Alinao, Luz Phyllis B.

Agrarian Law
Aluning, Reinaur S.
2-C

EN BANC

GR NO. 171101 July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL
MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE HACIENDA
LUISITA, INC. and WINDSOR ANDAYA, Respondents.

Velasco, J:

Facts:
Hacienda Luisita, consisting of 6,443 hectares mixed agricultural-industrial-residential
expanse straddling several Municipalities of Tarlac used to be owned by Compana
General de Tobaccos de Filipinas (Tabacalera). In 1957, it was sold to the Tarlac
Development Corporation (TADECO) then owned by Jose Cojuangco, Sr. Group.
Payment of the purchase by TADECO of the lands and interests of Tabacalera over
Hacienda Luisita was done with the assistance of the government through the Central
Bank and the GSIS. In approving the loan of TADECO, GSIS imposed the condition that
the lots comprising the Hacienda Luisita shall be subdivided by TADECO and sold at
cost to the tenants should there exist conditions warranting such motion under the
provisions of the Land Tenure Act.
TADECO was able to fully pay the purchase price for Hacienda Luisita as of March 31,
1958.
On May 7, 1980, the Martial Law administration filed a suit before the RTC of Manila
against TADECO for them to surrender Hacienda Luisita to the Ministry of Agrarian
Reform so that the land can be distributed to the farmers at cost. The government
obtained a favorable judgment in the case.
On March 17 1988, the OSG moved to withdraw the government’s case against
TADECO. The dismissal action was, however, made subject to TADECO obtaining
PARC’s approval of a stock distribution plan (SDP) that must initially be implemented
after such approval shall have been secured.
TADECO then organized Hacienda Luisita In. (HLI) on August 23, 1988, as a vehicle to
facilitate stock acquisition by the farmworkers per A.O. No. 10S of 1988 (DAO 10)
issued by DAR in accordance to Sec. 31 of R.A. 6657. For this purpose, TADECO
assigned and conveyed to HLI the agricultural land portion and other farm related
properties of Hacienda Luisita in exchange for HLI shares of stock.
To accommodate the assets transfer from TADECO to HLI, TADECO with Securities
and Exchange Commission’s (SEC) approval, increased its capital stock on May 10,
1989 from PhP 1.5 million divided into 1.5 million shares with a year value of Pho 1 per
share to PhP 400 million divided into 400 million shares also with a year value of PhP
per share, 1.5 million of u/c were to be issued only to qualified and registered
beneficiaries of the CARP, and the remaining 2.5 million to any stockholder of the
corporation.
On May 9, 1989, 93 percent of the Farmworkers Beneficiaries (FWB’s) complement of
Hacienda Luisita signified in a referendum their acceptance of the proposed HLI’s Stock
distribution plan. On May 11, 1989, the Stock Distribution Option Agreement (SDOA)
was entered into by TADECO, HLI, and the 5, 848 qualified FWB’s and attested by then
DAR Sec. Philip Juico.
Subsequently, HLI submitted to DAR its SDP. On November 21, 1989, the SDP of
TADECO/HLI was approved. Some of the provisions of the SDP are:
1. 30 years implementation period;
2. A total of 18, 804.32 shares per beneficiary;
3. A separate housing lot not to exceed 240 sq.m. per beneficiary; and
4. Production-sharing equivalent to 3% of gross sales from the production of the
agricultural land payable to the FWB’s in case dividends/incentive bonus.
After the approval of the SDP, 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
conversion was approved by DAR. Of the converted land, 300 hectares was acquired
by RCBC as payment of outstanding loan obligation of LIPCO and 80.51 hectares was
acquired by the government as part of the SCTEX.
In 2003, an undated letter was sent to the DAR by members of the Supervisory Group
of HLI seeking the recognition/cancellation of the SDP/SDOA for alleged violations of
HLI of its terms. A second petition asking for the revocation and nullification of the
SDOA and the distribution of the lands of the Hacienda was filed by the Alyansa ng mga
Manggagawang Bukid ng Hacieda Luisita (AMBALA).
DAR then created a special task force to investigate the issue. After investigation, the
task force recommended the revocation of the SDOA stating that HLI has not complied
with its obligations under R.A. 6657 despite the implementation of the SDP.
The PARC, pursuant to the recommendation of the task force issued a resolution
revoking the SDOA and ordering the lands of HLI to be placed under compulsory
coverage of the land acquisition scheme of the CARP. HLI filed a motion for
reconsideration but it was denied.
On August 31, 2010, the court created a Mediation Panel in order to have the parties
reach an amicable settlement but no acceptable agreement could be reached.

Issues:
1. Whether the PARC has jurisdiction to revoke/nullify /rescind the SDOA;
2. Whether the nullification of the SDOA is valid; and
3. Whether HLI is entitled to just compensation

RULING:
1. The Supreme Court ruled that the PARC has jurisdiction to revoke/nullify/rescind
the SDOA. It stated that although R.A. 6657 or other executive issuances on
agrarian reform do not explicitly vest the PARC with the power to revoke an
approved SDP, such power or authority is deemed possessed by PARC under
the principle of necessary implication, a basic postulate that what is implied in a
statute is as much as part of it as that which is expressed.

2. The Supreme Court ruled that the nullification of the SDOA was valid because it
violated certain terms of DAO 10. The provisions violated by the SDOA
according to the Supreme Court are the following:

a. “Man Days” and mechanics of stock distribution. The “Man days”

provision of the SDOA bases the distribution of stocks on the number
of days that the farmworker beneficiaries (FWB) have worked during
the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWB’s as the
minimum ratio of shares of stock for the purposes of compliance with
Sec. 31 of R.A. 6657. The minimum individual allocation of each
original FWB of 18, 804.32 shares was diluted as a result of the use of
“Man days” and the hiring of additional farmworkers.
b. Sec. 11 of DAO 10 provides that the implementation of the approved
SDP should be within 3 months from receipt by the corporate
landowner of the approval of the plan by PARC Par. 3 of the SDOA
provides for a 30-year time frame for HLI to FWBs stock transfer. This
violates Sec. 11 of DAO 10.
 3. The Supreme Court ruled that HLI shall be entitled to the payment of just
compensation for the agricultural lands it owns that will be transferred to DAR.
These lands shall consists of all remaining lands of HLI after segregation of:
(a) the 500-hectare lot subject of the August 14, l996 Conversion Order;
(b) the 80.51-hectare lot sold to, or acquired by, the government as part of the
SCTEX complex; and
(c) the aggregate area of 6,886.5 square meters of individual lots that each
FWB is entitled to under the CARP had he or she not opted to stay in HLI as a
stockholder.
- The just compensation to be given to HLI shall be reckoned from November 21, 1989,
the same date that the revoked SDP was approved.