Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al.

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G.R. No. 171101, July 5, 2011
THE FACTS
In 1958, the Spanish owners of Tabacalera sold Hacienda Luisita and the Central
Azucarera de Tarlac, the sugar mill of the hacienda, to the Tadeco. The Central Bank of
the Philippines assisted Tadeco in obtaining a dollar loan from a US bank. Also, the GSIS
extended a PhP5.911 million loan in favor of Tadeco to pay the peso price component of the
sale, with the condition that the lots comprising the Hacienda Luisita be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and whenever
conditions should exist warranting such action under the provisions of the Land Tenure Act.
Tadeco however did not comply with this condition.
On May 7, 1980, the martial law administration filed a suit before the Manila RTC
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian
Reform (MAR) so that the land can be distributed to farmers at cost.
The Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to
the MAR. Therefrom, Tadeco appealed to the CA.
The CA dismissed the case, subject to the PARCs approval of Tadecos proposed
stock distribution plan (SDP) in favor of its farmworkers.
On August 23, 1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as
vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco conveyed
to HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of
Hacienda Luisita in exchange for HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement
of Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock
Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally entered into by
Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR
approved the application.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of
stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area
to the latter. Subsequently, Centennary sold the entire 300 hectares for PhP750 million
to Luisita Industrial Park Corporation (LIPCO). Later, LIPCO transferred these 2 parcels to the
Rizal Commercial Banking Corporation (RCBC).
Such, was the state of things when a petition reached the DAR in the latter part of
2003. The petition prayed for the revocation and nullification of the SDOA and the
distribution of the lands in the hacienda.
ISSUES Are LIPCOs and RCBCs respective properties that once formed part of Hacienda
Luisita be included under the CARP compulsory acquisition scheme?
LAW
Sec. 65 of RA 6657
SEC. 65. Conversion of Lands. After the lapse of five (5) years from its award, when the land
ceases to be economically feasible and sound for agricultural purposes, or the locality has
become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes, the DAR, upon application of the beneficiary or the
landowner, with due notice to the affected parties, and subject to existing laws, may

authorize the reclassification, or conversion of the land and its disposition: Provided, That
the beneficiary shall have fully paid its obligation.
CASE HISTORY
The DAR found that HLI has not complied with its obligations under RA 6657 despite
the implementation of the SDP.
The PARC resolved that the subject lands be forthwith placed under the compulsory
coverage or mandated land acquisition scheme of the CARP.
RULING
Those portions of the converted land within Hacienda Luisita that RCBC and LIPCO
acquired by purchase should be excluded from the coverage of the assailed PARC
resolution.
Both LIPCO and RCBC are purchasers in good faith for value entitled to the benefits
arising from such status.
They are of the honest belief that the subject lots were validly converted to
commercial or industrial purposes and for which said lots were taken out of the CARP
coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly
acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition
of agricultural lands previously covered by CARP land acquisition after the lapse of five (5)
years from its award when the land ceases to be economically feasible and sound for
agricultural purposes or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes. Moreover, DAR notified
all the affected parties, more particularly the FWBs, and gave them the opportunity to
comment or oppose the proposed conversion. DAR, after going through the necessary
processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its
primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform
matters and its original exclusive jurisdiction over all matters involving the implementation
of agrarian reform. The DAR conversion order became final and executory after none of the
FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the
lots in question on their honest and well-founded belief that the previous registered owners
could legally sell and convey the lots though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots.
In relying upon the above-mentioned approvals, proclamation and conversion order,
both RCBC and LIPCO cannot be considered at fault for believing that certain portions of
Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP.
The PARC, and consequently DAR, gravely abused its discretion when it placed
LIPCOs and RCBCs property which once formed part of Hacienda Luisita under
the CARP compulsory acquisition scheme via the assailed Notice of Coverage.