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5-A. Hacienda Luisita Inc. (HLI) v. Presidential
Agrarian Reform Council (PARC), et al., G.R.
No. 171101, July 5, 2011
DECISION
VELASCO, JR., J.:
I. THE FACTS
In 1958, the Spanish owners of Compañia General
de Tabacos de Filipinas (Tabacalera) sold Hacienda
Luisita and the Central Azucarera de Tarlac, the
s u g a r m i l l o f t h e h a c i e n d a , t o t h e Ta r l a c
Development Corporation (Tadeco), then owned and
controlled by the Jose Cojuangco Sr. Group. 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. Responding,
Tadeco alleged that Hacienda Luisita does not have
tenants, besides which sugar lands – of which the
hacienda consisted – are not covered by existing
agrarian reform legislations(PD 27-rice and corn).
The Manila RTC rendered judgment ordering Tadeco
to surrender Hacienda Luisita to the MAR.
Therefrom, Tadeco appealed to the CA.
On March 17, 1988, during the administration of
President Corazon Cojuangco Aquino, the Office of
the Solicitor General moved to withdraw the
government’s case against Tadeco, et al. The CA
dismissed the case, subject to the PARC’s approval
of Tadeco’s proposed stock distribution plan (SDP) in
favor of its farmworkers. [Under EO 229 (Sec10)
and later RA 6657(Sec31), Tadeco had the option of
availing stock distribution as an alternative modality
to actual land transfer to the 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 HLI’s 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 Philip Juico. The SDOA embodied the
basis and mechanics of HLI’s SDP, which was
eventually approved by the PARC after a follow-up

referendum conducted by the DAR on October 14,
1989, in which 5,117 FWBs, out of 5,315 who
participated, opted to receive shares in HLI.
As may be gleaned from the SDOA, included as part
of the distribution plan are: (a) production-sharing
equivalent to three percent (3%) of gross sales
from the production of the agricultural land payable
to the FWBs in cash dividends or incentive bonus;
and (b) distribution of free homelots of not more
than 240 square meters each to family-
beneficiaries. The production-sharing, as the SDP
indicated, is payable "irrespective of whether [HLI]
makes money or not," implying that the benefits do
not partake the nature of dividends, as the term is
ordinarily understood under corporation law. (5,117
out of 5315 = shares; 132 = land distribution)
Prior to approval, DAR Secretary Miriam Defensor-
Santiago proposed that the SDP be revised, along
the following lines:
1. That over the implementation period of the
[SDP], [Tadeco]/HLI shall ensure that there will
be no dilution in the shares of stocks of individual
[FWBs];
2. That a safeguard shall be provided by
[Tadeco]/HLI against the dilution of the
percentage shareholdings of the [FWBs], i.e.,
that the 33% shareholdings of the [FWBs] will be
maintained at any given time
November 21, 1989 - the PARC, under then Sec.
Defensor-Santiago, issued Resolution No.
89-12-2, approving the SDP of Tadeco/HLI.
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From 1989 to 2005, HLI claimed to have extended
the following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of
salaries, wages and fringe benefits
(b) 59 million shares of stock distributed for free
to the FWBs;
(c) 150 million pesos (P150,000,000)
representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000)
representing 3% from the sale of 500 hectares of
converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for
free;
(f) 2.4 million pesos (P2,400,000) representing
3% from the sale of 80 hectares at 80 million
pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not
limited to free hospitalization/medical/maternity
services, old age/death benefits and no interest
bearing salary/educational loans and rice sugar
accounts.
Two separate groups subsequently contested this
claim of HLI. (the petitions/protets)
CONVERSION PROPER
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
August 14, 1996, subject to payment of three
percent (3%) of the gross selling price to the FWBs
and to HLI’s continued compliance with its

undertakings under the SDP, among other
conditions.
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), which used it in developing an
industrial complex. From this area was carved out 2
parcels(180 has and 4 has), for which 2 separate
titles were issued in the name of LIPCO. Later,
LIPCO transferred these 2 parcels to the Rizal
Commercial Banking Corporation (RCBC) in
payment of LIPCO’s PhP431,695,732.10 loan
obligations to RCBC(dacion en pago). LIPCO’s titles
were cancelled and new ones were issued to RCBC.
The other 200 has was transferred to Luisita Realty
Corporation (LRC) in two separate transactions in
1997 and 1998, both uniformly involving 100
hectares for PhP 250 million each.
Apart from the 500 hectares, another 80.51
hectares were later detached from Hacienda Luisita
and acquired by the government as part of the
Subic-Clark-Tarlac Expressway (SCTEX) complex.
Thus, 4,335.75 hectares remained of the original
4,915 hectares Tadeco ceded to HLI.
Such, was the state of things when two separate
petitions reached the DAR in the latter part of 2003.
The first was filed by the Supervisory Group of HLI
(Supervisory Group), praying for a renegotiation of
the SDOA, or, in the alternative, its revocation. The
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second petition, praying for the revocation and
nullification of the SDOA and the distribution of the
lands in the hacienda, was filed by Alyansa ng mga
Manggagawang Bukid ng Hacienda
Luisita (AMBALA). The DAR then constituted a
Special Task Force (STF) to attend to issues relating
to the SDP of HLI. After investigation and
evaluation, the STF found that HLI has not complied
with its obligations under RA 6657 despite the
implementation of the SDP, AND RECOMMENDED.
On December 22, 2005, the PARC issued the
assailed Resolution No. 2005-32-01, recalling/
revoking the SDO plan of Tadeco/HLI. It further
resolved that the subject lands be forthwith placed
under the compulsory coverage or mandated land
acquisition scheme of the CARP.
From the foregoing resolution, HLI sought
reconsideration. Its motion notwithstanding, HLI
also filed a petition before the Supreme Court in
light of what it considers as the DAR’s hasty placing
of Hacienda Luisita under CARP even before PARC
could rule or even read the motion for
reconsideration. PARC would eventually deny HLI’s
motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.
II. THE ISSUES
(1) Does the PARC possess jurisdiction to recall or
revoke HLI’s SDP?
(2) [Issue raised by intervenor FARM (group of
farmworkers)] Is Sec. 31 of RA 6657, which allows

stock transfer in lieu of outright land transfer,
unconstitutional?
(3) Is the revocation of the HLI’s SDP valid? [Did
PARC gravely abuse its discretion in revoking the
subject SDP and placing the hacienda under CARP’s
compulsory acquisition and distribution scheme?]
(4) Should those portions of the converted land
within Hacienda Luisita that RCBC and LIPCO
acquired by purchase be excluded from the
coverage of the assailed PARC resolution? [Did the
PARC gravely abuse its discretion when it included
LIPCO’s and RCBC’s respective properties that once
formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed
Notice of Coverage?]
III. THE RULING
HLI: PARC has no authority to revoke the SDP; it
has the power to disapprove, but not to recall its
previous approval of the SDP. It is the court which
has jurisdiction and authority to order the
revocation or rescission of the PARC-approved SDP
(1) YES, the PARC has jurisdiction to
revoke HLI’s SDP under the doctrine of
necessary implication.
Under Sec. 31 of RA 6657, as implemented by DAO
10, the authority to approve the plan for stock
distribution of the corporate landowner belongs to
PARC. Contrary to petitioner HLI’s posture, PARC
also has the power to revoke the SDP which it
previously approved. It may be, as urged, that RA
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6657 or other executive issuances on agrarian
reform do not explicitly vest the PARC with the
power to revoke/recall an approved SDP. Such
power or authority, however, is deemed possessed
by PARC under the principle of necessary
implication, a basic postulate that what is implied in
a statute is as much a part of it as that which is
expressed.
Following the doctrine of necessary implication, it
may be stated that the conferment of express
power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily
includes the power to revoke or recall the approval
of the plan. To deny PARC such revocatory power
would reduce it into a toothless agency of CARP,
because the very same agency tasked to ensure
compliance by the corporate landowner with the
approved SDP would be without authority to impose
sanctions for non-compliance with it.
HLI: the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in
determining their rights, obligations and remedies.
The Code should be the applicable law on the
disposition of the agricultural land of HLI.
SC: NO! the rights, obligations and remedies of the
parties to the SDOA embodying the SDP are
primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely
created in order to comply with RA 6657, which the
OSG aptly described as the "mother law" of the

SDOA and the SDP. It is, thus, paradoxical for HLI to
shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under
the guise of being a corporate entity.
(2) NO, Sec. 31 of RA 6657 is not
unconstitutional. [The Court actually refused to
pass upon the constitutional question because it was
not raised at the earliest opportunity and
because the resolution thereof is not the lis mota
of the case. Moreover, the issue has been rendered
moot and academic since SDO is no longer one of
the modes of acquisition under RA 9700.]
While there is indeed an actual case or controversy,
intervenor FARM, composed of a small minority of
27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 31 of RA 6657
as early as November 21, 1989 when PARC
approved the SDP of Hacienda Luisita or at least
within a reasonable time thereafter, and why its
members received benefits from the SDP without so
much of a protest. It was only on December 4, 2003
or 14 years after approval of the SDP that said plan
and approving resolution were sought to be
revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore,
the AMBALA petition did NOT question the
constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the
subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor
General, did not question the constitutionality of the
provision. On the other hand, FARM, whose 27
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members formerly belonged to AMBALA, raised the
constitutionality of Sec. 31 only on May 3, 2007
when it filed its Supplemental Comment with the
Court. Thus, it took FARM some eighteen (18) years
from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is
quite too late in the day. The FARM members slept
on their rights and even accepted benefits from the
SDP with nary a complaint on the alleged
unconstitutionality of Sec. 31 upon which the
benefits were derived. The Court cannot now be
goaded into resolving a constitutional issue that
FARM failed to assail after the lapse of a long period
of time and the occurrence of numerous events and
activities which resulted from the application of an
alleged unconstitutional legal provision.
The last but the most important requisite that the
constitutional issue must be the very lis mota of the
case does not likewise obtain. The lis mota aspect is
not present, the constitutional issue tendered not
being critical to the resolution of the case. If some
other grounds exist by which judgment can be
made without touching the constitutionality of a law,
such recourse is favored.
The lis mota in this case, proceeding from the basic
positions originally taken by AMBALA (to which the
FARM members previously belonged) and the
Supervisory Group, is the alleged non-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 not PARC acted in grave abuse

of discretion when it ordered the recall of the SDP
for such non-compliance and the fact that the SDP,
as couched and implemented, offends certain
constitutional and statutory provisions. To be sure,
any of these key issues may be resolved without
plunging into the constitutionality of Sec. 31 of RA
6657. Moreover, looking deeply into the underlying
petitions of AMBALA, et al., it is not the said section
per se that is invalid, but rather it is the alleged
application of the said provision in the SDP that is
flawed.
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 6657 vis-à-vis the stock
distribution component of said Sec. 31. In its
pertinent part, Sec. 5 of RA 9700 provides: “[T]hat
after June 30, 2009, the modes of acquisition
shall be limited to voluntary offer to sell and
compulsory acquisition.” Thus, for all intents and
purposes, the stock distribution scheme under Sec.
31 of RA 6657 is no longer an available option under
existing law. The question of whether or not it is
unconstitutional should be a moot issue.
(3) YES, the revocation of the HLI’s SDP
valid. [NO, the PARC did NOT gravely abuse its
discretion in revoking the subject SDP and
placing the hacienda under CARP’s compulsory
acquisition and distribution scheme.]
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The revocation of the approval of the SDP is valid:
(1) the mechanics and timelines of HLI’s stock
distribution violate DAO 10 because 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; (2) the 30-year timeframe for HLI-to-
FWBs stock transfer is contrary to what Sec. 11 of
DAO 10 prescribes.
In our review and analysis of par. 3 of the SDOA on
the mechanics and timelines of stock distribution,
We find that it violates two (2) provisions of DAO
10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of
30 years, the SECOND PARTY [HLI] shall arrange
with the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the
basis of number of days worked and at no cost to
them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY
that are presently owned and held by the FIRST
PARTY, until such time as the entire block of
1 1 8 , 3 9 1 , 9 7 6 . 8 5 s h a r e s s h a l l h a ve b e e n
completely acquired and distributed to the THIRD
PARTY.
[I]t is clear as day that the original 6,296 FWBs,
who were qualified beneficiaries at the time of the
approval of the SDP, suffered from watering down of
shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs
got less than the guaranteed 18,804.32 HLI shares

per beneficiary, because the acquisition and
distribution of the HLI shares were based on “man
days” or “number of days worked” by the FWB in a
year’s time. As explained by HLI, a beneficiary
needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If
it falls below 37 days, the FWB, unfortunately, does
not get any share at year end. The number of HLI
shares distributed varies depending on the number
of days the FWBs were allowed to work in one
year. Worse, HLI hired farmworkers in addition to
the original 6,296 FWBs, such that, as indicated in
the 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. All these
farmworkers, which include the original 6,296
FWBs, were given shares out of the 118,931,976.85
HLI shares representing the 33.296% of the total
outstanding capital stock of HLI. Clearly, 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.
Going into another but related matter, par. 3 of the
SDOA expressly providing for a 30-year timeframe
for HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10
prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution
plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by
PARC. In fact, based on the said provision, the
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transfer of the shares of stock in 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) days from implementation.
To the Court, there is a purpose, which is at once
discernible as it is practical, for the three-month
threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits
the implementation of the stock distribution
scheme. the reason underpinning the 30-year
accommodation does not apply to corporate
landowners in distributing shares of stock to the
qualified beneficiaries, as the shares may be issued
in a much shorter period of time.
Taking into account the above discussion, the
revocation of the SDP by PARC should be upheld
[because of violations of] DAO 10. It bears stressing
that under Sec. 49 of RA 6657, the PARC and the
DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such
rule-making power, DAO 10 has the force and effect
of law and must be duly complied with. The PARC is,
t h e r e f o r e , c o r r e c t i n r e v o k i n g t h e S D P.
Consequently, the PARC Resolution No. 89-12-2
dated November 21, l989 approving the HLI’s SDP is
nullified and voided.
(4) YES, 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.
[T]here are two (2) requirements before one may
be considered a purchaser in good faith, namely:
(1) that the purchaser buys the property of another
without notice that some other person has a right to
or interest in such property; and (2) that the
purchaser pays a full and fair price for the property
at the time of such purchase or before he or she has
notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC
are purchasers in good faith for value entitled to the
benefits arising from such status.
First, at the time LIPCO purchased the entire three
hundred (300) hectares of industrial land, there was
no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has
a right to or interest in such property. In fact, at the
time LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the
name of Centennary: the Secretary’s Certificate in
favor of Teresita Lopa, the Secretary’s Certificate in
favor of Shintaro Murai, and the conversion of the
property from agricultural to industrial and
residential use.
The same is true with respect to RCBC. At the time
it acquired portions of Hacienda Luisita, only the
following general annotations appeared on the TCTs
of LIPCO: the Deed of Restrictions, limiting its use
solely as an industrial estate; the Secretary’s
Certificate in favor of Koji Komai and Kyosuke Hori;
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and the Real Estate Mortgage in favor of RCBC to
guarantee the payment of PhP 300 million.
To be sure, intervenor RCBC and LIPCO knew that
the lots they bought were subjected to CARP
coverage by means of a stock distribution plan, as
the DAR conversion order was annotated at the
back of the titles of the lots they
acquired. However, 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.
And second, both LIPCO and RCBC purchased
portions of Hacienda Luisita for value. Undeniably,
LIPCO acquired 300 hectares of land from
Centennary for the amount of PhP750 million
pursuant to a Deed of Sale dated July 30, 1998. On
the other hand, in a Deed of Absolute Assignment
dated November 25, 2004, LIPCO conveyed portions
of Hacienda Luisita in favor of RCBC by way
of dacion en pago to pay for a loan of
PhP431,695,732.10.
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 LIPCO’s and RCBC’s property which
once formed part of Hacienda Luisita under the
CARP compulsory acquisition scheme via the
assailed Notice of Coverage.
[The Court went on to apply the operative fact
doctrine to determine what should be done in the
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aftermath of its disposition of the above-
enumerated issues:
While We affirm the revocation of the SDP on
Hacienda Luisita subject of PARC Resolution Nos.
2005-32-01 and 2006-34-01, the Court cannot
close its eyes to certain “operative facts” that had
occurred in the interim. Pertinently, the “operative
fact” doctrine realizes that, in declaring
a law or executive action null and void, or, by
extension, no longer without force and effect, undue
harshness and resulting unfairness must be
avoided. This is as it should realistically be, since
rights might have accrued in favor of natural or
juridical persons and obligations justly incurred in
the meantime. The actual existence of a statute or
executive act is, prior to such a determination, an
operative fact and may have consequences which
cannot justly be ignored; the past cannot always be
erased by a new judicial declaration.
While the assailed PARC resolutions effectively
nullifying the Hacienda Luisita SDP are upheld, the
revocation must, by application of the
operative fact principle, give way to the right
of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI
stockholders or not. The Court cannot turn a
blind eye to the fact that in 1989, 93% of the FWBs
agreed to the SDOA (or the MOA), which became
the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989.
From 1989 to 2005, the FWBs were said to have
received from HLI salaries and cash benefits,
hospital and medical benefits, 240-square meter

homelots, 3% of the gross produce from agricultural
lands, and 3% of the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare
lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22,
2005. On August 6, 20l0, HLI and private
respondents submitted a Compromise Agreement,
in which HLI gave the FWBs the option of acquiring
a piece of agricultural land or remain as HLI
stockholders, and as a matter of fact, most FWBs
indicated their choice of remaining as stockholders.
These facts and circumstances tend to indicate that
some, if not all, of the FWBs may actually desire to
continue as HLI shareholders. A matter best left to
their own discretion.]
The dissents in the July 5, 2011 decision
The dissents of the minority justices were on the
other fine points of the decision.
Chief Justice Corona dissented insofar as the
majority refused to declare Sec. 31 of RA 6657
unconstitutional. The provision grants to corporate
landowners the option to give qualified FWBs the
right to own capital stock of the corporation in lieu
of actual land distribution. The Chief Justice was of
the view that by allowing the distribution of capital
stock, and not land, as “compliance” with agrarian
reform, Sec. 31 of RA 6657 contravenes Sec. 4,
Article XIII of the Constitution, which, he argued,
requires that the law implementing the agrarian
reform program should employ [actual] land
redistribution mechanism. Under Sec. 31 of RA
6657, he noted, the corporate landowner remains to
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be the owner of the agricultural land. Qualified
beneficiaries are given ownership only of shares of
stock, not [of] the lands they till. He concluded that
since an unconstitutional provision cannot be the
basis of a constitutional act, the SDP of petitioner
HLI based on Section 31 of RA 6657 is also
unconstitutional.
Justice Mendoza fully concurred with Chief Justice
Corona’s position that Sec. 31 of RA 6657 is
unconstitutional. He however agreed with the
majority that the FWBs be given the option to
remain as shareholders of HLI. He also joined
Justice Brion’s proposal that that the reckoning date
for purposes of just compensation should be May
11, 1989, when the SDOA was executed by Tadeco,
HLI and the FWBs. Finally, he averred that
considering that more than 10 years have elapsed
from May 11, 1989, the qualified FWBs, who can
validly dispose of their due shares, may do so, in
favor of LBP or other qualified beneficiaries. The 10-
year period need not be counted from the issuance
of the Emancipation Title (EP) or Certificate of Land
Ownership Award CLOA) because, under the SDOA,
shares, not land, were to be awarded and
distributed.
Justice Brion’s dissent centered on the
consequences of the revocation of HLI’s SDP/SDOA.
He argued that that the operative fact doctrine only
applies in considering the effects of a declaration of
unconstitutionality of a statute or a rule issued by
the Executive Department that is accorded the
status of a statute. The SDOA/SDP is neither a
statute nor an executive issuance but a contract

between the FWBs and the landowners; hence, the
operative fact doctrine is not applicable. A contract
stands on a different plane than a statute or an
executive issuance. When a contract is contrary to
law, it is deemed void ab initio. It produces no legal
effects whatsoever. Thus, Justice Brion questioned
the option given by the majority to the FWBs to
remain as stockholders in an almost-bankrupt
corporation like HLI. He argued that the nullity of
HLI’s SDP/SDOA goes into its very existence, and
the parties to it must generally revert to their
respective situations prior to its execution.
Restitution, he said, is therefore in order. With the
SDP being void, the FWBs should return everything
they are proven to have received pursuant to the
terms of the SDOA/SDP. Justice Brion then proposed
that all aspects of the implementation of the
mandatory CARP coverage be determined by the
DAR by starting with a clean slate from [May 11,]
1989, the point in time when the compulsory CARP
coverage should start, and proceeding to adjust the
relations of the parties with due regard to the
events that intervened [thereafter]. He also held
that the time of the taking (when the computation
of just compensation shall be reckoned) shall be
May 11, 1989, when the SDOA was executed by
Tadeco, HLI and the FWBs.
Justice Sereno dissented with respect to how the
majority modified the questioned PARC Resolutions
(i.e., no immediate land distribution, give first the
original qualified FWBs the option to either remain
as stockholders of HLI or choose actual land
distribution) and the applicability of the operative
11
fact doctrine. She would instead order the DAR to
forthwith determine the area of Hacienda Luisita
that must be covered by the compulsory coverage
and monitor the land distribution to the qualified
FWBs.
Erroneous interpretation of the Court’s
decision
The High Tribunal actually voted unanimously
(11-0) to DISMISS/DENY the petition of HLI and to
AFFIRM the PARC resolutions. This is contrary to
media reports that the Court “voted 6-4” to dismiss
the HLI petition. The five (not four) minority justices
(Chief Justice Corona, and Justices Brion, Villarama,
Mendoza, and Sereno) only partially dissented
from the decision of the majority of six (Justice
Velasco Jr., Leonardo-De Castro, Bersamin, Del
Castillo, Abad, and Perez). Justice Antonio Carpio
took no part in the deliberations and in the voting,
while Justice Diosdado Peralta was on official leave.
The 14th and 15th seats in the Court were earlier
vacated by the retirements of Justices Eduardo
Antonio Nachura (June 13, 2011) and Conchita
Carpio-Morales (June 19, 2011).
Another misinterpretation came from no less than
the Supreme Court administrator and spokesperson,
Atty. Midas Marquez. In a press conference called
after the promulgation of the Court’s decision,
Marquez initially used the term “referendum” in
explaining the High Court’s ruling. This created
confusion among the parties and the interested
public since a “referendum” implies that the FWBs
will have to vote on a common mode by which to
pursue their claims over Hacienda Luisita. The

decision was thus met with cries of condemnation
by the misinformed farmers and the various
people’s organizations and militant groups
supportive of their cause.
Marquez would later correct himself in a subsequent
press briefing. But since by then the parties had
a l r e a d y f i l e d t h e i r r e s p e c t i ve m o t i o n s f o r
reconsideration, he called upon everyone to just
“wait for the final resolution of the motion[s], which
is forthcoming anyway.” The resolution of the
consolidated motions for reconsideration came
relatively early on November 22, 2011, or less than
five months from the promulgation of the decision.
G.R. No. 171101 November 22, 2011
(1)M o t i o n f o r C l a r i f i c a t i o n a n d P a r t i a l
Reconsideration dated July 21, 2011 filed by
petitioner Hacienda Luisita, Inc. (HLI);
- it is not proper to distribute the proceeds of the
conversion sale to the FWBs the proceeds of the
sale belong to the corporation for having sold its
asset, and the distribution would be considered
dissolution of HLI
- the actual taking is NOT November 21, 1989, but
should be reckoned from finality of the Decision
of this Court, or at the very least, the reckoning
period may be tacked to January 2, 2006, the
date when the Notice of Coverage was issued by
the DAR
12
(2)Motion for Partial Reconsideration dated July 20,
2011 filed by PARC and DAR
- Doctrine of Operative fact does not apply
because no law was declared void.
(3)Motion for Reconsideration dated July 19, 2011
filed by AMBALA
- RA 6657 is unconstitutional
- "operative fact doctrine" does not apply. the
option given to the farmers to remain as
stockholders of HLI is equivalent to an option
for HLI to retain land in direct violation of the
CARL, the SDP having been revoked. It should
not apply if it would result to inequity
- CA erred in holding that improving the economic
status of FWBs is not among the legal
obligations of HLI under the SDP and an
imperative imposition by RA 6657 and DAO 10
- CA erred in holding that LIPCO and RCBC were
purchasers for value
(4)Motion for Reconsideration dated July 21, 2011
filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc. (FARM);
- same with AMBALA
- issue of constitutionality is the lis mota of the
case which must be decided upon
(5)Motion for Reconsideration dated July 21, 2011
filed by private respondents Noel Mallari, Julio
Suniga, Supervisory Group of Hacienda Luisita,
Inc. (Supervisory Group) and Windsor Andaya
(collectively referred to as "Mallari, et al."); and
(6)Motion for Reconsideration dated July 22, 2011
filed by private respondents Rene Galang and

ISSUES:
(1) applicability of the operative fact doctrine;
(2) constitutionality of Sec. 31 of RA 6657 or the
Comprehensive Agrarian Reform Law of 1988;
(3) coverage of compulsory acquisition;
(4) just compensation;
(5) sale to third parties;
(6) the violations of HLI; and
(7) control over agricultural lands (revocation
of SDP)
OPERATIVE FACT DOCTRINE (not much related)
Bearing in mind that PARC Resolution No. 89-12-2
––an executive act––was declared invalid in the
instant case, the operative fact doctrine is clearly
applicable.
it should be recognized that SC, in its July 5, 2011
Decision, affirmed the revocation of Resolution No.
89-12-2 and ruled for the compulsory coverage of
the agricultural lands of Hacienda Luisita in view of
HLI’s violation of the SDP and DAO 10. By applying
the doctrine, this Court merely gave the qualified
FWBs the option to remain as stockholders of HLI
and ruled that they will retain the homelots and
other benefits which they received from HLI by
virtue of the SDP.
The application of the doctrine is favorable to the
FWBs because not only were the FWBs allowed to
retain the benefits and homelots they received
13
under the stock distribution scheme, they were also
given the option to choose for themselves whether
they want to remain as stockholders of HLI or not.
CONSTITUTIONALITY
(Upheld previous ruling)
FARM is, therefore, remiss in belatedly questioning
the constitutionality of Sec. 31 of RA 6657. The
second requirement that the constitutional question
should be raised at the earliest possible opportunity
is clearly wanting.
The last but the most important requisite that the
constitutional issue must be the very lis mota of the
case does not likewise obtain. The lis mota aspect is
not present, the constitutional issue tendered not
being critical to the resolution of the case.
COVERAGE OF COMPULSORY ACQUISITION
FARM argues that this Court ignored certain material
facts when it limited the maximum area to be
covered to 4,915.75 hectares, whereas the area
that should, at the least, be covered is 6,443
hectares, which is the agricultural land allegedly
covered by RA 6657 and previously held by Tarlac
Development Corporation (Tadeco).
We cannot subscribe to this view. Since what is put
in issue before the Court is the propriety of the
revocation of the SDP, which only involves 4,915.75
has. of agricultural land and not 6,443 has., then
We are constrained to rule only as regards the
4,915.75 has. of agricultural land.

DAR, however, contends that the declaration of the
area to be awarded to each FWB is too restrictive. It
stresses that in agricultural landholdings like
Hacienda Luisita, there are roads, irrigation canals,
and other portions of the land that are considered
commonly-owned by farmworkers, and this may
necessarily result in the decrease of the area size
that may be awarded per FWB. DAR also argues
that the July 5, 2011 Decision does not give it any
leeway in adjusting the area that may be awarded
per FWB in case the number of actual qualified
FWBs decreases.
The argument is meritorious. In order to ensure the
proper distribution of the agricultural lands of
Hacienda Luisita per qualified FWB, and considering
that matters involving strictly the administrative
implementation and enforcement of agrarian reform
laws are within the jurisdiction of the DAR, it is the
latter which shall determine the area with which
each qualified FWB will be awarded.
500 HECTARES
RCBC and LIPCO knew that the lots they bought
were subjected to CARP coverage by means of a
stock distribution plan, as the DAR conversion order
was annotated at the back of the titles of the lots
they acquired. However, 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.
14
PROCEEDS OF SALE
Considering that the 500-hectare converted land, as
well as the 80.51-hectare SCTEX lot, should have
been included in the compulsory coverage were it
not for their conversion and valid 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 proceeds from the sale shall
take the place of the lots.
JUST COMPENSATION - “TAKING”
In Our July 5, 2011 Decision, We stated that "HLI
shall be paid just compensation for the remaining
agricultural land that will be transferred to DAR for
land distribution to the FWBs." We also ruled that
the date of the "taking" is November 21, 1989,
when PARC approved HLI’s SDP per PARC Resolution
No. 89-12-2.
Mallari, et al. argued that the valuation of the land
cannot be based on November 21, 1989. Instead,
they aver that the date of "taking" for valuation
purposes is a factual issue best left to the
determination of the trial courts.
AMBALA alleged that HLI should no longer be paid
just compensation for the agricultural land that will
be distributed to the FWBs, since the RTC already
rendered a decision ordering "the Cojuangcos to
transfer the control of Hacienda Luisita to the
Ministry of Agrarian Reform, which will distribute the
land to small farmers after compensating the
landowners P3.988 million." In the event, however,
that this Court will rule that HLI is indeed entitled to
compensation, AMBALA contended that it should be

pegged at forty thousand pesos (PhP 40,000) per
hectare, since this was the same value that Tadeco
declared in 1989 to make sure that the farmers will
not own the majority of its stocks.
SC: the date of "taking" is November 21, 1989, the
date when PARC approved HLI’s SDP in view of the
fact that this is the time that the FWBs were
considered to own and possess the agricultural
lands in Hacienda Luisita. To be precise, these lands
became subject of the agrarian reform coverage
through the stock distribution scheme only upon the
approval of the SDP, that is, November 21, 1989.
Thus, such approval is akin to a notice of coverage
ordinarily issued under compulsory acquisition.
Further, any doubt should be resolved in favor of the
FWBs.
SALE TO THIRD PARTIES
There is a view that since the agricultural lands in
Hacienda Luisita were placed under CARP coverage
through the SDOA scheme on May 11, 1989, then
the 10-year period prohibition on the transfer of
awarded lands under RA 6657 lapsed on May 10,
1999, and, consequently, the qualified FWBs should
already be allowed to sell these lands with respect
to their land interests to third parties, including HLI,
regardless of whether they have fully paid for the
lands or not.
The proposition is erroneous. If the land has not yet
been fully paid by the beneficiary, the right to the
land may be transferred or conveyed, with prior
15
approval of the DAR, to any heir of the beneficiary
or to any other beneficiary who, as a condition for
such transfer or conveyance, shall cultivate the land
himself. Failing compliance herewith, the land shall
be transferred to the LBP which shall give due notice
of the availability of the land in the manner specified
in the immediately preceding paragraph.
In the event of such transfer to the LBP, the latter
shall compensate the beneficiary in one lump sum
for the amounts the latter has already paid,
together with the value of improvements he has
made on the land.
Without a doubt, under RA 6657 and DAO 1, the
awarded lands may only be transferred or conveyed
after ten (10) years from the issuance and
registration of the emancipation patent (EP) or
certificate of land ownership award (CLOA).
Considering that the EPs or CLOAs have not yet
been issued to the qualified FWBs in the instant
case, the 10-year prohibitive period has not even
started. Significantly, the reckoning point is the
issuance of the EP or CLOA, and not the placing of
the agricultural lands under CARP coverage.
if We maintain the position that the qualified FWBs
should be immediately allowed the option to sell or
convey the agricultural lands in Hacienda Luisita,
then all efforts at agrarian reform would be
rendered nugatory by this Court, since, at the end
of the day, these lands will just be transferred to
persons not entitled to land distribution under CARP.
CONTROL OVER AGRICULTURAL LANDS

SC realized that the FWBs will never have control
over these agricultural lands for as long as they
remain as stockholders of HLI.
bearing in mind that with the revocation of the
approval of the SDP, HLI will no longer be operating
under SDP and will only be treated as an ordinary
private corporation; the FWBs who remain as
stockholders of HLI will be treated as ordinary
stockholders and will no longer be under the
protective mantle of RA 6657.
In addition to the foregoing, in view of the operative
fact doctrine, all the benefits and homelots80
received by all the FWBs shall be respected with no
obligation to refund or return them, since, as We
have mentioned in our July 5, 2011 Decision, "the
benefits x x x were received by the FWBs as
farmhands in the agricultural enterprise of HLI and
other fringe benefits were granted to them pursuant
to the existing collective bargaining agreement with
Tadeco."
One last point, the HLI land shall be distributed only
to the 6,296 original FWBs. The remaining 4,206
FWBs are not entitled to any portion of the HLI land,
because the rights to said land were vested only in
the 6,296 original FWBs pursuant to Sec. 22 of RA
6657. With these, PARC/DAR’s, AMBALA’s, and
FARM’s Motions – GRANTED.
The order giving option to the FWBs to choose
whether or not to stay as shareholders was thereby
recalled.
 alternative to compulsory coverage, then the FWBs
16
G.R. No. 171101 April 24, 2012
Before the Court are the Motion to Clarify and
Reconsider Resolution of November 22, 2011 dated
December 16, 2011 filed by petitioner Hacienda
Luisita, Inc. (HLI) and the Motion for
Reconsideration/Clarification dated December 9,
2011 filed by private respondents Noel Mallari, Julio
Suniga, Supervisory Group of Hacienda Luisita, Inc.
and Windsor Andaya (collectively referred to as
"Mallari, et al.").
Basically, the issues raised by HLI and Mallari, et al.
boil down to the following: (1) determination of the
date of "taking"; (2) propriety of the revocation of
the option on the part of the original FWBs to
remain as stockholders of HLI; (3) propriety of
distributing to the qualified FWBs the proceeds from
the sale of the converted land and of the 80.51-
hectare Subic-Clark-Tarlac Expressway (SCTEX )
land; and (4) just compensation for the homelots
given to the FWBs.
PAYMENT OF JUST COMPENSATION
HLI contends that since the SDP is a modality which
the agrarian reform law gives the landowner as
cannot be considered as owners and possessors of
the agricultural lands of Hacienda Luisita at the time

the SDP was approved by PARC. It further claims
that the approval of the SDP is not akin to a Notice
of Coverage in compulsory coverage situations
because stock distribution option and compulsory
acquisition are two (2) different modalities with
independent and separate rules and mechanisms.
Concomitantly, HLI maintains that the Notice of
Coverage issued on January 2, 2006 may, at the
very least, be considered as the date of "taking" as
this was the only time that the agricultural lands of
Hacienda Luisita were placed under compulsory
acquisition in view of its failure to perform certain
obligations under the SDP.
UPHELD PREVIOUS DECISION: taking was effected
on November 21, 1989
What is notable, however, is that the divestment by
Tadeco of the agricultural lands of Hacienda Luisita
and the giving of the shares of stock for free is
nothing but an enticement or incentive for the FWBs
to agree with the stock distribution option scheme
and not further push for land distribution. And the
stubborn fact is that the "man days" scheme of HLI
impelled the FWBs to work in the hacienda in
exchange for such shares of stock.
When the agricultural lands of Hacienda Luisita were
transferred by Tadeco to HLI in order to comply with
CARP through the stock distribution option scheme,
sealed with the imprimatur of PARC under PARC
Resolution No. 89-12-2 dated November 21, 1989,
Tadeco was consequently dispossessed of the afore-
mentioned attributes of ownership. Notably, Tadeco
and HLI are two different entities with separate and
17
distinct legal personalities. Ownership by one cannot
be considered as ownership by the other.
Corollarily, it is the official act by the government,
that is, the PARC’s approval of the SDP, which
should be considered as the reckoning point for the
"taking" of the agricultural lands of Hacienda Luisita.
Although the transfer of ownership over the
agricultural lands was made prior to the SDP’s
approval, it is this Court’s consistent view that these
lands officially became subject of the agrarian
reform coverage through the stock distribution
scheme only upon the approval of the SDP. And as
We have mentioned in Our November 22, 2011
Resolution, such approval is akin to a notice of
coverage ordinarily issued under compulsory
acquisition.
FWBS ENTITLED TO PROCEEDS OF SALE
HLI reiterates its claim over the proceeds of the
sales of the 500 hectares and 80.51 hectares of the
land as corporate owner and argues that the return
of said proceeds to the FWBs is unfair and violative
of the Corporation Code.
This claim is bereft of merit.
UPHELD PREVIOUS RULING - were it not for the
approval of the SDP by PARC, these large parcels of
land would have been distributed and ownership
transferred to the FWBs, subject to payment of just
compensation, given that, as of 1989, the subject
4,915 hectares of Hacienda Luisita were already
covered by CARP.

HOMELOTS
In the present recourse, HLI also harps on the fact
that since the homelots given to the FWBs do not
form part of the 4,915.75 hectares covered by the
SDP, then the value of these homelots should, with
the revocation of the SDP, be paid to Tadeco as the
landowner.
We disagree. As We have explained in Our July 5,
2011 Decision, the distribution of homelots is
required under RA 6657 only for corporations or
business associations owning or operating farms
which opted for land distribution. This is provided
under Sec. 30 of RA 6657.
Since none of the provisions made reference to
corporations which opted for stock distribution
under Sec. 31 of RA 6657, then it is apparent that
said corporations are not obliged to provide for
homelots. Nonetheless, HLI undertook to "subdivide
and allocate for free and without charge among the
qualified family-beneficiaries x x x residential or
homelots of not more than 240 sq. m. each, with
each family beneficiary being assured of receiving
and owning a homelot in the barrio or barangay
where it actually resides." In fact, HLI was able to
distribute homelots to some if not all of the FWBs.
Thus, in our November 22, 2011 Resolution, We
declared that the homelots already received by the
FWBs shall be respected with no obligation to refund
or to return them. However, since the SDP was
already revoked with finality, the Court directs the
government through the DAR to pay HLI the just
compensation for said homelots in consonance with
18
Sec. 4, Article XIII of the 1987 Constitution that the
taking of land for use in the agrarian reform
program is "subject to the payment of just
compensation."
To recapitulate, the Court voted on the following
issues in this manner:
1)In determining the date of "taking," the Court
voted 8-6 to maintain the ruling fixing November
21, 1989 as the date of "taking," the value of the
affected lands to be determined by the LBP and
the DAR;
2)On the propriety of the revocation of the option of
the FWBs to remain as HLI stockholders, the
Court, by unanimous vote, agreed to reiterate its
ruling in its November 22, 2011 Resolution that
the option granted to the FWBs stays revoked;
3)On the propriety of returning to the FWBs the
proceeds of the sale of the 500-hectare converted
land and of the 80.51-hectare SCTEX land, the
Court unanimously voted to maintain its ruling to
order the payment of the proceeds of the sale of
the said land to the FWBs less the 3% share,
taxes and expenses specified in the fallo of the
November 22, 2011 Resolution;
4)On the payment of just compensation for the
homelots to HLI, the Court, by unanimous vote,
resolved to amend its July 5, 2011 Decision and
November 22, 2011 Resolution by ordering the
government, through the DAR, to pay to HLI the
just compensation for the homelots thus
distributed to the FWBS.
 19

the government, through DAR, is ordered to pay

Hacienda Luisita, Inc. the just compensation for the
240-square meter homelots distributed to the
FWBs.