Court.
army and navy and enforcing discipline therein, and utilized
A case in point is the concurrent appointment of Magdangal
under his orders or those of his authorized military
B. Elma (Elma) as Chairman of the Presidential Commission
representatives.”16
on Good Government (PCGG) and as Chief Presidential Legal
Evidently, the operative fact doctrine is not confined to
Counsel (CPLC) which was declared unconstitutional by this
statutes and rules and regulations issued by the executive
Court in Public Interest Center, Inc. v. Elma.13 In said case, this
Court ruled that the concurrent appointment of Elma to these

14 | P a g e
department that are accorded the same status as that of a statute duced acts and consequences in conformity to and in reliance
or those which are quasi-legislative in nature. of said decision, which must be respected. It is on this score
Even assuming that De Agbayani initially applied the that the operative fact doctrine should be applied to acts and
operative fact doctrine only to executive issuances like orders consequences that resulted from the implementation of the
and rules and regulations, said principle can nonetheless be PARC Resolution approving the SDP of HLI.
applied, by analogy, to decisions made by the President or the More importantly, respondents, and even the minority,
agencies under the executive department. This doctrine, in the failed to clearly explain how the option to remain in HLI
interest of justice and equity, can be applied liberally and in a granted to individual farmers would result in inequity and
broad sense to encompass said decisions of the executive prejudice. We can only surmise that respondents misinterpreted
branch. In keeping with the demands of equity, the Court can the option as a referendum where all the FWBs will be bound
apply the operative fact doctrine to acts and consequences that by a majority vote favoring the retention of all the 6,296 FWBs
resulted from the reliance not only on a law or executive act as HLI stockholders. Respondents are definitely mistaken.
which is quasi-legislative in nature but also on decisions or The fallo of Our July 5, 2011 Decision is unequivocal that only
orders of the executive branch which were later nullified. This those FWBs who signified their desire to remain as HLI
Court is not unmindful that such acts and consequences must stockholders are entitled to 18,804.32 shares each, while those
be recognized in the higher interest of justice, equity and who opted not to remain as HLI stockholders will be given land
fairness. by DAR. Thus, referendum was not required but only
Significantly, a decision made by the President or the individual options were granted to each FWB whether or not
administrative agencies has to be complied with because it has they will remain in HLI.
the force and effect of law, springing from the powers of the The application of the operative fact doctrine to the FWBs
President under the Constitution and existing laws. Prior to the is not iniquitous and prejudicial to their interests but is actually
nullification or recall of said decision, it may have pro- beneficial and fair to them. First, they are granted the right to
_______________ remain in HLI as stockholders and they acquired said shares
15 G.R. Nos. L-54558 and L-69882, May 22, 1987, 150 SCRA 144.
16 Id., at p. 159.
without paying their value to the corporation. On the other
hand, the qualified FWBs are required to pay the value of the
548 land to the Land Bank of the Philippines (LBP) if land is
548 SUPREME COURT awarded to them by DAR pursuant to RA 6657. If the qualified
REPORTS FWBs really want agricultural land, then they can simply say
ANNOTATED no to the option. And second, if the operative fact doctrine is
Hacienda Luisita, not applied to them, then the FWBs will be required to return to
Incorporated vs. Presidential HLI the 3% production share, the 3% share in the proceeds of
Agrarian Reform Council the sale of the 500-hectare converted land, and the 80.51-
hectare Subic-Clark-Tarlac Expressway (SCTEX) lot, the

15 | P a g e
homelots and other benefits received by the FWBs from HLI. _______________
17 League of Cities of the Phils. v. Commission on Elections, G.R. Nos.
With the application of the operative fact doctrine, said 176951, 177499 and 178056, August 24, 2010, 628 SCRA 819, 833.
benefits, homelots and the 3% production share and 3% share 18 LCK Industries, Inc. v. Planters Development Bank, G.R. No. 170606,
549 November 23, 2007, 538 SCRA 634, 652; cited in Land Bank of the Philippines
VOL. 660, 549 v. Ong, G.R. No. 190755, November 24, 2010, 636 SCRA 266, 280.
19 Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA
NOVEMBER 22, 2011 529.
Hacienda Luisita,
550
Incorporated vs. Presidential
Agrarian Reform Council 550 SUPREME COURT
from the sale of the 500-hectare and SCTEX lots shall be
REPORTS
respected with no obligation to refund or return them. The ANNOTATED
receipt of these things is an operative fact “that can no longer Hacienda Luisita,
be disturbed or simply ignored.” Incorporated vs. Presidential
(b) The Operative Fact Doctrine as Recourse in Agrarian Reform Council
Equity bution of the land as a result of the revocation of the SDP.
As mentioned above, respondents contend that the operative Pertinently, the last paragraph of Sec. 31 of RA 6657 states:
fact doctrine is a rule of equity which may be applied only in “If within two (2) years from the approval of this Act, the land or
the absence of a law, and that in the instant case, there is a stock transfer envisioned above is not made or realized or the plan
positive law which mandates the distribution of the land as a for such stock distribution approved by the PARC within the same
result of the revocation of the SDP. period, the agricultural land of the corporate owners or corporation
Undeniably, the operative fact doctrine is a rule of shall be subject to the compulsory coverage of this Act.” (Emphasis
supplied.)
equity.17 As a complement of legal jurisdiction, equity “seeks to
reach and complete justice where courts of law, through the Markedly, the use of the word “or” under the last paragraph
inflexibility of their rules and want of power to adapt their of Sec. 31 of RA 6657 connotes that the law gives the
judgments to the special circumstances of cases, are corporate landowner an “option” to avail of the stock
incompetent to do so. Equity regards the spirit and not the distribution option or to have the SDP approved within two (2)
letter, the intent and not the form, the substance rather than the years from the approval of RA 6657. This interpretation is
circumstance, as it is variously expressed by different consistent with the well-established principle in statutory
courts.”18 Remarkably, it is applied only in the absence of construction that “[t]he word or is a disjunctive term signifying
statutory law and never in contravention of said law.19 disassociation and independence of one thing from the other
In the instant case, respondents argue that the operative fact things enumerated; it should, as a rule, be construed in the
doctrine should not be applied since there is a positive law, sense in which it ordinarily implies, as a disjunctive
particularly, Sec. 31 of RA 6657, which directs the distri-

16 | P a g e
word.”20 In PCI Leasing and Finance, Inc. v. Giraffe-X The word “or” is a disjunctive term signifying
Creative Imaging, Inc.,21 this Court held: disassociation and independence of one thing from each of the
“Evidently, the letter did not make a demand for the payment of other things enumerated.”  (Emphasis in the original.)
24

the P8,248,657.47 AND the return of the equipment; only either one

Given that HLI secured approval of its SDP in November
of the two was required. The demand letter was prepared and signed
by Atty. Florecita R. Gonzales, presumably petitioner’s counsel. As 1989, well within the two-year period reckoned from June
such, the use of “or” instead of “and” in the letter could hardly be 1988 when RA 6657 took effect, then HLI did not violate the
treated as a simple typographical error, bearing in mind the nature of last paragraph of Sec. 31 of RA 6657. Pertinently, said
the demand, the amount involved, and the fact that it was made by a provision does not bar Us from applying the operative fact
lawyer. Certainly Atty. Gonzales would have known that a world of doctrine.
difference exists between “and” and “or” in the manner that the word Besides, it should be recognized that this Court, in its July
was employed in the letter. 5, 2011 Decision, affirmed the revocation of Resolution No.
_______________
20 Saludaga v. Sandiganbayan, G.R. No. 184537, April 23, 2010, 619 SCRA
89-12-2 and ruled for the compulsory coverage of the
364, 374; citing Agpalo, Statutory Construction, 2003 p. 204 and The Heirs of agricultural lands of Hacienda Luisita in view of HLI’s
George Poe v. Malayan Insurance Company, Inc., G.R. No. 156302, April 7, 2009, violation of the SDP and DAO 10. By applying the operative
584 SCRA 152 .
21 G.R. No. 142618, July 12, 2007, 527 SCRA 405, 422.
fact doctrine, this Court merely gave the qualified FWBs the
option to remain as stockholders of HLI and ruled that they will
551 retain the homelots and other benefits which they received
VOL. 660, 551 from HLI by virtue of the SDP.
It bears stressing that the application of the operative fact
NOVEMBER 22, 2011
doctrine by the Court in its July 5, 2011 Decision is favorable
Hacienda Luisita, _______________
Incorporated vs. Presidential 22 Citing Pimentel v. Commission on Elections, G.R. No. 126394, April 24,
Agrarian Reform Council 1998, 289 SCRA 586, 597.
23 Citing Centeno v. Villalon-Pornillos, G.R. No. 113092, September 1,
A rule in statutory construction is that the word “or” is a 1994, 236 SCRA 197, 206.
disjunctive term signifying dissociation and independence of 24 Citing Castillo-Co v. Barbers, G.R. No. 129952, June 16, 1998, 290
one thing from other things enumerated unless the context SCRA 717, 723.
requires a different interpretation. 22

552
In its elementary sense, “or”, as used in a statute, is a
disjunctive article indicating an alternative. It often 552 SUPREME COURT
connects a series of words or propositions indicating a REPORTS
choice of either. When “or” is used, the various members ANNOTATED
of the enumeration are to be taken separately. 23
Hacienda Luisita,
Incorporated vs. Presidential
Agrarian Reform Council
17 | P a g e
to the FWBs because not only were the FWBs allowed to retain 25 FARM MR, pp. 6-11, 30-36.
the benefits and homelots they received under the stock 553
distribution scheme, they were also given the option to choose
for themselves whether they want to remain as stockholders of VOL. 660, 553
HLI or not. This is in recognition of the fact that despite the NOVEMBER 22, 2011
claims of certain farmer groups that they represent the qualified Hacienda Luisita,
FWBs in Hacienda Luisita, none of them can show that they Incorporated vs. Presidential
are duly authorized to speak on their behalf. As We have Agrarian Reform Council
mentioned, “To date, such authorization document, which formerly belonged to AMBALA, raised the constitutionality of Sec.
would logically include a list of the names of the authorizing 31 only on May 3, 2007 when it filed its Supplemental Comment
FWBs, has yet to be submitted to be part of the records.” with the Court. Thus, it took FARM some eighteen (18) years from
II. Constitutionality of Sec. 31, RA 6657 November 21, 1989 before it challenged the constitutionality of Sec.
FARM insists that the issue of constitutionality of Sec. 31 31 of RA 6657 which is quite too late in the day. The FARM
of RA 6657 is the lis mota of the case, raised at the earliest members slept on their rights and even accepted benefits from the
opportunity, and not to be considered as moot and academic.25 SDP with nary a complaint on the alleged unconstitutionality of Sec.
31 upon which the benefits were derived. The Court cannot now be
This contention is unmeritorious. As We have succinctly
goaded into resolving a constitutional issue that FARM failed to
discussed in Our July 5, 2011 Decision: assail after the lapse of a long period of time and the occurrence of
“While there is indeed an actual case or controversy, intervenor numerous events and activities which resulted from the application
FARM, composed of a small minority of 27 farmers, has yet to of an alleged unconstitutional legal provision.
explain its failure to challenge the constitutionality of Sec. 3l of RA It has been emphasized in a number of cases that the question of
6657, since as early as November 21, l989 when PARC approved the constitutionality will not be passed upon by the Court unless it is
SDP of Hacienda Luisita or at least within a reasonable time properly raised and presented in an appropriate case at the first
thereafter and why its members received benefits from the SDP opportunity. FARM is, therefore, remiss in belatedly questioning the
without so much of a protest. It was only on December 4, 2003 or 14 constitutionality of Sec. 31 of RA 6657. The second requirement that
years after approval of the SDP via PARC Resolution No. 89-12-2 the constitutional question should be raised at the earliest possible
dated November 21, 1989 that said plan and approving resolution opportunity is clearly wanting.
were sought to be revoked, but not, to stress, by FARM or any of its The last but the most important requisite that the constitutional
members, but by petitioner AMBALA. Furthermore, the AMBALA issue must be the very lis mota of the case does not likewise obtain.
petition did NOT question the constitutionality of Sec. 31 of RA The lis mota aspect is not present, the constitutional issue tendered
6657, but concentrated on the purported flaws and gaps in the not being critical to the resolution of the case. The unyielding rule
subsequent implementation of the SDP. Even the public respondents, has been to avoid, whenever plausible, an issue assailing the
as represented by the Solicitor General, did not question the constitutionality of a statute or governmental act. If some other
constitutionality of the provision. On the other hand, FARM, whose grounds exist by which judgment can be made without touching the
27 members constitutionality of a law, such recourse is favored. Garcia v.
_______________
Executive Secretary explains why:

18 | P a g e
 Lis Mota—the fourth requirement to satisfy before this pertinent part, Sec. 5 of RA 9700 provides: “[T]hat after June 30,
Court will undertake judicial review—means that the Court 2009, the modes of acquisition shall be limited to voluntary offer
will not pass upon a question of unconstitutionality, although to sell and compulsory acquisition.” Thus, for all intents and
properly presented, if the case can be disposed of on purposes, the stock distribution scheme under Sec. 31 of RA 6657 is
some other ground, such as the application of the statute or no longer an available option under existing law. The question of
the general law. The petitioner must be able to show that the whether or not it is unconstitutional should be a moot issue.”
case cannot be legally resolved unless the constitutional (Citations omitted; emphasis in the original.)
question raised is determined. This requirement is based on
the rule that every law has in its favor the presumption of Based on the foregoing disquisitions, We maintain that this
constitutionality; to justify its nullification, there must be a Court is NOT compelled to rule on the constitutionality of Sec.
clear and unequivocal breach of the Constitution, and not one 31 of RA 6657. In this regard, We clarify that this Court, in its
that is doubtful, speculative, or argumentative.554 July 5, 2011 Decision, made no ruling in favor of the
constitutionality of Sec. 31 of RA 6657. There was, however, a
554 SUPREME COURT determination of the existence of an apparent grave violation of
REPORTS the Constitution that may justify the resolution of the issue of
ANNOTATED constitutionality, to which this Court ruled in the negative.
Hacienda Luisita, Having clarified this matter, all other points raised by both
Incorporated vs. Presidential FARM and AMBALA concerning the constitutionality of RA
Agrarian Reform Council 6657 deserve scant consideration.555
The lis mota in this case, proceeding from the basic positions VOL. 660, 555
originally taken by AMBALA (to which the FARM members NOVEMBER 22, 2011
previously belonged) and the Supervisory Group, is the alleged non- Hacienda Luisita,
compliance by HLI with the conditions of the SDP to support a plea
for its revocation. And before the Court, the lis mota is whether or
Incorporated vs. Presidential
not PARC acted in grave abuse of discretion when it ordered the Agrarian Reform Council
recall of the SDP for such non-compliance and the fact that the SDP, III. Coverage of Compulsory Acquisition
as couched and implemented, offends certain constitutional and FARM argues that this Court ignored certain material facts
statutory provisions. To be sure, any of these key issues may be when it limited the maximum area to be covered to 4,915.75
resolved without plunging into the constitutionality of Sec. 31 of RA hectares, whereas the area that should, at the least, be covered
6657. Moreover, looking deeply into the underlying petitions of is 6,443 hectares,26 which is the agricultural land allegedly
AMBALA, et al., it is not the said section per se that is invalid, but covered by RA 6657 and previously held by Tarlac
rather it is the alleged application of the said provision in the SDP Development Corporation (Tadeco).27
that is flawed.
We cannot subscribe to this view. Since what is put in issue
It may be well to note at this juncture that Sec. 5 of RA 9700,
amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA before the Court is the propriety of the revocation of the SDP,
6657 vis-à-vis the stock distribution component of said Sec. 31. In its which only involves 4,915.75 has. of agricultural land and not

19 | P a g e
6,443 has., then We are constrained to rule only as regards the were allegedly not transferred to HLI but were supposedly
4,915.75 has. of agricultural land. covered by RA 6657.
Moreover, as admitted by FARM itself, this issue was DAR, however, contends that the declaration of the area32 to
raised for the first time by FARM in its Memorandum dated be awarded to each FWB is too restrictive. It stresses that in
September 24, 2010 filed before this Court.28 In this regard, it agricultural landholdings like Hacienda Luisita, there are roads,
should be noted that “[a]s a legal recourse, the special civil irrigation canals, and other portions of the land that are
action of certiorari is a limited form of considered commonly-owned by farmworkers, and this may
review.”29 The certiorari jurisdiction of this Court is narrow in necessarily result in the decrease of the area size that may be
scope as it is restricted to resolving errors of jurisdiction and awarded per FWB.33 DAR also argues that the July 5, 2011
grave abuse of discretion, and not errors of judgment. 30 To Decision of this Court does not give it any leeway in adjusting
allow additional issues at this stage of the proceedings is the area that may be awarded per FWB in case the number of
violative of fair play, justice and due process.31 actual qualified FWBs decreases.34
Nonetheless, it should be taken into account that this should The argument is meritorious. In order to ensure the proper
not prevent the DAR, under its mandate under the distribution of the agricultural lands of Hacienda Luisita per
_______________ qualified FWB, and considering that matters involving strictly
26 Id., at p. 52.
27 Id.
the administrative implementation and enforcement of agrarian
28 Id. reform laws are within the jurisdiction of the DAR, 35 it is the
29 Apostol v. Court of Appeals, G.R. No. 141854, October 15, 2008, 569 latter which shall determine the area with which each qualified
SCRA 80, 92; citing Almuete v. Andres, 421 Phil 522, 531; 369 SCRA 619, 628 FWB will be awarded.
(2001).
30 Id.; citing Tolentino v. People, G.R. No. 170396, August 31, 2006, 500
(a) Conversion of Agricultural Lands
SCRA 721, 724 and Suyat, Jr. v. Torres, G.R. No. 133530, October 25, 2004, AMBALA insists that the conversion of the agricultural
441 SCRA 265, 274-275. lands violated the conditions of RA 6657 and DAO 10, stating
31 See C.F. Sharp Crew Management, Inc. v. Espanol, Jr., G.R. No. that “keeping the land intact and unfragmented is one of the
155903, September 14, 2007, 533 SCRA 424, 438-439.
essential conditions of [the] SD[P], RA 6657 and DAO 10.”36 It
556 _______________
556 SUPREME COURT
32 We stated in Our July 5, 2011 Decision that if a qualified FWB will
REPORTS choose land distribution, he or she will get 6,886.5 square meters of agricultural
ANNOTATED land in Hacienda Luisita.
33 DAR MR, p. 37.
Hacienda Luisita, 34 Id.
Incorporated vs. Presidential 35 See Soriano v. Bravo, G.R. No. 152086, December 15, 2010, 638 SCRA
Agrarian Reform Council 403, 420.
36 AMBALA MR, p. 67. 
agrarian reform law, from subsequently subjecting to agrarian
reform other agricultural lands originally held by Tadeco that 557

20 | P a g e
 VOL. 660, 557 viability of the corporate operations with its agricultural land being
NOVEMBER 22, 2011 intact and unfragmented. Corporate operation may be viable even if
the corporate agricultural land does not remain intact or
Hacienda Luisita, [un]fragmented.” 38

Incorporated vs. Presidential _______________

Agrarian Reform Council 37 Id.
38 HLI Consolidated Reply and Opposition, p. 65.
asserts that “this provision or conditionality is not mere
decoration and is intended to ensure that the farmers can 558
continue with the tillage of the soil especially since it is the 558 SUPREME COURT
only occupation that majority of them knows.”37
REPORTS
We disagree. As We amply discussed in Our July 5, 2011
Decision: ANNOTATED
“Contrary to the almost parallel stance of the respondents, Hacienda Luisita,
keeping Hacienda Luisita unfragmented is also not among the Incorporated vs. Presidential
imperative impositions by the SDP, RA 6657, and DAO 10. Agrarian Reform Council
The Terminal Report states that the proposed distribution plan It is, of course, anti-climactic to mention that DAR viewed the
submitted in 1989 to the PARC effectively assured the intended conversion as not violative of any issuance, let alone undermining
stock beneficiaries that the physical integrity of the farm shall remain the viability of Hacienda Luisita’s operation, as the DAR Secretary
inviolate. Accordingly, the Terminal Report and the PARC-assailed approved the land conversion applied for and its disposition via his
resolution would take HLI to task for securing approval of the Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA
conversion to non-agricultural uses of 500 hectares of the hacienda. 6657 which reads:
In not too many words, the Report and the resolution view the Sec. 65. Conversion of Lands.—After the lapse of five
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: years from its award when the land ceases to be economically
“a. that the continued operation of the corporation with its feasible and sound for agricultural purposes, or the locality
agricultural land intact and unfragmented is viable with potential for has become urbanized and the land will have a greater
growth and increased profitability.” economic value for residential, commercial or industrial
The PARC is wrong. purposes, the DAR upon application of the beneficiary or
In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of landowner with due notice to the affected parties, and subject
DAO 10 on increased income and greater benefits to qualified to existing laws, may authorize the x x x conversion of the
beneficiaries––is but one of the stated criteria to guide PARC in land and its dispositions. x x x”
deciding on whether or not to accept an SDP. Said Sec. 5(a) does not
exact from the corporate landowner-applicant the undertaking to Moreover, it is worth noting that the application for
keep the farm intact and unfragmented ad infinitum. And there is conversion had the backing of 5,000 or so FWBs, including
logic to HLI’s stated observation that the key phrase in the provision respondents Rene Galang, and Jose Julio Suniga, then leaders
of Sec. 5(a) is “viability of corporate operations”: “[w]hat is thus of the AMBALA and the Supervisory Group, respectively, as
required is not the agricultural land remaining intact x x x but the evidenced by the Manifesto of Support they signed and which

21 | P a g e
was submitted to the DAR.39 If at all, this means that AMBALA parcels of land they bought are under the coverage of the
should be estopped from questioning the conversion of a comprehensive agrarian reform program [CARP] and that the
portion of Hacienda Luisita, which its leader has fully conditions of the respective sales are imbued with public
supported. interest where normal property relations in the Civil Law sense
(b) LIPCO and RCBC as Innocent Purchasers for Value do not apply.”42
The AMBALA, Rene Galang and the FARM are in accord Avowing that the land subject of conversion still remains
that Rizal Commercial Banking Corporation (RCBC) and undeveloped, Rene Galang and AMBALA, through the PILC,
Luisita Industrial Park Corporation (LIPCO) are not innocent further insist that the condition that “[t]he development of the
purchasers for value. The AMBALA, in particular, argues that land should be completed within the period of five [5] years
LIPCO, being a wholly-owned subsidiary of HLI, is from the issuance of this Order” was not complied with.
conclusively presumed to have knowledge of the agrarian AMBALA also argues that since RCBC and LIPCO merely
dispute stepped into the shoes of HLI, then they must comply with the
_______________ conditions imposed in the conversion order.43
39 Id., at p. 80, Petition of HIL; id., at p. 944, Consolidated Reply of
HLI; id., at pp. 1327-1328.
In addition, FARM avers that among the conditions
attached to the conversion order, which RCBC and LIPCO
559 necessarily have knowledge of, are (a) that its approval shall in
VOL. 660, 559 no way amend, diminish, or alter the undertaking and
NOVEMBER 22, 2011 obligations of HLI as contained in the [SDP] approved on
Hacienda Luisita, November 21, 1989; and (b) that the benefits, wages and the
Incorporated vs. Presidential like, re-
_______________
Agrarian Reform Council 40 AMBALA MR, p. 76.
on the subject land and could not feign ignorance of this fact, 41 Galang MR, p. 21.
especially since they have the same directors and 42 Id., at p. 22.
stockholders.40 This is seconded by Rene Galang and 43 AMBALA MR, p. 72.
AMBALA, through the PILC, which intimate that a look at the 560
General Information Sheets of the companies involved in the 560 SUPREME COURT
transfers of the 300-hectare portion of Hacienda Luisita, REPORTS
specifically, Centennary Holdings, Inc. (Centennary), LIPCO ANNOTATED
and RCBC, would readily reveal that their directors are Hacienda Luisita,
interlocked and connected to Tadeco and HLI. 41 Rene Galang
Incorporated vs. Presidential
and AMBALA, through the PILC, also allege that “with the
clear-cut involvement of the leadership of all the corporations Agrarian Reform Council
concerned, LIPCO and RCBC cannot feign ignorance that the

22 | P a g e
ceived by the FWBs shall not in any way be reduced or _______________
44 FARM MR, p. 94.
adversely affected, among others.44
The contentions of respondents are wanting. In the first 561
place, there is no denying that RCBC and LIPCO knew that the
VOL. 660, 561
converted lands they bought were under the coverage of
CARP. Nevertheless, as We have mentioned in Our July 5, NOVEMBER 22, 2011
2011 Decision, this does not necessarily mean that both LIPCO Hacienda Luisita,
and RCBC already acted in bad faith in purchasing the Incorporated vs. Presidential
converted lands. As this Court explained: Agrarian Reform Council
“It cannot be claimed that RCBC and LIPCO acted in bad faith in the conversion of 500 hectares of Hacienda Luisita pursuant to its
acquiring the lots that were previously covered by the SDP. Good primary jurisdiction under Sec. 50 of RA 6657 to determine and
faith “consists in the possessor’s belief that the person from whom he adjudicate agrarian reform matters and its original exclusive
received it was the owner of the same and could convey his title. jurisdiction over all matters involving the implementation of agrarian
Good faith requires a well-founded belief that the person from whom reform. The DAR conversion order became final and executory after
title was received was himself the owner of the land, with the right to none of the FWBs interposed an appeal to the CA. In this factual
convey it. There is good faith where there is an honest intention to setting, RCBC and LIPCO purchased the lots in question on their
abstain from taking any unconscientious advantage from another.” It honest and well-founded belief that the previous registered owners
is the opposite of fraud. could legally sell and convey the lots though these were previously
To be sure, intervenor RCBC and LIPCO knew that the lots subject of CARP coverage. Ergo, RCBC and LIPCO acted in good
they bought were subjected to CARP coverage by means of a faith in acquiring the subject lots.” (Emphasis supplied.)
stock distribution plan, as the DAR conversion order was
annotated at the back of the titles of the lots they acquired. In the second place, the allegation that the converted lands
However, they are of the honest belief that the subject lots were remain undeveloped is contradicted by the evidence on record,
validly converted to commercial or industrial purposes and for particularly, Annex “X” of LIPCO’s Memorandum dated
which said lots were taken out of the CARP coverage subject of September 23, 2010,45 which has photographs showing that the
PARC Resolution No. 89-12-2 and, hence, can be legally and land has been partly developed. 46 Certainly, it is a general rule
validly acquired by them. After all, Sec. 65 of RA 6657 explicitly that the factual findings of administrative agencies are
allows conversion and disposition of agricultural lands previously conclusive and binding on the Court when supported by
covered by CARP land acquisition “after the lapse of five (5) years substantial evidence.47 However, this rule admits of certain
from its award when the land ceases to be economically feasible and exceptions, one of which is when the findings of fact are
sound for agricultural purposes or the locality has become urbanized
premised on the supposed absence of evidence and
and the land will have a greater economic value for residential,
commercial or industrial purposes.” Moreover, DAR notified all the contradicted by the evidence on record.48
affected parties, more particularly the FWBs, and gave them the In the third place, by arguing that the companies involved in
opportunity to comment or oppose the proposed conversion. DAR, the transfers of the 300-hectare portion of Hacienda Luisita
after going through the necessary processes, granted have interlocking directors and, thus, knowledge of one may

23 | P a g e
already be imputed upon all the other companies, AMBALA In applying the doctrine of piercing the veil of corporate fiction,
and Rene Galang, in effect, want this Court to pierce the veil of the following requisites must be established: (1) control, not merely
corporate fiction. However, piercing the veil of corporate majority or complete stock control; (2) such control must have been
fiction is warranted “only in cases when the separate legal used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest acts
entity is used to defeat public convenience, justify wrong,
_______________ in contravention of plaintiff’s legal rights; and (3) the aforesaid
45 Rollo, Vol. 3, pp. 3280-3323. control and breach of duty must proximately cause the injury or
46 Id., at pp. 3428-3468. unjust loss complained of. (Citations omitted.)
47 Nicolas v. Del-Nacia Corp. G.R. No. 158026, April 23, 2008, 552 SCRA Nowhere, however, in the pleadings and other records of the case
545, 556. can it be gathered that respondent has complete control over Sky
48 Bascos, Jr. v. Taganahan, G.R. No. 180666, February 18, 2009, 579 Vision, not only of finances but of policy and business practice in
SCRA 653, 674-675.
respect to the transaction attacked, so that Sky Vision had at the time
562 of the transaction no separate mind, will or existence of its own. The
562 SUPREME COURT existence of interlocking directors, corporate officers and
REPORTS shareholders is not enough justification to pierce the veil of corporate
fiction in the absence of fraud or other public policy considerations.”
ANNOTATED
Hacienda Luisita, _______________
49 Velarde v. Lopez, Inc., G.R. No. 153886, January 14, 2004, 419 SCRA
Incorporated vs. Presidential 422, 431-432; citing Tan Boon Bee & Co., Inc. v. Jarencio, 163 SCRA 205
Agrarian Reform Council (1988) and Yutivo Sons Hardware Co. v. CTA, 1 SCRA 160 (1961).
protect fraud, or defend crime, such that in the case of two 50 Id.
corporations, the law will regard the corporations as merged 563
into one.”49 As succinctly discussed by the Court in Velarde v. VOL. 660, 563
Lopez, Inc.:50 NOVEMBER 22, 2011
“Petitioner argues nevertheless that jurisdiction over the
Hacienda Luisita,
subsidiary is justified by piercing the veil of corporate fiction.
Piercing the veil of corporate fiction is warranted, however, only in Incorporated vs. Presidential
cases when the separate legal entity is used to defeat public Agrarian Reform Council
convenience, justify wrong, protect fraud, or defend crime, such that Absent any allegation or proof of fraud or other public
in the case of two corporations, the law will regard the corporations policy considerations, the existence of interlocking directors,
as merged into one. The rationale behind piercing a corporation’s officers and stockholders is not enough justification to pierce
identity is to remove the barrier between the corporation from the the veil of corporate fiction as in the instant case.
persons comprising it to thwart the fraudulent and illegal schemes of And in the fourth place, the fact that this Court, in its July 5,
those who use the corporate personality as a shield for undertaking
2011 Decision, ordered the payment of the proceeds of the sale
certain proscribed activities.
of the converted land, and even of the 80.51-hectare land sold

24 | P a g e
to the government, through the Bases Conversion Development ANNOTATED
Authority, to the qualified FWBs, effectively fulfils the Hacienda Luisita,
conditions in the conversion order, to wit: (1) that its approval Incorporated vs. Presidential
shall in no way amend, diminish, or alter the undertaking and Agrarian Reform Council
obligations of HLI as contained in the SDP approved on
Besides, to disregard the Conversion Order through the
November 21, 1989; and (2) that the benefits, wages and the
revocation of the approval of the SDP would create undue
like, received by the FWBs shall not in any way be reduced or
prejudice to LRC, which is not even a party to the proceedings
adversely affected, among others.
below, and would be tantamount to deprivation of property
A view has also been advanced that the 200-hectare lot
without due process of law.
transferred to Luisita Realty Corporation (LRC) should be
Nonethess, the minority is of the adamant view that since
included in the compulsory coverage because the corporation
LRC failed to intervene in the instant case and was, therefore,
did not intervene.
unable to present evidence supporting its good faith purchase
We disagree. Since the 200-hectare lot formed part of the
of the 200-hectare converted land, then LRC should be given
SDP that was nullified by PARC Resolution 2005-32-01, this
full opportunity to present its case before the DAR. This
Court is constrained to make a ruling on the rights of LRC over
minority view is a contradiction in itself. Given that LRC did
the said lot. Moreover, the 500-hectare portion of Hacienda
not intervene and is, therefore, not a party to the instant case,
Luisita, of which the 200-hectare portion sold to LRC and the
then it would be incongruous to order them to present evidence
300-hectare portion subsequently acquired by LIPCO and
before the DAR. Such an order, if issued by this Court, would
RCBC were part of, was already the subject of the August 14,
not be binding upon the LRC.
1996 DAR Conversion Order. By virtue of the said conversion
Moreover, LRC may be considered to have waived its right
order, the land was already reclassified as
to participate in the instant petition since it did not intervene in
industrial/commercial land not subject to compulsory coverage.
the DAR proceedings for the nullification of the PARC
Thus, if We place the 200-hectare lot sold to LRC under
Resolution No. 89-12-2 which approved the SDP.
compulsory coverage, this Court would, in effect, be
(c) Proceeds of the sale of the 500-hectare converted land
disregarding the DAR Conversion Order, which has long
and of the 80.51-hectare land used for the SCTEX
attained its finality. And as this Court held in Berboso v.
As previously mentioned, We ruled in Our July 5, 2011
CA,51 “Once final and executory, the Conversion Order can no
Decision that since the Court excluded the 500-hectare lot
longer be questioned.”
_______________
subject of the August 14, 1996 Conversion Order and the
51 G.R. No. 141593-94, July 12, 2006, 494 SCRA 583, 602. 80.51-hectare SCTEX lot acquired by the government from
compulsory coverage, then HLI and its subsidiary, Centennary,
564
should be liable to the FWBs for the price received for said
564 SUPREME COURT lots. Thus:
REPORTS

25 | P a g e
 “There is a claim that, since the sale and transfer of the 500 corporate purposes, titling expenses and in compliance with the
hectares of land subject of the August 14, 1996 Conversion Order August 14, 1996 Conversion Order. The cost of the audit will be
and the 80.51-hectare SCTEX lot came after compulsory coverage shouldered by HLI. If after such audit, it is determined that there
has taken place, the FWBs should have their corresponding share of remains a balance from the proceeds of the sale, then the balance
the land’s value. There is merit in the claim. Since the SDP approved shall be distributed to the qualified FWBs.”
by PARC Resolution No. 89-12-2 has been nullified, then all the
565 HLI, however, takes exception to the above-mentioned
ruling and contends that it is not proper to distribute the
VOL. 660, 565 unspent or unused balance of the proceeds of the sale of the
NOVEMBER 22, 2011 500-hectare converted land and 80.51-hectare SCTEX lot to the
Hacienda Luisita, qualified FWBs for the following reasons: (1) the proceeds of
Incorporated vs. Presidential the sale belong to the corporation, HLI, as corporate capital and
Agrarian Reform Council assets in substitution for the portions of its land asset which
lands subject of the SDP will automatically be subject of compulsory were sold to third parties; (2) to distribute the cash sales
coverage under Sec. 31 of RA 6657. Since the Court excluded the proceeds of the portions of the land asset to the FWBs, who are
500-hectare lot subject of the August 14, 1996 Conversion Order and stockholders of HLI, is to dissolve the corporation and
the 80.51-hectare SCTEX lot acquired by the government from the distribute the proceeds as liquidating dividends without
area covered by SDP, then HLI and its subsidiary, Centennary, shall 566
be liable to the FWBs for the price received for said lots. HLI shall 566 SUPREME COURT
be liable for the value received for the sale of the 200-hectare land to REPORTS
LRC in the amount of PhP 500,000,000 and the equivalent value of
the 12,000,000 shares of its subsidiary, Centennary, for the 300-
ANNOTATED
hectare lot sold to LIPCO for the consideration of PhP 750,000,000. Hacienda Luisita,
Likewise, HLI shall be liable for PhP 80,511,500 as consideration for Incorporated vs. Presidential
the sale of the 80.51-hectare SCTEX lot. Agrarian Reform Council
We, however, note that HLI has allegedly paid 3% of the even paying the creditors of the corporation; and (3) the doing
proceeds of the sale of the 500-hectare land and 80.51-hectare of said acts would violate the stringent provisions of the
SCTEX lot to the FWBs. We also take into account the payment of
Corporation Code and corporate practice.52
taxes and expenses relating to the transfer of the land and HLI’s
statement that most, if not all, of the proceeds were used for Apparently, HLI seeks recourse to the Corporation Code in
legitimate corporate purposes. In order to determine once and for all order to avoid its liability to the FWBs for the price received
whether or not all the proceeds were properly utilized by HLI and its for the 500-hectare converted lot and the 80.51-hectare SCTEX
subsidiary, Centennary, DAR will engage the services of a reputable lot. However, as We have established in Our July 5, 2011
accounting firm to be approved by the parties to audit the books of Decision, the rights, obligations and remedies of the parties in
HLI to determine if the proceeds of the sale of the 500-hectare land the instant case are primarily governed by RA 6657 and HLI
and the 80.51-hectare SCTEX lot were actually used for legitimate cannot shield itself from the CARP coverage merely under the

26 | P a g e
convenience of being a corporate entity. In this regard, it Without in any way minimizing the relevance of the
should be underscored that the agricultural lands held by HLI Corporation Code since the FWBs of HLI are also stockholders,
by virtue of the SDP are no ordinary assets. These are special its applicability is limited as the rights of the parties arising from
assets, because, originally, these should have been distributed the SDP should not be made to supplant or circumvent the
agrarian reform program.
to the FWBs were it not for the approval of the SDP by PARC.
Without doubt, the Corporation Code is the general law providing
Thus, the government cannot renege on its responsibility over for the formation, organization and regulation of private
these assets. Likewise, HLI is no ordinary corporation as it was corporations. On the other hand, RA 6657 is the special law on
formed and organized precisely to make use of these agrarian reform. As between a general and special law, the latter
agricultural lands actually intended for distribution to the shall prevail—generalia specialibus non derogant.  Besides, the
54

FWBs. Thus, it cannot shield itself from the coverage of CARP present impasse between HLI and the private respondents is not an
by invoking the Corporation Code. As explained by the Court: intra-corporate dispute which necessitates the application of the
“HLI also parlays the notion that the parties to the SDOA should Corporation Code. What private respondents questioned before the
now look to the Corporation Code, instead of to RA 6657, in DAR is the proper implementation of the SDP and HLI’s compliance
determining their rights, obligations and remedies. The Code, it adds, with RA 6657. Evidently, RA 6657 should be the applicable law to
should be the applicable law on the disposition of the agricultural the instant case.” (Emphasis supplied.)
land of HLI.
Contrary to the view of HLI, the rights, obligations and Considering that the 500-hectare converted land, as well as
remedies of the parties to the SDOA embodying the SDP are the 80.51-hectare SCTEX lot, should have been included in the
primarily governed by RA 6657. It should abundantly be made compulsory coverage were it not for their conversion and valid
clear that HLI was precisely created in order to comply with RA transfers, then it is only but proper that the price received for
6657, which the OSG aptly described as the “mother law” of the the sale of these lots should be given to the qualified FWBs. In
SDOA and the SDP.  It is, thus, paradoxical for HLI to shield
53
effect, the proceeds from the sale shall take the place of the
_______________
52 HLI MR, pp. 3-4.
lots.
53 TSN, August 24, 2010, p. 13. The Court, in its July 5, 2011 Decision, however, takes into
account, inter alia, the payment of taxes and expenses relating
567
to the transfer of the land, as well as HLI’s statement that most,
VOL. 660, 567 if not all, of the proceeds were used for legitimate corporate
NOVEMBER 22, 2011 purposes. Accordingly, We ordered the deduction of the
_______________
Hacienda Luisita, 54 Koruga v. Arcenas, G.R. Nos. 168332 and 169053, June 19, 2009, 590
Incorporated vs. Presidential SCRA 49, 68; citing In Re: Petition for Assistance in the Liquidation of the
Agrarian Reform Council Rural Bank of Bokod (Benguet), Inc., PDIC v. Bureau of Internal Revenue, G.R.
No. 158261, December 18, 2006, 511 SCRA 123, 141.
itself from the coverage of CARP by invoking exclusive
applicability of the Corporation Code under the guise of being a 568
corporate entity. 568 SUPREME COURT
27 | P a g e
 REPORTS We, however, find that the 3% production share should not
ANNOTATED be deducted from the proceeds of the sale of the 500-hectare
Hacienda Luisita, converted land and the 80.51-hectare SCTEX lot. The 3%
Incorporated vs. Presidential production share, like the homelots, was among the benefits
received by the FWBs as farmhands in the agricultural
Agrarian Reform Council
enterprise of HLI and, thus, should not be taken away from the
taxes and expenses relating to the transfer of titles to the
FWBs.
transferees, and the expenditures incurred by HLI and _______________
Centennary for legitimate corporate purposes, among others. 55 DAR MR, p. 33.
On this note, DAR claims that the “[l]egitimate corporate
569
expenses should not be deducted as there is no basis for it,
especially since only the auditing to be conducted on the
VOL. 660, 569
financial records of HLI will reveal the amounts to be offset NOVEMBER 22, 2011
between HLI and the FWBs.”55 Hacienda Luisita,
The contention is unmeritorious. The possibility of an Incorporated vs. Presidential
offsetting should not prevent Us from deducting the legitimate Agrarian Reform Council
corporate expenses incurred by HLI and Centennary. After all, Contrarily, the minority is of the view that as a consequence
the Court has ordered for a proper auditing “[i]n order to of the revocation of the SDP, the parties should be restored to
determine once and for all whether or not all the proceeds were their respective conditions prior to its execution and approval,
properly utilized by HLI and its subsidiary, Centennary.” In subject to the application of the principle of set-off or
this regard, DAR is tasked to “engage the services of a compensation. Such view is patently misplaced.
reputable accounting firm to be approved by the parties to audit The law on contracts, i.e. mutual restitution, does not apply
the books of HLI to determine if the proceeds of the sale of the to the case at bar. To reiterate, what was actually revoked by
500-hectare land and the 80.51-hectare SCTEX lot were this Court, in its July 5, 2011 Decision, is PARC Resolution
actually used for legitimate corporate purposes, titling expenses No. 89-12-2 approving the SDP. To elucidate, it was the SDP,
and in compliance with the August 14, 1996 Conversion not the SDOA, which was presented for approval by Tadeco to
Order.” Also, it should be noted that it is HLI which shall DAR.56 The SDP explained the mechanics of the stock
shoulder the cost of audit to reduce the burden on the part of distribution but did not make any reference nor correlation to
the FWBs. Concomitantly, the legitimate corporate expenses the SDOA. The pertinent portions of the proposal read:
incurred by HLI and Centennary, as will be determined by a MECHANICS OF STOCK DISTRIBUTION PLAN
reputable accounting firm to be engaged by DAR, shall be Under Section 31 of Republic Act No. 6657, a corporation
among the allowable deductions from the proceeds of the sale owning agricultural land may distribute among the qualified
of the 500-hectare land and the 80.51-hectare SCTEX lot. beneficiaries such proportion or percentage of its capital stock that
the value of the agricultural land actually devoted to agricultural

28 | P a g e
activities, bears in relation to the corporation’s total RESOLVED, as it is hereby resolved, to approve the stock
assets. Conformably with this legal provision, Tarlac distribution plan of TDC/HLI.
Development Corporation hereby submits for approval a stock UNANIMOUSLY APPROVED.”  (Emphasis supplied)
59

distribution plan that envisions the following:  (Terms and 57

conditions omitted; emphasis supplied) Clearly, what was approved by PARC is the SDP and not
xxxx the SDOA. There is, therefore, no basis for this Court to apply
_______________ the law on contracts to the revocation of the said PARC
56 As stated in the SDP: Resolution.
“Under Section 31 of Republic Act No. 6657, a corporation owning agricultural
land may distribute among the qualified beneficiaries such proportion or percentage IV. Just Compensation
of its capital stock that the value of the agricultural land actually devoted to In Our July 5, 2011 Decision, We stated that “HLI shall be
agricultural activities, bears in relation to the corporation’s total assets. Conformably paid just compensation for the remaining agricultural land that
with this legal provision, Tarlac Development Corporation hereby submits for
approval a stock distribution plan that envisions the following: x x x” (Rollo, p. will be transferred to DAR for land distribution to the FWBs.”
1322) We also ruled that the date of the “taking” is November 21,
57 Rollo, p. 1322; Annex “AA.” 1989, when PARC approved HLI’s SDP per PARC Resolution
570 No. 89-12-2.
In its Motion for Clarification and Partial Reconsideration,
570 SUPREME COURT HLI disagrees with the foregoing ruling and contends that the
REPORTS “taking” should be reckoned from finality of the Decision of
ANNOTATED this Court, or at the very least, the reckoning period may be
Hacienda Luisita, _______________
58 Id., at pp. 3747-3748.
Incorporated vs. Presidential 59 Id., at pp. 151.
Agrarian Reform Council
The above stock distribution plan is hereby submitted on the 571
basis of all these benefits that the farmworker-beneficiaries of VOL. 660, 571
Hacienda Luisita will receive under its provisions in addition to their NOVEMBER 22, 2011
regular compensation as farmhands in the agricultural enterprise and Hacienda Luisita,
the fringe benefits granted to them by their collective bargaining Incorporated vs. Presidential
agreement with management.” 58

Agrarian Reform Council

Also, PARC Resolution No. 89-12-2 reads as follows: tacked to January 2, 2006, the date when the Notice of
RESOLUTION APPROVING THE STOCK DISTRIBUTION Coverage was issued by the DAR pursuant to PARC
PLAN OF TARLAC DEVELOPMENT COMPANY/HACIENDA Resolution No. 2006-34-01 recalling/revoking the approval of
LUISITA INCORPORATED (TDC/HLI) the SDP.60
NOW THEREFORE, on motion duly seconded, For their part, Mallari, et al. argue that the valuation of the
land cannot be based on November 21, 1989, the date of

29 | P a g e
approval of the SDP. Instead, they aver that the date of ANNOTATED
“taking” for valuation purposes is a factual issue best left to the Hacienda Luisita,
determination of the trial courts.61 Incorporated vs. Presidential
At the other end of the spectrum, AMBALA alleges that Agrarian Reform Council
HLI should no longer be paid just compensation for the
doubt should be resolved in favor of the FWBs. As this Court
agricultural land that will be distributed to the FWBs, since the
held in Perez-Rosario v. CA:64
Manila Regional Trial Court (RTC) already rendered a decision “It is an established social and economic fact that the escalation
ordering “the Cojuangcos to transfer the control of Hacienda of poverty is the driving force behind the political disturbances that
Luisita to the Ministry of Agrarian Reform, which will have in the past compromised the peace and security of the people as
distribute the land to small farmers after compensating the well as the continuity of the national order. To subdue these acute
landowners P3.988 million.”62 In the event, however, that this disturbances, the legislature over the course of the history of the
Court will rule that HLI is indeed entitled to compensation, nation passed a series of laws calculated to accelerate agrarian
AMBALA contends that it should be pegged at forty thousand reform, ultimately to raise the material standards of living and
pesos (PhP 40,000) per hectare, since this was the same value eliminate discontent. Agrarian reform is a perceived solution to
that Tadeco declared in 1989 to make sure that the farmers will social instability. The edicts of social justice found in the
not own the majority of its stocks.63 Constitution and the public policies that underwrite them, the
extraordinary national experience, and the prevailing national
Despite the above propositions, We maintain that the date of
consciousness, all command the great departments of
“taking” is November 21, 1989, the date when PARC approved government to tilt the balance in favor of the poor and
HLI’s SDP per PARC Resolution No. 89-12-2, in view of the underprivileged whenever reasonable doubt arises in the
fact that this is the time that the FWBs were considered to own interpretation of the law. But annexed to the great and sacred
and possess the agricultural lands in Hacienda Luisita. To be charge of protecting the weak is the diametric function to put every
precise, these lands became subject of the agrarian reform effort to arrive at an equitable solution for all parties concerned: the
coverage through the stock distribution scheme only upon the jural postulates of social justice cannot shield illegal acts, nor do they
approval of the SDP, that is, November 21, 1989. Thus, such sanction false sympathy towards a certain class, nor yet should they
approval is akin to a notice of coverage ordinarily issued under deny justice to the landowner whenever truth and justice happen to
compulsory acquisition. Further, any be on her side. In the occupation of the legal questions in all agrarian
_______________ disputes whose outcomes can significantly affect societal harmony,
60 HLI MR, pp. 18-21. the considerations of social advantage must be weighed, an inquiry
61 Mallari, et al. MR, pp. 3-4. into the prevailing social interests is necessary in the adjustment of
62 AMBALA MR, p. 70. conflicting demands and expectations of the people, and the social
63 Id., at p. 71. interdependence of these interests, recognized.” (Emphasis supplied.)
572
The minority contends that it is the date of the notice of
572 SUPREME COURT coverage, that is, January 2, 2006, which is determinative of
REPORTS the just compensation HLI is entitled to for its expropriated
30 | P a g e
lands. To support its contention, it cited numerous cases where cannot, therefore, be denied that upon the approval of the SDP
the time of the taking was reckoned on the date of the issuance submitted by HLI, the agricultural lands of Hacienda Luisita
of the notice of coverage. became subject of CARP coverage. Evidently, the approval of
_______________ the SDP took the place of a notice of coverage issued under
64 G.R. No. 140796, June 30, 2006, 494 SCRA 66, 92-93.
compulsory acquisition.
573 Also, it is surprising that while the minority opines that
VOL. 660, 573 under the stock distribution option, “title to the property
NOVEMBER 22, 2011 remains with the corporate landowner, which should
Hacienda Luisita, presumably be dominated by farmers with majority
Incorporated vs. Presidential stockholdings in the corporation,” it still insists that the just
compensation that should be given to HLI is to be reckoned on
Agrarian Reform Council
January 2, 2006, the date of the issuance of the notice of
However, a perusal of the cases cited by the minority would
coverage, even after it found that the FWBs did not have the
reveal that none of them involved the stock distribution
majority stockholdings in HLI contrary to the supposed
scheme. Thus, said cases do not squarely apply to the instant
avowed policy of the law. In effect, what the minority wants is
case. Moreover, it should be noted that it is precisely because 574
the stock distribution option is a distinctive mechanism under 574 SUPREME COURT
RA 6657 that it cannot be treated similarly with that of
REPORTS
compulsory land acquisition as these are two (2) different
modalities under the agrarian reform program. As We have
ANNOTATED
stated in Our July 5, 2011 Decision, RA 6657 “provides two Hacienda Luisita,
(2) alternative modalities, i.e., land or stock transfer, pursuant Incorporated vs. Presidential
to either of which the corporate landowner can comply with Agrarian Reform Council
CARP.” to prejudice the FWBs twice. Given that the FWBs should have
In this regard, it should be noted that when HLI submitted had majority stockholdings in HLI but did not, the minority
the SDP to DAR for approval, it cannot be gainsaid that the still wants the government to pay higher just compensation to
stock distribution scheme is clearly HLI’s preferred modality in HLI. Even if it is the government which will pay the just
order to comply with CARP. And when the SDP was approved, compensation to HLI, this will also affect the FWBs as they
stocks were given to the FWBs in lieu of land distribution. As will be paying higher amortizations to the government if the
aptly observed by the minority itself, “[i]nstead of “taking” will be considered to have taken place only on
expropriating lands, what the government took and distributed January 2, 2006.
to the FWBs were shares of stock of petitioner HLI in The foregoing notwithstanding, it bears stressing that the
proportion to the value of the agricultural lands that should DAR’s land valuation is only preliminary and is not, by any
have been expropriated and turned over to the FWBs.” It means, final and conclusive upon the landowner. The

31 | P a g e
landowner can file an original action with the RTC acting as a their land interests to third parties, including HLI, regardless of
special agrarian court to determine just compensation. The whether they have fully paid for the lands or not.
court has the right to review with finality the determination in The proposition is erroneous. Sec. 27 of RA 6657 states:
the exercise of what is admittedly a judicial function.65 “SEC. 27. Transferability of Awarded Lands.—Lands acquired
A view has also been advanced that HLI should pay the by beneficiaries under this Act may not be sold, transferred or
qualified FWBs rental for the use and possession of the land up conveyed except through hereditary succession, or to the
to the time it surrenders possession and control over these government, or to the LBP, or to other qualified beneficiaries for
a period of ten (10) years: Provided, however, That the children or
lands. What this view fails to consider is the fact that the FWBs
the spouse of the transferor shall have a right to repurchase the land
are also stockholders of HLI prior to the revocation of PARC from the government or LBP within a period of two (2) years. Due
Resolution No. 89-12-2. Also, the income earned by the notice of the availability of the land shall be given by the LBP to the
corporation from its possession and use of the land ultimately Barangay Agrarian Reform Committee (BARC) of the barangay
redounded to the benefit of the FWBs based on its business where the land is situated. The Provincial Agrarian Coordinating
operations in the form of salaries, benefits voluntarily granted Committee (PARCCOM), as herein provided, shall, in turn, be given
by HLI and other fringe benefits under their Collective due notice thereof by the BARC.
Bargaining Agreement. That being so, there would be unjust If the land has not yet been fully paid by the beneficiary, the
enrichment on the part of the FWBs if HLI will still be required right to the land may be transferred or conveyed, with prior approval
to pay rent for the use of the land in question. of the DAR, to any heir of the beneficiary or to any other
V. Sale to Third Parties beneficiary who, as a condition for such transfer or conveyance,
shall cultivate the land himself. Failing compliance herewith, the
There is a view that since the agricultural lands in Hacienda
land shall be transferred to the LBP which shall give due notice of
Luisita were placed under CARP coverage through the SDOA the availability of the land in the manner specified in the
scheme on May 11, 1989, then the 10-year period pro- immediately preceding paragraph.
_______________
65 Heirs of Lorenzo and Carmen Vidad v. Land Bank of the Philippines,
In the event of such transfer to the LBP, the latter shall
G.R. No. 166461, April 30, 2010, 619 SCRA 609. compensate the beneficiary in one lump sum for the amounts the
latter has already paid, together with the value of improvements he
575 has made on the land.” (Emphasis supplied.)
VOL. 660, 575
NOVEMBER 22, 2011 To implement the above-quoted provision, inter alia, DAR
issued Administrative Order No. 1, Series of 1989 (DAO 1)
Hacienda Luisita,
entitled Rules and Procedures Governing Land Transactions.
Incorporated vs. Presidential Said Rules set forth the rules on validity of land transactions, to
Agrarian Reform Council wit:576
hibition on the transfer of awarded lands under RA 6657 lapsed 576 SUPREME COURT
on May 10, 1999, and, consequently, the qualified FWBs REPORTS
should already be allowed to sell these lands with respect to
ANNOTATED
32 | P a g e
 Hacienda Luisita, Agrarian Reform
Incorporated vs. Presidential Council
Agrarian Reform Council 4. Sale, transfer, conveyance or change of nature of the land outside of
urban centers and city limits either in whole or in part as of June 15,
II. RULES ON VALIDITY OF LAND TRANSACTIONS
1988, when R.A. 6657 took effect, except as provided for under DAR
A. The following transactions are valid:
Administrative Order No. 15, series of 1988.
1. Those executed by the original landowner in favor of the qualified
5. Sale, transfer or conveyance by beneficiary of the right to use or any
beneficiary from among those certified by DAR.
other usufructuary right over the land he acquired by virtue of being a
2. Those in favor of the government, DAR or the Land Bank of the
beneficiary, in order to circumvent the law.
Philippines.
        x x x x (Emphasis supplied.)
3. Those covering lands retained by the landowner under Section 6 of
R.A. 6657 duly certified by the designated DAR Provincial Agrarian
Reform Officer (PARO) as a retention area, executed in favor of Without a doubt, under RA 6657 and DAO 1, the awarded
transferees whose total landholdings inclusive of the land to be lands may only be transferred or conveyed after ten (10) years
acquired do not exceed five (5) hectares; subject, however, to the from the issuance and registration of the emancipation patent
right of pre-emption and/or redemption of tenant/lessee under Section
11 and 12 of R.A. 3844, as amended. (EP) or certificate of land ownership award (CLOA).
xxxx Considering that the EPs or CLOAs have not yet been issued to
4. Those executed by beneficiaries covering lands acquired under any the qualified FWBs in the instant case, the 10-year prohibitive
agrarian reform law in favor of the government, DAR, LBP or other
qualified beneficiaries certified by DAR. period has not even started. Significantly, the reckoning point
5. Those executed after ten (10) years from the issuance and is the issuance of the EP or CLOA, and not the placing of
registration of the Emancipation Patent or Certificate of Land the agricultural lands under CARP coverage.
Ownership Award.
B. The following transactions are not valid: Moreover, if We maintain the position that the qualified
1. Sale, disposition, lease management contract or transfer of possession FWBs should be immediately allowed the option to sell or
of private lands executed by the original landowner prior to June 15, convey the agricultural lands in Hacienda Luisita, then all
1988, which are registered on or before September 13, 1988, or those
executed after June 15, 1988, covering an area in excess of the five- efforts at agrarian reform would be rendered nugatory by this
hectare retention limit in violation of R.A. 6657. Court, since, at the end of the day, these lands will just be
2. Those covering lands acquired by the beneficiary under R.A. 6657 and transferred to persons not entitled to land distribution under
executed within ten (10) years from the issuance and registration of
an Emancipation Patent or Certificate of Land Ownership Award. CARP. As aptly noted by the late Senator Neptali Gonzales
3. Those executed in favor of a person or persons not qualified to acquire during the Joint Congressional Conference Committee on the
land under R.A. 6657.577 Comprehensive Agrarian Reform Program Bills:
SEN. GONZALES. My point is, as much as possible let the
VOL. 660, 577 said lands be distributed under CARP remain with the
NOVEMBER beneficiaries and their heirs because that is the lesson that we have
22, 2011 to learn from PD No. 27. If you will talk with the Congressmen
Hacienda Luisita, representing Nueva Ecija, Pampanga and Central Luzon provinces,
Incorporated vs. law or no law, you will find out that more than one-third of the
original, of the lands distributed under PD 27 are no longer
Presidential
33 | P a g e
578 leaseholder and shall lose his right to be a beneficiary under this Act. In case the
tenant chooses to be a beneficiary in another agricultural land, he loses his right
578 SUPREME COURT as a leaseholder to the land retained by the landowner. The tenant must exercise
REPORTS this option within a period

ANNOTATED 579
Hacienda Luisita, VOL. 660, 579
Incorporated vs. Presidential NOVEMBER 22, 2011
Agrarian Reform Council Hacienda Luisita,
owned, possessed or being worked by the grantees or the Incorporated vs. Presidential
awardees of the same, something which we ought to avoid under Agrarian Reform Council
the CARP bill that we are going to enact.  (Emphasis supplied.)
66
this Court, in effect, would be allowing HLI, the previous
Worse, by raising that the qualified beneficiaries may sell landowner, to own more than five (5) hectares of agricultural
their interest back to HLI, this smacks of outright indifference land, which We cannot countenance. There is a big difference
to the provision on retention limits67 under RA 6657, as between the ownership of agricultural lands by HLI under the
_______________ stock distribution scheme and its eventual acquisition of the
66 Joint Congressional Conference Committee on the Comprehensive agricultural lands from the qualified FWBs under the proposed
Agrarian Reform Program Bills, May 26, 1988, pp. 45-46.
67 SEC. 6. Retention Limits.—Except as otherwise provided in this Act,
buy-back scheme. The rule on retention limits does not apply to
no person may own or retain, directly, any public or private agricultural land, the former but only to the latter in view of the fact that the
the size of which shall vary according to factors governing a viable family-sized stock distribution scheme is sanctioned by Sec. 31 of RA 6657,
farm, such as commodity produced, terrain, infrastructure, and soil fertility as which specifically allows corporations to divest a proportion of
determined by the Presidential Agrarian Reform Council (PARC) created
hereunder, but in no case shall the retention by the landowner exceed five (5)
their capital stock that “the agricultural land, actually devoted
hectares. Three (3) hectares may be awarded to each child of the landowner, to agricultural activities, bears in relation to the company’s
subject to the following qualifications: (1) that he is at least fifteen (15) years of total assets.” On the other hand, no special rules exist under RA
age; and (2) that he is actually tilling the land or directly managing the 6657 concerning the proposed buy-back scheme; hence, the
farm: Provided, That landowners whose lands have been covered by
Presidential Decree No. 27 shall be allowed to keep the area originally retained general rules on retention limits should apply.
by them thereunder; Provided, further, That original homestead grantees or Further, the position that the qualified FWBs are now free
direct compulsory heirs who still own the original homestead at the time of the to transact with third parties concerning their land interests,
approval of this Act shall retain the same areas as long as they continue to regardless of whether they have fully paid for the lands or not,
cultivate said homestead.
The right to choose the area to be retained, which shall be compact or also transgresses the second paragraph of Sec. 27 of RA 6657,
contiguous, shall pertain to the landowner: Provided, however, That in case the which plainly states that “[i]f the land has not yet been fully
area selected for retention by the landowner is tenanted, the tenant shall have paid by the beneficiary, the right to the land may be transferred
the option to choose whether to remain therein or be a beneficiary in the same or conveyed, with prior approval of the DAR, to any heir of the
or another agricultural land with similar or comparable features. In case the
tenant chooses to remain in the retained area, he shall be considered a beneficiary or to any other beneficiary who, as
_______________

34 | P a g e
 of one (1) year from the time the landowner manifests his choice of the area “Where the law is clear and unambiguous, it must be taken to
for retention. mean exactly what it says and the court has no choice but to see to it
In all cases, the security of tenure of the farmers or farm workers on the
that its mandate is obeyed. Where the law is clear and free from
land prior to the approval of this Act shall be respected.
Upon the effectivity of this Act, any sale, disposition, lease, management doubt or ambiguity, there is no room for construction or
contract or transfer of possession of private lands executed by the original interpretation. Thus, where what is not clearly provided in the law
landowner in violation of this Act shall be null and void: Provided, is read into the law by construction because it is more logical and
however, That those executed prior to this Act shall be valid only when wise, it would be to encroach upon legislative prerogative to
registered with the Register of Deeds within a period of three (3) months after define the wisdom of the law, which is judicial legislation. For
the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the whether a statute is wise or expedient is not for the courts to
DAR within thirty (30) days of any transaction involving agricultural lands in
excess of five (5) hectares.
determine. Courts must administer the law, not as
_______________
580 68 Commissioner of Internal Revenue v. Central Luzon Drug Corp., G.R. No.
148512, June 26, 2006, 492 SCRA 575, 581.
580 SUPREME COURT 69 Philippine Amusement & Gaming Corp. v. Philippine Gaming Jurisdiction,
REPORTS Inc., et al., G.R. No. 177333, April 24, 2009, 586 SCRA 658, 664-665.
70 Fort Bonifacio Development Corporation v. Commissioner of Internal
ANNOTATED Revenue, G.R. Nos. 158885 & 170680, October 2, 2009, 602 SCRA 159, 169.
Hacienda Luisita,
581
Incorporated vs. Presidential
Agrarian Reform Council VOL. 660, 581
a condition for such transfer or conveyance, shall cultivate the NOVEMBER 22, 2011
land himself. Failing compliance herewith, the land shall be Hacienda Luisita,
transferred to the LBP x x x.” When the words and phrases in Incorporated vs. Presidential
the statute are clear and unequivocal, the law is applied Agrarian Reform Council
according to its express terms.68 Verba legis non est they think it ought to be but as they find it and without regard to
recedendum, or from the words of a statute there should be no consequences.”  (Emphasis supplied.)
71

departure.69
The minority, however, posits that “[t]o insist that the And as aptly stated by Chief Justice Renato Corona in his
FWBs’ rights sleep for a period of ten years is unrealistic, and Dissenting Opinion in Ang Ladlad LGBT Party v. COMELEC:72
may seriously deprive them of real opportunities to capitalize “Regardless of the personal beliefs and biases of its individual
and maximize the victory of direct land distribution.” By members, this Court can only apply and interpret the Constitution
and the laws. Its power is not to create policy but to recognize,
insisting that We disregard the ten-year restriction under the
review or reverse the policy crafted by the political departments if
law in the case at bar, the minority, in effect, wants this Court and when a proper case is brought before it. Otherwise, it will tread
to engage in judicial legislation, which is violative of the on the dangerous grounds of judicial legislation.”
principle of separation of powers.70 The discourse by Ruben E.
Agpalo, in his book on statutory construction, is enlightening:

35 | P a g e
 Considerably, this Court is left with no other recourse but to lives of the FWBs through greater productivity of agricultural lands.
respect and apply the law. We disagree.
VI. Grounds for Revocation of the SDP Sec. 2 of RA 6657 states:
AMBALA and FARM reiterate that improving the SECTION 2. Declaration of Principles and Policies.—
It is the policy of the State to pursue a Comprehensive
economic status of the FWBs is among the legal obligations of
Agrarian Reform Program (CARP). The welfare of the
HLI under the SDP and is an imperative imposition by RA landless farmers and farm workers will receive the highest
6657 and DAO 10.73 FARM further asserts that “[i]f that consideration to promote social justice and to move the nation
minimum threshold is not met, why allow [stock distribution towards sound rural development and industrialization, and
option] at all, unless the purpose is not social justice but a the establishment of owner cultivatorship of economic-sized
political accommodation to the powerful.”74 farms as the basis of Philippine agriculture.
Contrary to the assertions of AMBALA and FARM, To this end, a more equitable distribution and ownership
nowhere in the SDP, RA 6657 and DAO 10 can it be inferred of land, with due regard to the rights of landowners to just
that improving the economic status of the FWBs is among the compensation and to the ecological needs of the nation, shall
legal obligations of HLI under the SDP or is an imperative be undertaken to provide farmers and farm workers with the
imposition by RA 6657 and DAO 10, a violation of which opportunity to enhance their dignity and improve the
_______________ quality of their lives through greater productivity of
71 R.E. Agpalo, STATUTORY CONSTRUCTIOn 125 (5th edition, 2003); agricultural lands.
citations omitted. The agrarian reform program is founded on the right of
72 G.R. No. 190582, April 8, 2010, 618 SCRA 33. farmers and regular farm workers, who are landless, to own
73 AMBALA MR, pp. 65-66; FARM MR, p. 60. directly or collectively the lands they till or, in the case of
74 FARM MR, p. 60.
other farm workers, to receive a share of the fruits thereof. To
582 this end, the State shall encourage the just distribution of all
582 SUPREME COURT agricultural lands, subject to the priorities and retention limits
set forth in this Act, having taken into account ecological,
REPORTS
developmental, and equity considerations, and subject to the
ANNOTATED payment of just compensation. The State shall respect the
Hacienda Luisita, right of small landowners and shall provide incentives for
Incorporated vs. Presidential voluntary land-sharing.
Agrarian Reform Council Paragraph 2 of the above-quoted provision specifically mentions
would justify discarding the stock distribution option. As We that “a more equitable distribution and ownership of land x x x shall
be undertaken to provide farmers and farm workers with
have painstakingly explained in Our July 5, 2011 Decision:
the opportunity to enhance their dignity and improve the quality of
“In the Terminal Report adopted by PARC, it is stated that the 583
SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as
the said plan failed to enhance the dignity and improve the quality of VOL. 660, 583
NOVEMBER 22, 2011
36 | P a g e
 Hacienda Luisita, that the shares of stocks were given by HLI to the FWBs for free.
Incorporated vs. Presidential Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from
Agrarian Reform Council the SDP as HLI has not anyway earned profits through the years, it
their lives through greater productivity of agricultural lands.” Of note cannot be over-emphasized that, as a matter of common business
is the term “opportunity” which is defined as a favorable chance or sense, no corporation could guarantee a profitable run all the time.
opening offered by circumstances. Considering this, by no stretch of As has been suggested, one of the key features of an SDP of
imagination can said provision be construed as a guarantee in 584
improving the lives of the FWBs. At best, it merely provides for a
possibility or favorable chance of uplifting the economic status of the 584 SUPREME COURT
FWBs, which may or may not be attained. REPORTS
Pertinently, improving the economic status of the FWBs is ANNOTATED
neither among the legal obligations of HLI under the SDP nor an
imperative imposition by RA 6657 and DAO 10, a violation of which Hacienda Luisita,
would justify discarding the stock distribution option. Nothing in that Incorporated vs. Presidential
option agreement, law or department order indicates otherwise. Agrarian Reform Council
Significantly, HLI draws particular attention to its having paid its a corporate landowner is the likelihood of the corporate vehicle not
FWBs, during the regime of the SDP (1989-2005), some PhP 3 earning, or, worse still, losing money.
billion by way of salaries/wages and higher benefits exclusive of free The Court is fully aware that one of the criteria under DAO 10
hospital and medical benefits to their immediate family. And for the PARC to consider the advisability of approving a stock
attached as Annex “G” to HLI’s Memorandum is the certified true distribution plan is the likelihood that the plan “would result in
report of the finance manager of Jose Cojuangco & Sons increased income and greater benefits to [qualified beneficiaries]
Organizations-Tarlac Operations, captioned as “HACIENDA than if the lands were divided and distributed to them
LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand individually.” But as aptly noted during the oral arguments, DAO 10
Pesos) Since the Stock Option was Approved by PARC/CARP,” ought to have not, as it cannot, actually exact assurance of success on
detailing what HLI gave their workers from 1989 to 2005. The sum something that is subject to the will of man, the forces of nature or
total, as added up by the Court, yields the following numbers: Total the inherent risky nature of business.  Just like in actual land
75

Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; distribution, an SDP cannot guarantee, as indeed the SDOA does not
Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP guarantee, a comfortable life for the FWBs. The Court can take
303,040. The cash out figures, as stated in the report, include the cost judicial notice of the fact that there were many instances wherein
of homelots; the PhP 150 million or so representing 3% of the gross after a farmworker beneficiary has been awarded with an agricultural
produce of the hacienda; and the PhP 37.5 million representing 3% land, he just subsequently sells it and is eventually left with nothing
from the proceeds of the sale of the 500-hectare converted lands. in the end.
While not included in the report, HLI manifests having given the In all then, the onerous condition of the FWBs’ economic status,
FWBs 3% of the PhP 80 million paid for the 80 hectares of land their life of hardship, if that really be the case, can hardly be
traversed by the SCTEX. On top of these, it is worth remembering attributed to HLI and its SDP and provide a valid ground for the
plan’s revocation.” (Citations omitted; emphasis in the original.)

37 | P a g e
 This Court, despite the above holding, still affirmed the reads, “The approval by the PARC of a plan for such stock
revocation by PARC of its approval of the SDP based on the distribution, and its initial implementation, shall be deemed
following grounds: (1) failure of HLI to fully comply with its compliance with the land distribution requirement of the
undertaking to distribute homelots to the FWBs under the SDP; CARP.”79
(2) distribution of shares of stock to the FWBs based on the Again, the matters raised by Mallari, et al. have been
number of “man days” or “number of days worked” by the extensively discussed by the Court in its July 5, 2011 Decision.
FWB in a year’s time; and (3) 30-year timeframe for the As stated:
implementation or distribution of the shares of stock to the On Titles to Homelots
FWBs. Under RA 6657, the distribution of homelots is required only for
Just the same, Mallari, et al. posit that the homelots required corporations or business associations owning or operating farms
to be distributed have all been distributed pursuant to the which opted for land distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of
SDOA, and that what merely remains to be done is the release
Cooperatives.—The individual members of the cooperatives
of title from the Register of Deeds.76 They further or corporations mentioned in the preceding section shall be
_______________
75 TSN, August 24, 2010, p. 125. provided with homelots and small farmlots for their family
76 Mallari, et al. MR, p. 3. use, to be taken from the land owned by the cooperative or
corporation.
585 The “preceding section” referred to in the above-quoted provision
VOL. 660, 585 is as follows:
NOVEMBER 22, 2011 SEC. 29. Farms Owned or Operated by Corporations
Hacienda Luisita, or Other Business Associations.—In the case of farms owned
or
Incorporated vs. Presidential _______________
Agrarian Reform Council 77 Id.
assert that there has been no dilution of shares as the corporate 78 Id.
79 Id.
records would show that if ever not all of the 18,804.32 shares
were given to the actual original FWB, the recipient of the 586
difference is the next of kin or children of said original
586 SUPREME COURT
FWB.77 Thus, they submit that since the shares were given to
REPORTS
the same “family beneficiary,” this should be deemed as
substantial compliance with the provisions of Sec. 4 of DAO ANNOTATED
10.78 Also, they argue that there has been no violation of the Hacienda Luisita,
three-month period to implement the SDP as mandated by Sec. Incorporated vs. Presidential
11 of DAO, since this provision must be read in light of Sec. 10 Agrarian Reform Council
of Executive Order No. 229, the pertinent portion of which

38 | P a g e
 operated by corporations or other business associations, the that the qualified family beneficiaries were already provided
following rules shall be observed by the PARC. the 240 square meter homelots.
In general, lands shall be distributed directly to the Atty. Asuncion: We will, your Honor please.587
individual worker-beneficiaries.
In case it is not economically feasible and sound to divide VOL. 660, 587
the land, then it shall be owned collectively by the worker- NOVEMBER 22, 2011
beneficiaries who shall form a workers’ cooperative or Hacienda Luisita,
association which will deal with the corporation or business Incorporated vs. Presidential
association. Until a new agreement is entered into by and
between the workers’ cooperative or association and the Agrarian Reform Council
corporation or business association, any agreement existing at Other than the financial report, however, no other substantial
the time this Act takes effect between the former and the proof showing that all the qualified beneficiaries have received
previous landowner shall be respected by both the workers’ homelots was submitted by HLI. Hence, this Court is constrained to
cooperative or association and the corporation or business rule that HLI has not yet fully complied with its undertaking to
association. distribute homelots to the FWBs under the SDP.
Noticeably, the foregoing provisions do not make reference to On “Man Days” and the Mechanics of Stock Distribution
corporations which opted for stock distribution under Sec. 31 of RA In our review and analysis of par. 3 of the SDOA on the
6657. Concomitantly, said corporations are not obliged to provide for mechanics and timelines of stock distribution, We find that
it except by stipulation, as in this case. it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
Under the SDP, HLI undertook to “subdivide and allocate for free 3.  At the end of each fiscal year, for a period of 30
and without charge among the qualified family-beneficiaries x x x years, the SECOND PARTY [HLI] shall arrange with the
residential or homelots of not more than 240 sq. m. each, with each FIRST PARTY [TDC] the acquisition and distribution to the
family beneficiary being assured of receiving and owning a homelot THIRD PARTY [FWBs] on the basis of number of days
in the barrio or barangay where it actually resides,” “within a worked and at no cost to them of one-thirtieth (1/30) of
reasonable time.” 118,391,976.85 shares of the capital stock of the SECOND
More than sixteen (16) years have elapsed from the time the SDP PARTY that are presently owned and held by the FIRST
was approved by PARC, and yet, it is still the contention of the PARTY, until such time as the entire block of 118,391,976.85
FWBs that not all was given the 240-square meter homelots and, of shares shall have been completely acquired and distributed to
those who were already given, some still do not have the the THIRD PARTY.
corresponding titles. Based on the above-quoted provision, the distribution of the
During the oral arguments, HLI was afforded the chance to refute shares of stock to the FWBs, albeit not entailing a cash out from
the foregoing allegation by submitting proof that the FWBs were them, is contingent on the number of “man days,” that is, the number
already given the said homelots: of days that the FWBs have worked during the year. This formula
Justice Velasco: x x x There is also an allegation that the deviates from Sec. 1 of DAO 10, which decrees the distribution of
farmer beneficiaries, the qualified family beneficiaries were equal number of shares to the FWBs as the minimum ratio of shares
not given the 240 square meters each. So, can you also [prove] of stock for purposes of compliance with Sec. 31 of RA 6657. As
stated in Sec. 4 of DAO 10:

39 | P a g e
 Section 4. Stock Distribution Plan.—The [SDP] On the other hand, the second set or category of shares partakes
submitted by the corporate landowner-applicant shall provide of a gratuitous extra grant, meaning that this set or category
for the distribution of an equal number of shares of the constitutes an augmentation share/s that the corporate landowner
same class and value, with the same rights and features as may give under an additional stock distribution scheme, taking into
all other shares, to each of the qualified beneficiaries. This account such variables as rank, seniority, salary, position and like
distribution plan in all cases, shall be at least the minimum factors which the management, in the exercise of its sound
ratio for purposes of compliance with Section 31 of R.A. No. discretion, may deem desirable.
6657. Before anything else, it should be stressed that, at the time PARC
On top of the minimum ratio provided under Section 3 of approved HLI’s SDP, HLI recognized 6,296 individuals as qualified
this Implementing Guideline, the corporate landowner- FWBs. And under the 30-year stock distribution program envisaged
applicant may adopt additional stock distribution schemes under the plan, FWBs who came in after 1989, new FWBs in fine,
taking into account factors such as rank, sen- may be accommodated, as they appear to have in fact been
588 accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original
588 SUPREME COURT 1989 FWBs shall depend on the number of “man days,” HLI violated
REPORTS the afore-quoted rule on stock distribution and effectively deprived
ANNOTATED the FWBs of equal shares of stock in the corporation, for, in net
Hacienda Luisita, effect, these 6,296 qualified FWBs, who theoretically had given up
their rights to the land that could have been distributed to them,
Incorporated vs. Presidential
suffered a dilution of their due share entitlement. As has been
Agrarian Reform Council observed during the oral arguments, HLI has chosen to use the shares
iority, salary, position and other circumstances which may earmarked for farmworkers as reward system chips to water down
be deemed desirable as a matter of sound company policy. the shares of the original 6,296 FWBs. Particularly: 589
The above proviso gives two (2) sets or categories of shares of
stock which a qualified beneficiary can acquire from the corporation VOL. 660, 589
under the SDP. The first pertains, as earlier explained, to the NOVEMBER 22, 2011
mandatory minimum ratio of shares of stock to be distributed to the
FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio
Hacienda Luisita,
contemplates of that “proportion of the capital stock of the Incorporated vs. Presidential
corporation that the agricultural land, actually devoted to Agrarian Reform Council
agricultural activities, bears in relation to the company’s total Justice Abad: If the SDOA did not take place, the other
assets.” It is this set of shares of stock which, in line with Sec. 4 of thing that would have happened is that there would be CARP?
DAO 10, is supposed to be allocated “for the distribution of an equal Atty. Dela Merced: Yes, Your Honor.
number of shares of stock of the same class and value, with the same Justice Abad: That’s the only point I want to know
rights and features as all other shares, to each of the qualified x x x. Now, but they chose to enter SDOA instead of placing
beneficiaries.” the land under CARP. And for that reason those who would
have gotten their shares of the land actually gave up their

40 | P a g e
 rights to this land in place of the shares of the stock, is that Agrarian Reform Council
correct? Atty. Dela Merced: None, Your Honor, I was referring,
Atty. Dela Merced: It would be that way, Your Honor. Your Honor, to the original… (interrupted)
Justice Abad: Right now, also the government, in a way, Justice Abad: So why is it that the rights of those who
gave up its right to own the land because that way the gave up their lands would be diluted, because the company
government takes own [sic] the land and distribute it to the has chosen to use the shares as reward system for new
farmers and pay for the land, is that correct? workers who come in? It is not that the new workers, in effect,
Atty. Dela Merced: Yes, Your Honor. become just workers of the corporation whose stockholders
Justice Abad: And then you gave thirty-three percent were already fixed. The TADECO who has shares there about
(33%) of the shares of HLI to the farmers at that time that sixty six percent (66%) and the five thousand four hundred
numbered x x x those who signed five thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain
ninety eight (5,498) beneficiaries, is that correct? to me. Why, why will you x x x what right or where did you
Atty. Dela Merced: Yes, Your Honor. get that right to use this shares, to water down the shares of
Justice Abad: But later on, after assigning them their those who should have been benefited, and to use it as a
shares, some workers came in from 1989, 1990, 1991, 1992 reward system decided by the company?
and the rest of the years that you gave additional shares who From the above discourse, it is clear as day that the original 6,296
were not in the original list of owners? FWBs, who were qualified beneficiaries at the time of the approval
Atty. Dela Merced: Yes, Your Honor. of the SDP, suffered from watering down of shares. As determined
Justice Abad: Did those new workers give up any right earlier, each original FWB is entitled to 18,804.32 HLI shares. The
that would have belong to them in 1989 when the land was original FWBs got less than the guaranteed 18,804.32 HLI shares per
supposed to have been placed under CARP? beneficiary, because the acquisition and distribution of the HLI
Atty. Dela Merced: If you are talking or referring… shares were based on “man days” or “number of days worked” by the
(interrupted) FWB in a year’s time. As explained by HLI, a beneficiary needs to
Justice Abad: None! You tell me. None. They gave up work for at least 37 days in a fiscal year before he or she becomes
no rights to land? entitled to HLI shares. If it falls below 37 days, the FWB,
Atty. Dela Merced: They did not do the same thing as we unfortunately, does not get any share at year end. The number of HLI
did in 1989, Your Honor. shares distributed varies depending on the number of days the FWBs
Justice Abad: No, if they were not workers in 1989 what were allowed to work in one year. Worse, HLI hired farmworkers in
land did they give up? None, if they become workers later addition to the original 6,296 FWBs, such that, as indicated in the
on.590 Compliance dated August 2, 2010 submitted by HLI to the Court, the
total number of farmworkers of HLI as of said date stood at 10,502.
590 SUPREME COURT All these farmworkers, which include the original 6,296 FWBs, were
REPORTS given shares out of the 118,931,976.85 HLI shares representing the
ANNOTATED 33.296% of the total outstanding capital stock of HLI. Clearly, the
Hacienda Luisita, minimum individual allocation of each original FWB of 18,804.32
Incorporated vs. Presidential

41 | P a g e
shares was diluted as a result of the use of “man days” and the hiring Reinforcing this conclusion is the 60-day stock transfer recording
of additional farmworkers. (with the SEC) requirement reckoned from the implementation of the
Going into another but related matter, par. 3 of the SDOA SDP.
expressly providing for a 30-year timeframe for HLI-to-FWBs stock To the Court, there is a purpose, which is at once discernible as it
transfer is an arrangement contrary to what Sec. 11 of DAO 10 is practical, for the three-month threshold. Remove this timeline and
prescribes. Said Sec. 11 provides for the implementation of the ap- the corporate landowner can veritably evade compliance with
591 agrarian reform by simply deferring to absurd limits the
implementation of the stock distribution scheme.
VOL. 660, 591 The argument is urged that the thirty (30)-year distribution
NOVEMBER 22, 2011 program is justified by the fact that, under Sec. 26 of RA 6657,
Hacienda Luisita, payment by beneficiaries of land distribution under CARP shall be
Incorporated vs. Presidential made in thirty (30) annual amortizations. To HLI, said section
provides a justifying dimension to its 30-year stock distribution
Agrarian Reform Council
program.
proved stock distribution plan within three (3) months from receipt
HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is
by the corporate landowner of the approval of the plan by PARC. In
obviously misplaced as the said provision clearly deals with land
fact, based on the said provision, the transfer of the shares of stock in
distribution.592
the names of the qualified FWBs should be recorded in the stock and
transfer books and must be submitted to the SEC within sixty (60) 592 SUPREME COURT
days from implementation. As stated:
REPORTS
Section 11. Implementation/Monitoring of Plan.—The
approved stock distribution plan shall be implemented within ANNOTATED
three (3) months from receipt by the corporate landowner- Hacienda Luisita,
applicant of the approval thereof by the PARC, and the Incorporated vs. Presidential
transfer of the shares of stocks in the names of the qualified Agrarian Reform Council
beneficiaries shall be recorded in stock and transfer books SEC. 26. Payment by Beneficiaries.—Lands awarded
and submitted to the Securities and Exchange Commission pursuant to this Act shall be paid for by the beneficiaries to
(SEC) within sixty (60) days from the said implementation the LBP in thirty (30) annual amortizations x x x.
of the stock distribution plan. Then, too, the ones obliged to pay the LBP under the said
It is evident from the foregoing provision that the provision are the beneficiaries. On the other hand, in the instant case,
implementation, that is, the distribution of the shares of stock to the aside from the fact that what is involved is stock distribution, it is the
FWBs, must be made within three (3) months from receipt by HLI of corporate landowner who has the obligation to distribute the shares
the approval of the stock distribution plan by PARC. While neither of stock among the FWBs.
of the clashing parties has made a compelling case of the thrust of Evidently, the land transfer beneficiaries are given thirty (30)
this provision, the Court is of the view and so holds that the intent is years within which to pay the cost of the land thus awarded them to
to compel the corporate landowner to complete, not merely initiate, make it less cumbersome for them to pay the government. To be
the transfer process of shares within that three-month timeframe. sure, the reason underpinning the 30-year accommodation does not

42 | P a g e
apply to corporate landowners in distributing shares of stock to the lands for as long as they remain as stockholders of HLI. In Our
qualified beneficiaries, as the shares may be issued in a much shorter July 5, 2011 Decision, this Court made the following
period of time. observations:
Taking into account the above discussion, the revocation of the “There is, thus, nothing unconstitutional in the formula
SDP by PARC should be upheld for violating DAO 10. It bears prescribed by RA 6657. The policy on agrarian reform is that
stressing that under Sec. 49 of RA 6657, the PARC and the DAR control over the agricultural land must always be in the hands of
have the power to issue rules and regulations, substantive or the farmers. Then it falls on the shoulders of DAR and PARC to see
procedural. Being a product of such rule-making power, DAO 10 has to it the farmers should always own majority of the common shares
the force and effect of law and must be duly complied with. The entitled to elect the members of the board of directors to ensure that
PARC is, therefore, correct in revoking the SDP. Consequently, the the farmers will have a clear majority in the board. Before the SDP is
PARC Resolution No. 89-12-2 dated November 21, l989 approving approved, strict scrutiny of the proposed SDP must always be
the HLI’s SDP is nullified and voided. (Citations omitted; emphasis undertaken by the DAR and PARC, such that the value of the
in the original.) agricultural land contributed to the corporation must always be more
than 50% of the total assets of the corporation to ensure that the
Based on the foregoing ruling, the contentions of Mallari, et
majority of the members of the board of directors are composed of
al. are either not supported by the evidence on record or are the farmers. The PARC composed of the President of the Philippines
utterly misplaced. There is, therefore, no basis for the Court to and cabinet secretaries must see to it that control over the board of
reverse its ruling affirming PARC Resolution No. 2005-32-01 directors rests with the farmers by rejecting the inclusion of non-
and PARC Resolution No. 2006-34-01, revoking the previous agricultural assets which will yield the majority in the board of
approval of the SDP by PARC. directors to non-farmers. Any deviation, however, by PARC or DAR
VII. Control over Agricultural Lands from the correct application of the formula prescribed by the second
After having discussed and considered the different paragraph of Sec. 31 of RA 6675 does not make said provision
contentions raised by the parties in their respective motions, constitutionally infirm. Rather, it is the application of said provision
We are now left to contend with one crucial issue in the case at that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on
bar, the constitutional policy of ensuring control by the farmers.”
593 (Emphasis supplied.)
VOL. 660, 593 In line with Our finding that control over agricultural lands
NOVEMBER 22, 2011 must always be in the hands of the farmers, We reconsider our
Hacienda Luisita, ruling that the qualified FWBs should be given an option to
Incorporated vs. Presidential remain as stockholders of HLI, inasmuch as these qualified
Agrarian Reform Council FWBs will never gain control given the present proportion of
that is, control over the agricultural lands by the qualified shareholdings in HLI.594
FWBs. 594 SUPREME COURT
Upon a review of the facts and circumstances, We realize REPORTS
that the FWBs will never have control over these agricultural
43 | P a g e
 ANNOTATED corporation; the FWBs who remain as stockholders of HLI will
Hacienda Luisita, be treated as ordinary stockholders and will no longer be under
Incorporated vs. Presidential the protective mantle of RA 6657.595
Agrarian Reform Council VOL. 660, 595
A revisit of HLI’s Proposal for Stock Distribution under NOVEMBER 22, 2011
CARP and the Stock Distribution Option Agreement (SDOA) Hacienda Luisita,
upon which the proposal was based reveals that the total assets Incorporated vs. Presidential
of HLI is PhP 590,554,220, while the value of the 4,915.7466 Agrarian Reform Council
hectares is PhP 196,630,000. Consequently, the share of the In addition to the foregoing, in view of the operative fact
farmer-beneficiaries in the HLI capital stock is 33.296% doctrine, all the benefits and homelots80 received by all the
(196,630,000 divided by 590,554.220); 118,391,976.85 HLI FWBs shall be respected with no obligation to refund or return
shares represent 33.296%. Thus, even if all the holders of the them, since, as We have mentioned in our July 5, 2011
118,391,976.85 HLI shares unanimously vote to remain as HLI Decision, “the benefits x x x were received by the FWBs as
stockholders, which is unlikely, control will never be placed in farmhands in the agricultural enterprise of HLI and other fringe
the hands of the farmer-beneficiaries. Control, of course, means benefits were granted to them pursuant to the existing
the majority of 50% plus at least one share of the common collective bargaining agreement with Tadeco.”
shares and other voting shares. Applying the formula to the One last point, the HLI land shall be distributed only to the
HLI stockholdings, the number of shares that will constitute the 6,296 original FWBs. The remaining 4,206 FWBs are not
majority is 295,112,101 shares (590,554,220 divided by 2 plus entitled to any portion of the HLI land, because the rights to
one [1] HLI share). The 118,391,976.85 shares subject to the said land were vested only in the 6,296 original FWBs pursuant
SDP approved by PARC substantially fall short of the to Sec. 22 of RA 6657.
295,112,101 shares needed by the FWBs to acquire control In this regard, DAR shall verify the identities of the 6,296
over HLI. Hence, control can NEVER be attained by the original FWBs, consistent with its administrative prerogative to
FWBs. There is even no assurance that 100% of the identify and select the agrarian reform beneficiaries under RA
118,391,976.85 shares issued to the FWBs will all be voted in 6657.81
favor of staying in HLI, taking into account the previous WHEREFORE, the Motion for Partial
referendum among the farmers where said shares were not Reconsideration dated July 20, 2011 filed by public
voted unanimously in favor of retaining the SDP. In light of the respondents Presidential Agrarian Reform Council and
foregoing consideration, the option to remain in HLI granted to Department of Agrarian Reform, the Motion for
the individual FWBs will have to be recalled and revoked. Reconsideration dated July 19, 2011 filed by private
Moreover, bearing in mind that with the revocation of the respondent Alyansa ng mga Manggagawang Bukid sa
approval of the SDP, HLI will no longer be operating under Hacienda Luisita, the Motion for Reconsideration dated July
SDP and will only be treated as an ordinary private 21, 2011 filed by respondent-intervenor Farmworkers Agrarian

44 | P a g e
Reform Movement, Inc., and the Motion for  All salaries, benefits, the 3% of the gross sales of the
Reconsideration dated July 22, 2011 filed by private production of the agricultural lands, the 3% share in the
respondents Rene Galang and AMBALA are PARTIALLY proceeds of the sale of the 500-hectare converted land and the
GRANTED with respect to the option granted to the 80.51-hectare SCTEX lot and the homelots already received by
original farmworker-beneficiaries of Hacienda Luisita to the 10,502 FWBs composed of 6,296 original FWBs and the
remain 4,206 non-qualified FWBs shall be respected with no
_______________ obligation to refund or return them. The 6,296 original FWBs
80 Rollo, p. 3738. These homelots do not form part of the 4,915.75 hectares
of agricultural land in Hacienda Luisita. These are part of the residential land
shall forfeit and relinquish their rights over the HLI shares of
with a total area of 120.9234 hectares, as indicated in the SDP. stock issued to them in favor of HLI. The HLI Corporate
81 See Concha v. Rubio, G.R. No. 162446, March 29, 2010, 617 SCRA 22, Secretary shall cancel the shares issued to the said FWBs and
31. transfer them to HLI in the stocks and transfer book, which
596 transfers shall be exempt from taxes, fees and charges. The
596 SUPREME COURT 4,206 non-qualified FWBs shall remain as stockholders of HLI.
REPORTS DAR shall segregate from the HLI agricultural land with an
ANNOTATED area of 4,915.75 hectares subject of PARC’s SDP-approving
Resolution No. 89-12-2 the 500-hectare lot subject of the
Hacienda Luisita, August 14, l996 Conversion Order and the 80.51-hectare lot
Incorporated vs. Presidential sold to, or acquired by, the government as part of the SCTEX
Agrarian Reform Council complex. After the segregation process, as indicated, is done,
with Hacienda Luisita, Inc., which is the remaining area shall be turned over to DAR for immediate
hereby RECALLED and SET ASIDE. The Motion for land distribution to the original 6,296 FWBs or their
Clarification and Partial Reconsideration dated July 21, 2011 successors-in-interest which will be identified by the DAR. The
filed by petitioner HLI and the Motion for 597
Reconsideration dated July 21, 2011 filed by private VOL. 660, 597
respondents Noel Mallari, Julio Suniga, Supervisory Group of NOVEMBER 22, 2011
Hacienda Luisita, Inc. and Windsor Andaya are DENIED. Hacienda Luisita,
The fallo of the Court’s July 5, 2011 Decision is hereby Incorporated vs. Presidential
amended and shall read:
Agrarian Reform Council
PARC Resolution No. 2005-32-01 dated December 22,
2005 and Resolution No. 2006-34-01 dated May 3, 2006, 4,206 non-qualified FWBs are not entitled to any share in the
placing the lands subject of HLI’s SDP under compulsory land to be distributed by DAR.
coverage on mandated land acquisition scheme of the CARP, HLI is directed to pay the original 6,296 FWBs the
are hereby AFFIRMED with the following modifications: consideration of PhP 500,000,000 received by it from Luisita
Realty, Inc. for the sale to the latter of 200 hectares out of the

45 | P a g e
500 hectares covered by the August 14, 1996 Conversion REPORTS
Order, the consideration of PhP 750,000,000 received by its ANNOTATED
owned subsidiary, Centennary Holdings, Inc., for the sale of Hacienda Luisita,
the remaining 300 hectares of the aforementioned 500-hectare Incorporated vs. Presidential
lot to Luisita Industrial Park Corporation, and the price of PhP
Agrarian Reform Council
80,511,500 paid by the government through the Bases
execution of this judgment within the first 15 days after the end
Conversion Development Authority for the sale of the 80.51-
of each quarter, until fully implemented.
hectare lot used for the construction of the SCTEX road
The temporary restraining order is lifted.
network. From the total amount of PhP 1,330,511,500 (PhP
SO ORDERED.
500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP
Peralta, Del Castillo, Abad and Perez, JJ.,  concur.
1,330,511,500) shall be deducted the 3% of the proceeds of
Corona (C.J.), Please see concurring and dissenting
said transfers that were paid to the FWBs, the taxes and
opinion.
expenses relating to the transfer of titles to the transferees, and
Carpio, J., No Part, prior inhibition.
the expenditures incurred by HLI and Centennary Holdings,
Leonardo-De Castro, J., I concur with Justice Velasco
Inc. for legitimate corporate purposes. For this purpose, DAR
and maintain my vehement disagreement with Justice Sereno’s
is ordered to engage the services of a reputable accounting firm
opinion which will put the land beyond the capacity of the
approved by the parties to audit the books of HLI and
farmers to pay, based on her strained construction/inter-
Centennary Holdings, Inc. to determine if the PhP
pretation of the law re: date of taking.
1,330,511,500 proceeds of the sale of the three (3)
Brion, J., I certify that Mr. Justice Brion submitted a
aforementioned lots were actually used or spent for legitimate
Concurring and Dissenting Opinion.
corporate purposes. Any unspent or unused balance and any
Bersamin, J., With Concurring and Dissenting opinion.
disallowed expenditures as determined by the audit shall be
Villarama, Jr., J.,  I join C.J. R.C. Corona’s opinion.
distributed to the 6,296 original FWBs.
Sereno, J., See Concurring and Dissenting Opinion.
HLI is entitled to just compensation for the agricultural land
Mendoza, J.,  I maintain my positions in my separate
that will be transferred to DAR to be reckoned from November
opinion except as to the reckoned date for just compensation. It
21, 1989 which is the date of issuance of PARC Resolution No.
should be from November 21, 1989.
89-12-2. DAR and LBP are ordered to determine the
Reyes, J., Subject to Dissenting Opinion of Justice
compensation due to HLI.
Bersamin.
DAR shall submit a compliance report after six (6) months
Perlas-Bernabe, J., Subject to J. Bersamin’s dissenting
from finality of this judgment. It shall also submit, after
opinion.
submission of the compliance report, quarterly reports on the
598 599
598 SUPREME COURT VOL. 660, 599

46 | P a g e
NOVEMBER 22, 2011 _______________
1 Hamilton, Alexander, The Federalist No. 78 at pp. 521-22, Carl Van
Hacienda Luisita, Doren ed., 1945.
Incorporated vs. Presidential
600
Agrarian Reform Council
600 SUPREME COURT
CONCURRING AND DISSENTING OPINION REPORTS
ANNOTATED
CORONA, C.J.: Hacienda Luisita,
The complete independence of the courts of justice is Incorporated vs. Presidential
peculiarly essential to a limited Constitution. By a limited Agrarian Reform Council
Constitution I understand one which contains certain specified “SEC. 31. Corporate Landowners.—Corporate landowners
exceptions to the legislative authority .... Limitations of this may voluntarily transfer ownership over their agricultural
kind can be preserved in practice no other way than through landholdings to the Republic of the Philippines pursuant to Section
the medium of the courts of justice, whose duty it must be 20 hereof or to qualified beneficiaries, under such terms and
to declare all acts contrary to the manifest tenor of the conditions consistent with this Act, as they may agree upon, subject
Constitution void. Without this, all the reservations of to confirmation by the DAR.
particular rights or privileges would amount to nothing. 1
Upon certification by the DAR, corporations owning
The fundamental standard of agrarian reform is Section 4, agricultural lands may give their qualified beneficiaries the right
Article XIII of the Constitution: to purchase such proportion of the capital stock of the
“Section 4. The State shall, by law, undertake an agrarian corporation that the agricultural land, actually devoted to
reform program founded on the right of farmers and regular agricultural activities, bears in relation to the company’s total
farmworkers who are landless, to own directly or collectively the assets, under such terms and conditions as may be agreed upon
lands they till or, in the case of other farmworkers, to receive a just by them. In no case shall the compensation received by the workers
share of the fruits thereof. To this end, the State shall encourage at the time the shares of stocks are distributed be reduced. The same
and undertake the just distribution of all agricultural lands, principle shall be applied to associations, with respect to their equity
subject to such priorities and reasonable retention limits as the or participation.
Congress may prescribe, taking into account ecological, Corporations or associations which voluntarily divest a
developmental, or equity considerations, and subject to the payment proportion of their capital stock, equity or participation in favor
of just compensation. In determining retention limits, the State shall of their workers or other qualified beneficiaries under this
respect the right of small landowners. The State shall further provide section shall be deemed to have complied with the provisions of
incentives for voluntary land-sharing.” (Emphasis supplied) this Act: Provided, That the following conditions are complied with:
a) In order to safeguard the right of beneficiaries who own
It is against this standard that the following provision of shares of stocks to dividends and other financial benefits, the books
Section 31 of RA 6657 (Comprehensive Agrarian Reform Law of the corporation or association shall be subject to periodic audit by
of 1988) should be tested: certified public accountants chosen by the beneficiaries;

47 | P a g e
 b) Irrespective of the value of their equity in the corporation or issue of constitutionality is not the lis mota of the case and the
association, the beneficiaries shall be assured of at least one (1) issue is already moot.
representative in the board of directors, or in a management or The Court should not decline to test the constitutional
executive committee, if one exists, of the corporation or association; validity of Section 31 of RA 6657 on the basis of either the
c) Any shares acquired by such workers and beneficiaries shall requirement of lis mota or the doctrine of mootness.
have the same rights and features as all other shares; and
The requirement of lis mota does not apply where the
d) Any transfer of shares of stocks by the original beneficiaries
shall be void ab initio unless said transaction is in favor of a question of constitutionality was raised by the parties and
qualified and registered beneficiary within the same corporation. addressing such question is unavoidable.2 It cannot be disputed
If within two (2) years from the approval of this Act, the land or that the parties-in-interest to this case presented the question of
stock transfer envisioned above is not made or realized or the plan constitutionality. Also, any discussion of the stock distribution
for such stock distribution approved by the PARC within the same plan of petitioner Hacienda Luisita, Inc. (HLI) necessarily and
601 inescapably involves a discussion of its legal basis, Section 31
of RA 6657. While the said provision enjoys the presumption
VOL. 660, 601
of constitutionality, that presumption has precisely been
NOVEMBER 22, 2011 challenged. Its inconsistency with the fundamental law was
Hacienda Luisita, raised specifically as an issue.
Incorporated vs. Presidential _______________
Agrarian Reform Council 2 Sotto v. Commission on Elections, 76 Phil. 516, 522 (1946).
period, the agricultural land of the corporate owners or corporation 602
shall be subject to the compulsory coverage of this Act.” 602 SUPREME COURT
COURT’S DUTY TO CONFRONT REPORTS
THE CONSTITUTIONAL QUESTION ANNOTATED
Where a provision of a statute goes against the fundamental Hacienda Luisita,
law, specially if it impairs basic rights and constitutional Incorporated vs. Presidential
values, the Court should not hesitate to strike it down as Agrarian Reform Council
unconstitutional. In such a case, refusal to address the issue of More importantly, considerations of public interest render the
constitutionality squarely is neither prudence nor restraint but issue of the constitutionality of Section 31 of RA 6657
evasion of judicial duty and abdication of the Court’s authority. inevitable. Agriculture is historically significant in Philippine
With this in mind, I register my dissent to the ponencia’s society and economy and agrarian reform is historically
resolution of the motions for reconsideration of the July 5, imbued with public interest. Our constitutional history and
2011 decision in this case. tradition show that agrarian reform has always been a pillar of
The ponencia persists to reject an inquiry into the social justice. Relevantly, the records of the Constitutional
constitutionality of Section 31 of RA 6657 on two grounds: the

48 | P a g e
Commission show that Hacienda Luisita has always been the exceptions in my dissent to the July 5, 2011 decision in this
viewed as an acid test of genuine agrarian reform.3 case:
Furthermore, the Constitution recognizes the primacy of the “First, a grave violation of the Constitution exists. Section
right of farmers and farmworkers to directly or collectively 31 of RA 6657 runs roughshod over the language and spirit of
own the lands they till. Any artificial or superficial substitute Section 4, Article XIII of the Constitution.
such as the stock distribution plan diminishes the right and The first sentence of Section 4 is plain and unmistakeable. It
debases the constitutional intent. If this Court has the authority grounds the mandate for agrarian reform on the right of farmers
to promulgate rules that protect and enforce constitutional and regular farmworkers, who are landless, to own directly or
rights,4 it also has the duty to render decisions that ensure collectively the land they till. The express language of the
constitutional rights are preserved and safeguarded, not provision is clear and unequivocal – agrarian reform means that
diminished or modified. farmers and regular farmworkers who are landless should be
On the other hand, the invocation of the doctrine of given direct or collective ownership of the land they till. That is
mootness does not provide Section 31 of RA 6657 an their right.
unpierceable veil that will prevent the Court from prying into Unless there is land distribution, there can be no
its constitutionality. Indeed, the mootness doctrine admits of agrarian reform. Any program that gives farmers or
several exceptions.5 I have amply discussed why this case falls farmworkers anything less than ownership of land fails to
under conform to the mandate of the Constitution. In other words, a
_______________ program that gives qualified beneficiaries stock certificates
3 See Record of the Constitutional Commission, Vol. II, pp. 663-664.
4 Sec. 5(5), Article VIII, Constitution.
instead of land is not agrarian reform.
5 See Province of North Cotabato v. Government of the Republic of the Actual land distribution is the essential characteristic of a
Philippines, G.R. No. 183591, 14 October 2008, 568 SCRA 402. “[T]he “moot constitutional agrarian reform program. The polar star, when
and academic” principle not being a magical formula that automatically we speak of land reform, is that the farmer has a right to the
dissuades courts in resolving a case, it will decide cases, otherwise moot and
academic, if it finds that (a) there is a grave violation of the Constitution; (b) the
land he tills. Indeed, a reading of the framers’ intent clearly
situation is of exceptional character and paramount public interest is involved; shows that the philosophy behind agrarian reform is the
(c) the constitutional issue raised requires formulation of controlling principles distribution of land to farmers, nothing less.
to guide the bench, the bar, and the public; and (d) the case is capable of MR. NOLLEDO. And when we talk of the phrase “to own
repetition yet evading review.”
directly,” we mean the principle of direct ownership by
603 the tiller?
VOL. 660, 603 MR. MONSOD. Yes.
NOVEMBER 22, 2011 MR. NOLLEDO. And when we talk of “collectively,” we
Hacienda Luisita, mean communal ownership, stewardship or State
Incorporated vs. Presidential ownership?
Agrarian Reform Council

49 | P a g e
 MS. NIEVA. In this section, we conceive of cooperatives; pang magkaroon ng “land reform” na kung saan ay
that is farmers’ cooperatives owning the land, not the bibigyan sila ng tig-iisang titulo. At sila nga ay nagpunta
State. sa Ministry of Agrarian Reform at sinabi nila na hindi ito
MR. NOLLEDO. And when we talk of “collectively,” ang gusto nila; kasi sila naman ay magkakamag-
referring to farmers’ cooperatives, do the farmers own anak. Ang gusto nila ay lupa at hindi na kailangan ang
specific areas of land where they only unite in their tig-iisang titulo. Maraming ganitong kaso mula sa
efforts? Cordillera hanggang Zambales, Mindoro at Mindanao,
MS. NIEVA. That is one way.604 kayat kasali ito sa konsepto ng “collective ownership.”
x x x   x x x   x x x
604 SUPREME COURT MR. VILLACORTA. xxx Section 5 gives
REPORTS the opportunity for tillers of the soil to own the land
ANNOTATED that they till; xxx
Hacienda Luisita, x x x   x x x   x x x
Incorporated vs. Presidential MR. TADEO. xxx Ang dahilan ng kahirapan natin sa
Agrarian Reform Council Pilipinas ngayon ay ang pagtitipon-tipon ng vast
MR. NOLLEDO. Because I understand that there are two tracts of land sa kamay ng iilan. Lupa ang nagbibigay
basic systems involved: the “moshave” type of ng buhay sa magbubukid at sa iba pang manggagawa sa
agriculture and the “kibbutz.” So are both contemplated bukid. Kapag inalis sa kanila ang lupa, parang inalisan na
in the report? rin sila ng buhay. Kaya kinakailangan talagang
MR. TADEO. Ang dalawa kasing pamamaraan ng magkaroon ng tinatawag na just distribution. xxx
pagpapatupad ng tunay na reporma sa lupa ay ang x x x   x x x   x x x605
pagmamay-ari ng lupa na hahatiin sa individual na
VOL. 660, 605
pagmamay-ari – directly – at ang tinatawag na sama-
samang gagawin ng mga magbubukid. Tulad sa Negros,
NOVEMBER 22, 2011
ang gusto ng mga magbubukid ay gawin nila itong Hacienda Luisita,
“cooperative or collective farm.” Ang ibig sabihin ay Incorporated vs. Presidential
sama-sama nilang sasakahin. Agrarian Reform Council
MR. BENNAGEN. Madam President, nais ko lang MR. TADEO. Kasi ganito iyan. Dapat muna nating
dagdagan iyong sagot ni Ginoong Tadeo. xxxx makita ang prinsipyo ng agrarian reform, iyong
Kasi, doon sa “collective ownership,” kasali din maging may-ari siya ng lupa na kaniyang
iyong “communal ownership” ng mga minorya. binubungkal. Iyon ang kauna-unahang prinsipyo
Halimbawa sa Tanay, noong gumawa kami ng isang nito. xxx
pananaliksik doon, nagtaka sila kung bakit kailangan x x x   x x x   x x x

50 | P a g e
 MR. TINGSON. xxx When we speak here of “to own MR. TADEO. xxx Kung sinasabi nating si Kristo ay
directly or collectively the lands they till,” is this land for liberating dahil ang api ay lalaya at ang mga bihag ay
the tillers rather than land for the landless? Before, we mangalilig-
used to hear “land for the landless,” but now the slogan 606
is “land for the tillers.” Is that right?
606 SUPREME COURT
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land
for the tillers. Ang ibig sabihin ng “directly” ay tulad sa REPORTS
implementasyon sa rice and corn lands kung saan inaari ANNOTATED
na ng mga magsasaka ang lupang binubungkal nila. Hacienda Luisita,
Ang ibig sabihin naman ng “collectively” ay sama- Incorporated vs. Presidential
samang paggawa sa isang lupain o isang bukid, Agrarian Reform Council
katulad ng sitwasyon sa Negros. tas, sinabi rin ni Commissioner Felicitas Aquino na kung ang
x x x   x x x   x x x history ay liberating, dapat ding maging liberating ang Saligang
MR. BENNAGEN. Maaari kayang magdagdag sa Batas. Ang magpapalaya sa atin ay ang agrarian and natural
pagpapaliwanag ng “primacy”? Kasi may cultural resources reform.
background ito. Dahil agrarian society pa ang lipunang The primary, foremost and paramount principles and
Pilipino, maigting talaga ang ugnayan ng mga magsasaka objectives are contained [i]n lines 19 to 22: “primacy of
sa kanilang lupa. Halimbawa, sinasabi nila na ang lupa the rights and of farmers and farmworkers to own
ay pinagbuhusan na ng dugo, pawis at luha. So land directly or collectively the lands they till.” Ito ang
acquires a symbolic content that is not simply negated by kauna-unahan at pinakamahalagang prinsipyo at
growth, by productivity, etc. The primacy should be seen layunin ng isang tunay na reporma sa lupa – na ang
in relation to an agrarian program that leads to a later nagbubungkal ng lupa ay maging may-ari nito. xxx
stage of social development which at some point in time (695-696)
may already negate this kind of attachment. The The essential thrust of agrarian reform is land-to-the-tiller.
assumption is that there are already certain options Thus, to satisfy the mandate of the constitution, any
available to the farmers. Marahil ang primacy ay ang implementation of agrarian reform should always preserve the
pagkilala sa pangangailangan ng magsasaka – ang control over the land in the hands of its tiller or tillers, whether
pag-aari ng lupa. Ang assumption ay ang pag-aari individually or collectively.
mismo ng lupa becomes the basis for the farmers to Consequently, any law that goes against this constitutional
enjoy the benefits, the fruits of labor. xxx (678) mandate of the actual grant of land to farmers and regular
x x x   x x x   x x x farmworkers must be nullified. If the Constitution, as it is now
worded and as it was intended by the framers envisaged an
alternative to actual land distribution (e.g., stock distribution)

51 | P a g e
such option could have been easily and explicitly provided for issue of constitutionality be resolved now, before the stormy
in its text or even conceptualized in the intent of the framers. cloud of doubt can cause a social cataclysm.
Absolutely no such alternative was provided for. Section 4, At the risk of being repetitive, agrarian reform is
Article XIII on agrarian reform, in no uncertain terms, speaks fundamentally imbued with public interest and the
of land to be owned directly or collectively by farmers and implementation of agrarian reform at Hacienda Luisita has
regular farm workers. always been of paramount interest. Indeed, it was specifically
By allowing the distribution of capital stock, not land, as and unequivocally targeted when agrarian reform was
“compliance” with agrarian reform, Section 31 of RA 6657 being discussed in the Constitutional Commission.
directly and explicitly contravenes Section 4, Article XIII of Moreover, the Court should take judicial cognizance of the
the Constitution. The corporate landowner remains to be the violent incidents that intermittently occur at Hacienda Luisita,
owner of the agricultural land. Qualified beneficiaries are given solely because of the agrarian problem there. Indeed, Hacienda
ownership only of shares of stock, not the lands they till. Luisita proves that, for landless farmers and farmworkers, the
Landless farmers and farmworkers land they till is their life.
become landless stockholders but still tilling the land of the The Constitution does not only bestow the landless farmers
corporate owner, thereby perpetuating their status as landless and farmworkers the right to own the land they till but also
farmers and farmworkers. concedes that right to them and makes it a duty of the State to
Second, this case is of exceptional character and involves respect that right through genuine and authentic agrarian
paramount public interest. In La Bugal-B’Laan Tribal reform. To subvert this right through a mechanism that allows
Association, Inc., the Court reminded itself of the need to stock distribution in lieu of land distribution as mandated by
recognize the extraor- the Constitution strikes at the very heart of social justice. As a
607 grave injustice, it must be struck down through the invalidation
of the statutory provision that permits it.
VOL. 660, 607
To leave this issue unresolved is to allow the further
NOVEMBER 22, 2011 creation of laws, rules or orders that permit policies creating,
Hacienda Luisita, unintentionally or otherwise, means to avoid compliance with
Incorporated vs. Presidential the foremost objective of agrarian reform—to give the humble
Agrarian Reform Council farmer and farmworker the right to own the land he tills. To
dinary character of the situation and the overriding public leave this matter unsettled is to encourage future subversion or
interest involved in a case. Here, there is a necessity for a frustration of agrarian reform, social justice and the
categorical ruling to end the uncertainties plaguing agrarian Constitution.
reform caused by serious constitutional doubts on Section 31 of Third, the constitutional issue raised requires the
RA 6657. While the ponencia would have the doubts linger, formulation of controlling principles to guide the bench, the bar
strong reasons of fundamental public policy demand that the

52 | P a g e
and the public. Fundamental principles of agrarian reform must been imposed by the Constitution itself, no exception could
be established in order that its aim may be truly attained. have been carved by courts (for either ground) as courts only
One such principle that must be etched in stone is that no apply and interpret the Constitution and do not modify it.
law, rule or policy can subvert the ultimate goal of agrarian Judicial review is particularly important in enjoining and
reform, the redressing constitutional violations inflicted by all levels of
608 government and government officers.6 Thus, this Court may not
be hampered in the performance of its essential function to
608 SUPREME COURT
uphold the Constitution by prudential doctrines of justiciability.
REPORTS Indeed, in this case, to avoid the constitutional question
ANNOTATED would be to ignore a violation of the Constitution and to
Hacienda Luisita, disregard the trampling of basic rights and constitutional
Incorporated vs. Presidential values.609
Agrarian Reform Council VOL. 660, 609
actual distribution of land to farmers and farmworkers who are NOVEMBER 22, 2011
landless. Agrarian reform requires that such landless farmers Hacienda Luisita,
and farmworkers be given direct or collective ownership of the Incorporated vs. Presidential
land they till, subject only to the retention limits and the Agrarian Reform Council
payment of just compensation. There is no valid substitute to
CONSTITUTIONAL INFIRMITY
actual distribution of land because the right of landless farmers
OF SECTION 31 OF RA 6657
and farmworkers expressly and specifically refers to a right to
I maintain my stance that Section 31 of RA 6657 is invalid.
own the land they till.
Agrarian reform’s underlying principle is the recognition of the
Fourth, this case is capable of repetition, yet evading
rights of farmers and farmworkers who are landless to own,
review. As previously mentioned, if the subject provision is not
directly or collectively, the lands they till. Under the
struck down today as unconstitutional, the possibility of
Constitution, actual land distribution to qualified agrarian
passing future laws providing for a similar option is ominously
reform beneficiaries is mandatory. Anything that promises
present. Indeed, what will stop our legislators from providing
something other than land must be struck down for being
artificial alternatives to actual land distribution if this Court, in
unconstitutional.
the face of an opportunity to do so, does not declare that such
By allowing corporate landholders to continue owning the
alternatives are completely against the Constitution?”
land by the mere expedient of divesting a proportion of their
Moreover, the requirement of lis mota and the mootness capital stock, equity or participation in favor of their workers or
doctrine are not constitutional requirements but simply other qualified beneficiaries, Section 31 defeats the right of
prudential doctrines of justiciability fashioned by the Court in farmers and regular farmworkers who are landless, under
the exercise of judicial restraint. For if the said grounds have Section 4, Article XIII of the Constitution, to own directly or

53 | P a g e
collectively the lands they till. Section 31 of RA 6657 does not collective control of the land by the qualified farmer and
therefore serve the ends of social justice as envisioned under farmworkers.
the agrarian reform provisions of the Constitution. Here, Section 31 of RA 6657 deprives the farmworker-
Section 31 of RA 6657 as implemented under the stock beneficiaries not only of either naked title to or beneficial
distribution option agreement merely entitles farmworker- ownership of the lands they till. It also prevents them from
beneficiaries of petitioner HLI to certificates of stocks which exercising effective control both of the land and of the
represent equity or interest in the corporate landowner, corporate vehicle as it simply assures beneficiaries “of at least
petitioner HLI, not in the land itself. Under Section 31 of RA one (1) representative in the board of directors, or in a
6657, the corporate landowner retains ownership of the management or executive committee, if one exists, of the
agricultural land while the farmworker-beneficiaries become corporation or association,” “irrespective of the value of their
stockholders but remain landless. While farmworker- equity in the corporation or association.” Thus, while they are
beneficiaries hold a piece of paper that represents interest in the given voice in the decision-making process of the corporate
corporation that has owned and still owns the land, that paper landowner with respect to the land, the beneficiaries have no
actually deprives them of their rightful claim which is guarantee of control of the lands as they are relegated to the
ownership of the land they till. Thus, Section 31 unduly status of minority shareholders.
prevents the farmworker-beneficiaries from enjoying the CONCOMITANT RIGHTS OF THE FARM-
promise of Section 4, Article XIII of the Constitution for them WORKERS AND THE LANDOWNER
to own directly or collectively the lands they till.610 In view of the unconstitutionality of Section 31 of RA 6657
610 SUPREME COURT and the consequent invalidity of the stock distribution option
REPORTS agreement which was based on the said provision, how should
ANNOTATED the respective rights of the parties be addressed?
Hacienda Luisita, Previously, I grudgingly and qualifiedly joined the majority
in applying the operative fact doctrine in this case. On further
Incorporated vs. Presidential
reflection, however, I believe that the operative fact doctrine
Agrarian Reform Council should not be applied. The operative fact doctrine is a principle
Corporate ownership by the corporate landowner under fundamentally based on equity. The basis of the applica-
Section 31 does not satisfy the collective ownership envisioned 611
under Section 4, Article XIII of the Constitution. Where the VOL. 660, 611
farmworker-beneficiaries are neither the collective naked NOVEMBER 22, 2011
owners nor the collective beneficial owners of the land they till,
Hacienda Luisita,
there can be no valid compliance with the Constitution’s
objective of collective ownership by farmers and farmworkers. Incorporated vs. Presidential
Collective ownership of land under the agrarian reform Agrarian Reform Council
provisions of the Constitution must operate on the concept of

54 | P a g e
tion of the said doctrine in this case was the supposed status of achieving the principal objective of land reform to transfer
the stock distribution option agreement as having been already ownership of land to the farmworker-beneficiaries.612
implemented. However, equity is extended only to one who 612 SUPREME COURT
comes to court with clean hands. Equity should be refused to REPORTS
the iniquitous and guilty of inequity. For this reason, petitioner ANNOTATED
HLI may not benefit on the ground of equity from its invalid Hacienda Luisita,
stock distribution option agreement with the farmworker-
Incorporated vs. Presidential
beneficiaries as it was found guilty of breach of several
material terms and conditions of the said agreement.
Agrarian Reform Council
As Section 31 of RA 6657 is unconstitutional, the stock The principal objective and the manifestation of the
distribution agreement between petitioner HLI and its government’s intent to act thereon subsist despite the invalidity
farmworker-beneficiaries has no leg to stand on and must of the accessory. Thus, on November 21, 1989, the government
perforce be annulled. This means that the agricultural land of should rightly be considered to have pursued the objective of
petitioner HLI should be deemed placed under compulsory land reform and transferred the ownership of the land to the
coverage of land reform on November 21, 1989, the date the farmworker-beneficiaries. November 21, 1989 should therefore
stock distribution option agreement between petitioner HLI and be deemed as the time of taking of the land from petitioner
the farmworker-beneficiaries was approved by the Presidential HLI, as well as the date from which to reckon the just
Agrarian Reform Council (PARC). While PARC could not compensation payable to petitioner HLI.
have validly approved the stock distribution option agreement It may, however, be argued that there could have been no
for lack of legal basis (Section 31 of RA 6657 being taking (in the sense of transferring ownership to the
unconstitutional), the action of PARC manifested the intent of farmworker-beneficiaries) on November 21, 1989 as the land
the government to subject petitioner HLI’s land to the land was actually in the possession and control of petitioner HLI.
reform program. In other words, the agricultural land of True, petitioner HLI may have continued to possess the land
petitioner HLI was subjected to land reform with respect to but this did not negate taking and transferring of ownership to
petitioner HLI, the farmworker-beneficiaries and the the farmworker-beneficiaries on November 21, 1989. From that
government through PARC on November 21, 1989. date, petitioner HLI’s status became that of a lawful possessor
While there could have been no valid approval of the stock or one who held the “thing or right to keep or enjoy it, the
distribution agreement, the government’s intent to bring the ownership pertaining to another person,”7 particularly the
land under the coverage of land reform could nonetheless be farmworker-beneficiaries. Moreover, petitioner HLI should be
deemed implemented by its action as the subject matter of land deemed as a possessor in good faith, or one that is not aware of
reform is basically the redistribution of land. The stock any flaw in his title or mode of acquisition thereof.8 Its reliance
distribution option agreement as an invalid means to implement on the validity of Section 31 of RA 6657 and, concomitantly,
land reform may be considered as simply an accessory to of its stock distribution option agreement could be considered

55 | P a g e
as a mistake on a difficult question of law, a fact which said transferees as they were transferees (buyers) in good faith.
supports its possession in good faith. The land distribution shall also exclude the portion
While the stock distribution option agreement was supposed expropriated by the government for the SCTEX.
to cover only 4,195 hectares of petitioner HLI’s land, no For the excluded portions, however, the farmworker-
_______________ beneficiaries shall be entitled to the portion of the proceeds of
6 Chemerinsky, Erwin, Constitutional Law: Principles and Policies, 3rd
Edition (2006), p. 52.
the sale to LIPCO and RCBC corresponding to the market
7 Article 525, New Civil Code: The possession or things or rights may be value thereof as of November 21, 1989. It would be unfair to
had in one of two concepts: either in the concept of an owner, or that of the rule otherwise as any increase in value of the land may
holder of the thing or right to keep or enjoy it, the ownership pertaining to reasonably be attributed to the improvements thereon made by
another person.”
8 Article 526, New Civil Code: “He is deemed a possessor in good faith
petitioner HLI and petitioner HLI’s efforts to have the said
who is not aware that there exists in his title or mode of acquisition any flaw portion reclassified to industrial land. Moreover, this would be
which invalidates it. x x x Mistake upon a doubtful or difficult question of law in consonance with the rule that “the possessor in good faith is
may be the basis of good faith.” entitled to the fruits received before the possession is legally
613 interrupted.”10
VOL. 660, 613 The amount accruing to the farmworker-beneficiaries shall
NOVEMBER 22, 2011 also be less the 3% of the proceeds already given to them. On
the other hand, the proceeds of the portion expropriated for the
Hacienda Luisita,
SCTEX shall accrue to the farmworker-beneficiaries.
Incorporated vs. Presidential _______________
Agrarian Reform Council 9  Section 4, Article XIII, Constitution.
such term or condition should be deemed imposed on the 10 Article 544, New Civil Code.
coverage of land reform as of November 21, 1989. The 614
limitation of the coverage shall be determined subject only to 614 SUPREME COURT
such priorities and reasonable retention limits prescribed by REPORTS
law, “taking into account ecological, developmental, or equity ANNOTATED
considerations.”9 The Department of Agrarian Reform (DAR)
Hacienda Luisita,
shall therefore determine the area properly covered by land
reform, guided by the retention limits set by law and taking Incorporated vs. Presidential
into account ecological, developmental or equity Agrarian Reform Council
considerations. Upon determination of the area properly Indeed, Section 4, Article XIII of the Constitution requires
covered by land reform, the DAR should immediately and that the landowner be given just compensation. For this
actually distribute the same to the farmworker-beneficiaries. purpose, the DAR shall determine the just compensation
This shall, however, exclude the portion of converted land payable by each farmworker-beneficiary to petitioner HLI as it
transferred to LIPCO and RCBC which shall remain with the has jurisdiction in matters involving the administrative

56 | P a g e
implementation and enforcement of agrarian reform laws.11 The 11 See Soriano v. Bravo, G.R. No. 152086, 15 December 2010, 638 SCRA
403.
just compensation shall be based on the market value as of
November 21, 1989 of the entire portion that may be 615
determined by the DAR as subject to the coverage of land VOL. 660, 615
reform. The portion of the proceeds of the portion sold to NOVEMBER 22, 2011
LIPCO and RCBC as well as the proceeds of the portion Hacienda Luisita,
expropriated for the SCTEX may be the subject of legal Incorporated vs. Presidential
compensation or set off for purposes of the payment of just
Agrarian Reform Council
compensation.
amounts accruing to the farmworker-beneficiaries, namely, (a)
Finally, the farmworker-beneficiaries shall return the shares
the portion of the proceeds of the sale to LIPCO and RCBC
of stock which they received to petitioner HLI under the
corresponding to the market value thereof as of November 21,
invalid stock distribution option agreement.
1989 and (b) the proceeds of the portion expropriated for the
WHEREFORE, I vote that the Court’s July 5, 2011 decision
SCTEX shall accrue to the farmworker-beneficiaries.
be RECONSIDERED. Section 31 of RA 6657 should be
SEPARATE CONCURRING
declared NULL and VOID for being unconstitutional.
AND DISSENTING OPINION
Consequently, the stock distribution plan of petitioner HLI
BRION, J.:
should likewise be declared NULL and VOID for being
In the Court’s Decision dated July 5, 2011, the crucial
unconstitutional.
questions that the Court resolved were: (1) whether the
The land of petitioner HLI subject to agrarian reform, as
Presidential Agrarian Reform Council (PARC) has the power to
determined by the DAR, should be immediately and actually
revoke or recall its approval of a stock distribution option
distributed to the farmworker-beneficiaries, except the (a)
entered into between a corporate landowner and its
portion of converted land transferred to LIPCO and RCBC
farmworkers-beneficiaries (FWBs), under Section 31 of
which shall remain with the said transferees as they were
Republic Act No. 6657 or the Comprehensive Agrarian Reform
transferees (buyers) in good faith and the (b) portion of land
Law (CARL); and (2) whether the PARC has a ground to
expropriated by the government for the SCTEX.
revoke or recall the stock distribution plan (SDP) between
The farmworker-beneficiaries should return the shares of
petitioner Hacienda Luisita, Incorporated (HLI) and its FWBs.
stock which they received to petitioner HLI under the invalid
The Court was unanimous in declaring that the PARC’s
stock distribution option agreement. Each of them should also
express power to approve the plan for stock distribution of
be liable to pay petitioner HLI just compensation in the amount
corporate landowners, under Section 31 of the CARL, includes
to be determined by the DAR based on the fair market value of
the implied power to revoke its approval. In the case of HLI,
the land as of November 21, 1989. This may be subject to set-
the majority of the Court, myself included, found that the
off or legal compensation with the
_______________ PARC has solid bases to revoke its approval of HLI’s SDP.1
_______________

57 | P a g e
 1 The majority ruled that the SDP/Stock Distribution Option Agreement is c. 3% share of the proceeds of the sale of the 500
contrary to law due to the “man days” method it adopted in computing the
number of shares that each FWB shall be entitled to, and the extended period of
hectares of converted land and the 80-hectare
30 years to complete the distribution of shares; see July 5, 2011 Decision, pp. Subic-Clark-Tarlac Expressway (SCTEX) lot, and
67-72. d. 6,886.5-square meter homelots that each FWB
616
received;
3. From the 4,915.75 hectares of agricultural land shall be
616 SUPREME COURT
segregated:
REPORTS a. the 500 hectares of converted land acquired by
ANNOTATED Luisita Industrial Park Corporation (LIPCO)/
Hacienda Luisita, Rizal Commercial Banking Corporation
Incorporated vs. Presidential 617
Agrarian Reform Council VOL. 660, 617
In view of this ruling, the corollary issue of the effects of NOVEMBER 22, 2011
the revocation arose, and it was at this point that I diverged Hacienda Luisita,
from the majority’s position. The majority—speaking Incorporated vs. Presidential
through Justice Velasco—found it equitable to recognize the Agrarian Reform Council
existence of certain “operative facts,” notwithstanding the (RCBC) and Luisita Realty Corporation (LRC);
revocation of the SDP. Hence, the majority gave the qualified b. the 80 hectares of land expropriated by the
FWBs the option of choosing whether or not to remain as HLI government for the SCTEX; and
stockholders. On the same principle, the majority authorized c. the aggregate area of homelots of FWBs who
the FWBs to retain all benefits received under the SDP. The choose to remain as HLI stockholders.2
dispositive of the July 5, 2011 Decision, thus, decreed that: After segregation, the remaining areas shall be turned
1. the qualified FWBs, totaling 6,296, are given the option over by HLI to the Department of Agrarian Reform
to choose whether to remain as stockholders of HLI or (DAR) for land distribution to qualified FWBs who
not. Should they choose to remain, they are entitled to prefer land distribution over stock ownership.
18,804.32 shares each; otherwise, they are entitled to 4. HLI is directed to turn over the consideration of
land distribution. The non-qualified FWBs totaling a. P500 million from the sale of the 200 hectares of
4,206, however, are not given this option, but are converted land to LRC,
allowed to retain the shares already received; b. P750 million from the sale of the 300 hectares of
2. all the 10,502 FWBs are entitled to retain the following converted land to Centennary Holdings, Inc.
items they received on account of the SDP: (Centennary), and
a. salaries and benefits, c. P80 million from the expropriation of 80 hectares
b. 3% production share, for the SCTEX.

58 | P a g e
 From the sum total of P1.33 billion shall be deducted FWBs on whether or not to remain as HLI stockholders. I
a. the 3% production share, opined that the revocation of the PARC’s approval of the SDP
_______________ carried with it the nullification of the Stock Distribution Option
2 The July 5, 2011 Decision, pp. 88-89 referred to the “aggregate area of
6,886.5 square meters of individual lots that each FWB is entitled to under the
Agreement (SDOA) between HLI and the qualified FWBs. As
CARP had he or she not opted to stay in HLI as stockholder” as among those to a consequence of the nullification, restitution should take
be segregated from the 4,915.75 hectares of land (and thus not subject to place, and the parties are to account and restore what they
compulsory land distribution). I believe that the ponencia was referring instead received from one another. Subject to certain adjustments,
to the homelots of FWBs who opted to remain as stockholders of HLI, as may
be apparent from its subsequent statement that “the aforementioned area
I maintain the same view regarding the inapplicability of
composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the operative fact doctrine to the present case. Based on this
the corporation shall form part of the HLI assets.”  perspective, I propose to dispose of the case as discussed
618
below.
618 SUPREME COURT The application of the Operative
Fact Doctrine to “Executive Acts”
REPORTS
The ponencia misapplies the operative fact doctrine. I
ANNOTATED maintain the view that the doctrine is applicable only in
Hacienda Luisita, considering the effects of a declaration of unconstitutionality of
Incorporated vs. Presidential a law (a generic term that includes statutes, rules and
Agrarian Reform Council 619
b. the 3% share in the proceeds of the sale of the VOL. 660, 619
500-hectare converted land and expropriation of NOVEMBER 22, 2011
the 80-hectare land, Hacienda Luisita,
c. the taxes and expenses relating to the transfer of Incorporated vs. Presidential
titles, and Agrarian Reform Council
d. the expenditures incurred by HLI for legitimate regulations issued by the executive department and are
corporate purposes. accorded the same status as a statute). The doctrine’s limited
The remaining balance shall be distributed among the application is apparent from a review of its origins.
qualified FWBs, and The doctrine of operative fact is of American origin, first
5. HLI shall be paid just compensation for the agricultural discussed in the 1940 case of Chicot County Drainage Dist. v.
land that will be subject to land distribution, the amount Baxter States Bank.3 Chicot Country sought to resist the Baxter
of which shall be determined by the DAR. States Bank’s claim by raising a debt readjustment decree
I dissented from the majority’s determination of the effects issued by a district court pursuant to a law enacted by the US
of the revocation, objecting primarily to their application of the Congress.4 The Baxter States Bank countered that the
“operative fact doctrine” to justify the option given to the readjustment decree was no longer binding, as the law upon

59 | P a g e
which the decree was based has been declared unconstitutional. ingly, of public policy in the light of the nature both of the statute
The lower court sustained the Baxter States Bank’s argument, and of its previous application, demand examination. These
following the void ab initio doctrine5 laid down in the 1886 questions are among the most difficult of those which have engaged
case of Norton v. Shelby County.6 The US Supreme Court the attention of courts x x x and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute
reversed the decision and ordered the remand of the case,
retroactive invalidity c
rejecting the broad application of the void ab initio doctrine
through this rationalization: Notably, Chicot and the numerous cases that followed its lead
“[T]he effect of a determination of unconstitutionality must be applied the “operative fact doctrine” only in considering the
taken with qualifications. The actual existence of a statute, prior effects of a declaration of unconstitutionality of a statute.
to such a determination, is an operative fact and may have De Agbayani v. Philippine National
consequences which cannot justly be ignored. The past cannot Bank (PNB),7 promulgated in this jurisdiction in 1971, was the
always be erased by a new judicial declaration. The effect of the
first instance when the “operative fact doctrine” was extended
subsequent ruling as to invalidity may have to be considered in
various aspects—with respect to particular relations, individual and to consider the effects of a declaration of unconstitutionality of
corporate, and particular conduct, private and official. Questions of an “executive act.” The ponencia cites De Agbayani (as well as
rights claimed to have become vested, of status, of prior subsequent cases that echoed the “operative fact” principle) to
determinations deemed to have finality and acted upon accord- support its position, but this reliance proceeds from a
_______________ misreading of the context in which De Agbayani used the term
3 308 US 317, 318-319, 60 S. Ct. 317.
4 In particular, the Act of May 24, 1934 (48 Stat. 798), amending the
“executive act.”
Bankruptcy Act of July 1, 1898, see Ashton v. Cameron County Water Imp. Dist. The executive act referred to in De Agbayani was Executive
No. 1, 298 U.S. 513 (1936). Order No. 32 (EO 32) issued by then President Sergio Osmeña
5 The void ab initio doctrine declares that an “unconstitutional act is not a law;
it confers no rights; it imposes no duties; it affords no protection; it creates no office;
in March 10, 1945, which imposed a debt moratorium. Since
it is, in legal contemplation, as inoperative as though it had never been the Court (in the case of Rutter v. Esteban8) already declared
passed”; infra note 6. EO 32 unconstitutional, Francisco de Agbayani contended that
6 118 US 425, 442.
the PNB’s action for foreclosure against him had already
620 prescribed. The Court was then confronted with the issue of
whether to give effect to EO 32 prior to the declaration of its
620 SUPREME COURT unconstitutionality. The Court, per Justice Enrique Fernando,
REPORTS resolved the issue in this manner:
ANNOTATED “The decision now on appeal reflects the orthodox view that an
Hacienda Luisita, unconstitutional act, for that matter an executive order or a municipal
Incorporated vs. Presidential ordinance likewise suffering from that infirmity, cannot be the source
of any legal rights or duties. Nor can it justify any official act taken
Agrarian Reform Council
under it. Its repugnancy to the fundamental law once judi-
_______________

60 | P a g e
 7 No. L-23127, April 29, 1971, 38 SCRA 429. quality of fairness and justice then, if there be no recognition of what
8 93 Phil. 68 (1953). had transpired prior to such adjudication.”9

621
When these paragraphs are read together, the phrase “such
VOL. 660, 621 challenged legislative or executive act” quite obviously
NOVEMBER 22, 2011 pertains to the “administrative or executive acts, orders and
Hacienda Luisita, regulations” mentioned in Article 7 of the Civil Code.
Incorporated vs. Presidential Thus, the context in which the term “executive act” was
used in De Agbayani referred to only executive issuances
Agrarian Reform Council
(acts, orders, rules and regulations) that have the force and
cially declared results in its being to all intents and purposes a mere
scrap of paper. As the new Civil Code [Article 7] puts it: "When the
effect of laws; it was not used to refer to any act
_______________
courts declare a law to be inconsistent with the Constitution, the 9 Id., at pp. 434-435.
former shall be void and the latter shall govern.[”] Administrative
or executive acts, orders and regulations shall be valid only when 622
they are not contrary to the laws of the Constitution. It is 622 SUPREME COURT
understandable why it should be so, the Constitution being supreme REPORTS
and paramount. Any legislative or executive act contrary to its terms ANNOTATED
cannot survive.
Such a view has support in logic and possesses the merit of Hacienda Luisita,
simplicity. It may not however be sufficiently realistic. It does not Incorporated vs. Presidential
admit of doubt that prior to the declaration of nullity such Agrarian Reform Council
challenged legislative or executive act must have been in force performed by the Executive Department. De
and had to be complied with. This is so as until after the judiciary, Agbayani’s extension of the operative fact doctrine, therefore,
in an appropriate case, declares its invalidity, it is entitled to more properly refers only to the recognition of the effects of a
obedience and respect. Parties may have acted under it and may have declaration of unconstitutionality of executive issuances,
changed their positions. What could be more fitting than that in a
and not to all executive acts as the ponencia loosely construes
subsequent litigation regard be had to what has been done while such
legislative or executive act was in operation and presumed to be the term. The limited construction of an “executive act,” i.e.,
valid in all respects. It is now accepted as a doctrine that prior to its executive issuances, is actually more consistent
being nullified, its existence as a fact must be reckoned with. This is with the rationale behind the operative fact doctrine: the
merely to reflect awareness that precisely because the judiciary is the presumption of constitutionality of laws. Accordingly, it is
governmental organ which has the final say on whether or not a only to this kind of executive action that the operative fact
legislative or executive measure is valid, a period of time may have doctrine can apply.
elapsed before it can exercise the power of judicial review that may In my separate opinion to the July 5, 2011 Decision, I raised
lead to a declaration of nullity. It would be to deprive the law of its the propriety of applying the operative fact doctrine to the

61 | P a g e
present case, primarily to object to the option granted by to the execution of the nullified agreement. There should be no
the ponencia to the qualified FWBs of whether to remain as question that the PARC’s revocation of the approval of the
HLI stockholders or not. Although in the present Resolution, SDP carried with it the nullification of the SDOA because the
the ponencia reconsidered and has now withdrawn the option PARC’s approval is necessary to the validity of the SDOA 11;
given to the qualified FWBs to remain as HLI stockholders, it accordingly, the effects of the revocation should be deemed to
still relied on the operative fact doctrine to justify the have taken place on November 21, 1989, the date when PARC
FWBs retention of certain benefits arising from the Resolution No. 89-12-2 approving the SDP was issued. To
revoked SDP: consider any other date (either at the time PARC Resolution
“With the application of the operative fact doctrine, said benefits, No. 2005-32-01, revoking its approval of the SDP, was issued
homelots and the 3% production share and the 3% share from or at the time this Court’s decision becomes final) is not only
the sale of the 500-hectare and SCTEX lots shall be respected iniquitous for the parties but also preposterous under the law.
with no obligation to refund or return them. The receipt of these Hence, to accomplish a complete, orderly, and fair disposition
things is an operative fact “that can no longer be disturbed or simply of the case, we have to consider the effects of the revocation to
ignored.”  (emphasis ours)
10

accrue from November 21, 1989. The Court should decree that
Because of this continued (and mistaken) reliance on the compulsory Comprehensive Agrarian Reform Program
operative fact doctrine, I regretfully have to register my coverage should start at this point in time, and then proceed to
continued objection to the manner by which adjust the relations of the parties with due regard to the
the ponencia proposes to dispose of this case. intervening events that transpired.12
Indeed, much of the confusion that arose in the disposition _______________
11 This is inferable from Section 31 of the CARL, the relevant portion of
of this case stemmed from the varying perspectives taken by which declares, “If within two (2) years from the approval of this Act, the land
the members of the Court on what are the effects of the or stock transfer envisioned above is not made or realized or the plan for such
_______________ stock distribution approved by the PARC within the same period, the
10 Resolution, p. 11. agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act.”
623 12 I have previously declared May 11, 1989 (the date when HLI, TADECO
VOL. 660, 623 and the qualified FWBs executed the SDOA) as the starting point to reckon the
NOVEMBER 22, 2011 effects of the revocation of the SDP (Separate Concurring and Dissenting
Opinion, pp. 38-39). Upon closer study of the CARL and the relevant DAR
Hacienda Luisita, issuances, I have reconsidered my position and propose that the starting point
Incorporated vs. Presidential should be November 21, 1989.
Agrarian Reform Council 624
revocation and when these effects should accrue. The 624 SUPREME COURT
revocation of the SDP amounts to the nullification of the REPORTS
SDOA, and the logical and legal consequence of this should be ANNOTATED
the restoration of the parties to their respective situations prior

62 | P a g e
 Hacienda Luisita, 625

Incorporated vs. Presidential VOL. 660, 625

Agrarian Reform Council NOVEMBER 22, 2011
Treatment of the Sale of the Converted Land Hacienda Luisita,
Since the effects of the revocation are deemed to have taken Incorporated vs. Presidential
place on November 21, 1989, the entire 4,915.75 hectares of
Agrarian Reform Council
agricultural land should be considered as placed under
xxxx
compulsory coverage as of this time. To declare (as x x x. We maintain that the date of “taking” is November 21,
the ponencia does13) that 500 hectares of the subject land can no 1989, the date when PARC approved HLI’s SDP per PARC
longer be included under the CARL’s compulsory coverage Resolution No. 89-12-2, in view of the fact that this is the time that
because it had already been converted into industrial land 14 is the FWBs were considered to own and possess the agricultural
erroneous, as this implies that the land was placed under lands in Hacienda Luisita. To be precise, these lands became
compulsory coverage only when revocation of the SDP was subject of the agrarian reform coverage through the stock distribution
declared, not in 1989. If this was the case then, the FWBs scheme only upon the approval of the SDP, that is, November 21,
should not be entitled to any of the proceeds of the sale of the 1989. Thus, such approval is akin to a notice of coverage ordinarily
500 hectares of converted land because their right to these issued under compulsory acquisition.”  (emphases, italics, and
15

proceeds stems from their right to own the land which accrues underscoring ours)
only when the land is placed under compulsory coverage. To reconcile these inconsistent positions, I venture to guess
Oddly enough, the ponencia takes an inconsistent position by that what the ponencia perhaps meant was that, on account of
subsequently declaring that— the revocation, the entire 4,915.75 hectares were deemed
“Considering that the 500-hectare converted land, as well as placed under compulsory coverage on November 21, 1989;
the 80.51-hectare SCTEX lot, should have been included in the however, despite the inclusion, portions of the land
compulsory coverage were it not for their conversion and valid
(specifically, the 500 hectares of converted land and the 80
transfers, then it is only but proper that the price received for the sale
of these lots should be given to the qualified FWBs. In effect, the hectares of the SCTEX land) can no longer
proceeds from the sale shall take the place of the lots. be distributed among the qualified FWBs under Section 22 of
_______________ the CARL16 because of the valid transfers made in favor of third
13 The ponencia (p. 24) said: parties. Thus, it was not the conversion of the 500-hectare land
“the 500-hectare portion of Hacienda Luisita, of which the 200-hectare portion
sold to LRC and the 300-hectare portion subsequently acquired by LIPCO and
that exclude it from compulsory coverage as it was already
RCBC were part of, was already subject of the August 14, 1996 DAR Conversion deemed included in the compulsory coverage since 1989; it
Order. By virtue of the said conversion order, the land was already reclassified was the recognition of the valid transfers of these lands to third
as industrial/commercial land not subject to compulsory coverage.” (emphasis
ours)
parties that excluded them from the actual land
14 Conversion from agricultural to industrial land took place on August 14, distribution among the qualified FWBs.
1996 through DAR Conversion Order No. 03060174-764-(95).

63 | P a g e
 The ponencia itself recognizes this legal reality by citing the hectare converted land should belong to the FWBs on account
“valid transfers” of the land as basis for exclusion. Yet, this is of the revocation of the SDP, the valid transfer to
precisely what is lacking in LRC’s case. By failing to intervene LIPCO/RCBC entitles them only to the proceeds of the sale.
in this case, LRC was unable to present evidence supporting its The ponencia, however, decrees that the entire P750 million
good faith purchase of the 200-hectare con- paid for the 200-hectare converted land should be paid to the
_______________ FWBs.
15 Supra note 10, at pp. 27, 29.
16 Sec. 22. Qualified Beneficiaries.—The lands covered by the CARP
I disagree with this position, as it fails to take into account
shall be distributed as much as possible to landless residents of the same that it was HLI which invested in and caused the conversion of
barangay, or in the absence thereof, landless residents of the same the land from agricultural to commercial/industrial:
municipality[.] Since the sale and transfer of these acquired lands came after the
626
compulsory CARP coverage had taken place, the FWBs are entitled
to be paid for the 300 hectares of land transferred to LIPCO based on
626 SUPREME COURT its value in 1989, not on the P750 million selling price paid by
REPORTS LIPCO to HLI [through its subsidiary, Centennary] as proposed by
ANNOTATED the ponencia. This outcome recognizes the reality that the value of
Hacienda Luisita, these lands increased due to the improvements introduced by HLI,
Incorporated vs. Presidential specifically HLI’s move to have these portions reclassified as
industrial land while they were under its possession. Thus, unless it
Agrarian Reform Council is proven that the P750 million is equivalent to the value of the land
verted land. The ponencia’s conclusion that there was a valid as
transfer to LRC of the 200 hectares of converted land, _______________
therefore, lacks both factual and basis. 17 Supra note 10, at p. 47.
Thus, I propose, as I did in my separate opinion to the July 627
5, 2011 Decision, that LRC be given “full opportunity to
present its case before the DAR x x x the failure of [LRC] to VOL. 660, 627
actively intervene at the PARC level and before this Court does NOVEMBER 22, 2011
not really affect the intrinsic validity of the transfer made in its Hacienda Luisita,
favor if indeed it is similarly situated as LIPCO and RCBC. x x Incorporated vs. Presidential
x [A] definitive ruling on the transfer of the 200 hectares to Agrarian Reform Council
[LRC] is premature to make.” The FWBs’ right to the 200- of [November 21, 1989] and excludes the value of any improvements
hectare converted land itself or only to the proceeds of the sale that may have been introduced by HLI, I maintain that the land’s
(amounting to P500 million17) can be determined only after 1989 value, as determined by the DAR, should be the price paid to
LRC has presented its case before the DAR. the FWBs for the lands transferred to LIPCO/RCBC. 18

On the other hand, LIPCO/RCBC’s acquisition in good

faith has been adequately proven. Thus, although the 300-

64 | P a g e
In case the LRC is able to prove its good faith purchase of the Hacienda Luisita,
200-hectare converted land before the DAR, the treatment of Incorporated vs. Presidential
the proceeds of the sale of this land shall be the same as those Agrarian Reform Council
of LIPCO/RCBC’s 300-hectare converted land – the FWBs production share and the expenditures incurred by HLI and
will be entitled only to the land’s value as of November 21, Centennary for legitimate corporate purposes should also be
1989, and the balance shall be for the HLI as compensation for deducted from the total proceeds of the sale.
any improvements introduced. In proposing that the 3% production share be deducted from
With respect to the proceeds of the sale of the 80-hectare the total proceeds of sale to be returned to the FWBs,
land to the government for the SCTEX, “the FWBs are entitled the ponencia has effectively reversed its own insistent
to be paid the full amount of just compensation that HLI declaration that all the benefits received by the FWBs shall “be
received from the government for the 80 hectares of respected with no obligation to refund or return them.” 20 Its
expropriated land forming the SCTEX highway. What was reliance on the “operative fact doctrine” to authorize the
transferred in this case was a portion of the HLI property that FWBs’ retention of all the benefits would thus be for
was not covered by any conversion order. The transfer, too, naught; what the ponencia has given with its right hand, it takes
came after compulsory CARP coverage had taken place and away with its left hand.
without any significant intervention from HLI. Thus, the whole Also, I do not find any legitimate basis for allowing HLI to
of the just compensation paid by the government should accrue deduct from the proceeds of the sale to be turned over to the
solely to the FWBs as owners.”19 FWBs the amounts it used for legitimate corporate purposes. It
Amounts to be Deducted from the is irrelevant for the ponencia to order the DAR “to determine if
Proceeds of the Sale of the Lands the proceeds of the sale of the 500-hectare land and the 80-
HLI claimed that it had already paid out 3% of the proceeds hectare SCTEX lot were actually used for legitimate corporate
of the sale of the lands to the FWBs. This amount should thus purposes.”21 The FWBs are entitled to the proceeds of the sale
be deducted from the total proceeds that should be returned to of the 300-hectare land in lieu of the actual land which they are
the qualified FWBs. The taxes and expenses related to the deemed to have acquired under the CARL since 1989.
transfer of titles should likewise be deducted, since the same The ponencia never explained why the FWBs should bear such
amounts will be incurred regardless of the seller (HLI or the portion of the proceeds of the sale that HLI used to finance its
FWBs). The ponencia proposes that the 3% operations.
_______________
18 Separate Concurring and Dissenting Opinion, pp. 40-41. Transferability of Awarded Lands
The ponencia denies the applicability of Section 27 of the
628 CARL, which states:
628 SUPREME COURT “Sec. 27. Transferability of Awarded Lands.—Lands acquired
REPORTS by beneficiaries under this Act may not be sold, transferred or
ANNOTATED

65 | P a g e
conveyed except through hereditary succession, or to the of 1989 (DAR AO 1-89), it states that “the awarded lands may
government, or to the LBP, or to other qualified bene- only be transferred or conveyed [to third persons] after ten (10)
_______________
19 Id., at p. 41.
years from the issuance and registration of the emancipation
20 Supra note 10, at p. 11. patent (EP) or certificate of land ownership award (CLOA).
Considering that the EPs or CLOAs have not yet been issued to
629
the qualified FWBs x x x, the 10-year prohibitive period has
VOL. 660, 629 not even started.”22
NOVEMBER 22, 2011 I agree with the ponencia’s declaration, but only to the
Hacienda Luisita, extent of prohibiting the qualified FWBs from selling the land
Incorporated vs. Presidential directly to HLI (or other non-qualified purchasers). Properly
construed, the law means that, as a general rule, the FWBs
Agrarian Reform Council
are prohibited from transferring or conveying
ficiaries for a period of ten (10) years: Provided, however, That the _______________
children or the spouse of the transferor shall have a right to 22 Id., at p. 32.
repurchase the land from the government or LBP within a period of
two (2) years. Due notice of the availability of the land shall be given 630
by the LBP to the Barangay Agrarian Reform Committee (BARC) of 630 SUPREME COURT
the barangay where the land is situated. The Provincial Agrarian REPORTS
Coordinating Committee (PARCCOM), as herein provided, shall, in ANNOTATED
turn, be given due notice thereof by the BARC.
If the land has not yet been fully paid by the beneficiary, the right
Hacienda Luisita,
to the land may be transferred or conveyed, with prior approval of Incorporated vs. Presidential
the DAR, to any heir of the beneficiary or to any other beneficiary Agrarian Reform Council
who, as a condition for such transfer or conveyance, shall cultivate the lands within 10 years from the issuance of the EPs or
the land himself. Failing compliance herewith, the land shall be CLOAs, except if the transfer or conveyance is made in
transferred to the LBP which shall give due notice of the availability favor of (a) a hereditary successor, (b) the government, (c)
of the land in the manner specified in the immediately preceding the Land Bank of the Philippines (LBP), or (d) other
paragraph. qualified beneficiaries; transfers or conveyances made in
In the event of such transfer to the LBP, the latter shall
favor of any of those enumerated, even within the 10 years
compensate the beneficiary in one lump sum for the amounts the
latter has already paid, together with the value of improvements he period, are not prohibited by law. A contrary interpretation
has made on the land.” would prevent the beneficiary’s heir from inheriting the land in
the event that the beneficiary dies within the 10-year period,
The ponencia opposes the application of the above provision and put the land’s ownership in limbo. Thus, under Section 27
by denying the FWBs the right to sell the land to third parties, of the CARL, the FWBs who are no longer interested in
including HLI. Citing DAR Administrative Order No. 1, series owning their proportionate share of the land may opt to sell it

66 | P a g e
to the government or the LBP, which in turn can sell it to HLI This principle, however, does not apply to the present case
or the LRC (if it is unable to prove its good faith purchase of because HLI never lost possession and control of the land; all
the 200-hectare converted land), in order not to disrupt their the incomes that the land generated were appropriated by HLI.
existing operations. No loss of income from the land (that should be compensated
Distribution of land to FWBs and payment by the imposition of interest on the just compensation due)
of just compensation to HLI therefore resulted. On the contrary, it is the qualified FWBs
As a consequence of the revocation of the SDP, the who have been denied of income due to HLI’s possession and
4,915.75 hectares of agricultural land subject of the SDP are control of the land since 1989. Thus, HLI should pay the
deemed placed under the CARL’s compulsory coverage since qualified FWBs rental for the use and possession of the land up
November 21, 1989. Corollary, the taking is deemed to have to the time it surrenders possession and control over these
occurred at this time and HLI is entitled to just compensation lands. The DAR, as the agency tasked to implement agrarian
based on the value of the entire 4,915.75-hectare land in reform laws, shall have the authority to determine the
1989.23 In light of this conclusion, the question that begs for a appropriate rental due from HLI to the qualified FWBs. In
definitive response is: is HLI entitled to interest from 1989 recognition, however, of any improvements that HLI may have
up to the present on the amount of just compensation it introduced on these lands, HLI is entitled to offset their value
should receive? from the rents due.
In several cases, the Court awarded interests when there is Application of the principle of set-off
delay in the payment of just compensation. The underlying  The consequence of the revocation of the SDP, as I have
_______________ repeatedly stated, is the restoration of the parties to their
23 The value of the 300-hectare land conveyed to LIPCO/RCBC and the _______________
80-hectare land for SCTEX should not be excluded if the Court is to rule that 24 See Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No.
the FWBs are entitled to the proceeds of these conveyances. 164195, October 12, 2010, 632 SCRA 727. See also Land Bank of the
Philippines (LBP) v. Soriano, G.R. Nos. 180772 and 180776, May 6, 2010, 620
631
SCRA 347, where the Court declared that
VOL. 660, 631 The concept of just compensation embraces not only the correct
NOVEMBER 22, 2011 determination of the amount to be paid to the owners of the land, but
also payment within a reasonable time from its taking. Without prompt
Hacienda Luisita, payment, compensation cannot be considered “just” inasmuch as the
Incorporated vs. Presidential property owner is made to suffer the consequences of being
Agrarian Reform Council immediately deprived of his land while being made to wait for a decade
or more before actually receiving the amount necessary to cope with his
rationale for the award is to compensate the landowner not loss.
simply for the delay, but for the income the landowner would
have received from the land had there been no immediate 632
taking thereof by the government.24 632 SUPREME COURT
REPORTS

67 | P a g e
 ANNOTATED The DAR is ORDERED to determine the amount of just
Hacienda Luisita, compensation that HLI is entitled to for the entire 4,915.75
Incorporated vs. Presidential hectares of agricultural land, based on the value at the time of
Agrarian Reform Council taking—November 21, 1989, and no interest shall be imposed
on this amount. The DAR is FURTHER ORDERED to
respective conditions prior to its execution and approval – thus,
determine the amount of RENTALS that HLI must pay to the
they are bound to restore whatever they received on account of
633
the SDP. However, this does not prevent the application of the
VOL. 660, 633
principle of set-off or compensation. The retention, either by
the qualified FWBs or the HLI, of some of the benefits
NOVEMBER 22, 2011
received pursuant to the revoked SDP is based on the Hacienda Luisita,
application of the principle of compensation, not on the Incorporated vs. Presidential
misapplication of the operative fact doctrine. Agrarian Reform Council
qualified FWBs for the use and possession of the land
DISPOSITIVE PORTION beginning November 21, 1989, until possession is turned over
to the DAR, for distribution (with due adjustment for the
Accordingly, I maintain my vote to DENY HLI’s petition portions conveyed to LIPCO/RCBC, the government for the
and AFFIRM the PARC’s Resolution Nos. 2005-32-01 and SCTEX, and, if found by the DAR to be a valid transfer, LRC).
2006-34-01 revoking the SDP. HLI, however, is entitled to DEDUCT from the rentals due the
The entire 4,915.75 hectares of land are deemed PLACED value of the improvements it made over the land (excluding
UNDER COMPULSORY COVERAGE of the CARL AS OF those sold to LIPCO/RCBC and LRC, if the DAR finds that
NOVEMBER 21, 1989, and the 6,296 qualified FWBs shall be there was a valid transfer).
deemed to have acquired rights over the land as of this date. HLI shall PAY to the FWBs the value of the
The DAR shall DISTRIBUTE the land among the 6,296 a. 300 hectares of converted land conveyed to
qualified FWBs, EXCLUDING: LIPCO/RCBC, based on its November 21, 1989 value, as
a. the 300 hectares of converted land acquired by determined by the DAR; and
LIPCO/RCBC; and b. if the DAR finds that there was a valid transfer, 200
b. the 80 hectares of land expropriated by the government hectares of converted land conveyed to LRC.
for the SCTEX. HLI shall also PAY the qualified FWBs just compensation
The LRC shall be entitled to prove before the DAR that there received from the government for the 80 hectares of
was valid transfer of the 200 hectares of converted land. If the expropriated land for the SCTEX.
DAR finds that LRC is a purchaser in good faith and for value, From the total amount of the proceeds of the sale and the
the 200 hectares of converted land shall likewise be excluded just compensation to be paid by HLI to the qualified FWBs, the
from the land to be distributed among the qualified FWBs. DAR shall DEDUCT the P150 million, representing the 3%

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production share and the aggregate value of the homelots that declared HLI entitled to just compensation to be reckoned from
the qualified FWBs received from HLI. The amount of the 3% November 21, 1989.
production share shall depend on the amount actually received Today’s Resolution continues to follow the same reckoning
by the FWBs from HLI, to be determined by the DAR. date of November 21, 1989 due to its being the date when
All the FWBs shall return to HLI the 59 million shares of PARC approved HLI’s SDP and thereby placed the affected
stock. They are, however, entitled to retain all the salaries, agricultural lands under the coverage of CARP. The Resolution
wages and other benefits received as employees of HLI.634 explains that it was upon the approval of the SDP that the
634 SUPREME COURT farmworker-beneficiaries (FWBs) had come to be considered
REPORTS to own and possess the affected agricultural lands.
ANNOTATED The determination of when the taking occurred is an
Hacienda Luisita, integral and vital part of the determination and computation of
just compensation. The nature and character of land at the time
Incorporated vs. Presidential
of its taking are the principal criteria to determine just
Agrarian Reform Council 635
CONCURRING AND DISSENTING OPINION VOL. 660, 635
BERSAMIN, J.: NOVEMBER 22, 2011
I concur with the Resolution the Court issues today by way
Hacienda Luisita,
of resolving the various motions filed against the decision
dated July 21, 2011. Incorporated vs. Presidential
I respectfully dissent on two aspects, however, and I Agrarian Reform Council
humbly opine that: one, the reckoning date for purposes of compensation to the landowner.1 In National Power
determining just compensation should be left to the DAR and Corporation v. Court of Appeals,2 the Court emphasized the
Land Bank, and, ultimately, to the Special Agrarian Court importance of the time of taking in fixing the amount of just
(SAC) to determine; and two, the landowner should be compensation, thus:
compensated for the value of the homelots granted to the “xxx [T]he Court xxx invariably held that the time of taking is the
critical date in determining lawful or just compensation.
farmworkers-beneficiaries (FWBs) pursuant to the discredited
Justifying this stance, Mr. Justice (later Chief Justice) Enrique
stock distribution plan (SDP). Fernando, speaking for the Court in Municipality of La Carlota vs.
Let me explain my position. The Spouses Felicidad Baltazar and Vicente Gan, said, “xxx the
I owner as is the constitutional intent, is paid what he is entitled to
In the decision of July 5, 2011, the Court upheld the according to the value of the property so devoted to public use as of
PARC’s assailed resolutions placing the agricultural lands the date of the taking. From that time, he had been deprived thereof.
subject of the SDP under compulsory coverage of the He had no choice but to submit. He is not, however, to be despoiled
Comprehensive Agrarian Reform Program (CARP), and of such a right. No less than the fundamental law guarantees just
compensation. It would be an injustice to him certainly if from such

69 | P a g e
a period, he could not recover the value of what was lost. There for the determination of just compensation to landowners, and the
could be on the other hand, injustice to the expropriator if by a delay prosecution of all criminal offenses under this Act.
in the collection, the increment in price would accrue to the owner. The Rules of Court shall apply to all proceedings before the
The doctrine to which this Court has been committed is intended Special Agrarian Courts, unless modified by this Act.
precisely to avoid either contingency fraught with The Special Agrarian Courts shall decide all appropriate cases
unfairness.”  (emphasis supplied)
3
under their special jurisdiction within thirty (30) days from
submission of the case for decision.”
It is my humble submission, therefore, that the factual issue
of when the taking had taken place as to the affected II
agricultural lands should not be separated from the It appears to me that the homelots granted to the FWBs
determination of just compensation by DAR, Land Bank and under the SDP do not form part of the total area of the
SAC. Accordingly, I urge that the Court should leave the agricultural lands to be turned over to DAR for distribution to
matter of the reckoning date to be hereafter determined by the the qualified FWBs for which the landowner will be justly
DAR and Land Bank pursuant to Section 18 of Republic Act compensated. If my impression is correct, I fear that the result
No. 6657.4 Should the parties disagree thereon, the proper SAC will be unfair should the landowner not be justly compensated
_______________ for the value of the homelots. In such a situation, the taking
1 Republic v. Cancio, G.R. No. 170147, January 30, 2009, 577 SCRA will be confiscatory and unconstitutional.
346; National Power Corporation v. Henson, G.R. No. 129998, December 29,
1998, 300 SCRA 751, 756. I submit, therefore, that HLI as the landowner should be
2 G.R. No. 113194, March 11, 1996, 254 SCRA 577. justly compensated also for the homelots.
3 Id., at p. 589.
4 Section 18. Valuation and Mode of Compensation.—The LBP shall CONCURRING AND DISSENTING OPINION
compensate the landowner in such amount as may be

636 SERENO, J.:
636 SUPREME COURT  At the outset, I have maintained that the nullity of the Stock
REPORTS Distribution Option Agreement (SDOA) in Hacienda Luisita
ANNOTATED should lead to the immediate distribution of the agricultural
lands to the 6,296 qualified farmer-beneficiaries
Hacienda Luisita, _______________
Incorporated vs. Presidential agreed upon by the landowner and the DAR and LBP or as may be finally
Agrarian Reform Council determined by the court as just compensation for the land.
will then resolve their disagreement as an integral part of a 637
petition for determination of just compensation made pursuant VOL. 660, 637
to Section 57 of Republic Act No. 6657, to wit: NOVEMBER 22, 2011
“Section 57. Special Jurisdiction.—The Special Agrarian
Hacienda Luisita,
Courts shall have original and exclusive jurisdiction over all petitions

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Incorporated vs. Presidential new rule—that for SDOAs that are nullified, the compensation
Agrarian Reform Council for the value of the lands that will be distributed are to be
(FWBs). The first draft of the ponencia of the original reckoned at their fair market value at the time of the approval
Decision was circulated among the Members of the Court on of the nullified SDOA.638
11 February 2011. The draft ponencia, which eventually 638 SUPREME COURT
became the majority Decision, said that the nullity of the REPORTS
SDOA notwithstanding, effects of its approval have taken place ANNOTATED
and cannot be undone under the operative facts doctrine and Hacienda Luisita,
thus directed the holding of a secret voting among the FWBs Incorporated vs. Presidential
on whether they will opt to remain as stockholders of petitioner Agrarian Reform Council
Hacienda Luisita, Inc. (HLI). Shortly thereafter, on 25 March In my view, such an approach is partially confiscatory as it
2011, the first draft of my opinion objecting to the grant of the makes an unjustified exception to the long line of jurisprudence
secret voting option to the FWBs to stay with the SDOA was that the Court has laid down regarding the time of “taking” of
circulated. Other draft dissenting opinions against the agrarian reform lands for purposes of just compensation. It
proposed ponencia were subsequently released. After the would have been preferable, from a policy point of view, that at
promulgation of the Decision dated 05 July 2011 and after the time that the CARL was passed in 1989, Congress had
carefully reviewing the instant motions for reconsideration, my chosen one of two options: (a) either the State subsidize the
initial position remains the same—the SDOA is illegal and land difference between the fair market value at the time of the
distribution should immediately be directed under Section 33 taking and what the farmers can afford to pay, which some of
of Republic Act No. 6657, or the Comprehensive Agrarian the 1986 Constitutional Commissioners said should happen; or
Reform Law (CARL). (b) authorize the confiscation of a part of the price of the fair
 I welcome the change in the position of the majority, and market value under a radical but rational interpretation of the
voting with them, this Court is now unanimously directing social justice clause of the 1987 Constitution. Congress chose
immediate land distribution. However, I disagree with its neither option and opted for payment of the fair market value at
identification of the reckoning date of the “taking” of the lands the time of the taking as just compensation to be amortized by
ordered to be distributed for the purpose of eventually the farmers for 30 years. This Court has invariably sustained
determining “just compensation.” On the instant motions for that policy choice. This in large part accounts for the confessed
reconsideration, the ponencia talks of the possibility of lack of financial viability to make land reform a genuine
rendering it impossible for the FWBs to pay for the lands if the success.
reckoning date were the date of Notice of Coverage, or on 02 The choice having been thusly made, this Court has no
January 2006. It holds that regardless of the uniform rulings of alternative except to apply the rule uniformly, otherwise, this
the Court I enumerated in this Opinion to the effect that the will result in a discriminatory and partially confiscatory
“taking” is the date of the Notice of Coverage, it is creating a treatment of the Hacienda Luisita lands. That is also why I was

71 | P a g e
proposing that the lands to be distributed to the qualified FWBs Dissenting Opinion of the same date. A secret voting will take
be declared to be immediately and freely transferable. After all, place in which FWBs want to indicate whether they will retain
the 10-year prohibition against the transfer effectively lapsed their stockholding in petitioner HLI in lieu of their individual
on the tenth year of the effectivity of the CARL. The FWBs right to a direct share in the land, or whether they want direct
can sell part and retain part of the lands, and can best determine land ownership. In cases where direct land ownership is
how to make optimal economic use of them. selected, petitioner HLI shall be paid the value of the lands as
My view resonates with the opinion of Justice Arturo D. of 21 November 1989, which was the date when the PARC
Brion, who reckoned the value of the lands to the time the approved its SDOA with the FWBs.
SDOA was approved on 21 November 1989, but at the same The second approach is that proposed by Justice Arturo D.
time recognized petitioner HLI’s entitlement to the value of the Brion in his earlier Separate Concurring and Dissenting
improvements to the land. He laments the fact that petitioner Opinion, which Justice Martin S. Villarama, Jr., joined in. The
HLI will be uncompensated for all the improvements it approach is to order direct land distribution to all the FWBs of
639 the 4,916 hectares of land. The date of the taking will be
VOL. 660, 639 pegged to 11 May 1989 (the date of the SDOA), and the just
NOVEMBER 22, 2011 compensation will also be pegged to that time. There will be no
Hacienda Luisita, interest on the just compensation and petitioner HLI will be
Incorporated vs. Presidential required to pay back rentals as of that date.
Agrarian Reform Council The third approach is like the first approach, but modified
has introduced as a builder in good faith from 21 November by the legal consequences of the statement made by the
1989 until now. I agree with him on this point. majority in the body of the Decision that a stock option
arrangement can only be valid if majority control of the
The Five Approaches to Resolving this Petition corpora-
640
There are before the Court five major approaches to 640 SUPREME COURT
resolving the agrarian legal problems involving Hacienda REPORTS
Luisita. Each approach advances operative solutions to two ANNOTATED
standing issues: (a) whether to distribute the agricultural lands Hacienda Luisita,
to the FWBs or allow them to secretly vote to remain as Incorporated vs. Presidential
stockholders; and (b) how much compensation, if any, is due to Agrarian Reform Council
the corporate landowner. tion is in the hands of the FWBs. Thus, the Court must
The first approach, which has now been abandoned, is that categorically direct (a) a revaluation of the assets of HLI; (b)
ordered by the Court’s questioned Decision dated 05 July 2011, this revaluation must result in at least 51% control of the voting
and as suggested by Chief Justice Renato C. Corona in his stock and the beneficial interest; and (c) this restructuring must

72 | P a g e
be completed before the referendum for the FWBs is VOL. 660, 641
undertaken by public respondent Department of Agrarian NOVEMBER 22, 2011
Reform (DAR). Hacienda Luisita,
The fourth approach is a suggested modification of the Incorporated vs. Presidential
second approach. The “taking” and the value of the just
Agrarian Reform Council
compensation is pegged to 11 May 1989, but the Tarlac
agrarian reform cases when “socialized taking” was
Development Corporation (TADECO) and/or petitioner HLI
contemplated, but since 1989, law and jurisprudence prevents
(a) must be compensated for (i) interest on the value of the just
this approach from being adopted. The third approach, while
compensation at that time onwards; (ii) and improvements that
still legally wrong, mitigates much of the injustice that will be
have been introduced to the lands with interest on the value of
perpetrated by the first approach. The fourth approach will
the improvements since these improvements were utilized; (b)
contradict jurisprudence on “just compensation” and require a
may be required to pay rentals for the use of the land in their
lot of accounting exercises, but is less harsh to the farmers and
state as of 11 May 1989 adjudicated by a reasonable annual
the landowners. The fifth approach is logically consistent, but
rate applicable to the lands in such state; and (c) cannot be
requires much creative designing by public respondent DAR.
made to return the entire P750,000,000 paid by Luisita
The last three approaches would not work too great an injustice
Industrial Park Corporation (LIPCO) to petitioner HLI for the
on either the FWBs or the landowners.
300 hectare lands, the P80,000,000 paid by the national
government for the 84 hectares expropriated for the Subic- Land Distribution v. Secret Voting
Clark-Tarlac-Expressway (SCTEX), but only the value of the
300 hectares and the 84 hectares as of 11 May 1989, plus The Court has unanimously struck a lethal blow to the
interest on the same at the same rate that will be given in favor SDOA between petitioner Hacienda Luisita, Inc., (HLI) and the
of petitioner HLI under item (a) above. signatory farmworker-beneficiaries (FWBs), since its
The fifth approach requires direct land distribution. The provisions were found to be in violation of the Comprehensive
“taking” and the value of the just compensation is pegged Agrarian Reform Law (CARL). Despite the unequivocal
according to law and prevailing jurisprudence. The just invalidation of the SDOA, the Court was divided on the various
compensation is pegged to the date of actual taking, and its approaches in dealing with the aftermath of the declaration in
value is approximately at fair market value. accordance with the promises of agrarian reform under the
The first approach is contrary to law and unjust to the Constitution.
farmers. The second approach is contrary to prevailing To my mind, no other option is permissible under the law
jurisprudence on just compensation and is confiscatory of the other than the immediate and direct land distribution to the
right of the landowners. It would have been legally supportable FWBs as provided for under the CARL. The rejection of the
under the initial interpretation of “just compensation” in secret voting option by the ponente, Justice Presbitero J.
641
Velasco, Jr., in his Resolution of the various Motions for

73 | P a g e
Clarification/Reconsideration by the main concerned parties, as through collective ownership. Considering that stock
well as by Chief Justice Corona in his Separate Opinion, is a distribution options per se have not been declared as
very positive turn of events. unconstitutional mechanisms in agrarian reform, the Court
As the new ponencia points out, the distribution of the must at present give life to the intention of the legislature in
stocks under the SDOA is evidently iniquitous because the opening up that option to corporate landowners, but not at the
FWBs will continue to be relegated as minority stockholders expense of relegating the FWBs to minority status. The
642 presence of this solution also avoids having to pronounce
642 SUPREME COURT Section 28 of the CARL void, a preferred
REPORTS _______________
1 Under the SDOA, the FWBs are entitled to the equivalent of the value of
ANNOTATED the agricultural lands compared with the total assets of petitioner HLI. In this
Hacienda Luisita, case, the value of petitioner HLI’s agricultural land is pegged at P196,630,000;
Incorporated vs. Presidential while its claimed total assets are worth P590,554,220. Thus, the FWBs would
be able to hold at maximum 33.296% of petitioner HLI’s shares.
Agrarian Reform Council
holding, at best, 33.29% of the votes in the corporation. 1 Under 643
the first approach, the secret voting option would, in fact, VOL. 660, 643
further aggravate the minority position of the FWBs in NOVEMBER 22, 2011
petitioner HLI since those who opt for direct land distribution Hacienda Luisita,
would have to surrender their stockholdings. Should petitioner Incorporated vs. Presidential
HLI’s current corporate structure of lands-to-total-assets ratio Agrarian Reform Council
be maintained, FWBs who will opt to remain as stockholders approach to statutory construction that this Court is bound to
will find themselves with a decreased voting power base and observe by judicial review doctrines.
placed at an even greater disadvantage with the exodus of other
FWBs who will opt for individual distribution of land. Just Compensation v. Modified Compensation
The outcome of the SDOA in Hacienda Luisita may have
been different had the FWBs been given majority or even full Since there is now unanimity in ordering the distribution of
control of petitioner HLI at the outset, which is the rationale of the agricultural lands to the FWBs in this case, the Court now
the third approach. The secret voting option would have been contends with the quantum of compensation due to petitioner
less unjust, if majority control of the corporation is first handed HLI with respect to its expropriated farm lands. It is not
to the FWBs, before they decide whether to remain as surprising that the issue of just compensation that has plagued
stockholders or opt for land distribution. The third approach the members of the Constitutional Commission and Congress
recognizes the constitutional mandate to hand over ownership has again reared its head in the present legal controversy,
and control of agricultural lands to the farmers or farmworkers, involving the peculiar mechanism of a stock distribution option
whether directly through individual ownership or indirectly under the CARL. Fortunately, the wealth of jurisprudence in

74 | P a g e
the years following the passage of the landmark law up to the for eminent domain is to make the private owner “whole” after
present offers some guidance in arriving at a solution that his property is taken by the State.5
conforms with the constitutional mandate of agrarian reform The taking of private lands under the agrarian reform
and social justice. program partakes of the nature of an expropriation
While distribution of land was the prevailing ideology in proceeding.6 For purposes of taking under the agrarian reform
crafting our agrarian reform policies in the Constitution, the program, the framers of the Constitution expressly made its
other side of the spectrum is the recognition of the rights of the intention known that the owners of the land should not
landowner specifically the right of just compensation. 2 The aim receive less than the market value for their expropriated
of redistributing agricultural lands under the Constitution was properties and drew parallelisms with the ordinary
primarily to correct the unjust social structures then prevailing understanding of just compensation in non-land reform
in order to achieve an equitable distribution of wealth from the expropriation.7 Indeed, the matter of just compensation was
landed few in favor of the landless majority. Yet, in never meant to involve a severe diminution of what the land
recognizing the social function of the lands and the demands of owner gets.8 The aim of just compensation in terms of
social justice, the framers never lost sight of the property rights expropriation, even in agrarian reform, should be
of landowners, as an inherent limitation to the exercise of the _______________
3 “No person shall be deprived of life, liberty, or property without due
State’s power of eminent domain or expro- process of law, nor shall any person be denied the equal protection of the laws.”
_______________
(CONSTITUTION, Art. III, Sec. 1)
2 “… To this end, the State shall encourage and undertake the just
4 CONSTITUTION, Art. III, Sec. 9.
distribution of all agricultural lands, subject to such priorities and reasonable
5 Dissenting Opinion of Chief Justice Renato C. Corona, in Republic of the
retention limits as the Congress may prescribe, taking into account ecological,
Philippines v. Gingoyon, G.R. No. 166429, 19 December 2005, 478 SCRA 474,
developmental, or equity considerations, and subject to the payment of just
citing State by Department of Highways v. McGuckin, 242 Mont 81, 788 P2d
compensation. …” (CONSTITUTION, Art. XIII, Sec. 4)
926.
644 6 Gabatin v. Land Bank of the Philippines, G.R. No. 148223, 25 November
2004, 444 SCRA 176.
644 SUPREME COURT 7 “FR. BERNAS: But is it the intention of the Committee that the owner
REPORTS should receive less than the market value?
ANNOTATED  “MR. MONSOD: It is not the intention of the Committee that the owner
should receive less than the just compensation.” (Minutes of the Deliberations
Hacienda Luisita, of the Constitutional Commission, [17 August 1986], p. 17)
Incorporated vs. Presidential 8 Minutes of the Deliberations of the Constitutional Commission, Fr.
Joaquin Bernas, S. J. (04 August 1986), p. 648.
Agrarian Reform Council
priation, even in cases of agrarian reform. Concomitant with 645
the fundamental right not to be deprived of property without VOL. 660, 645
due process of law3 is the constitutional provision that NOVEMBER 22, 2011
“[p]rivate property shall not be taken for public use without Hacienda Luisita,
just compensation.”4 Hence, the policy underlying the provision

75 | P a g e
Incorporated vs. Presidential 646 SUPREME COURT
Agrarian Reform Council REPORTS
just to the owner—that which approximates the market ANNOTATED
value.9 Hence, the Court acknowledged the other side of the Hacienda Luisita,
agrarian reform coin and ruled: Incorporated vs. Presidential
“The Comprehensive Agrarian Reform Program was undertaken Agrarian Reform Council
primarily for the benefit of our landless farmers. However, the
lands under the police power. We deal here with an actual taking of
undertaking should not result in the oppression of landowners by
private agricultural lands that has dispossessed the owners of their
pegging the cheapest value for their lands. Indeed, the taking of
property and deprived them of all its beneficial use and
properties for agrarian reform purposes is a revolutionary kind
enjoyment, to entitle them to the just compensation mandated by
of expropriation, but not at the undue expense of landowners
the Constitution.
who are also entitled to protection under the Constitution and
As held in Republic of the Philippines v. Castellvi, there is
agrarian reform laws. …”  (Emphasis supplied)
10
compensable taking when the following conditions concur: (1) the
In the seminal case Association of Small Landowners in the expropriator must enter a private property; (2) the entry must be for
Philippines v. Secretary of Agrarian Reform,11 the Court, more than a momentary period; (3) the entry must be under warrant
or color of legal authority; (4) the property must be devoted to public
speaking through retired Justice Isagani Cruz, eloquently
use or otherwise informally appropriated or injuriously affected; and
expounded on the inherent right of landowners to just (5) the utilization of the property for public use must be in such a
compensation, in this wise: way as to oust the owner and deprive him of beneficial
“Just compensation is defined as the full and fair equivalent of enjoyment of the property. All these requisites are envisioned in
the property taken from its owner by the expropriator. It has been the measures before us.”
repeatedly stressed by this Court that the measure is not the
taker’s gain but the owner’s loss. The word “just” is used to Since the farm lands in Hacienda Luisita are to be the
intensify the meaning of the word “compensation” to convey the idea subject of distribution, petitioner HLI or Tarlac Development
that the equivalent to be rendered for the property to be taken shall Corporation (TADECO), as landowners, are entitled to just
be real, substantial, full, ample. compensation, which is an indispensible legal requirement in
It bears repeating that the measures challenged in these petitions
agrarian reform expropriations.12The issue now lies in the
contemplate more than a mere regulation of the use of private
_______________ reckoning period in which the just compensation shall be
9 “FR. BERNAS. The sense is, it must be just to the owner. computed, as illustrated by the second, fourth and fifth
MR. TREÑAS. Precisely. approaches. Crucial to the Court’s resolution of this matter is
FR. BERNAS. The owner should get the full market value. But then we have to
make a provision as to where the payment will come from.” (Minutes of the the time of the taking by the government of the farm lands in
Deliberations of the Constitutional Commission, [17 August 1986], p. 18) Hacienda Luisita.
10 LBP v. Chico, G.R. No. 168453, 13 March 2009, 581 SCRA 226. Just compensation in cases of expropriation is ordinarily to
11 G.R. Nos. 78742, 79310, 79744, and 79777, 14 July 1989, 175 SCRA 343.
be ascertained as of the time of the taking.13 In computing the
646 _______________

76 | P a g e
 12 “Agrarian reform is a revolutionary kind of expropriation. The 14 B. H. Berkenkotter & Co. v. Court of Appeals, id., citing Republic of the
recognized rule in expropriation is that title to the expropriated property shall Philippines v. Ker and Company Limited, 383 SCRA 584 (2002)
pass from the owner to the expropriator only upon full payment of the just and Association of Small Landowners in the Philippines, Inc. v. Secretary of
compensation. Thus, payment of just compensation to the landowner is Agrarian Reform, 175 SCRA 343 (1989).
indispensable.” (Land Bank of the Philippines v. Dumlao, G.R. No. 167809, 27 15 B. H. Berkenkotter & Co. v. Court of Appeals, id.
November 2008, 572 SCRA 108) 16 “ ‘Taking’ under the power of eminent domain may be defined generally
13 B. H. Berkenkotter & Co. v. Court of Appeals, G.R. No. 89980, 14 as entering upon private property for more than a momentary period, and, under
December 1992, 216 SCRA 584, citing Land Bank of the Philippines v. Court the warrant or color of legal authority, devoting it to a public use, or otherwise
of Appeals, 258 SCRA 404 (1996) and Association of informally appropriating or injuriously affecting it in such a way as
substantially to oust the owner and deprive him of all beneficial enjoyment
647 thereof.” (Republic of the Philippines v. vda. de Castellvi, G.R. No. L-20620,
VOL. 660, 647 15 August 1974, 157 Phil. 329, citing 26 Am. Jur. 2nd ed., Sec. 157)
17 “It is reminded to adhere strictly to the doctrine that just compensation
NOVEMBER 22, 2011 must be valued at the time of taking. The ‘time of taking’ is the time when the
Hacienda Luisita, landowner was deprived of the use and benefit of his property, such as when
Incorporated vs. Presidential title is transferred to the Republic.” (Land Bank of the Philippines v. Livioco,
G.R. No. 170685, 22 September 2010, citing Eusebio v. Luis, 603 SCRA 576,
Agrarian Reform Council 586-587 [2009])
just compensation for expropriation proceedings, it is the
value of the land at the time of the taking, not at the time of the 648
rendition of judgment, which should be taken into 648 SUPREME COURT
consideration.14 Hence, in determining the value of the land for REPORTS
the payment of just compensation, the time of taking should be ANNOTATED
the basis.15 The concept of taking in both land reform and non- Hacienda Luisita,
land reform expropriations is well-settled. There is taking of Incorporated vs. Presidential
private property by the State in expropriation proceedings Agrarian Reform Council
when the owner is ousted from his property and deprived of his SDOA, or on 21 November 1989 (date of the PARC
beneficial enjoyment thereof.16 The “time of taking” is the approval). Second, the date the SDOA was signed, 18 May
moment when landowners are deprived of the use and benefit 1989, (date of the SDOA) was also considered as a reckoning
of the property.17 point of the valuation period. Lastly, I submit that the valuation
Three reckoning periods are for consideration of the be made based on the current fair market value in accordance
Court. First, Justice Velasco, who is now joined by Justice with established laws, rules and jurisprudence; or more
Brion, proposes that the amount of just compensation to be specifically, at the time that petitioner HLI was issued a Notice
paid should be based on the date that the PARC approved the of Coverage on 02 January 2006 (date of Notice of Coverage).
_______________
Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,
With all due respect to my colleagues, the third reckoning
175 SCRA 343 (1989). period alone satisfies the constitutional directive to give real,
substantial, full and ample compensation to the landowner in

77 | P a g e
recognition of the latter’s right to property and of the express Hence, no taking of agricultural lands can be considered
limitation on the State’s power of expropriation. either at the time the SDOA was signed or at the time PARC
The period of valuation of the property cannot be reckoned approved it, since petitioner HLI retained full ownership and
by considering the first two dates as the time that the use of the lands thereafter. Despite the change in stockholders,
agricultural lands were taken, precisely because petitioner HLI petitioner was never ousted from or deprived of the beneficial
and the FWBs resorted to the mechanism of a stock distribution enjoyment of the agricultural lands in Hacienda Luisita. This
option. This was a distinctive mechanism under the agrarian was the very reason why the stock distribution option was the
reform scheme, by which shares of stock of the corporate mode specifically preferred by the corporate landowner in this
landowner, instead of agricultural lands, were distributed to the case. Indeed, petitioner freely exercised ownership of the
farmers. The singular advantage of the said scheme, unlike a property in the interim, when it applied for the conversion of
direct land transfer to individual farmers or cooperatives, is that the lands and sold them to third parties. Even Justice Brion
title to the property remains with the corporate landowner, acknowledged this fact in his earlier Separate Opinion, in
which should presumably be dominated by farmers with which he said: “HLI never lost possession and control of the
majority stockholdings in the corporation. land under the terms of the SDOA.” It appears iniquitous to
The reason behind the 1989 reckoning periods (the date of reckon the valuation of the now expropriated farm lands in
SDOA or the date of PARC approval) is that the agricultural Hacienda Luisita by their 1989 levels, when the property had
lands are made the subject of the CARL, and are thus not yet been actually taken or expropriated by the government
considered to have been expropriated private property under at that time.
the agrarian reform program. However, the use of these periods The CARL, as amended, had expressly identified the factors
ignores the fact that petitioner HLI, as the corporate landowner, in arriving at just compensation for landowners whose
exactly availed itself of the stock distribution option under the properties have been subject to land reform expropriation:
CARL, which resulted in the title remaining in the hands of “In determining just compensation, the cost of acquisition of the
private persons. Instead of expropriating lands, what the land, the value of the standing crop, the current value of like
government took and distributed to the FWBs were shares of properties, its nature, actual use and income, the sworn valuation
stock of petitioner HLI in proportion to the value of by the owner, the tax declarations, the assessment made by
649 government assessors, and seventy percent (70%) of the zonal
VOL. 660, 649 valuation of the Bureau of Internal Revenue (BIR), translated into
a basic formula by the DAR shall be considered, subject to the final
NOVEMBER 22, 2011 decision of the proper court. The social and economic
Hacienda Luisita, benefits contributed by the farmers and the farmworkers and by the
Incorporated vs. Presidential Government to the property as well as the nonpayment of taxes or
Agrarian Reform Council loans secured from any government
650
the agricultural lands that should have been expropriated and
turned over to the FWBs. 650 SUPREME COURT

78 | P a g e
 REPORTS 178097, 25 June 2009, 591 SCRA 1; LBP v. Rufino, G.R. No.
ANNOTATED 175644 and 175702, 02 October 2009, 602
_______________
Hacienda Luisita, 18 Republic Act No. 6657, Sec. 17, as amended by Republic Act No. 9700.
Incorporated vs. Presidential 19 DAR Administrative Order No. 06-92 dated 30 October 1992, as
Agrarian Reform Council amended by DAR Administrative Order No. 11-94 dated 13 September
1994; see also DAR Administrative Order No. 05-98 dated 15 April 1998 and
financing institution on the said land shall be considered as DAR Administrative Order No. 02-09 dated 15 October 2009.
additional factors to determine its valuation.”
18

651
Pursuant to its rule-making powers, the Department of VOL. 660, 651
Agrarian Reform (DAR) reduced these factors into a basic NOVEMBER 22, 2011
general formula that computes the value of the land subject of
Hacienda Luisita,
agrarian reform in this manner:19
Land Value = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Incorporated vs. Presidential
Where Agrarian Reform Council
CNI = Capitalized Net Income SCRA 399; LBP v. Luciano, G.R. No. 165428, 25 November
       CS = Comparable Sales 2009, 605 SCRA 426; LBP v. Dizon, G.R. No. 160394, 27
       MV = Market Value per Tax Declaration November 2009, 606 SCRA 66; Heirs of Lorenzo and Carmen
In a long line of cases, the Court has given judicial Vidad v. LBP, G.R. No. 166461, 30 April 2010, 619 SCRA
imprimatur to the above formulation made by the DAR. The 609; LBP v. Soriano, G.R. No. 180772 and 180776, 06 May
following cases demonstrate judicial fealty to this 2010, 620 SCRA 347; LBP v. Barrido, G.R. No. 183688, 18
formula: LBP v. Spouses Banal,  G.R. No. 143276, 20 July August 2010, 628 SCRA 454; LBP v. Colarina, G.R. No.
2004, 434 SCRA 543; LBP v. Celada, G.R. No. 164876, 23 176410, 01 September 2010, 629 SCRA 614; LBP v. Livioco,
January 2006, 479 SCRA 495; Lubrica v. LBP, G.R. No. G.R. No. 170685, 22 September 2010, 631 SCRA 86; LBP v.
170220, 20 November 2006, 507 SCRA 415; LBP v. Lim, G.R. Escandor, G.R. No. 171685, 11 October 2010, 632 SCRA
No. 171941, 02 August 2007, 529 SCRA 129; LBP v. Suntay, 504; LBP v. Rivera, G.R. No. 182431, 17 November 2010, 635
G.R. No. 157903, 11 October 2007, 535 SCRA 605; Spouses SCRA 285; LBP v. DAR, G.R. No. 171840, 04 April 2011. In
Lee v. LBP, G.R. No. 170422, 07 March 2008, 548 SCRA all these cases, the formula approximately reflects the fair
52; LBP v. Heirs of Eleuterio Cruz, G.R. No. 175175, 29 market value of the property at the time of the Notice of
September 2008, 567 SCRA 31; LBP v. Dumlao, G.R. No. Coverage to estimate the loss suffered by the landowner,
167809, 27 November 2008, 572 SCRA 108; LBP v. whose property was the subject of expropriation.
Gallego, Jr., G.R. No. 173226, 20 January 2009, 576 SCRA Thus, under the uniform rulings of this Court, the notice
680; LBP v. Kumassie Plantation, G.R. No. 177404 and of coverage commences the process of acquiring
private agricultural lands covered by the CARP.20 The date
of the notice of coverage is therefore determinative of the just

79 | P a g e
compensation petitioner HLI is entitled to for its expropriated property due to the improvements introduced therein. To
lands. In computing capitalized net income under the DAR simply disregard the changes, appreciation or improvements in
formula, one should use the average gross production of the the agricultural lands of Hacienda Luisita by pegging the
latest available 12 months immediately preceding the date of property to its 1989 value is to resort to expropriation that
notice of coverage, in case of compulsory acquisition, and the is confiscatory—considering that it will be the sole exception
average selling price of the latest available 12 months prior to to a long line of jurisprudence—and not compensatory which is
the date of receipt of the claim folder by the Land Bank of the prescribed under the Constitution as a fundamental right of a
Philippines for processing.21 landowner.
The rationale for pegging the period of computing the value Indeed, the previous decisions of this Court dealt with
so close or near the present market value at the time of the voluntary or compulsory coverage under the CARL. It would
taking is to consider the appreciation of the property brought appear that this is the first instance that the Court is confronted
about by improvements therein and other factors. The nature with the question of determining just compensation for cases
_______________ where the landowners and farmworker-beneficiaries resorted to
20 DLR Administrative Order No. 04-05 dated 02 August 2005.
21 LBP v. Rufino, G.R. No. 175644 and 175702, 02 October 2009, 602
a stock distribution option that had failed and was nullified.
SCRA 399. Unlike voluntary or compulsory coverage where the
_______________
652 22 National Power Corporation v. Tiangco, G.R. No. 170846, 06 February
652 SUPREME COURT 2007, 514 SCRA 674, citing National Power Corporation v. Chiong, 404
SCRA 527 (2003).
REPORTS 23 National Power Corporation v. Tiangco, id., citing Export Processing
ANNOTATED Zone Authority v. Dulay, 149 SCRA 305 (1987).
24 “Determination of just compensation for commercial farms shall include
Hacienda Luisita, not only the land but also the facilities and improvements introduced by the
Incorporated vs. Presidential landowner. It may take into account the type of commercial crops planted (e.g.
Agrarian Reform Council banana, pineapple, rubber) and such other relevant factors consistent with
agrarian laws, rules and regulations;” (DAR Administrative Order No. 09-98
and character of the land at the time of its taking is the dated 23 December 1998, Art. 1, Sec. 2 [f])
principal criterion for determining how much just
compensation should be given to the landowner. 22 All the facts 653
as to the condition of the property and its surroundings, as well VOL. 660, 653
as its improvements and capabilities, should be NOVEMBER 22, 2011
considered.23 For the compensation to be just to the owner of a Hacienda Luisita,
commercial farm land, the facilities and improvements Incorporated vs. Presidential
introduced by the landowner—not just the land—shall also be Agrarian Reform Council
taken into consideration.24 It is but equitable to extend to the payment of just compensation was roughly speaking executed
landowner compensation arising from the appreciation of the together with the taking, the stock distribution option in the

80 | P a g e
present scenario has “time” complication. Although the lands 654
were subjected the stock distribution mechanism in 1989, the
654 SUPREME COURT
PARC’s decision to nullify the SDOA and its Notice of
REPORTS
Coverage ordering immediate land distribution came about
only in 2006. The Court is confronted with the judicial task of ANNOTATED
determining standards to reconcile the various legal contentions Hacienda Luisita,
on this time difference, considering other existing stock Incorporated vs. Presidential
distribution schemes across the country that are also subject of Agrarian Reform Council
similar legal challenges. value of the property as of the time of filing of the complaint
I believe there is no reason why those same principles and consistent with the above provision of the Rules. So too,
standards in determining just compensation in voluntary or where the institution of the action precedes entry into the
compulsory acquisition should not be equally applicable to a property, the just compensation is to be ascertained as of the
time of the filing of the complaint.
stock distribution scheme. The Constitution, the CARL and
The trial court fixed the value of the property at its 1984
even our own jurisprudence have been consistent in value, while the CA, at its 1993 worth. Neither of the two
approximating a fair valuation of the properties expropriated by determinations is correct. For purposes of just compensation, the
the State under its agrarian reform program, and must continue respondents should be paid the value of the property as of the time of
to do so in the case of a failed stock distribution scheme. the filing of the complaint which is deemed to be the time of taking
With the equal protection clause in mind, it is simply wrong the property.
for landowners to have their real properties, subject of It was certainly unfair for the trial court to have considered a
expropriation, valued several years or even decades behind, property value several years behind its worth at the time the
considering the upward trend in property values. The Court complaint in this case was filed on November 20, 1990. The
explained this inherent unfairness when it was confronted by a landowners are necessarily shortchanged, considering that, as a
non-land reform expropriation case, in which the trial court and rule, land values enjoy steady upward movement. It was likewise
erroneous for the appellate court to have fixed the value of the
the appellate court fixed the valuation of the property at its
property on the basis of a 1993 assessment. NPC would be paying
1984 and 1993 values, respectively, in this wise: too much. Petitioner corporation is correct in arguing that the
“In eminent domain cases, the time of taking is the filing of the respondents should not profit from an assessment made years after
complaint, if there was no actual taking prior thereto. Hence, in this the taking.
case, the value of the property at the time of the filing of the The expropriation proceedings in this case having been initiated
complaint on November 20, 1990 should be considered in by NPC on November 20, 1990, property values on such month and
determining the just compensation due the respondents. So it is that year should lay the basis for the proper determination of just
in National Power Corporation v. Court of Appeals, et al., we ruled: compensation. In Association of Small Landowners in the
Normally, the time of the taking coincides with the Philippines, Inc. v. Secretary of Agrarian Reform, the Court ruled
filing of the complaint for expropriation. Hence, many that the equivalent to be rendered for the property to be taken shall
rulings of this Court have equated just compensation with the be substantial, full, ample and, as must apply to this case, real. This

81 | P a g e
must be taken to mean, among others, that the value as of the time of expropriations, so that the landowner would not be short-
taking should be the price to be paid the property owner. changed:
Just compensation is defined as the full and fair equivalent of the “Under the circumstances of the present case, we see no
property taken from its owner by the expropriator. In this case, this compelling reason to depart from the rule that Republic firmly
simply means the property’s fair market value at the time of the established. Let it be remembered that shorn of its eminent
filing of the complaint, or “that sum of money which a person domain and social justice aspects, what the agrarian land reform
desirous but not compelled to buy, and an owner willing but not program involves is the purchase by the government, through
compelled to sell, would agree on as a price to be given and received the LBP, of agricultural lands for sale and distribution to
therefor.” The measure is not the taker’s gain, but the owner’s farmers. As a purchase, it involves an exchange of values—the
loss.655 landholdings in exchange for the LBP's payment. In determining the
just compensation for this exchange, however, the measure to be
VOL. 660, 655 borne in mind is not the taker’s gain but the owner’s loss since what
NOVEMBER 22, 2011 is involved is the takeover of private property under the State’s
Hacienda Luisita, _______________
25 National Power Corporation v. Tiangco, G.R. No. 170846, 06 February
Incorporated vs. Presidential 2007, 514 SCRA 674.
Agrarian Reform Council 26 G.R. No. 164195, 12 October 2010, 632 SCRA 727.
In the determination of such value, the court is not limited to the 656
assessed value of the property or to the schedule of market values
determined by the provincial or city appraisal committee; these 656 SUPREME COURT
values consist but one factor in the judicial valuation of the REPORTS
property. The nature and character of the land at the time of its
ANNOTATED
taking is the principal criterion for determining how much just
compensation should be given to the landowner. All the facts as Hacienda Luisita,
to the condition of the property and its surroundings, as well as Incorporated vs. Presidential
its improvements and capabilities, should be considered. Agrarian Reform Council
Neither of the two determinations made by the courts below coercive power. As mentioned above, in the value-for-value
is therefore correct. A new one must be arrived at, taking into exchange in an eminent domain situation, the State must ensure
consideration the foregoing pronouncements.”  (Emphasis supplied)
25
that the individual whose property is taken is not shortchanged
and must hence carry the burden of showing that the “just
In Apo Fruits Corporation, et al., v. Land Bank of the compensation” requirement of the Bill of Rights is satisfied.
Philippines,26 the Court en banc awarded 12% interest to The owner’s loss, of course, is not only his property but also its
petitioners Apo Fruits Corporation and Hijo Plantation, Inc., income-generating potential. Thus, when property is taken, full
for prime agricultural farmlands voluntarily offered to the compensation of its value must immediately be paid to achieve a fair
farmers way back in 1995. We underscored then the value-for- exchange for the property and the potential income lost. The just
value exchange dictated by just compensation in land reform compensation is made available to the property owner so that he may
derive income from this compensation, in the same manner that he

82 | P a g e
would have derived income from his expropriated property. If full Under the factual circumstances of this case, the agrarian
compensation is not paid for property taken, then the State must reform process is still incomplete as the just compensation to be
make up for the shortfall in the earning potential immediately lost paid private respondents has yet to be settled. Considering the
due to the taking, and the absence of replacement property from passage of Republic Act No. 6657 (RA 6657) before the completion
which income can be derived; interest on the unpaid compensation of this process, the just compensation should be determined and the
becomes due as compliance with the constitutional mandate on process concluded under the said law. Indeed, RA 6657 is the
eminent domain and as a basic measure of fairness.” (Emphasis applicable law, with PD 27 and EO 228 having only suppletory
supplied) effect, conformably with our ruling in Paris v. Alfeche.
Section 17 of RA 6657 which is particularly relevant, providing
In the seminal case Land Bank of the Philippines v. as it does the guideposts for the determination of just compensation,
Natividad,27 the Court rejected outright the contention of reads as follows:
Land Bank of the Philippines that the compensation for Sec. 17. Determination of Just Compensation.—In
property, subject of agrarian reform expropriation, should determining just compensation, the cost of acquisition of the
be based on the effectivity of the previous law (Presidential land, the current value of like properties, its nature, actual use
Decree No. 27) on 21 October 1972. The Court ruled that the and income, the sworn valuation by the owner, the tax
compensation should be pegged to the time the property declarations, and the assessment made by government
was taken in possession in 1993 under the new CARL: assessors shall be considered. The social and economic
“Land Bank’s contention that the property was acquired for benefits contributed by the farmers and the farm-workers and
purposes of agrarian reform on October 21, 1972, the time of the by the Government to the property as well as the non-payment
effectivity of PD 27, ergo just compensation should be based on of taxes or loans secured from any government financing
the value of the property as of that time and not at the time of institution on the said land shall be considered as additional
possession in 1993, is likewise erroneous. In Office of the factors to determine its valuation.
President, Malacañang, Manila v. Court of Appeals, we ruled It would certainly be inequitable to determine just compensation
_______________ based on the guideline provided by PD 27 and EO 228 considering
27 G.R. No. 127198, 16 May 2005, 458 SCRA 411. the DAR’s failure to determine the just compensation for a
considerable length of time. That just compensation should be
657
determined in accordance with RA 6657, and not PD 27 or EO
VOL. 660, 657 228, is especially imperative considering that just compensation
should be the full and fair equivalent of the property taken from
NOVEMBER 22, 2011
its owner by the expropriator, the equivalent being real,
Hacienda Luisita, substantial, full and ample.
Incorporated vs. Presidential In this case, the trial court arrived at the just compensation due
Agrarian Reform Council private respondents for their property, taking into account its nature
that the seizure of the landholding did not take place on the date of as irrigated land, location along the highway, market value,
effectivity of PD 27 but would take effect on the payment of just assessor’s value and the volume and value of its produce. This Court
compensation. is convinced that the trial court correctly determined the amount of
658

83 | P a g e
658 SUPREME COURT 342; Land Bank v. Chico, G.R. No. 168453, 13 March 2009, 581 SCRA
226; Land Bank v. Pacita Agricultural Multi-Purpose Cooperative, Inc., G.R.
REPORTS No. 177607, 19 January 2009, 576 SCRA 291; Land Bank v. Dumlao, G.R. No.
ANNOTATED 167809, 27 November 2008, 572 SCRA 108; Land Bank v. Heirs of Eleuterio
Cruz, G.R. No. 175175, 29 September 2008, 567 SCRA 31; Land Bank v. Heirs
Hacienda Luisita, of Angel Domingo, G.R. No. 168533, 04 February 2008, 543 SCRA 627; Land
Incorporated vs. Presidential Bank v. Spouses Hermosa, G.R. No. 166777, 10 July 2007, 527 SCRA
Agrarian Reform Council 181; Lubrica v. Land Bank, G.R. No. 170220, 20 November 2006, 507 SCRA
415.
just compensation due private respondents in accordance with, and
guided by, RA 6657 and existing jurisprudence.”  (Emphasis 28
659
supplied) VOL. 660, 659
Applied to the instant case, the more just and equitable NOVEMBER 22, 2011
solution is to reckon the period of the taking from the date of Hacienda Luisita,
the notice of coverage under the fifth approach, since this was Incorporated vs. Presidential
the time that petitioner HLI was put on notice that its stock Agrarian Reform Council
distribution option was defective and that its agricultural lands petitioner HLI if the agricultural lands to be distributed to the
therein would be subject to compulsory coverage and direct FWBs are to be valued at their 1989 levels.
land distribution under the CARL. It is argued that the time the To be sure, the fourth approach explained above may
SDOA was signed and/or the PARC Resolution was issued approximate the value of the property at the date of the Notice
could be considered as the time petitioner HLI was given due of Coverage, but would unnecessarily call for meticulous
notice that its agricultural lands would be subject of agrarian accounting and valuation of improvements. Although the
reform. This argument is undeniably unfair and contrary to fourth approach would continue to peg the value of the
uniform jurisprudence interpreting the constitutional dictum agricultural land to its 1989 level, it recognizes the passage of
that just compensation in expropriations should approximate an inordinate length of time and hopes to mitigate its unjust
equivalent value that is real, substantial, full and ample. effects by adding the payment of interest. The award of interest
Landowners would be shortchanged if their real properties are may alleviate the hardship caused by depriving petitioner HLI
taken by the State in exchange for compensation that is pegged of the current and fair market value of the property under the
at values two decades prior. In this case, unwarranted prevailing laws and rules, but the order for it to pay rentals for
discrimination would be committed against  the lands from 198929 would negate the benefit of any interest,
_______________ if not possibly saddle it with a heavier financial burden.
28 See also Land Bank v. Livioco, G.R. No. 170685, 22 September 2010,
631 SCRA 86; Land Bank v. J. L. Jocson and Sons, G.R. No. 180803, 23 Although Justice Brion reckoned the period for the
October 2009, 604 SCRA 373; Land Bank v. Heirs of Asuncion Añonuevo vda. valuation of the land to 21 November 1989, he recognized
de Santos, et al., G.R. No. 179862, 03 September 2009, 598 SCRA 115; DAR v. petitioner HLI’s entitlement to the value of the improvements
Tongson, G.R. No. 171674, 04 August 2009, 595 SCRA 181; Land Bank v.
that it has introduced into the agricultural lands for the past
Carolina B. vda. de Abello, et al., G.R. No. 168631, 07 April 2009, 584 SCRA

84 | P a g e
twenty years. The proposition is akin to the Civil the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such
Code30 situation case, he shall pay reasonable rent, if the owner of the land does not choose to
_______________
appropriate the building or trees after proper indemnity. The parties shall agree
29 “Since land reform coverage and the right to the transfer of the CARL-
upon the terms of the lease and, in case of disagreement, the court shall fix the
covered lands accrued to the FWBs as of May 11, 1989, HLI—which continued
terms thereof.” (Civil Code, Art. 448)
to possess and to control the covered land—should pay the qualified FWBs
“Necessary expenses shall be refunded to every possessor; but only the
yearly rental for the use and possession and control over these lands. As a detail
possessor in good faith may retain the thing until he has been reimbursed
of land reform implementation the authority to determine the appropriate rentals
therefor.” (Civil Code, Art. 546)
belongs to the DAR using established norms and standards for the purpose.
“Useful expenses shall be refunded only to the possessor in good faith with
Proper adjustment, of course, should be made for the sale of the acquired lands
the same right of retention, the person who has defeated him in the possession
to LIPCO and to the government as no rentals can be due for these portions
having the option of refunding the amount of the expenses or of paying the
after their sale.” (Separate Opinion of Justice Brion)
increase in value which the thing may have acquired by reason thereof.” (Civil
30 “The owner of the land on which anything has been built, sown or
Code, Art. 546)
planted in good faith, shall have the right to appropriate as his own the works,
31 “Where the builder, planter or sower has acted in good faith, a conflict of
sowing or planting, after payment of the indemnity provided for in Articles 546
rights arises between the owners, and it becomes necessary to protect the owner
and 548, or to oblige the one who built or planted to pay the price of the land,
of the improvements without causing injustice to the owner of the land. In view
and the one who sowed,
of the impracticability of creating a state of forced co-ownership, the law has
660 provided a just solution by giving the owner of the land the option to acquire
the improvements after payment of the proper indemnity, or to oblige the
660 SUPREME COURT builder or planter to pay for the land and the sower the proper rent. He cannot
REPORTS refuse to exercise either option. It is the owner of the land who is authorized to
ANNOTATED exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.” (Heirs of the
Hacienda Luisita, Late Joaquin Limense, v. Vda. De Ramos, G.R. No. 152319, 28 October 2009,
Incorporated vs. Presidential 604 SCRA 599 citing Rosales v. Castelltort, 472 SCRA 144, 161 [2005]).
Agrarian Reform Council 661
where a landowner opts to acquire the improvements VOL. 660, 661
introduced by a builder in good faith and must necessarily pay NOVEMBER 22, 2011
their value.31 Hence, although the land of petitioner HLI is Hacienda Luisita,
expropriated by the government, there is a need for
Incorporated vs. Presidential
compensation for the introduction of the improvements actually
installed by petitioner HLI, such as roads and other Agrarian Reform Council
infrastructure, which have evidently improved the value of the ments, pegging the values to its 1989 levels will not be as
property, aside from its appreciation over time. In recognizing severely confiscatory, if the value will be included as part of
the necessity for compensating petitioner HLI for their the just compensation to be paid. I would even be willing to
improve- accept the formulation proposed by Justice Brion since it
_______________ would, to a lesser amount, approximates a fair market value of
the property. But to simply evaluate the property’s worth to

85 | P a g e
outdated levels and exclude entirely the improvements made Hacienda Luisita,
and the market appreciation of the lands in all the 17 years that Incorporated vs. Presidential
petitioner HLI invested in the lands is not even supportable by Agrarian Reform Council
the Civil Code. owner, and this does not necessarily have to come from the
Furthermore, identifying and valuing the improvements in farmer. The State should subsidize this and pay a just
Hacienda Luisita introduced by petitioner HLI may pose compensation to the owner and let the tenant farmer pay the
another source of conflict that may protract the case further. In state in accordance with the capacity of the farmer. If there is a
addition, their naked costs and book values may fail to account difference let the State subsidize the difference. … (Emphasis
for the intangible effects and the appreciation of values that supplied)32

may result from improvements, such as roads. To obviate these

Thus, the original intention was that there should be no
possible deficiencies in approximating the fair value of the
strict correspondence between the just compensation due to
farm lands, their real value at the time of the notice of
the landowner and the amounts to be paid by the farmworkers:
coverage, following the DAR’s formula, would render a better MR. MONSOD: However, as far as the source of the repayment is
accounting result and preclude complicated calculations. concerned, it may be that the famer is not able to afford the just
The approximation of fair value of the expropriated lands as compensation. This is a proper area where the State can come in, if it
just compensation is not meant to increase the burdens of intends to give support or subsidy. That may be called for in order
payment by the qualified FWBs. When the framers of the that the farmer will get a chance to own a piece of land. Besides,
Constitution originally determined that just compensation, there might not be a strict correspondence between a just
as understood in prevailing jurisprudence, was to be given compensation for the landowner and the capacity of the farmer
to landowners in agrarian reform expropriation, the point to pay.
was clarified that the amounts to be awarded to the MR. DAVIDE: As a matter of fact, the opening sentence of my
landowners were not the exact figures that would in turn be proposal states: “It is the duty of the State.” This means that the State
should first expropriate, distribute and then the government will
paid by the farmers, in other words it should be subsidized:
deal with the farmers or farmworkers as to the mode of
MR. RODRIGO: I was about to say what Commissioner
reimbursement or refunding the amount that the government
Concepcion said. I just want to add that the phrase “just
had paid to the landowner, which should be a more just and
compensation” already has a definite meaning in jurisprudence. And,
equitable arrangement for the farmers and the farm workers. It
of course, I would like to reiterate the fact that “just compensation”
is now a duty.
here is not the amount paid by the farmers. It is the amount paid
MR. MONSOD: That is why I believe that his is consistent with
to the
662
the comments of Commissioner Tadeo because the objective of the
agrarian reform is equity. It is really not efficiency or production, but
662 SUPREME COURT the first objective is equity. In that sense, the State may have to step
REPORTS in to help the farmer pay for the land. (Emphasis supplied) 33

ANNOTATED _______________

86 | P a g e
 32 Minutes of the Deliberations of the Constitutional Commission, (07 government for distribution to the qualified FWBs. But in order
August 1986), at pp. 17-18.
33 Minutes of the Deliberations of the Constitutional Commission, (05
to come within the constitutional directives on eminent domain
August 1986), p. 703. and just compensation, its sacrifice cannot be made to be
overly burdensome as to force them to receive but a small
663
fraction of current market values for its expropriated properties.
VOL. 660, 663 In ruling for the payment of just compensation to petitioner
NOVEMBER 22, 2011 HLI under the fifth approach—which is pegged to the date of
Hacienda Luisita, notice of coverage under the prevailing laws, rules and
Incorporated vs. Presidential jurisprudence—the Court will perform its obligation to uphold
Agrarian Reform Council the dictates of social justice in distributing the lands in
Hence, there was an acknowledgement of the limited Hacienda Luisita to the qualified FWBs, but not to the extent of
capacity of the farmers to pay for value of the expropriated sacrificing the right of land-
lands under a willing-buyer-willing seller formulation. Thus, 664
the obligation was imposed on the State to subsidize payments 664 SUPREME COURT
in order to support the financial arrangements of the country’s REPORTS
agrarian reform program. The fair value paid to the landowner ANNOTATED
for the distributed lands is to be shouldered by the State, in line Hacienda Luisita,
with the right to just compensation and the limitations on the Incorporated vs. Presidential
state power of expropriation. However, a different principle Agrarian Reform Council
governs when it is the State that will receive amortization owners and consigning them to accept the cheapest value for
payments from the farmers for expropriated lands, namely the their lands. In Land Bank of the Philippines v. Chico,34 the
policy of social justice. Hence, the State’s function is to Court, through retired Justice Eduardo Nachura, succinctly
subsidize the repayment schemes and offer terms that are summarized this point in this wise:
affordable to the farmers considering their limited capacity to “The Comprehensive Agrarian Reform Program was
pay. The burden is now on the State to consider programs that undertaken primarily for the benefit of our landless farmers.
are more financially viable in order to balance the rights of the However, the undertaking should not result in the oppression of
landowners to just compensation with the social justice landowners by pegging the cheapest value for their lands. Indeed,
demands of the poor farmworkers with limited capabilities to the taking of properties for agrarian reform purposes is a
simultaneously pursue agricultural enterprises and pay for the revolutionary kind of expropriation, but not at the undue expense of
lands. landowners who are also entitled to protection under the Constitution
Petitioner HLI, as a corporate landowner, must undoubtedly and agrarian reform laws. Verily, to pay respondent only P10,000.00
per hectare for his land today, after he was deprived of it since 1994,
share the costs and burdens of the country’s type of agrarian
would be unjust and inequitable.” (Emphasis supplied)
reform scheme by surrendering the agricultural lands to the

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 Sale of Distributed Lands to Third Parties prohibitive period under the CARL was meant to provide CARP
beneficiaries sufficient time to profit from the awarded lands in order
In my earlier Dissenting Opinion, I forwarded the position to sustain their daily living, pay off the yearly amortization, and earn
that once the agricultural lands are transferred and awarded to modest savings for other needs. This period protected them from
the qualified FWBs, they, as absolute landowners, should be being influenced by dire necessity and short-sightedness and
able to make full use of the properties, including the right to consequently, selling their awarded lands to a willing buyer
(oftentimes the previous landowner) in exchange for quick money.
sell them, considering the lapse of the ten-year prohibition
This reasoning ordinarily may have been availing during the first few
under the CARL: years of the CARL, but becomes an unreasonable obstruction for the
“In addition, considering the lapse of the prohibitive period for qualified FWBs of Hacienda Luisita, who have been made to endure
the transfer of agricultural lands, nothing prevents the FWBs, as a null and void SDOA for more than 20 years.
direct owner-beneficiaries of the Hacienda Luisita lands, from selling Undeniably, some of the lands under compulsory coverage have
their ownership interest back to petitioner HLI, or to any other become more viable for non-agricultural purposes, as seen from the
interested third-party, such as but not limited to the government, converted lands of LIPCO and RCBC. In fact, the then Municipality
LBP, or other qualified beneficiaries, among others. Considering that of Tarlac had unanimously approved the Luisita Land Use Plan
the Hacienda Luisita lands were placed under CARP coverage covering 3,290 hectares of agricultural lands in Hacienda Luisita,
through the SDOA scheme of petitioner HLI on 11 May 1989 owned by, among others, petitioner HLI; and reclassifying them for
and the lapse of the two-year period for the approval of its residential, commercial, industrial or institutional use. The
compliance, the period prohibiting the transfer of awarded lands development of these kinds of land in Hacienda Luisita would better
under CARL has undeniably lapsed. As landowner-beneficiaries, serve the local communities through the increase in economic
the qualified FWBs are now free to transact with third activities in the area and the creation of more domestic employment.
_______________
34 G.R. No. 168453, 13 March 2009, 581 SCRA 226. Similarly, qualified FWBs should be afforded the same freedom
to have the lands awarded to them transferred, disposed of, or sold, if
665 found to have substantially greater economic value as reclassified
lands. The proceeds from the sale of reclassified lands in a free,
VOL. 660, 665 competitive market may give the qualified FWBs greater options to
NOVEMBER 22, 2011 improve their lives. The funds sourced from the sale may open up
Hacienda Luisita, greater and more diverse entrepreneurial opportunities for them as
Incorporated vs. Presidential opposed to simply tying them to the awarded lands. Severely
Agrarian Reform Council restricting the options available to them with respect to the use or
parties with respect to their land interests, regardless of whether they disposition of the awarded lands will only prolong their bondage to
have fully paid for the lands or not. the land instead of freeing them from economic want. Hence, in the
To make the qualified FWBs of Hacienda Luisita wait another 10 interest of equity, the ten-year prohibitive period for the transfer of
years from the issuance of the Certificate of Land Ownership Award the Hacienda Luisita lands covered under the CARL shall be deemed
666
(CLOA) or Emancipation Patent (EP) before being allowed to
transfer the land is unduly prohibitive in the instant case. The 666 SUPREME COURT

88 | P a g e
 REPORTS 35 “The object of agrarian reform is to vest in the farmer-beneficiary, to the
exclusion of others, the rights to possess, cultivate and enjoy the landholding for
ANNOTATED himself; hence, to insure his continued possession and enjoyment thereof, he is
Hacienda Luisita, prohibited by law to make any form of transfer except only to the government
or by hereditary succession.” (Maylem v. Ellano, G.R. No. 162721, 13 July
Incorporated vs. Presidential 2009, 592 SCRA 440, citing Torres v. Ventura, 187 SCRA 96 [1990])
Agrarian Reform Council 36 Estate of the Late Encarnacio Vda. de Panlilio v. Dizon, G.R. Nos.
to have been lifted, and nothing shall prevent qualified FWBs from 148777 & 157598, 18 October 2007, citing Torres v. Ventura, 187 SCRA 96
negotiating the sale of the lands transferred to them.” (Emphasis (1990).
supplied) 667
Concerns have been expressed that such a reading of the VOL. 660, 667
provisions of the CARL shows an indifference to the retention NOVEMBER 22, 2011
limits imposed, and that strict adherence to the law and the Hacienda Luisita,
rules would dictate that the ten-year period should commence Incorporated vs. Presidential
only upon the issuance and registration of the emancipation Agrarian Reform Council
patent or certificate of land ownership award. However, sought to be retained for a decade as properties for purposes of
considering the protracted litigation in this case and the years agricultural cultivation, even when they were transferred or
that the FWBs have been made to wait, I maintain that absolute sold to other owners. However, significant time has passed and
ownership be immediately transferred to them in this case, with considerable developments have occurred in the neighboring
the full freedom to transfer or sell the properties, if they so areas of formerly exclusive agricultural lands, thus requiring a
choose. review of the initial assumptions. Are the acquired lands more
The rationale for the 10-year prohibition on the sale of the economically beneficial or feasible as agricultural lands? Will
transferred land may have been laudable at the starting point of these properties become more financially viable for other
the CARL but it comes close to oppressing agrarian reform economic uses? Do the FWBs want to remain as farmers
beneficiaries 20 years hence. The aim of the prohibition then forever, or do they want to branch out to other profitable
was to ensure that agricultural lands would be retained by those enterprises or interests? With these compelling questions, the
who were awarded by government and to ensure their current realities confronting the FWBs require a careful and
continued possession and enjoyment of the property for the considerate study of the application and interpretation of the
purpose of cultivation.35 It was to preclude farmers from laws that would extend their maximum benefit and uphold their
becoming “easy prey to those who would like to tempt [them] welfare.
with cash in exchange for inchoate title over the same” and The qualified FWBs in Hacienda Luisita should not only be
thus allow non-tillers of the soil to acquire title over confined to a ten-year license to farm the distributed lands, but
agricultural lands.36 Hence, lands acquired under the CARL should be able to enjoy all the rights to the land and fruits
were thereof. As full owners, the qualified FWBs who would be
_______________

89 | P a g e
awarded lands must be afforded the entire gamut of opportunities to capitalize on and maximize the victory of
opportunities to make use of the land as their circumstances direct land distribution. The restriction will limit their access to
and capabilities see fit. Nothing prevents them from continuing credit markets, as studies in land reform have shown. In a
to till the agricultural land, whether individually or as a World Bank Policy Research Report,37 Klaus Deininger
collective, as in the case of a cooperative. However, the same identified the counterproductive effects of transferability
freedom should be afforded to them when they see that the best restrictions:
economically and financially advantageous use of the property “Governments have frequently imposed restrictions on the
is to sell portions of the property, especially in this case in transferability of land through the sales market on beneficiaries of
which developments in the neighboring lots have greatly land reform or settlers on formerly state-owned land to prevent them
enhanced the value thereof. from selling or mortgaging their land. Such a restriction could be
justified as a temporary measure to prevent the beneficiaries of a
To prolong for a decade the FWBs’ enjoyment of the right
land reform program from selling their land based on inadequate
to transfer and dispose of portions of the agricultural lands is to information or in response to temporary imperfections in product and
continue to bind them to the land. Without any assistance from financial markets. Even temporary restrictions on land mortgages
the government or other civic organizations, FWBs may be can be counterproductive, however, as they would deprive
awarded a possible pyrrhic legal victory, in which they own the beneficiaries from accessing credit during the establishment
land but without the financial means to till and cultivate it. phase when they need it the most. The literature has reported
Freeing them from the strict application of the ten-year cases where farmers were forced to resort to less efficient
668 arrangements, such as usufruct mortgaging and use of wage
668 SUPREME COURT labor, to gain access to credit. Investigators have also noted this
REPORTS problem in Korea and in the Philippines, where restrictions on
ANNOTATED land market activity have limited investment. Land received
under land reform in Chile was freely trans
Hacienda Luisita, _______________
Incorporated vs. Presidential 37 Klaus Deninger, Land Policies for Growth and Poverty Reduction (June
2003), pp. 122-124 available at http://www-
Agrarian Reform Council wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2003/08/08/0000
prohibition under the CARL, will allow them full discretion to 94946_0307250400474 /Rendered/PDF/multi0page.pdf last visited on 11 November
dispose and transfer portions of the property as they see fit and 2011.

as are suitable to their needs. This will release locked-up 669

capital in the soil and enable the qualified FWBs to use the
proceeds thereof in other productive enterprises or in the VOL. 660, 669
procurement of other assets necessary for tilling the remaining NOVEMBER 22, 2011
land. Hacienda Luisita,
To insist that the rights of the FWB sleep for a period of ten Incorporated vs. Presidential
years is unrealistic and may seriously deprive them of real Agrarian Reform Council

90 | P a g e
ferable, and Jarvis (1985) views this as one of the key ingredients General imposition of restrictions on the transferability of
of its success. Precluding land reform beneficiaries from sales in the land by sale is unlikely to be enforceable or beneficial. In many
medium term would reduce efficiency by preventing adjustments in situations such restrictions will have little impact in practice because
response to differential beneficiary abilities, and could, if combined of the absence of land or credit markets. Where appropriate
with rental restrictions, cause large tracts of land to be institutions for intragroup decisionmaking are available, permitting
underutilized. The danger of beneficiaries’ undervaluing their 670
land could be reduced through other means, and the goal of
preventing small landowners from selling out in response to 670 SUPREME COURT
temporary shocks would be better served by ensuring that they REPORTS
have access to output and credit markets and to technical ANNOTATED
assistance, and by providing safety nets during disasters to avoid Hacienda Luisita,
distress sales. Incorporated vs. Presidential
Restrictions on land sales markets can increase the costs
associated with certain actions, but if the rewards from Agrarian Reform Council
circumventing them are high enough, will not eliminate them. For the community to limit sales and giving it the right to decide whether
example, owners who have no desire to farm tend to disregard the to eventually allow sales to outsiders may be an acceptable
temporary prohibition of land sales in Nicaragua and circumvent it compromise between equity and efficiency concerns. Restrictions on
by long-term rentals with the promise to sell, which because of the the marketability of land are common in many developing countries,
associated insecurity leads to much lower land prices. and many customary or communal systems prohibit the sale of land
A number of countries have combined initial privatization of land to outsiders. Some countries, such as Bolivia, have a minimum
with a moratorium on land sales to prevent the possibility that, after holding size that cannot be mortgaged or alienated. While these
decades of collectivism, new landowners’ exposure to land sales regulations impose some losses in terms of foregone credit market
markets may cause them to dispose of their assets without being access, they can also help to reduce undesirable social externalities
aware of their true value, leading to negative social consequences from driving some people into destitution. As long as they are the
and concentration of land in the hands of speculators. The example product of a conscious choice by the group and the group has clear
of some CIS countries suggests that such concerns may not be and transparent mechanisms for changing the land tenure regime,
completely unfounded. Moratoriums may be justified as a way of they are unlikely to be harmful. As traditional social ties loosen or
allowing new landowners to acquire better knowledge of their assets the efficiency loss from the sales restriction becomes too high,
and prevent quick sell-offs at unrealistic prices in an environment groups are likely to allow sales to outsiders in some form. The recent
where markets work imperfectly. In Albania this restriction has been constitutional reform of the land rights system in Mexico allows for
combined with a right of first refusal, whereby before consummating free sales and rental within all ejidos and for decisionmaking by
a land sale to an outsider, neighbors or village members must be majority vote on whether to eliminate the restriction on sales to
given the opportunity to acquire the land at the same price for some outsiders. An initial evaluation of the reforms suggests that with
period. This has few adverse consequences and can help allay appropriate technical assistance communities are clearly able to
communities’ fears of being bought out by outsiders. make such decisions.” (Emphasis supplied; citations omitted)

91 | P a g e
 Imposing a ten-year restriction will decrease the desirability poorer than they otherwise would be.”  (Emphasis supplied;
38

of these farm lands as collateral and will even increase the citations omitted)
transaction costs for private creditors to extend farm loans to Considering the perceived inadequacy of public funds to
the small qualified FWBs. In fact, in the experience of other provide the qualified FWBs access to farm credits and loans to
countries like Venezuela, the government’s imposition of finance the cultivation of the awarded lands, it is necessary to
transferability restrictions have compelled desperate farmers to afford them the prospect of soliciting private funds and loans to
resort to selling their awarded farm lands in the black market cultivate and develop their lands by freeing them from the 10-
way below their fair value and have made “poor farmers even year prohibition period. At this delayed stage in the agrarian
poorer”: reform program covering Hacienda Luisita after the failed
“For example, in an attempt to curb formerly-landless peasants
stock distribution mechanism, the protection afforded by
selling their newly acquired lands back to the large landowners, the
INTI [National Land Institute] will hold the land title in an escrow inflexible restriction on the alienability of the awarded lands is
account for three years. Once three years have passed, with the new greatly outweighed by the market opportunities available to the
landowner living and cultivating the land during that time period, qualified FWBs if full ownership is given to them.
title will pass to the landowner free from any government enacted The agrarian reform policies placed in the Constitution and
restrictions that initially made the land inalienable. According to as implemented in the CARL were laudable efforts to address
critics of the Chavez administration, these government restrictions social injustice. However, Fr. Joaquin Bernas, S. J., a member
671 of the Constitutional Commission, compared the previous
VOL. 660, 671 attempts at agrarian reform and underscored the crucial role of
effective public financing in the success of the program.39 As
NOVEMBER 22, 2011 _______________
Hacienda Luisita, 38 Andy Mielnik, “Hugo Chavez: Venezuela’s New Bandit or Zorro,” 14 L.
Incorporated vs. Presidential & Bus. Rev. Am. 591 (2008).
39 “FR. BERNAS: I do not see the possibility of massive land reform
Agrarian Reform Council unless the government somehow gets involved in the financings; and I think one
on land transfers are tantamount to providing only licenses to farm of the reasons the past land reform program
the land, rather than actual ownership of it. Moreover, excessive
672
restrictions on the alienability of land may actually burden the new
farmers more, especially since they will be deprived of access to 672 SUPREME COURT
credit to improve their land and expand its size when it is REPORTS
economically prudent. Desperate farmers will have to resort to ANNOTATED
selling their farmland at 40 to 60 percent below its fair market Hacienda Luisita,
value on the black market due to the government restrictions
currently in place. And with poor farmers having to sell their
Incorporated vs. Presidential
land at such a low level, such a provision made to assist the Agrarian Reform Council
destitute will unintentionally “lead to making poor farmers even

92 | P a g e
aptly captured by then Senator Heherson Alvarez, funding 673
became the defining line that would determine whether the VOL. 660, 673
promises of agrarian reform would remain a dream or become NOVEMBER 22, 2011
a reality: Hacienda Luisita,
“Where will the funding come from? Without going to an Incorporated vs. Presidential
involved accounting let me say that funding for this program will
Agrarian Reform Council
come from various sources already identified, among which are
proceeds from the Assets Privatization Trust, the Presidential administration enjoyed a strong mandate from the people, who
Commission on Good Government, the Economic Support Fund, desired change and would support a sweeping agrarian reform
PAGCOR, Philippine Charity Sweepstakes Office, the sales of measure to distribute lands. In this scenario, the State could
government properties in Tokyo and if need be, from foreign sources have chosen a more revolutionary approach, introducing into
or foreign borrowings. its agrarian reform program a more “confiscatory
Funding and cost were thoroughly considered in this bill in element.”42 Following the examples of other revolutionary
weeks, even months, as it became clear that implementability governments, the State could have resorted to simply
went hand in hand with cost, our Committee, in collaboration confiscating agricultural lands under the claim of social justice
with financing institutions of the Government, studiously pored and the social function of lands, with little need of payment of
over details that drew the line between keeping agrarian reform
full just compensation.43
a dream and making it a reality.”  (Emphasis supplied)
40

However, the framers of the Constitution and the legislators

After the fall of the martial law regime and at the start of the at that time chose a different path and employed a traditional
new democratic society, a “window of opportunity” was land reform program, where landowners are paid ap-
presented to the State to determine and adopt the type of land _______________
reforms, such as those in Japan, Taiwan, South Korea, Mexico, and certain
and agrarian reform to be implemented.41 The newly formed states in India, have involved the mandatory expropriation of land, but with
_______________ reasonable (although not full market value) compensation to the landowner.”
did not have the success that it gave the impression of having was precisely (Kristen Mitchell, “Market-Assisted Land Reform in Brazil: A New Approach
the fact that there was no effective financing system for it. to Address an Old Problem,” 22 N.Y.L. SCh. J. Int’l & Comp. L. 557 [2003])
So all of these will have to be necessarily packaged into the land reform 42 “The bank’s mission also called attention to the problem of ‘just
program.” (Minutes of the Deliberations of the Constitutional Commission, [04 compensation’ arguing that successful agrarian reform programmes have always
August 1986], p. 648) ‘included a confiscatory element.’ ” (James Putzel, A Captive Land: The
40 Sponsorship speech of Sen. Heherson Alvarez, chairperson of the Politics of Agrarian Reform in the Philippines [Ateneo de Manila University
Committee on Land Reform, Records of the Senate dated 26 June 1988, pp. Press 1992] p. 288)
2975-2977. 43 “The most successful land reforms have been traditional programs that
41 “Successful land reforms in this century have had many common used a mandatory redistribution mechanism, and they often occurred during
characteristics. Often there is a ‘window of opportunity’ where land reform is periods of political instability. In these situations, authoritarian governments
possible. Land reform efforts necessitate significant political will to commit to have been able to forcibly remove property from wealthy landowners. Based on
change. In addition, grassroots support of the populace and threat of violent this history, some scholars question the feasibility of mandatory redistribution
uprising can be an impetus for reform. The government must also have adequate in a full democracy. In particular, scholars have begun to question the
financial resources or external support for the program. Successful land contemporary applicability of the traditional land reform model in many

93 | P a g e
developing countries where governments cannot afford expensive social country at that time was heavily burdened by foreign debt due
programs, and where peace, industrialization, and foreign investment are seen
as more important than shifting the power balances within the country.” (Andre
to the excessive borrowings made during the
_______________
Sawchenko, “Choosing a Mechanism for Land Distribution in the Philippines,”
44 Simeon Gilding, AGRARIAN REFORM AND COUNTER-REFORM UNDER
9 Pac. Rim L. & Pol’y J. 681 [2000])
THE AQUINO ADMINISTRATION: STUDY IN POST-MARCOS POLITICS  (1993),
674 p.11.
45 “MR. OPLE: … We all know, those who have taken a glance at the
674 SUPREME COURT history of land reform in Japan, Taiwan and Korea, that the economic miracles
REPORTS that have taken place in those countries and have compelled the admiration of
ANNOTATED the whole world, to a large extent, were rooted in the earlier land reform
program pursued by their governments. …” (Minutes of the Deliberations of the
Hacienda Luisita, Constitutional Commission, [08 August 1986], p. 83)
Incorporated vs. Presidential 46 Kristen Mitchell, “Market-Assisted Land Reform in Brazil: A New
Approach to Address an Old Problem,” 22 N.Y.L. Sch. J. Int’l & Comp. L. 557
Agrarian Reform Council (2003).
proximately the full and fair market value of their expropriated
properties. The competing interests of the influential 675
landowners and the peasant agrarian unrest posed serious VOL. 660, 675
dilemmas to the nation’s leaders and, in the end, resulted in an NOVEMBER 22, 2011
agrarian reform program that satisfied neither group: Hacienda Luisita,
“This campaign against agrarian reform placed Aquino in a very Incorporated vs. Presidential
difficult situation. If in the first three months of the year Aquino had Agrarian Reform Council
been forced to move more rapidly on land reform in response to
peasant demands, these recent events had forced her to hesitate.
Marcos regime. Worse, legislators pinned their hopes of the
Aquino was thus faced with a dilemma: either she decree agrarian financial sustainability of the program on the future proceeds of
reform and face the immediate threat of destabilization by those Marcos ill-gotten wealth to be recovered by the Presidential
opposed to land reform, or she leave the task to Congress and Commission on Good Government. That the country is still in
perhaps forfeit legitimacy among the rural poor thereby precipitating the process of identifying and fully recovering these moneys
the long-term destabilization of her government by fueling from Marcos and his cronies only speak of the inadequate
insurgency.” 44
viability of the agrarian reform program. The unrealistic and
naïve expectations of financial self-sufficiency doomed the full
The country thus bound itself to finance an ambitious and
implementation of a redistributive land reform.
expensive land acquisition and redistribution scheme without
For the Court to suddenly shift the burden to landowners 20
the necessary public resources to fund it. The policy choice was
years after the government has chosen market value
made based on the examples of land reform in Japan, Taiwan,
compensation over partial or total confiscation is to treat
and South Korea,45 which had adequate financial resources to
petitioner HLI with an uneven hand. The Court cannot simply
fund a distributive land reform program.46 Unfortunately, the
reckon the valuation of the Hacienda Luisita properties from its

94 | P a g e
1989 levels based on the unspoken premise that the 1987, but it has now become unacceptable due to standards that
government does not possess sufficient public resources to pay Congress and this Court itself have uniformly applied.
the approximate fair market value of the expropriated lands.
The framers of the Constitution, the legislators, and even this Inapplicability of the Operative Facts Doctrine
Court have long defined the concept of just compensation when
the State exercises eminent domain that should apply squarely A brief disgression. The resort to the secret voting option
in land reform expropriation. The only plausible justification under the first or third approach is premised on a
for antedating the valuation of the land to its 1989 levels would misapplication of the operative facts doctrine. The majority has
be the inability of the State to shoulder such amount. Yet, now abandoned the actual application of the operative facts
neither the PARC nor the DAR has shown in their Motion for doctrine to the HLI SDOA after realizing that indeed, as I had
Reconsideration in this case that the State has utter lack of earlier stated, the most that the FWBs can hope to control in
available resources to shoulder such costs or is without any HLI is a third of the shares. Considering the outcome of the
available schemes that would permit a staggered and affordable new voting, any discussion on the operative facts doctrine
payment of just compensation to the landowner. Let the Court would therefore be primarily academic. But the
not pre-judge the ability or willingness of the government to new ponencia continues to insist that its description of the
pay just compensation under the same formula the latter operative facts doctrine is correct. A clarification must be made
applied to other agrarian reform cases. to correctly place the application of the doctrine.
Without any exceptional reason or circumstance obtaining, The general rule is that an unconstitutional law has no force
aside from a supposed lack of government funds (which has and effect—it produces no rights, imposes no duties and
not been alleged by government), there is no apparent affords no protection.47 Hence, the pronouncement of
justification for denying petitioner HLI the fair market value of unconstitutionality by the Court retroacts to all acts
its undertaken between the effectivity of the law and the
676 declaration of its invalidity.
676 SUPREME COURT The doctrine of operative facts serves as an exception to
REPORTS this general rule.48 The declaration of a law or an executive act
ANNOTATED as unconstitutional is given limited retroactive application in
cases in which acts or circumstances may have
Hacienda Luisita, _______________
Incorporated vs. Presidential 47 Planters Products, Inc. v. Fertiphil Corp., G.R. No. 166006, 14 March
Agrarian Reform Council 2008, 548 SCRA 485.
48 Yap v. Thenamaris Ship’s Management and Intermare Maritime
property. To materially uplift the conditions of qualified FWBs Agencies, Inc., G.R. No. 179532, 30 May 2011, 649 SCRA 369.
who have been awarded agricultural lands, at the expense of
imposing upon petitioner HLI old and low valuation levels, 677
may have been permissible during those revolutionary times of VOL. 660, 677

95 | P a g e
NOVEMBER 22, 2011 making any declaration as to the constitutional validity of a
Hacienda Luisita, stock distribution option on the ground that it is
_______________
Incorporated vs. Presidential 49 Manila Motor Co., Inc., v. Flores, G.R. No. L-9396, 16 August 1956, 99
Agrarian Reform Council Phil. 738; De Agbayani v. Philippine National Bank, G.R. No. L-23127, 29
arisen in the operation of the invalidated law prior to the April 1971, 38 SCRA 429; Republic v. Herida, G.R. No. L-34486, 27
December 1982, 119 SCRA 411; Republic v. Court of First Instance, G.R. No.
pronouncement of invalidity. Considerations of equity would L-29725, 27 January 1983, 120 SCRA 154.
avert the injustice of nullifying the interim effects of a person’s
good faith reliance on the law’s provisions. The cases 678
involving the unconstitutionality of the debt moratorium laws 678 SUPREME COURT
and the non-payment of debts during the suspensive period REPORTS
prior to the declaration best exemplify the application of the ANNOTATED
exceptional doctrine of operative facts.49 In these instances, Hacienda Luisita,
equity interests of the parties surpass the concern over the Incorporated vs. Presidential
retroactive application of the law’s unconstitutionality. Agrarian Reform Council
The application of the operative facts doctrine to the not the lis mota of the present Petition, and that the challenge
invalidated SDOA is being justified on the ground that what is was not timely made, among others.
being nullified is the PARC’s prior approval of the SDOA, What the Court invalidated was the SDOA, which was
which is an executive act. According to the argument, since simply an application of the law, and not any statute or
petitioners HLI and the FWBs have relied for the past two executive act, on the basis of its having violated the spirit and
decades on the validity of the SDOA and accumulated benefits intent of the existing law. The invalidated PARC Resolution
therefrom, it would be prejudicial to their interests if their prior that approved the SDOA of Hacienda Luisita did not rise to the
acts would be wiped clean by the nullification of the SDOA. level of a legislative statute or executive act, in which the
The reasoning is strained. operative facts doctrine would become applicable.
No law or executive act with respect to stock distribution In Municipality of Malabang v. Benito,50 the Court
options has been declared unconstitutional by the Court. For recognized the applicability of the operative facts doctrine to an
the operative facts doctrine to have been applied, a law or an executive order (Executive Order No. 386) issued by then
executive act that was made effective for a temporary period President Carlos P. Garcia, creating the municipality of
should have been invalidated by the Court for being inherently Balabagan out of sitios and barrios of the municipality of
in contravention of the Constitution and, thus, without force Malabang,51 based on earlier jurisprudence holding that the
and effect from its very inception. Except for the previous executive did not have authority to create municipal
Separate Opinions of Chief Justice Renato Corona and Justice corporations.52
Jose Mendoza, a majority of the Court generally refrained from _______________
50 G.R. No. L-28113, 28 March 1969, 27 SCRA 533.

96 | P a g e
 51 “Executive Order 386 ‘created no office.’ This is not to say, however, A judicial decision annulling a presidential exercise of authority
that the acts done by the municipality of Balabagan in the exercise of its is not without its effect either. That much is evident from the holding
corporate powers are a nullity because the executive order ‘is, in legal
now reached. The act stricken down, whether proceeding from the
contemplation, as inoperative as though it had never been passed.’ For the
existence of Executive Order 386 is ‘an operative fact which cannot justly be legislature or the Executive, could in the language of the Chicot
ignored.’” (Id.) County case, be considered, prior to the declaration of invalidity, as
52 “Then, also, the power of control of the President over executive “an operative fact and may have consequences which cannot justly
departments, bureaus or offices implies no more than the authority to assume be ignored.”
directly the functions thereof or to interfere in the exercise of discretion by its Thus the frontiers of the law have been extended, a doctrine
officials. Manifestly, such control does not include the authority either to which to some may come into play when a statute is voided is
abolish an executive department or bureau, or to create a new one. As a
consequence, the alleged power of the President to create municipal
now considered equally applicable to a Presidential act that has
corporations would necessarily connote the exercise by him of an authority met a similar fate. Such a result should not occasion surprise. That
even greater than that of control which he has over the executive is to be expected.
departments, bureaus or offices. In other words, Section 68 of the Revised There would be unjustified deviation from the doctrine of
Administrative Code does not merely fail to comply with the constitutional separation of powers if a consequence attached to the annulment of a
mandate above quoted. Instead of giving the President less power over local statute is considered as not operative where an executive order is
governments than that vested in him over the executive departments, bureaus or
involved. The doctrine of co-equal or coordinate departments would
offices, it
_______________
679   reverses the process and does the exact opposite, by conferring upon him more
power over municipal corporations than that which he has over said executive
VOL. 660, 679 departments, bureaus or offices
NOVEMBER 22, 2011 .…  …  …
WHEREFORE, the Executive Orders in question are hereby declared null and
Hacienda Luisita, void ab initio and the respondent permanently restrained from passing in audit any
Incorporated vs. Presidential expenditure of public funds in implementation of said Executive Orders or any
disbursement by the municipalities above referred to. It is so ordered.” (Pelaez v.
Agrarian Reform Council Auditor General, G.R. No. L-23825, 24 December 1965, 15 SCRA 569)
In his Concurring Opinion, then Justice Enrique Fernando
680
made explicit the application of the doctrine of operative facts
only to executive acts that are quasi-legislative in nature, 680 SUPREME COURT
specifically in the creation of municipal corporations by the REPORTS
executive and the subsequent declaration of unconstitutionality ANNOTATED
by the judiciary:
“Nothing can be clearer therefore in the light of the two above
Hacienda Luisita,
cases than that a previous declaration of invalidity of legislative acts Incorporated vs. Presidential
would not be bereft of legal results. Would that view hold true of Agrarian Reform Council
nullification of executive acts? There might have been doubts as to be meaningless if a discrimination of the above sort were considered
the correct answer before. There is none now. permissible. The cognizance taken of the prior existence of an
enactment subsequently declared unconstitutional applies as well to a

97 | P a g e
Presidential act thereafter successfully assailed. There was a time 681
when it too did exist and, as such, a fact to be reckoned with, though VOL. 660, 681
an infirm source of a legal right, if, as subsequently held, NOVEMBER 22, 2011
considered violative of a constitutional command.” (Emphasis
Hacienda Luisita,
supplied)
Incorporated vs. Presidential
The PARC Resolution, while an executive act, is not an Agrarian Reform Council
exercise of a quasi-legislative power by the executive, but a used (i.e., debt moratorium cases), the unraveling of the effects
mere wrongful application of the law on stock distribution of the declaration of unconstitutionality resorted to a dearth in
options under the CARL. The CARL provided the norms used the law and the need for the courts to provide guidance as to its
to evaluate any stock distribution option and this was applied retroactive application. In this case, no such vacuum exists,
by the PARC in deciding whether to approve the SDOA. as in fact the CARL itself provides for the ultimate
Hence, it was the interpretation of the PARC when it consequence when a stock distribution plan or option is
mistakenly approved the SDOA of petitioner HLI and the eventually invalidated—direct land distribution.53 The Court
FWBs that has been declared invalid, and not the enabling law therefore need not exercise its equity jurisdiction.
itself. The source of infirmity in this case lies not in the
provisions of the CARL allowing stock distribution options, Guiding Principles for the Operational Steps
but in the erroneous approval previously granted by the PARC.
The good faith reliance of petitioner HLI with respect to the I maintain that the outright distribution of the
approval (albeit erroneous) of its SDOA does not justify the agricultural lands in Hacienda Luisita to the qualified
operation of the doctrine, since no less than this Court has FWBs should be immediately ordered owing to the absolute
found that the SDOA and its approval were in utter violation of nullification of the SDOA. Considering the multilayered issues
the intent of the CARL on stock distribution options. of implementation surrounding the case and imposed on the
Furthermore, it would be incongruous to avoid the DAR, it is best to offer some guiding principles and values
constitutionality issue of the stock distribution mechanism when executing the Court’s orders in this landmark case.
under the CARP on the ground that it is not the lis mota of the 1. Scope of Covered Lands
case, yet at the same time, invoke the operative facts doctrine. DAR shall first determine which of the lands in Hacienda
There is simply no room for the application of operative facts Luisita previously owned by both petitioner HLI and TADECO
doctrine, absent an unconstitutionally invalid legislative or should be included in the compulsory coverage, including the
executive act. identification of the improvements previously introduced by
The operative facts doctrine can only come into play as a the corporate landowners.
rule of equity in cases where there is a vacuum in the law _______________
53 “If within two (2) years from the approval of this Act, the land or stock
created by the subsequent declaration of nullity by the Court. In transfer envisioned above is not made or realized or the plan for such stock
those instances where the operative facts doctrine was distribution approved by the PARC within the same period, the agricultural land

98 | P a g e
of the corporate owners or corporation shall be subject to the compulsory land TADECO surrendered for the SDOA (4,916 hectares). The exclusion of a
coverage of this Act.” (CARL, Sec. 31) substantial amount of land from the SDOA is highly suspicious and deserves a
review by the DAR. Whether these lands were properly excluded should have
682 been subject to the DAR’s determination and validation. Thus, the DAR is
682 SUPREME COURT tasked to determine the breadth and scope of the portion of the agricultural
landholdings of TADECO and petitioner HLI that should have been the subject
REPORTS of CARP coverage at the time of the execution of the SDOA on 11 May 1989.”
ANNOTATED (Dissenting Opinion)
Hacienda Luisita, 683
Incorporated vs. Presidential VOL. 660, 683
Agrarian Reform Council NOVEMBER 22, 2011
As previously discussed,54 the nullification of the SDOA
Hacienda Luisita,
brings into question the preliminary arrangements made by
Incorporated vs. Presidential
petitioner HLI, TADECO and the qualified FWBs, specifically
the unilateral decision of TADECO to segregate and select Agrarian Reform Council
which of its lands (totaling 6,443 hectares) will be transferred a. The 300 out of the 500 hectares of converted lands,
to petitioner HLI for purposes of the SDOA (4,916 hectares), which are now titled in the names of LIPCO and RCBC,
and which of those it will keep for itself (1,527 hectares). both of whom are considered innocent purchasers in
Whether the sizeable area of 1,527 hectares of farm lands good faith;
should have been excluded from the SDOA at the time of its b. The 80 hectares of land purchased and acquired by the
execution on 11 May 1989, is best determined by the DAR. Bases Conversion Development Authority for the
The lands determined by the DAR to be subject of construction of a portion of the Subic-Clark-Tarlac
compulsory coverage shall, nonetheless, exclude the following Expressway; and
lands: c. All homelots already awarded to the qualified FWBs.
_______________ 2. Preliminary Valuation of the Lands
54 “However, as pointed out by private respondent FARM, there were other Based on its own rules and formula, DAR shall give a
lots in Hacienda Luisita that were not included in the stock distribution scheme, preliminary and objective valuation of the covered lands,
but should have been covered under the CARP. TADECO, as the previous
agricultural landowner, preempted the determination of the lands to be covered whose values shall be pegged to the time of the Notice of
under the CARP by selecting which of the agricultural lands it would transfer to Coverage issued on 02 January 2006. This valuation is, of
petitioner HLI and consequently, subject to the SDOA. The DAR never course, subject to a determination of just compensation by the
approved the exclusion of the other lands that TADECO kept for itself. It seems proper court in case of disagreement.
incongruous to the intention of the CARP under a stock distribution agreement,
to let the corporate landowner choose and select which of its agricultural lands Accounting and Compensation
would be included and which ones it would retain for itself. Serious doubts are Thereafter, DAR shall also make a factual determination of
entertained with respect to the process of inclusion and exclusion of agricultural the values and amounts of benefits actually received by the
lands for CARP coverage employed by the corporate landowner, especially
since the excluded land area (1,527 hectares) involves one-third the size of the

99 | P a g e
qualified FWBs under the SDOA, including but not limited to of the total
the following: lands subject
a. Three percent (3%) total gross sales from the production of compulsory
of the agricultural lands coverage,
b. Homelots actually awarded to qualified FWBs excluding the
c. Any dividends received by qualified FWBs 300-hectare
d. The proceeds of the sale of the 300-hectare converted converted
land and SCTEX land, if any, distributed to the FWBs lands of
However, petitioner HLI shall have no claim over any LIPCO and
salary, wage or benefit given to the farmworker, and neither RCBC and the
shall the latter, qualified or otherwise, be required to return the
80 hectares of
same, since they received those benefits for services ren-
684
SCTEX lands;
684 SUPREME COURT b. The value  
REPORTS of the 200-
ANNOTATED hectare
converted
Hacienda Luisita,
lands, which
Incorporated vs. Presidential
shall be
Agrarian Reform Council awarded to
dered in an employee-employer relationship, and not under the LRC;
relationship established under the SDOA. However, all FWBs
c. The 3% of a. The
shall surrender all their shareholdings in petitioner HLI to the
the purchase purchase
corporation.
price of the price of the
Thereafter, the DAR shall calculate the amounts due to each
of the parties, namely, petitioner HLI, Luisita Realty 300-hectare 300-hectare
Corporation (LRC) and the qualified FWBs. These amounts converted converted
shall be offset one another for purposes of convenience in order lands given to lands; and
to arrive at a single amount to be paid: FWBs;
Amounts due Amounts d. The 3% of b. The
to petitioner due to the purchase price paid by
HLI/LRC qualified price of the the
FWBs SCTEX lands, government
a. The value   and the cost of for the 80-

100 | P a g e
 titling and hectare In order to ensure that the qualified FWBs can maximize the
other SCTEX use of the lands awarded to them, the DAR, in the performance
expenses; lands. of its mandate, shall provide support services to them,
e. The 3% of   including but not limited to adequate agricultural credit,
total gross technical assistance, and enhanced market infrastructures to
sales from the improve the delivery and sale of their agricultural produce.
production of True agrarian reform must not be limited to the equitable
agricultural redistribution of lands, but shall encompass the extension of
lands given to supplemental public services that will enable the FWBs of
Hacienda Luisita to realize and capitalize on the full potential
the FWBs;
of the lands given to them.
f. The values  
of the EPILOGUE
homelots
awarded to the Twenty years after the CARL was issued and the hope of
FWBs; farmers and farmworkers across the country was renewed, the
g. Any   fulfillment of the promise of a sweeping agrarian reform
dividend program in the country to spur agricultural and economic
actually growth has remained elusive. Although there have been
received by the instances of a successful redistribution of land, they are too few
FWBs. to have had a positive and appreciable impact in uplifting
685 farmers across the nation. The main obstacles to the success of
VOL. 660, 685 our agrarian reform program are its lack of financial viability
NOVEMBER 22, 2011 and the lack of adequate public resources to ensure full
Hacienda Luisita, implementation.
Incorporated vs. Presidential The wide gap between the just compensation due to the
landowner and the ability of the farmer-beneficiaries to pay
Agrarian Reform Council 686
After determining the just compensation due to petitioner 686 SUPREME COURT
HLI, TADECO and LRC, the DAR shall settle the amount with
REPORTS
the qualified FWBs under an affordable program or scheme
ANNOTATED
that takes cognizance of their ability to pay, under the existing
rules and procedures. Hacienda Luisita,
3. Support Services Incorporated vs. Presidential

101 | P a g e
 Agrarian Reform Council Incorporated vs. Presidential
was intended to be subsidized by the State. 55 Despite the Agrarian Reform Council
identification of the public resources that would be used by the ficient to successfully finance the costly agrarian reform
government under the CARL,56 these proved elusive or insuf- program in the entire country. The result was the stifling of
_______________ crucial developments in agriculture in the rural areas, and
55 “MR. RODRIGO: I was about to say what Commissioner Concepcion
said. I just want to add that the phrase ‘just compensation’ already has a definite continuing agrarian unrest among the farmer-beneficiaries, who
meaning in jurisprudence. And, of course, I would like to reiterate the fact that have remained destitute and unable to improve their families’
‘just compensation’ here is not the amount paid by the farmers. It is the amount quality of life.
paid to the owner, and this does not necessarily have to come from the In doing right by the qualified FWBs in Hacienda Luisita by
farmer. The State should subsidize this and pay a just compensation to the
owner and let the tenant farmer pay the state in accordance with the ordering the distribution of the land in this case, the
capacity of the farmer. If there is a difference let the State subsidize the government must now face the current economic difficulties
difference. …” (Minutes of the Deliberations of the Constitutional and devise creative solutions and programs for moving
Commission, [07 August 1986], at pp. 17-18) forward. The legal victory that the qualified FWBs have
56 “The initial amount needed to implement this Act for the period of ten
(10) years upon approval hereof shall be funded from the Agrarian Reform secured from this Court in awarding them the lands that they
Fund created under Sections 20 and 21 of Executive Order No. 229. have tilled will only be felt if the State, especially the DAR,
Additional amounts are hereby authorized to be appropriated as and when extends all the necessary support that will allow them to
needed to augment the Agrarian Reform Fund in order to fully implement the
maximize the agricultural outputs of the lands. Long-term
provisions of this Act.
Sources of funding or appropriations shall include the following: vision, responsive action plans and strong political will are
a) Proceeds of the sales of the Assets Privatization Trust; necessary to realize the social justice tenets of the Constitution
b)  All receipts from assets recovered and from sales of ill-gotten wealth in the country’s agrarian reform program. These tenets are
recovered through the Presidential Commission on Good Government;
c) Proceeds of the disposition of the properties of the Government in
aimed at ending economic disparities in the rural areas and
foreign countries; affording Filipino farmer-beneficiaries the tools required to
d)  Portion of amounts accruing to the Philippines from all sources of become more productive citizens. There is no better
official foreign grants and concessional financing from all countries, to be used opportunity to start on this path than with full support for the
for the specific purposes of financing production credits, infrastructures, and
other support services required by this Act;
qualified FWBs of Hacienda Luisita. This support should
e) Other government funds not otherwise appropriated. include full freedom to make use of the land by allowing the
All funds appropriated to implement the provisions of this Act shall be qualified FWBs to deal with them as any property owner can,
considered continuing appropriations during the period of its implementation.” including the right to immediately transfer the same.
(CARL, Sec. 63)

687 DISPOSITIVE PORTION

VOL. 660, 687
NOVEMBER 22, 2011 Although I agree with the majority with respect to the
revocation of the Stock Distribution Option Agreement, the
Hacienda Luisita,

102 | P a g e
immediate compulsory coverage of the agricultural lands in disposition of the converted lands expressed in the paragraph
Hacienda Luisita under the Comprehensive Agrarian Reform after the next, but shall necessarily exclude only the following:
Law, and their immediate distribution to the qualified a. 300 out of the 500 hectares of converted lands, now in
farmworker-beneficiaries, I maintain my dissent regarding the the name of Luisita Industrial Park Corp., (LIPCO) and
following: (a) the amount of just compensation to be awarded Rizal Commercial Banking, Corp., (RCBC);
to petitioner Hacienda Luisita, Inc., and Tarlac Development b. 80 hectares of Subic-Clark-Tarlac Expressway
688 (SCTEX) land; and
688 SUPREME COURT c. homelots already awarded to the qualified FWBs.
REPORTS 2. Petitioner HLI and Luisita Realty, Inc., shall be entitled
ANNOTATED to the payment of just compensation for the agricultural lands
Hacienda Luisita, and the 200-hectare converted lands, which shall be based on
Incorporated vs. Presidential their fair market value as of 02 January 2006, to be determined
Agrarian Reform Council by the Department of Agrarian Reform; petitioner HLI shall
not be held liable for the payment of any rentals for
Corporation should be reckoned from the fair market value 689
under the law, rules and jurisprudence, specifically as of the
VOL. 660, 689
date of the issuance of the Notice of Coverage on 02 January
2006; (b) the 10-year limitation on the transferability of the
NOVEMBER 22, 2011
awarded agricultural lands is no longer applicable, and the Hacienda Luisita,
qualified farmworker-beneficiaries should be allowed to sell or Incorporated vs. Presidential
transfer the properties, if they so desire; and (c) that the Agrarian Reform Council
benefits received by the qualified FWBs be offset by the the use of the property with final turn-over of the lands to the
amount of just compensation due to petitioner Hacienda qualified FWBs.
Luisita, Inc., Tarlac Development Corp., and Luisita Realty, 3. All shares of stock of petitioner HLI issued to the
Corp. qualified FWBs, as beneficiaries of the direct land transfer, are
Thus, I maintain my previous Opinion on the following nullified; and all such shares are restored to the name of
points: TADECO, insofar as it transferred assets and liabilities to
1. Agricultural lands covered by the Comprehensive petitioner HLI as the spin-off corporation; but the shares issued
Agrarian Reform Law and previously held by the Tarlac to non-qualified FWBs shall be considered as additional and
Development Corp., including those transferred to petitioner variable employee benefits and shall remain in their names.
Hacienda Luisita, Inc., shall be subject to compulsory coverage 4. Petitioner HLI shall have no claim over any of the
and immediately distributed to the 6,296 original qualified salaries, wages and benefits given to farmworkers; and neither
farmworker-beneficiaries who signed the Stock Distribution shall the farmworkers, qualified or not, be required to return
Option Agreement; or, if deceased, their heirs, subject to the

103 | P a g e
the same, having received them for services rendered in an The DAR is also ORDERED to monitor the land
employer-employee relationship. distribution and extend support services that the qualified
5. Petitioner HLI shall be liable to the qualified FWBs for farmworker-beneficiaries may need in choosing the most
the value received for the sale or transfer of the 300 out of the appropriate and economically viable option for land
500 hectares of converted lands, specifically the equivalent distribution, and is further REQUIRED to render a compliance
value of 12,000,000 shares of Centennary Holdings; for the report on this matter one-hundred eighty (180) days after
300-hectare land assigned, but not less than P750,000,000; and receipt of this Order. The compliance report shall include a
the money received from the sale of the SCTEX land, less determination of Hacienda Luisita’s exact land area that shall
taxes and other legitimate expenses normally associated with be subject to compulsory coverage in accordance with the
the sale of land. Decision.
6. Petitioner HLI’s liability shall be offset by payments Petitioner HLI is REQUIRED to render a complete
actually received by qualified FWBs under the SDOA, namely: accounting and to submit evidentiary proof of all the benefits
a. Three percent (3%) total gross sales from the production given and extended to the qualified FWBs under the void
of the agricultural lands; SDOA—including but not limited to the dividends received,
b. The value of the homelots awarded to qualified FWBs; homelots awarded, and proceeds of the sales of the lands,
c. Any dividend given to qualified FWBs; and which shall serve as bases for the offset of petitioner HLI’s
d. Proceeds of the sale of the 300-hectare converted land liabilities to the qualified FWBs, and its accounting shall be
and SCTEX land, if any, distributed to the FWBs.690 subject to confirmation and verification by the DAR.
690 SUPREME COURT All titles issued over the 300-hectare converted land,
REPORTS including those under the names of petitioners-in-intervention
ANNOTATED Rizal Commercial Banking Corporation and Luisita Industrial
Hacienda Luisita, Park Corporation and those awarded as homelots, are hereby
AFFIRMED and EXCLUDED from the Notice of Compulsory
Incorporated vs. Presidential
coverage. The 200-hectare converted lands transferred to
Agrarian Reform Council Luisita Realty, Inc., by petitioner Hacienda Luisita, Inc. is
The DAR is DIRECTED to determine the scope of deemed covered by the direct land transfer under the CARP in
TADECO’s and/or petitioner HLI’s agricultural lands that favor of the qualified FWBs, subject to the payment of just
should have been included under the compulsory coverage of compensation.691
CARL at the time the SDOA was executed on 11 May 1989,
VOL. 660, 691
but excluding those directed to be excluded as stated above.
This means that the unilateral designation of those lands by
NOVEMBER 22, 2011
TADECO, of which only 4,916 hectares were counted as the Hacienda Luisita,
farmers’ agricultural land contribution to the SDO is to be Incorporated vs. Presidential
disregarded and a new assessment is to be made by the DAR. Agrarian Reform Council

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Motion for Partial Reconsideration dated July 20, 2011,
Motion for Reconsideration dated July 19, 2011, Motion for
Reconsideration dated July 21, 2011, and Motion for
Reconsideration dated July 22, 2011 partially granted; while
Motion for Clarification and Partial Reconsideration dated
July 21, 2011 and Motion for Reconsideration dated July 21,
2011 denied. PARC Resolution No. 2005-32-01 dated
December 22, 2005 and Resolution No. 2006-34-01 dated May
3, 2006 affirmed with modifications.
Note.—Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the
expropriation. (Land Bank of the Philippines vs. Orilla, 556
SCRA 102 [2006])
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