Hacienda Luisita, Incorporated vs. Presidential Agrarian Reform Council

G.R.No.171101.November22,2011.
HACIENDA LUISITA, INCORPORATED, petitioner, LUISITA

INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL
BANKING CORPORATION, petitionersinintervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY
NASSERPANGANDAMANOFTHEDEPARTMENTOFAGRARIAN
REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG
HACIENDALUISITA,RENEGALANG,NOELMALLARI,andJULIO
SUNIGA1 and his SUPERVISORY GROUP OF THE HACIENDA
LUISITA,INC.andWINDSORANDAYA,respondents.
Constitutional Law; Words and Phrases; Operative Fact Doctrine; The
operative fact doctrine does not only apply to laws subsequently declared
unconstitutional or unlawful as it also applies to executive acts subsequently
declared as invalid.Contrary to the stance of respondents, the operative fact
doctrine does not only apply to laws subsequently declared unconstitutional or
unlawful,asitalsoappliestoexecutiveactssubsequentlydeclaredasinvalid.AsWe
have discussed in Our July 5, 2011 Decision: That the operative fact doctrine
squarelyappliestoexecutiveactsinthiscase,theapprovalbyPARCoftheHLI
proposalforstockdistributioniswellsettledinourjurisprudence.In Chavezv.
NationalHousingAuthority,Weheld:Petitionerpostulatesthattheoperativefact
doctrineisinapplicabletothepresentcasebecauseitisanequitabledoctrinewhich
couldnotbeusedtocountenanceaninequitableresultthatiscontrarytoitsproper
office.Ontheotherhand,thepetitionerSolicitorGeneralarguesthattheexistenceof
thevariousagreementsimplementingtheSMDRPisanoperativefactthatcanno
longerbedisturbedorsimplyignored,citingRietav.PeopleofthePhilippines.The
argumentoftheSolicitorGeneralismeritorious.Theoperativefactdoctrineis
embodiedinDeAgbayaniv.CourtofAppeals,whereinitisstatedthatalegislativeor
executiveact,
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*ENBANC.
1JoseJulioZunigainsomepartsoftherecords.
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SUPREMECOURTREPORTSANNOTATED
HaciendaLuisita,Incorporatedvs.PresidentialAgrarianReformCouncil
priortoitsbeingdeclaredasunconstitutionalbythecourts,isvalidandmustbe
compliedwith.
Same;Same;Thetermexecutiveactisbroadenoughtoencompassdecisions
of administrative bodies and agencies under the executive department which are
subsequentlyrevokedbytheagencyinquestionornullifiedbytheCourt.Forone,
neithertheDeAgbayanicasenortheMunicipalityofMalabangcaseelaborateswhat
executiveactmean.Moreover,whileorders,rulesandregulationsissuedbythe
President or the executive branch have fixed definitions and meaning in the
AdministrativeCodeandjurisprudence,thephraseexecutiveactdoesnothave
suchspecificdefinitionunderexistinglaws.Itshouldbenotedthatinthecasescited
bytheminority,nowherecanitbefoundthatthetermexecutiveactisconfinedto
theforegoing.Contrarily,thetermexecutiveactisbroadenoughtoencompass
decisions of administrative bodies and agencies under the executive department
whicharesubsequentlyrevokedbytheagencyinquestionornullifiedbytheCourt.
Same;OperativeFactDoctrine;Theoperativefactdoctrineisnotconfinedto
statutes and rules and regulations issued by the executive department that are
accordedthesamestatusasthatofastatuteorthosewhicharequasilegislativein
nature.The operative fact doctrine is not confined to statutes and rules and
regulationsissuedbytheexecutivedepartmentthatareaccordedthesamestatusas
thatofastatuteorthosewhicharequasilegislativeinnature.
Same;Same;Theoperativefactdoctrineisaruleofequity;Itisappliedonlyin
theabsenceofstatutorylawandneverincontraventionofsaidlaw.Theoperative
factdoctrineisaruleofequity.Asacomplementoflegaljurisdiction,equityseeks
toreachandcompletejusticewherecourtsoflaw,throughtheinflexibilityoftheir
rulesandwantofpowertoadapttheirjudgmentstothespecialcircumstancesof
cases,areincompetenttodoso.Equityregardsthespiritandnottheletter,theintent
and not the form, the substance rather than the circumstance, as it is variously
expressed by different courts. Remarkably, it is applied only in the absence of
statutorylawandneverincontraventionofsaidlaw.
CorporationLaw;PiercingtheVeilofCorporateFiction;Absentanyallegation
orproofoffraudorotherpublicpolicyconsiderations,
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HaciendaLuisita,Incorporated
vs.PresidentialAgrarian
ReformCouncil
the existence of interlocking directors, officers and stockholders is not enough

justificationtopiercetheveilofcorporatefiction.Inthethirdplace,byarguingthat
the companies involved in the transfers of the 300hectare portion of Hacienda
Luisita have interlocking directors and, thus, knowledge of one may already be
imputeduponalltheothercompanies,AMBALAandReneGalang,ineffect,want
this Court to pierce the veil of corporate fiction. However, piercing the veil of
corporatefictioniswarrantedonlyincaseswhentheseparatelegalentityisusedto
defeatpublicconvenience,justifywrong,protectfraud,ordefendcrime,suchthatin
thecaseoftwocorporations,thelawwillregardthecorporationsasmergedinto
one.Absentanyallegationorproofoffraudorotherpublicpolicyconsiderations,
the existence of interlocking directors, officers and stockholders is not enough
justificationtopiercetheveilofcorporatefictionasintheinstantcase.
Agrarian Reform Law; Expropriation; Just Compensation; Department of
AgrarianReforms(DARs)landvaluationisonlypreliminaryandisnot,byany
means,finalandconclusiveuponthelandowner;Thecourthastherighttoreview
with finality the determination in the exercise of what is admittedly a judicial
function.The foregoing notwithstanding, it bears stressing that the DARs land
valuationisonlypreliminaryandisnot,byanymeans,finalandconclusiveuponthe
landowner.ThelandownercanfileanoriginalactionwiththeRTCactingasaspecial
agrariancourttodeterminejustcompensation.Thecourthastherighttoreviewwith
finalitythedeterminationintheexerciseofwhatisadmittedlyajudicialfunction.
Same;Same;Same;ComprehensiveAgrarianReformProgram(CARP);The
reckoningpointistheissuanceoftheemancipationpatent(EP)orcertificateofland
ownershipaward(CLOA)andnottheplacingoftheagriculturallandsunderthe
ComprehensiveAgrarianReformProgram(CARP)coverage.UnderRA6657and
DAO1,theawardedlandsmayonlybetransferredorconveyedafterten(10)years
fromtheissuanceandregistrationoftheemancipationpatent(EP)orcertificateof
landownershipaward(CLOA).ConsideringthattheEPsorCLOAshavenotyet
beenissuedtothequalifiedFWBsintheinstantcase,the10yearprohibitiveperiod
hasnotevenstarted.Significantly,thereckoningpointistheissuanceof
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theEPorCLOA,and nottheplacingoftheagriculturallandsunderCARP
coverage.
CORONA,C.J.,ConcurringandDissentingOpinion:
Constitutional Law; Judicial Review; Where a provision of a statute goes

againstthefundamentallaw,speciallyifitimpairsbasicrightsandconstitutional
values,theCourtshouldnothesitatetostrikeitdownasunconstitutional.Wherea
provisionofastatutegoesagainstthefundamentallaw,speciallyifitimpairsbasic
rightsandconstitutionalvalues,theCourtshouldnothesitatetostrikeitdownas
unconstitutional. In such a case, refusal to address the issue of constitutionality
squarelyisneitherprudencenorrestraintbutevasionofjudicialdutyandabdication
oftheCourtsauthority.
Same;Same;Therequirementoflismotadoesnotapplywherethequestionof
constitutionality was raised by the parties and addressing such question is
unavoidable.The Court should not decline to test the constitutional validity of
Section31ofRA6657onthebasisofeithertherequirementof lismota orthe
doctrineofmootness.Therequirementoflismotadoesnotapplywherethequestion
of constitutionality was raised by the parties and addressing such question is
unavoidable.Itcannotbedisputedthatthepartiesininteresttothiscasepresented
thequestionofconstitutionality.Also,anydiscussionofthestockdistributionplanof
petitioner Hacienda Luisita, Inc. (HLI) necessarily and inescapably involves a
discussionofitslegalbasis,Section31ofRA6657.Whilethesaidprovisionenjoys
thepresumptionofconstitutionality,thatpresumptionhaspreciselybeenchallenged.
Itsinconsistencywiththefundamentallawwasraisedspecificallyasanissue.
Same;Same;IftheCourthastheauthoritytopromulgaterulesthatprotectand
enforceconstitutionalrights,italsohasthedutytorenderdecisionsthatensure
constitutionalrightsarepreservedandsafeguarded,notdiminishedormodified.
TheConstitutionrecognizestheprimacyoftherightoffarmersandfarmworkersto
directlyorcollectivelyownthelandstheytill.Anyartificialorsuperficialsubstitute
suchasthestockdistributionplandiminishestherightanddebasestheconstitutional
intent.IfthisCourthastheauthoritytopromulgaterulesthatprotectandenforce
constitutionalrights,it
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ReformCouncil
alsohasthedutytorenderdecisionsthatensureconstitutionalrightsarepreserved
andsafeguarded,notdiminishedormodified.
Same;Same;Therequirementoflismotaandthemootnessdoctrinearenot
constitutionalrequirementsbutsimplyprudentialdoctrinesofjusticiabilityfashioned
bytheCourtintheexerciseofjudicialrestraint.Therequirementof lismotaand
the mootness doctrine are not constitutional requirements but simply prudential
doctrinesofjusticiabilityfashionedbytheCourtintheexerciseofjudicialrestraint.
ForifthesaidgroundshavebeenimposedbytheConstitutionitself,noexception
could have been carved by courts (for either ground) as courts only apply and
interprettheConstitutionanddonotmodifyit.
Same;Same;TheCourtmaynotbehamperedintheperformanceofitsessential
functiontoupholdtheConstitutionbyprudentialdoctrinesofjusticiability.Judicial
reviewisparticularlyimportantinenjoiningandredressingconstitutionalviolations
inflictedbyalllevelsofgovernmentandgovernmentofficers.Thus,thisCourtmay
not be hampered in the performance of its essential function to uphold the
Constitutionbyprudentialdoctrinesofjusticiability.
Agrarian Reform Law; Under the Constitution, actual land distribution to
qualifiedagrarianreformbeneficiaries ismandatory.I maintainmystance that
Section 31 of RA 6657 is invalid. Agrarian reforms underlying principle is the
recognition of the rights of farmers and farmworkers who are landless to own,
directly or collectively, the lands they till. Under the Constitution, actual land
distributiontoqualifiedagrarianreformbeneficiariesismandatory. Anything
that promises something other than land must be struck down for being
unconstitutional.
Same; Under Section 31 of RA 6657, the corporate landowner retains
ownership of the agricultural land while the farmworkerbeneficiaries become
stockholdersbutremainlandless.Section31ofRA6657asimplementedunderthe
stock distribution option agreement merely entitles farmworkerbeneficiaries of
petitioner HLI to certificates of stocks which represent equity or interest in the
corporatelandowner,petitionerHLI,notinthelanditself.UnderSection31ofRA
6657,thecorporatelandownerretainsownershipoftheagriculturallandwhilethe
farmworkerbeneficiaries become stockholders but remain landless. While
farmworkerbeneficiariesholda
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pieceofpaperthatrepresentsinterestinthecorporationthathasownedandstillowns
theland,thatpaperactuallydeprivesthemoftheirrightfulclaimwhichisownership
ofthelandtheytill.Thus,Section31undulypreventsthefarmworkerbeneficiaries
fromenjoyingthepromiseofSection4,ArticleXIIIoftheConstitutionforthemto
owndirectlyorcollectivelythelandstheytill.
Same;Collectiveownershipoflandundertheagrarianreformprovisionsofthe
Constitutionmustoperateontheconceptofcollectivecontrolofthelandbythe
qualified farmer and farmworkers.Corporate ownership by the corporate
landowner under Section 31 does not satisfy the collective ownership envisioned
underSection4,ArticleXIIIoftheConstitution.Wherethefarmworkerbeneficiaries
areneitherthecollectivenakedownersnorthecollectivebeneficialownersofthe
landtheytill,therecanbenovalidcompliancewiththeConstitutionsobjectiveof
collective ownership by farmers and farmworkers. Collective ownership of land
undertheagrarianreformprovisionsoftheConstitutionmustoperateontheconcept
ofcollectivecontrolofthelandbythequalifiedfarmerandfarmworkers.
Same;JustCompensation;Thejustcompensationshallbebasedonthemarket
valueasofNovember21,1989oftheentireportionthatmaybedeterminedbythe
Department of AgrarianReform (DAR) assubjecttocoverageoflandreform.
Section4,ArticleXIIIoftheConstitutionrequiresthatthelandownerbegivenjust
compensation. For this purpose, the DAR shall determine the just compensation
payablebyeachfarmworkerbeneficiarytopetitionerHLIasithasjurisdictionin
matters involving the administrative implementation and enforcement of agrarian
reform laws. The just compensation shall be based on the market value as of
November21,1989oftheentireportionthatmaybedeterminedbytheDARas
subjecttothecoverageoflandreform.Theportionoftheproceedsoftheportionsold
toLIPCOandRCBCaswellastheproceedsoftheportionexpropriatedforthe
SCTEXmaybethesubject of legalcompensationor setoff for purposesof the
paymentofjustcompensation.
BRION,J.,SeparateConcurringandDissentingOpinion:
ConstitutionalLaw;WordsandPhrases;OperativeFactDoctrine;Thedoctrine
isapplicableonlyinconsideringtheeffectsofa
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ReformCouncil
declarationofunconstitutionalityofalaw(agenerictermthatincludesstatutes,
rulesandregulationsissuedbytheexecutivedepartmentandareaccordedthesame
status as a statute).The ponencia misapplies the operative fact doctrine. I
maintaintheviewthatthedoctrineisapplicableonlyinconsideringtheeffectsofa
declarationofunconstitutionalityofalaw(agenerictermthatincludesstatutes,rules
andregulationsissuedbytheexecutivedepartmentandareaccordedthesamestatus
as a statute). The doctrines limited application is apparent from a review of its
origins.
AgrarianReformLaw;JustCompensation;Inseveralcases,theCourtawarded
interestswhenthereisdelayinthepaymentofjustcompensation.Inseveralcases,
theCourtawardedinterestswhenthereisdelayinthepaymentofjustcompensation.
Theunderlyingrationalefortheawardistocompensatethelandownernotsimplyfor
thedelay,butfortheincomethelandownerwouldhavereceivedfromthelandhad
therebeennoimmediatetakingthereofbythegovernment.
BERSAMIN,J.,ConcurringandDissentingOpinion:
AgrarianReformLaw;JustCompensation;Thefactualissueofwhenthetaking
hadtakenplaceastotheaffectedagriculturallandsshouldnotbeseparatedfrom
thedeterminationofjustcompensationbyDepartmentofAgrarianReform(DAR),
Land Bank and Special Agrarian Court (SAC).It is my humble submission,
therefore,thatthefactualissueofwhenthetakinghadtakenplaceastotheaffected
agricultural lands should not be separated from the determination of just
compensationbyDAR,LandBankandSAC.Accordingly,IurgethattheCourt
shouldleavethematterofthereckoningdatetobehereafterdeterminedbytheDAR
andLandBankpursuanttoSection18ofRepublicActNo.6657.Shouldtheparties
disagreethereon,theproperSACwillthenresolvetheirdisagreementasanintegral
partofapetitionfordeterminationofjustcompensationmadepursuanttoSection57
ofRepublicActNo.6657
SERENO,J.,ConcurringandDissentingOpinion:
Agrarian Reform; Expropriation; Just Compensation; The taking of private
landsundertheagrarianreformprogrampartakesofthenatureofanexpropriation
proceeding;Theaimofjustcompensationintermsofexpropriation,eveninagrarian
reform,shouldbejust
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to theownerthat which approximates the market value.The takingof private

landsundertheagrarianreformprogrampartakesofthenatureofanexpropriation
proceeding.Forpurposesoftakingundertheagrarianreformprogram,theframers
oftheConstitutionexpresslymadeitsintentionknownthattheownersofthe
land should not receive less than the market value for their expropriated
properties and drew parallelisms with the ordinary understanding of just
compensation in nonland reform expropriation. Indeed, the matter of just
compensationwasnevermeanttoinvolveaseverediminutionofwhatthelandowner
gets.Theaimofjustcompensationintermsofexpropriation,eveninagrarianreform,
shouldbejusttotheownerthatwhichapproximatesthemarketvalue.
Same; Same; Same; In computing the just compensation for expropriation
proceedings,itisthevalueofthelandatthetimeofthetaking,notatthetimeofthe
rendition of judgment, which should be taken into consideration; The time of
takingisthemomentwhenlandownersaredeprivedoftheuseandbenefitofthe
property.Justcompensationincasesofexpropriationisordinarilytobeascertained
asofthetimeofthetaking.Incomputingthejustcompensationforexpropriation
proceedings,itisthevalueofthelandatthetimeofthetaking,notatthetimeofthe
rendition of judgment, which should be taken into consideration. Hence, in
determiningthevalueofthelandforthepaymentofjustcompensation,thetimeof
takingshouldbethebasis.Theconceptoftakinginbothlandreformandnonland
reformexpropriationsiswellsettled.ThereistakingofprivatepropertybytheState
in expropriation proceedings when the owner is ousted from his property and
deprivedofhisbeneficialenjoymentthereof.Thetimeoftakingisthemoment
whenlandownersaredeprivedoftheuseandbenefitoftheproperty.
Same;Same;Same;Thevaluationbemadebasedonthecurrentfairmarket
value in accordance with established laws, rules and jurisprudence, or more
specifically at the time that petitioner Hacienda Luisita, Incorporated (HLI) was
issuedaNoticeofCoverageon02January2006(dateofNoticeofCoverage).
ThreereckoningperiodsareforconsiderationoftheCourt. First,JusticeVelasco,
whoisnowjoinedbyJusticeBrion,proposesthattheamountofjustcompensationto
bepaidshouldbebasedonthedatethatthePARCapprovedtheSDOA,oron21
November1989(dateofthePARC
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ReformCouncil
approval).Second,thedatetheSDOAwassigned,18May1989,(dateoftheSDOA)
wasalsoconsideredasareckoningpointofthevaluationperiod.Lastly,Isubmitthat
thevaluationbemadebasedonthecurrentfairmarketvalueinaccordancewith
established laws, rules and jurisprudence; or more specifically, at the time that
petitionerHLIwasissuedaNoticeofCoverageon02January2006(dateofNotice
ofCoverage).Withallduerespecttomycolleagues,thethirdreckoningperiodalone
satisfies the constitutional directive to give real, substantial, full and ample
compensationtothelandownerinrecognitionofthelattersrighttopropertyandof
theexpresslimitationontheStatespowerofexpropriation.
Same;Same;Same;Thenoticeofcoveragecommencestheprocessofacquiring
privateagriculturallandscoveredbytheComprehensiveAgrarianReformProgram
(CARP).Under the uniform rulings of this Court, the notice of coverage
commencestheprocessofacquiringprivateagriculturallandscoveredbytheCARP.
Thedateofthenoticeofcoverageisthereforedeterminativeofthejustcompensation
petitionerHLIisentitledtoforitsexpropriatedlands.Incomputingcapitalizednet
incomeundertheDARformula,oneshouldusetheaveragegrossproductionofthe
latestavailable12monthsimmediatelyprecedingthedateofnoticeofcoverage,in
caseofcompulsoryacquisition,andtheaveragesellingpriceofthelatestavailable12
months prior tothedateof receiptof theclaimfolder bythe LandBank of the
Philippinesforprocessing.
Constitutional Law; The pronouncement of unconstitutionality by the Court
retroactstoallactsundertakenbetweentheeffectivityofthelawandthedeclaration
ofitsinvalidity.Thegeneralruleisthatanunconstitutionallawhasnoforceand
effectitproducesnorights,imposesnodutiesandaffordsnoprotection.Hence,the
pronouncementofunconstitutionalitybytheCourtretroactstoallactsundertaken
betweentheeffectivityofthelawandthedeclarationofitsinvalidity.
Same;OperativeFactsDoctrine;Thedoctrinecanonlycomeintoplayasarule
ofequityincaseswherethereisavacuuminthelawcreatedbythesubsequent
declarationofnullitybytheCourt.Theoperativefactsdoctrinecanonlycomeinto
playasaruleofequityincaseswherethereisavacuuminthelawcreatedbythe
subsequentdeclarationofnullitybytheCourt.Inthoseinstanceswheretheoperative
factsdoctrinewasused(i.e.,debtmoratorium
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cases),theunravelingoftheeffectsofthedeclarationofunconstitutionalityresorted
to a dearth in the law and the need for the courts to provide guidance as to its
retroactiveapplication.Inthiscase,nosuchvacuumexists,asinfacttheCARL
itselfprovidesfortheultimateconsequencewhenastockdistributionplanor
option is eventually invalidateddirect land distribution. The Court therefore
neednotexerciseitsequityjurisdiction.
MOTIONforClarificationandPartialReconsiderationofadecisionofthe
SupremeCourt;MOTIONforPartialReconsiderationofadecisionof
theSupremeCourt;andMOTIONSforReconsiderationofadecision
oftheSupremeCourt.
ThefactsarestatedintheresolutionoftheCourt.
GenerE.Asuncion,AntonioA.Merelos andMariaEstelitaB.Arles
forpetitioner.
JorgeCesarM.Sandiegoforpetitionerintervenor.
RomeoT.Capulong,RachelF.Pastores,AmylynB.SatoandSandra
Jill S. Santos lead counsel for respondent R. Galang and collaborating
counselforrespondentAMBALA.
JorbertIlardePahilgaandDavidD.ErroforrespondentAMBALA
andReneGalang.
CarmelitoM.SantoyoforAlyansangmgaManggagawangBukidng
Hacienda Luisita/Noel Mallari/United Luisita Workers/Eldifonso
Pingol/Supervisory Group of the Hacienda Luisita, Inc. and Windsor
Andaya.
ChristianS.Monsod,MarlonJ.Manuel,MagistradoA.Mendoza,Jr.,
JoevenD.Dellosa,EdgarDL.Bernal and MaryClaireA.Demaisip for
FarmPeaceFoundation,Inc.
AnacletoM.Diaz and MariaRosarioZ.DelRosario collaborating
counselforpetitionerintervenorRCBC.
Mario Luza Bautista and Brigitte M. Da Costa for petitioner
intervenorLuisitaIndustrialParkCorporation.
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HaciendaLuisita,
Incorporatedvs.
PresidentialAgrarian
ReformCouncil
RESOLUTION
VELASCO,JR.,J.:
For resolution are the (1) Motion for Clarification and Partial
ReconsiderationdatedJuly21,2011filedbypetitionerHaciendaLuisita,
Inc.(HLI);(2) MotionforPartialReconsideration datedJuly20,2011
filedbypublicrespondentsPresidentialAgrarianReformCouncil(PARC)
and Department of Agrarian Reform (DAR); (3) Motion for
Reconsideration datedJuly19,2011filedbyprivaterespondentAlyansa
ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4)
Motion for Reconsideration dated July 21, 2011 filed by respondent
intervenorFarmworkersAgrarianReformMovement,Inc.(FARM);(5)
Motion for Reconsideration dated July 21, 2011 filed by private
respondentsNoelMallari,JulioSuniga,SupervisoryGroupofHacienda
Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively
referredtoasMallari,etal.);and(6)MotionforReconsiderationdated
July22,2011filedbyprivaterespondentsReneGalangandAMBALA.2
On July 5, 2011, this Court promulgated a Decision 3 in the above
captioned case, denying the petition filed by HLI and affirming
PresidentialAgrarianReformCouncil(PARC)ResolutionNo.20053201
datedDecember22,2005andPARCResolutionNo.20063401dated
May 3, 2006 with the modification that the original 6,296 qualified
farmworkerbeneficiaries of Hacienda Luisita (FWBs) shall have the
optiontoremainasstockholdersofHLI.
_______________
2TheMotionforReconsiderationdatedJuly22,2011wasfiledbyprivaterespondents
ReneGalangandAMBALA,throughAtty.RomeoT.CapulongofthePublicInterestLaw
Center,asleadcounselforReneGalangandascollaboratingcounselofAtty.JobertPahilga
ofSENTRAforAMBALA.
3G.R.No.171101,July5,2011;hereinafterreferredtoasJuly5,2011Decision.
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HaciendaLuisita,Incorporatedvs.PresidentialAgrarianReform
Council
InitsMotionforClarificationandPartialReconsiderationdatedJuly
21,2011,HLIraisesthefollowingissuesforOurconsideration:
A
ITISNOTPROPER,EITHERINLAWORINEQUITY,TODISTRIBUTETO
THEORIGINALFWBsOF6,296THEUNSPENTORUNUSEDBALANCEOF
THE PROCEEDS OF THE SALE OF THE 500 HECTARES AND 80.51
HECTARESOFTHEHLILAND,BECAUSE:
(1)THEPROCEEDSOFTHESALEBELONGTOTHECORPORATION,HLI,
AS CORPORATE CAPITAL AND ASSETS IN SUBSTITUTION FOR THE
PORTIONSOFITSLANDASSETWHICHWERESOLDTOTHIRDPARTY;
(2)TODISTRIBUTETHECASHSALESPROCEEDSOFTHEPORTIONSOF
THELANDASSETTOTHEFWBs,WHOARESTOCKHOLDERSOFHLI,IS
TODISSOLVETHECORPORATIONANDDISTRIBUTETHEPROCEEDSAS
LIQUIDATINGDIVIDENDSWITHOUTEVENPAYINGTHECREDITORSOF
THECORPORATION;
(3)THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT
PROVISIONSOFTHECORPORATIONCODEANDCORPORATEPRACTICE.
B
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE
PAYMENTOFJUSTCOMPENSATIONFROMNOVEMBER21,1989WHEN
THE PARC, THEN UNDER THE CHAIRMANSHIP OF DAR SECRETARY
MIRIAMDEFENSORSANTIAGO,APPROVEDTHESTOCKDISTRIBUTION
PLAN(SDP)PROPOSEDBYTADECO/HLI,BECAUSE:
(1)THATPARCRESOLUTIONNO.89122DATEDNOVEMBER21,1989
WAS NOT THE ACTUAL TAKING OF THE TADECOs/HLIs
AGRICULTURALLAND;
(2)THERECALLORREVOCATIONUNDERRESOLUTIONNO.20053201
OFTHATSDPBYTHENEWPARCUNDERTHECHAIRMANSHIPOFDAR
SECRETARYNASSERPANGANDA
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ReformCouncil
MANONDECEMBER22,2005OR16YEARSEARLIERWHENTHESDPWAS
APPROVEDDIDNOTRESULTINACTUALTAKINGONNOVEMBER21,
1989;
(3)TOPAYTHEJUSTCOMPENSATIONASOFNOVEMBER21,1989OR22
YEARS BACK WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE,
CONSIDERINGTHEIMPROVEMENTS,EXPENSESINTHEMAINTENANCE
AND PRESERVATION OF THE LAND, AND RISE IN LAND PRICES OR
VALUEOFTHEPROPERTY.
Ontheotherhand,PARCandDAR,throughtheOfficeoftheSolicitor
General (OSG), raise the following issues in their Motion for Partial
ReconsiderationdatedJuly20,2011:
THEDOCTRINEOFOPERATIVEFACTDOESNOTAPPLYTOTHISCASE
FORTHEFOLLOWINGREASONS:
I
THEREISNOLAWORRULEWHICHHASBEENINVALIDATEDONTHE
GROUNDOFUNCONSTITUTIONALITY;AND
II
THISDOCTRINEISARULEOFEQUITYWHICHMAYBEAPPLIEDONLY
INTHEABSENCEOFALAW.INTHISCASE,THEREISAPOSITIVELAW
WHICHMANDATESTHEDISTRIBUTIONOFTHELANDASARESULTOF
THEREVOCATIONOFTHESTOCKDISTRIBUTIONPLAN(SDP).
Foritspart,AMBALAposesthefollowingissuesinits Motionfor
ReconsiderationdatedJuly19,2011:
I
THEMAJORITYOFTHEMEMBERSOFTHEHONORABLECOURT,WITH
DUERESPECT,ERREDINHOLDINGTHATSECTION31OFREPUBLICACT
6657(RA6657)ISCONSTITUTIONAL.
II
DUERESPECT,ERREDINHOLDINGTHAT
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ONLY THE [PARCS] APPROVAL OF HLIs PROPOSAL FOR STOCK

DISTRIBUTIONUNDERCARPANDTHE[SDP]WEREREVOKEDANDNOT
THESTOCKDISTRIBUTIONOPTIONAGREEMENT(SDOA).
III
DUE RESPECT, ERRED IN APPLYING THE DOCTRINE OF OPERATIVE
FACTSANDINMAKINGTHE[FWBs]CHOOSETOOPTFORACTUALLAND
DISTRIBUTIONORTOREMAINASSTOCKHOLDERSOF[HLI].
IV
DUERESPECT,ERREDINHOLDINGTHATIMPROVINGTHEECONOMIC
STATUS OF FWBs IS NOT AMONG THE LEGAL OBLIGATIONS OF HLI
UNDERTHESDPANDANIMPERATIVEIMPOSITIONBY[RA6657]AND
DEPARTMENTOFAGRARIANREFORMADMINISTRATIVEORDERNO.10
(DAO10).
V
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING
THAT THE CONVERSION OF THE AGRICULTURAL LANDS DID NOT
VIOLATETHECONDITIONSOFRA6657ANDDAO10.
VI
THATPETITIONERISENTITLEDTOPAYMENTOFJUSTCOMPENSATION.
SHOULDTHEHONORABLECOURTAFFIRMTHEENTITLEMENTOFTHE
PETITIONERTOJUSTCOMPENSATION,THESAMESHOULDBEPEGGED
TOFORTYTHOUSANDPESOS(PhP40,000.00)PERHECTARE.
VII
THAT LUISITA INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL
COMMERCIAL BANKING CORPORATION (RCBC) ARE INNOCENT
PURCHASERSFORVALUE.
539
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HaciendaLuisita,
Incorporatedvs.
ReformCouncil
InitsMotionforReconsiderationdatedJuly21,2011,FARMsimilarly
putsforththefollowingissues:
I
THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN
SECTION 31 OF [RA 6657] FOR BEING UNCONSTITUTIONAL. THE
CONSTITUTIONALITYISSUETHATWASRAISEDBYTHERESPONDENTS
INTERVENORSISTHELISMOTAOFTHECASE.
II
THEHONORABLESUPREMECOURTSHOULDNOTHAVEAPPLIEDTHE
DOCTRINEOFOPERATIVEFACTTOTHECASE.THEOPTIONGIVENTO
THEFARMERSTOREMAINASSTOCKHOLDERSOFHACIENDALUISITA
IS EQUIVALENT TO AN OPTION FOR HACIENDA LUISITA TO RETAIN
LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE AGRARIAN
REFORMLAW.THEDECEPTIVESTOCKDISTRIBUTIONOPTION/STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, ESPECIALLY
AFTERTHESUPREMECOURTHASAFFIRMEDITSREVOCATION.
III
THEHONORABLESUPREMECOURTSHOULDNOTHAVECONSIDERED
[LIPCO] AND [RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE
INSTANTCASE.
Mallari, etal.,ontheotherhand, advancethefollowinggroundsin

supportoftheirMotionforReconsiderationdatedJuly21,2011:
(1) THEHOMELOTSREQUIREDTOBEDISTRIBUTEDHAVEALLBEEN
DISTRIBUTED PURSUANT TO THE MEMORANDUM OF AGREEMENT.
WHAT REMAINS MERELY IS THE RELEASE OF TITLE FROM THE
REGISTEROFDEEDS.
(2)THEREHASBEENNODILUTIONOFSHARES.CORPORATERECORDS
WOULDSHOWTHATIFEVERNOTALLOFTHE18,804.32SHARESWERE
GIVENTOTHE ACTUAL ORIGINAL FARMWORKER BENEFICIARY, THE
RECIPIENTOFTHEDIFFERENCEISTHENEXTOFKINORCHILDRENOF
SAID
540
540
ORIGINAL[FWBs].HENCE,WERESPECTFULLYSUBMITTHATSINCETHE
SHARES WERE GIVEN TO THE SAME FAMILY BENEFICIARY, THIS
SHOULD BE DEEMED AS SUBSTANTIAL COMPLIANCE WITH THE
PROVISIONSOFSECTION4OFDAO10.
(3) THERE HAS BEEN NO VIOLATION OF THE 3MONTH PERIOD TO
IMPLEMENTTHE[SDP]ASPROVIDEDFORBYSECTION11OFDAO10AS
THIS PROVISION MUST BE READ IN LIGHT OF SECTION 10 OF
EXECUTIVE ORDER NO. 229, THE PERTINENT PORTION OF WHICH
READS,THEAPPROVALBYTHEPARCOFAPLANFORSUCHSTOCK
DISTRIBUTION,ANDITSINITIALIMPLEMENTATION,SHALLBEDEEMED
COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE
CARP.
(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF
NOVEMBER 21, 1989, THE DATE OF APPROVAL OF THE STOCK
DISTRIBUTION OPTION. INSTEAD, WE RESPECTFULLY SUBMIT THAT
THE TIME OF TAKING FOR VALUATION PURPOSES IS A FACTUAL
ISSUEBESTLEFTFORTHETRIALCOURTSTODECIDE.
(5) TOTHOSEWHOWILLCHOOSELAND,THEYMUSTRETURNWHAT
WASGIVENTOTHEMUNDERTHESDP.ITWOULDBEUNFAIRIFTHEY
AREALLOWEDTOGETTHELANDANDATTHESAMETIMEHOLDONTO
THEBENEFITSTHEYRECEIVEDPURSUANTTOTHESDPINTHESAME
WAYASTHOSEWHOWILLCHOOSETOSTAYWITHTHESDO.
Lastly,ReneGalangandAMBALA,throughthePublicInterestLaw
Center(PILC),submitthefollowinggroundsinsupportoftheir Motion
forReconsiderationdatedJuly22,2011:
I
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN
ORDERINGTHEHOLDINGOFAVOTINGOPTIONINSTEADOFTOTALLY
REDISTRIBUTINGTHESUBJECTLANDSTO[FWBs]in[HLI].
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A.THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE
REVOCATIONOFTHE[SDP]CARRIESWITHITTHEREVOCATIONOFTHE
[SDOA].
B.GIVINGTHE[FWBs]THEOPTIONTOREMAINASSTOCKHOLDERSOF
HLIWITHOUTMAKINGTHENECESSARYCHANGESINTHECORPORATE
STRUCTURE WOULD ONLY SUBJECT THEM TO FURTHER
MANIPULATIONANDHARDSHIP.
C.OTHERVIOLATIONSCOMMITTEDBYHLIUNDERTHE[SDOA]AND
PERTINENT LAWS JUSTIFY TOTAL LAND REDISTRIBUTION OF
HACIENDALUISITA.
II
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN
HOLDINGTHATTHE[RCBC]AND[LIPCO]AREINNOCENTPURCHASERS
FOR VALUE OF THE 300HECTARE PROPERTY IN HACIENDA LUISITA
THATWASSOLDTOTHEMPRIORTOTHEINCEPTIONOFTHEPRESENT
CONTROVERSY.
Ultimately, the issues for Our consideration are the following: (1)
applicabilityoftheoperativefactdoctrine;(2)constitutionalityofSec.31
of RA 6657 or the Comprehensive Agrarian Reform Law of 1988; (3)
coverage of compulsory acquisition; (4) just compensation; (5) sale to
thirdparties;(6)theviolationsofHLI;and(7)controloveragricultural
lands.
Weshalldiscusstheseissuesaccordingly.
I.ApplicabilityoftheOperativeFactDoctrine
Intheirmotionforpartialreconsideration,DARandPARCarguethat
thedoctrineofoperativefactdoesnotapplytotheinstantcasesince:(1)
there is no law or rule which has been invalidated on the ground of
unconstitutionality;4 (2)thedoctrineofoperativefactisaruleofequity
whichmaybeappliedonlyintheabsenceofalaw,andinthiscase,they
maintainthatthereisapositivelawwhichmandatesthedistribution
_______________
4PARC/DARMotionforReconsideration(MR),p.7.
542
542
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of the land as a result of the revocation of the stock distribution plan
(SDP).5
EchoingthestanceofDARandPARC,AMBALAsubmitsthatthe
operativefactdoctrineshouldonlybemadetoapplyintheextremecasein
whichequitydemandsit,whichallegedlyisnotintheinstantcase. 6 It
furtherarguesthattherewouldbenoundueharshnessorinjurytoHLIin
caselandsareactuallydistributedtothefarmworkers,andthatthedecision
whichordersthefarmworkerstochoosewhethertoremainasstockholders
ofHLIortooptforlanddistributionwouldresultininequityandprejudice
to the farmworkers.7 The foregoing views are also similarly shared by
ReneGalangandAMBALA,throughthePILC.8Inaddition,FARMposits
thattheoptiongiventotheFWBsisequivalenttoanoptionforHLIto
retainlandindirectviolationofRA6657.9
(a)OperativeFactDoctrineNotLimitedto
InvalidorUnconstitutionalLaws
Contrarytothestanceofrespondents,theoperativefactdoctrinedoes
notonlyapplytolawssubsequentlydeclaredunconstitutionalorunlawful,
asitalsoappliestoexecutiveactssubsequentlydeclaredasinvalid.AsWe
havediscussedinOurJuly5,2011Decision:
Thattheoperativefactdoctrinesquarelyappliestoexecutiveactsinthiscase,
theapprovalbyPARCoftheHLIproposalforstockdistributioniswellsettledin
ourjurisprudence.InChavezv.NationalHousingAuthority,Weheld:
Petitionerpostulatesthattheoperativefactdoctrineisinapplicabletothe
presentcasebecauseitisanequitabledoc
_______________
5PARC/DARMR,p.16.
6AMBALAMR,p.51.
7AMBALAMR,pp.5560.
8ReneGalangandAMBALAMR,pp.1113.
9FARMMR,p.47.
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trinewhich could not be used tocountenance aninequitable resultthat is
contrarytoitsproperoffice.
Ontheotherhand,thepetitionerSolicitorGeneralarguesthattheexistence
ofthevariousagreementsimplementingtheSMDRPisanoperativefactthat
cannolongerbedisturbedorsimplyignored,citing Rietav.Peopleofthe
Philippines.
TheargumentoftheSolicitorGeneralismeritorious.
The operative fact doctrine is embodied in De Agbayani v. Court of
Appeals,whereinitisstatedthatalegislativeor executiveact,priortoits
beingdeclaredasunconstitutionalbythecourts,isvalidandmustbecomplied
with,thus:
xxxxxxxxx
Thisdoctrinewasreiteratedinthemorerecentcaseof CityofMakativ.
CivilServiceCommission,whereinweruledthat:
Moreover, we certainly cannot nullify the City Governments order of
suspension,aswehavenoreasontodoso,muchlessretroactivelyapplysuch
nullificationtodepriveprivaterespondentofacompellingandvalidreason
fornotfilingtheleaveapplication.Foraswehaveheld,avoidactthoughin
lawamerescrapofpapernonethelessconferslegitimacyuponpastacts
or omissions done in reliance thereof. Consequently, the existence of a
statuteorexecutiveorderpriortoitsbeingadjudgedvoidisanoperativefact
towhichlegalconsequencesareattached.Itwouldindeedbeghastlyunfairto
preventprivaterespondentfromrelyingupontheorderofsuspensioninlieu
ofaformalleaveapplication.
The applicability of the operative fact doctrine to executive acts was further
explicatedbythisCourtinRietav.People,thus:
PetitionercontendsthathisarrestbyvirtueofArrestSearchandSeizure
Order(ASSO)No.4754wasinvalid,asthelawuponwhichitwaspredicated
GeneralOrderNo.60,issuedbythenPresidentFerdinandE.Marcoswas
subsequentlydeclaredbytheCourt,inTaadav.Tuvera,33tohavenoforce
and effect. Thus, he asserts, any evidence obtained pursuant thereto is

inadmissibleinevidence.
544
544
We do not agree. In Taada, the Court addressed the possible effects of its
declarationoftheinvalidityofvariouspresidentialissuances.Discussingthereinhow
suchadeclarationmightaffectactsdoneonapresumptionoftheirvalidity,theCourt
said:
....InsimilarsituationsinthepastthisCourthadtakenthepragmatic
andrealisticcoursesetforthin ChicotCountyDrainageDistrictvs.Baxter
Banktowit:
ThecourtsbelowhaveproceededonthetheorythattheActofCongress,
having been found to be unconstitutional, was not a law; that it was
inoperative,conferringnorightsandimposingnoduties,andhenceaffording
nobasisforthechallengeddecree....Itisquiteclear,however,thatsuch
broadstatementsastotheeffectofadeterminationofunconstitutionalitymust
betakenwithqualifications.Theactualexistenceofastatute,priorto[the
determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be
erasedbyanewjudicialdeclaration.Theeffectofthesubsequentrulingasto
invalidity may have to be considered in various aspectswith respect to
particularconduct,privateandofficial.Questionsofrightsclaimedtohave
becomevested,ofstatus,ofpriordeterminationsdeemedtohavefinalityand
acteduponaccordingly,ofpublicpolicyinthelightofthenaturebothofthe
statuteandofitspreviousapplication,demandexamination.Thesequestions
areamongthemostdifficultofthosewhichhaveengagedtheattentionof
courts,stateandfederal,anditismanifestfromnumerousdecisionsthatan
allinclusivestatementofaprincipleofabsoluteretroactiveinvaliditycannot
bejustified.
xxxxxxxxx
Similarly,theimplementation/enforcementofpresidentialdecreespriorto
theirpublicationintheOfficialGazetteisanoperativefactwhichmayhave
consequences which cannot be justly ignored. The past cannot always be
erasedbyanewjudicialdeclaration...that
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an allinclusive statement of a principle of absolute retroactive invalidity
cannotbejustified.
TheChicotdoctrinecitedinTaadaadvocatesthat,priortothenullificationofa
statute,thereisanimperativenecessityoftakingintoaccountitsactualexistenceas
an operative fact negating the acceptance of a principle of absolute retroactive
invalidity.Whatever wasdonewhilethelegislativeorthe executiveact wasin
operationshouldbedulyrecognizedandpresumedtobevalidinallrespects. The
ASSOthatwasissuedin1979underGeneralOrderNo.60longbeforeour
DecisioninTaadaandthearrestofpetitionerisanoperativefactthatcanno
longer be disturbed or simply ignored. (Citations omitted; emphasis in the
original.)
BearinginmindthatPARCResolutionNo.8912210anexecutive
actwasdeclaredinvalidintheinstantcase,theoperativefactdoctrineis
clearlyapplicable.
Nonetheless,theminorityisofthepersistentviewthattheapplicability
oftheoperativefactdoctrineshouldbelimitedtostatutesandrulesand
regulationsissuedbytheexecutivedepartmentthatareaccordedthesame
statusasthatofastatuteorthosewhicharequasilegislativeinnature.
Thus,theminorityconcludesthatthephraseexecutiveactusedinthe
caseof DeAgbayaniv.PhilippineNationalBank11 refersonlytoacts,
orders,andrulesandregulationsthathavetheforceandeffectoflaw.The
minorityalsomadementionoftheConcurringOpinionofJusticeEnrique
Fernando in Municipality of Malabang v. Benito,12 where it was
supposedly made explicit that the operative fact doctrine applies to
executiveacts,whichareultimatelyquasilegislativeinnature.
_______________
10Under PARC Resolution No. 89122 dated November 21, 1989, then Secretary
Miriam DefensorSantiago approved the SDP of HLI/Tarlac Development Corporation
(Tadeco).
11G.R.No.L23127,April29,1971,38SCRA429.
12G.R.No.L28113,March28,1969,27SCRA533.
546
546
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We disagree. For one, neither the De Agbayani case nor the
Municipality of Malabang case elaborates what executive act mean.
Moreover,whileorders,rulesandregulationsissuedbythePresidentor
the executive branch have fixed definitions and meaning in the
AdministrativeCodeandjurisprudence,thephraseexecutiveactdoes
nothavesuchspecificdefinitionunderexistinglaws.Itshouldbenoted
thatinthecasescitedbytheminority,nowherecanitbefoundthatthe
term executive act is confined to the foregoing. Contrarily, the term
executiveactisbroadenoughtoencompassdecisionsofadministrative
bodies and agencies under the executive department which are
subsequentlyrevokedbytheagencyinquestionornullifiedbytheCourt.
AcaseinpointistheconcurrentappointmentofMagdangalB.Elma
(Elma)asChairmanofthePresidentialCommissiononGoodGovernment
(PCGG) and as Chief Presidential Legal Counsel (CPLC) which was
declaredunconstitutionalbythisCourtin PublicInterestCenter,Inc.v.
Elma.13 Insaidcase,thisCourtruledthattheconcurrentappointmentof
ElmatotheseofficesisinviolationofSection7,par.2,ArticleIXBof
the1987Constitution,sincetheseareincompatibleoffices.Notably,the
appointmentofElmaasChairmanofthePCGGandasCPLCis,withouta
question,anexecutiveact.Priortothedeclarationofunconstitutionalityof
thesaidexecutiveact,certainactsortransactionsweremadeingoodfaith
andinrelianceoftheappointmentofElmawhichcannotjustbesetaside
orinvalidatedbyitssubsequentinvalidation.
InTanv.Barrios,14thisCourt,inapplyingtheoperativefactdoctrine,
heldthatdespitetheinvalidityofthejurisdictionofthemilitarycourts
over civilians, certain operative facts must be acknowledged to have
existed so as not to trample upon the rights of the accused therein.
Relevantthereto,
_______________
13G.R.No.138965,June30,2006,494SCRA53.
14G.R.Nos.8548182,October18,1990,190SCRA686.
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in Olaguerv.MilitaryCommissionNo.34,15 itwasruledthatmilitary
tribunalspertaintotheExecutiveDepartmentoftheGovernmentandare
simply instrumentalities of the executive power, provided by the
legislatureforthePresidentasCommanderinChieftoaidhiminproperly
commanding the army and navy and enforcing discipline therein, and
utilized under his orders or those of his authorized military
representatives.16
Evidently,theoperativefactdoctrineisnotconfinedtostatutesand
rulesandregulationsissuedbytheexecutivedepartmentthatareaccorded
thesamestatusasthatofastatuteorthosewhicharequasilegislativein
nature.
Evenassumingthat DeAgbayani initiallyappliedtheoperativefact
doctrineonlytoexecutiveissuanceslikeordersandrulesandregulations,
saidprinciplecannonethelessbeapplied,byanalogy,todecisionsmade
by the President or the agencies under the executive department. This
doctrine,intheinterestofjusticeandequity,canbeappliedliberallyand
inabroadsensetoencompasssaiddecisionsoftheexecutivebranch.In
keepingwiththedemandsofequity,theCourtcanapplytheoperativefact
doctrinetoactsandconsequencesthatresultedfromthereliancenotonly
onalaworexecutiveactwhichisquasilegislativeinnaturebutalsoon
decisionsorordersoftheexecutivebranchwhichwerelaternullified.This
Court is not unmindful that such acts and consequences must be
recognizedinthehigherinterestofjustice,equityandfairness.
Significantly,adecisionmadebythePresidentortheadministrative
agencieshastobecompliedwithbecauseithastheforceandeffectoflaw,
springing from the powers of the President under the Constitution and
existinglaws.Priortothenullificationorrecallofsaiddecision,itmay
havepro
_______________
15G.R.Nos.L54558andL69882,May22,1987,150SCRA144.
16Id.,atp.159.
548
548
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duced acts and consequences in conformity to and in reliance of said
decision,whichmustberespected.Itisonthisscorethattheoperativefact
doctrineshouldbeappliedtoactsandconsequencesthatresultedfromthe
implementationofthePARCResolutionapprovingtheSDPofHLI.
Moreimportantly,respondents,andeventheminority,failedtoclearly
explainhowtheoptiontoremaininHLIgrantedtoindividualfarmers
would result in inequity and prejudice. We can only surmise that
respondentsmisinterpretedtheoptionasareferendumwherealltheFWBs
willbeboundbyamajorityvotefavoringtheretentionofallthe6,296
FWBs as HLI stockholders. Respondents are definitely mistaken. The
fallo ofOurJuly5,2011DecisionisunequivocalthatonlythoseFWBs
whosignifiedtheirdesiretoremainasHLIstockholdersareentitledto
18,804.32 shares each, while those who opted not to remain as HLI
stockholders will be given land by DAR. Thus, referendum was not
requiredbutonlyindividualoptionsweregrantedtoeachFWBwhetheror
nottheywillremaininHLI.
The application of the operative fact doctrine to the FWBs is not
iniquitousandprejudicialtotheirinterestsbutisactuallybeneficialand
fair to them. First, they are granted the right to remain in HLI as
stockholdersandtheyacquiredsaidshareswithoutpayingtheirvalueto
thecorporation.Ontheotherhand,thequalifiedFWBsarerequiredtopay
thevalueofthelandtotheLandBankofthePhilippines(LBP)iflandis
awardedtothembyDARpursuanttoRA6657.IfthequalifiedFWBs
reallywantagriculturalland,thentheycansimplysaynototheoption.
Andsecond,iftheoperativefactdoctrineisnotappliedtothem,thenthe
FWBswillberequiredtoreturntoHLIthe3%productionshare,the3%
shareintheproceedsofthesaleofthe500hectareconvertedland,andthe
80.51hectareSubicClarkTarlacExpressway(SCTEX)lot,thehomelots
andotherbenefitsreceivedbytheFWBsfromHLI.Withtheapplication
of the operative fact doctrine, said benefits, homelots and the 3%
productionshareand3%share
549
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fromthesaleofthe500hectareandSCTEXlotsshallberespectedwith
noobligationtorefundorreturnthem.Thereceiptofthesethingsisan
operativefactthatcannolongerbedisturbedorsimplyignored.
(b)TheOperativeFactDoctrineasRecoursein
Equity
As mentioned above, respondents contend that the operative fact
doctrineisaruleofequitywhichmaybeappliedonlyintheabsenceofa
law,andthatintheinstantcase,thereisapositivelawwhichmandatesthe
distributionofthelandasaresultoftherevocationoftheSDP.
Undeniably, the operative fact doctrine is a rule of equity.17 As a
complement of legal jurisdiction, equity seeks to reach and complete
justicewherecourtsoflaw,throughtheinflexibilityoftheirrulesandwant
ofpowertoadapttheirjudgmentstothespecialcircumstancesofcases,
areincompetenttodoso.Equityregardsthespiritandnottheletter,the
intentandnottheform,thesubstanceratherthanthecircumstance,asitis
variouslyexpressedbydifferentcourts.18Remarkably,itisappliedonly
intheabsenceofstatutorylawandneverincontraventionofsaidlaw.19
Intheinstantcase,respondentsarguethattheoperativefactdoctrine
shouldnotbeappliedsincethereisapositivelaw,particularly,Sec.31of
RA6657,whichdirectsthedistri
_______________
17LeagueofCitiesofthePhils.v.CommissiononElections,G.R.Nos.176951,177499
and178056,August24,2010,628SCRA819,833.
18LCKIndustries,Inc.v.PlantersDevelopmentBank,G.R.No.170606,November23,
2007,538SCRA634,652;citedinLandBankofthePhilippinesv.Ong,G.R.No.190755,
November24,2010,636SCRA266,280.
19Brito,Sr.v.Dianala,G.R.No.171717,December15,2010,638SCRA529.
550
550
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butionofthelandasaresultoftherevocationoftheSDP.Pertinently,the
lastparagraphofSec.31ofRA6657states:
Ifwithintwo(2)yearsfromtheapprovalofthisAct,thelandorstocktransfer
envisioned above is not made or realized or the plan for such stock distribution
approvedbythePARCwithinthesameperiod,theagriculturallandofthecorporate
owners or corporation shall be subject to the compulsory coverage of this Act.
(Emphasissupplied.)
Markedly,theuseofthewordorunderthelastparagraphofSec.31
of RA 6657 connotes that the law gives the corporate landowner an
option to avail of the stock distribution option or to have the SDP
approved within two (2) years from the approval of RA 6657. This
interpretationisconsistentwiththewellestablishedprincipleinstatutory
construction that [t]he word or is a disjunctive term signifying
disassociation and independence of one thing from the other things
enumerated;itshould, asarule, beconstrued inthe sensein which it
ordinarilyimplies,asadisjunctiveword.20InPCILeasingandFinance,
Inc.v.GiraffeXCreativeImaging,Inc.,21thisCourtheld:
Evidently,theletterdidnotmakeademandforthepaymentoftheP8,248,657.47
AND thereturnof theequipment;onlyeither one of thetwowasrequired.The
demandletterwaspreparedandsignedbyAtty.FlorecitaR.Gonzales,presumably
petitionerscounsel.Assuch,theuseof or insteadof and inthelettercould
hardlybetreatedasasimpletypographicalerror,bearinginmindthenatureofthe
demand,theamountinvolved,andthefactthatitwasmadebyalawyer.Certainly
Atty.Gonzaleswouldhaveknownthataworldofdifferenceexistsbetweenand
andorinthemannerthatthewordwasemployedintheletter.
_______________
20Saludagav.Sandiganbayan,G.R.No.184537,April23,2010,619SCRA364,374;citing
Agpalo,StatutoryConstruction,2003p.204andTheHeirsofGeorgePoev.MalayanInsurance
Company,Inc.,G.R.No.156302,April7,2009,584SCRA152.
21G.R.No.142618,July12,2007,527SCRA405,422.
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Aruleinstatutoryconstructionisthatthewordorisadisjunctiveterm
signifying dissociation and independence of one thing from other things
enumeratedunlessthecontextrequiresadifferentinterpretation.22
In its elementary sense, or, as used in a statute, is a disjunctive
articleindicatinganalternative.Itoftenconnectsaseriesofwordsor
propositionsindicatingachoiceofeither.Whenorisused,thevarious
membersoftheenumerationaretobetakenseparately.23
The word or is a disjunctive term signifying disassociation and
independence of one thing from each of the other things enumerated. 24
(Emphasisintheoriginal.)
GiventhatHLIsecuredapprovalofitsSDPinNovember1989,well
withinthetwoyearperiodreckonedfromJune1988whenRA6657took
effect,thenHLIdidnotviolatethelastparagraphofSec.31ofRA6657.
Pertinently,saidprovisiondoesnotbarUsfromapplyingtheoperative
factdoctrine.
Besides,itshouldberecognizedthatthisCourt,initsJuly5,2011
Decision,affirmedtherevocationofResolutionNo.89122andruledfor
thecompulsorycoverageoftheagriculturallandsofHaciendaLuisitain
view of HLIs violation of the SDP and DAO 10. By applying the
operativefactdoctrine,thisCourtmerelygavethequalifiedFWBsthe
optiontoremainasstockholdersofHLIandruledthattheywillretainthe
homelotsandotherbenefitswhichtheyreceivedfromHLIbyvirtueofthe
SDP.
Itbearsstressingthattheapplicationoftheoperativefactdoctrineby
theCourtinitsJuly5,2011Decisionisfavorable
_______________
22CitingPimentelv.CommissiononElections,G.R.No.126394,April24,1998,289
SCRA586,597.
23Citing Centeno v. VillalonPornillos, G.R. No. 113092, September 1, 1994, 236
SCRA197,206.
24CitingCastilloCov.Barbers,G.R.No.129952,June16,1998,290SCRA717,723.
552
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to the FWBs because not only were the FWBs allowed to retain the
benefitsandhomelotstheyreceivedunderthestockdistributionscheme,
theywerealsogiventheoptiontochooseforthemselveswhetherthey
wanttoremainasstockholdersofHLIornot.Thisisinrecognitionofthe
factthatdespitetheclaimsofcertainfarmergroupsthattheyrepresentthe
qualifiedFWBsinHaciendaLuisita,noneofthemcanshowthattheyare
dulyauthorizedtospeakontheirbehalf.AsWehavementioned,Todate,
suchauthorizationdocument,whichwouldlogicallyincludealistofthe
namesoftheauthorizingFWBs,hasyettobesubmittedtobepartofthe
records.
II.ConstitutionalityofSec.31,RA6657
FARMinsiststhattheissueofconstitutionalityofSec.31ofRA6657
isthelismotaofthecase,raisedattheearliestopportunity,andnottobe
consideredasmootandacademic.25
Thiscontentionisunmeritorious.AsWehavesuccinctlydiscussedin
OurJuly5,2011Decision:
Whilethereisindeedanactualcaseorcontroversy,intervenorFARM,composed
ofasmall minorityof 27farmers,hasyettoexplainitsfailuretochallengethe
constitutionalityofSec.3lofRA6657,sinceasearlyasNovember21,l989when
PARCapprovedtheSDPofHaciendaLuisitaoratleastwithinareasonabletime
thereafterandwhyitsmembersreceivedbenefitsfromtheSDPwithoutsomuchofa
protest.ItwasonlyonDecember4,2003or14yearsafterapprovaloftheSDPvia
PARC Resolution No. 89122 dated November 21, 1989 that said plan and
approvingresolutionweresoughttoberevoked,butnot,tostress,byFARMorany
ofitsmembers,butbypetitionerAMBALA.Furthermore,theAMBALApetitiondid
NOTquestiontheconstitutionalityofSec.31ofRA6657,butconcentratedonthe
purportedflawsandgapsinthesubsequentimplementationoftheSDP.Eventhe
public respondents, as represented by the Solicitor General, did not question the
constitutionalityoftheprovision.Ontheotherhand,FARM,whose27members
_______________
25FARMMR,pp.611,3036.
553
VOL.660,
NOVEMBER22,2011
553
ReformCouncil
formerlybelongedtoAMBALA,raisedtheconstitutionalityofSec.31onlyonMay
3,2007whenitfileditsSupplementalCommentwiththeCourt.Thus,ittookFARM
some eighteen (18) years from November 21, 1989 before it challenged the
constitutionalityofSec.31ofRA6657whichisquitetoolateintheday.TheFARM
memberssleptontheirrightsandevenacceptedbenefitsfromtheSDPwithnarya
complaintontheallegedunconstitutionalityofSec.31uponwhichthebenefitswere
derived.TheCourtcannotnowbegoadedintoresolvingaconstitutionalissuethat
FARMfailedtoassailafterthelapseofalongperiodoftimeandtheoccurrenceof
numerouseventsandactivities whichresultedfromthe applicationof analleged
unconstitutionallegalprovision.
Ithasbeenemphasizedinanumberofcasesthatthequestionofconstitutionality
willnotbepasseduponbytheCourtunlessitisproperlyraisedandpresentedinan
appropriatecase at the first opportunity. FARM is, therefore, remiss inbelatedly
questioningtheconstitutionalityofSec.31ofRA6657.Thesecondrequirementthat
theconstitutional questionshouldberaisedattheearliestpossibleopportunityis
clearlywanting.
Thelastbutthemostimportantrequisitethattheconstitutionalissuemustbethe
verylismotaofthecasedoesnotlikewiseobtain.Thelismotaaspectisnotpresent,
theconstitutionalissuetenderednotbeingcriticaltotheresolutionofthecase.The
unyielding rule has been to avoid, whenever plausible, an issue assailing the
constitutionalityof astatuteor governmentalact.Ifsomeothergroundsexistby
whichjudgmentcanbemadewithouttouchingtheconstitutionalityofalaw,such
recourseisfavored.Garciav.ExecutiveSecretaryexplainswhy:
Lis Motathe fourth requirement to satisfy before this Court will
undertakejudicialreviewmeansthattheCourtwillnotpassuponaquestion
of unconstitutionality, although properly presented, if the case can be

disposedofonsomeotherground,suchastheapplicationofthestatuteorthe
general law.Thepetitioner must be able toshow that thecase cannot be
legallyresolvedunlesstheconstitutionalquestionraisedisdetermined.This
requirement is based on the rule that every law has in its favor the
presumptionofconstitutionality;tojustifyitsnullification,theremustbea
clearandunequivocalbreachoftheConstitution,andnotonethatisdoubtful,
speculative,orargumentative.
554
554
Thelismotainthiscase,proceedingfromthebasicpositionsoriginallytakenby
AMBALA(towhichtheFARMmemberspreviouslybelonged)andtheSupervisory
Group,is the alleged noncompliance by HLI with theconditions of the SDPto
supportapleaforitsrevocation.AndbeforetheCourt,thelismotaiswhetherornot
PARCactedingraveabuseofdiscretionwhenitorderedtherecalloftheSDPfor
suchnoncomplianceandthefactthattheSDP,ascouchedandimplemented,offends
certainconstitutionalandstatutoryprovisions.Tobesure,anyofthesekeyissues
mayberesolvedwithoutplungingintotheconstitutionalityofSec.31ofRA6657.
Moreover,lookingdeeplyintotheunderlyingpetitionsofAMBALA,etal.,itisnot
thesaidsectionpersethatisinvalid,butratheritistheallegedapplicationofthesaid
provisionintheSDPthatisflawed.
ItmaybewelltonoteatthisjuncturethatSec.5ofRA9700,amendingSec.7of
RA6657,hasallbutsupersededSec.31ofRA6657visvisthestockdistribution
componentofsaidSec.31.Initspertinentpart,Sec.5ofRA9700provides:[T]hat
afterJune30,2009,themodesofacquisitionshallbelimitedtovoluntaryoffer
tosellandcompulsoryacquisition.Thus,forallintentsandpurposes,thestock
distributionschemeunderSec.31ofRA6657isnolongeranavailableoptionunder
existinglaw.Thequestionofwhetherornotitisunconstitutionalshouldbeamoot
issue.(Citationsomitted;emphasisintheoriginal.)
Basedontheforegoingdisquisitions,WemaintainthatthisCourtis
NOTcompelledtoruleontheconstitutionalityofSec.31ofRA6657.In
thisregard,WeclarifythatthisCourt,initsJuly5,2011Decision,made
norulinginfavoroftheconstitutionalityofSec.31ofRA6657.There
was, however, a determination of the existence of an apparent grave
violationoftheConstitutionthatmayjustifytheresolutionoftheissueof
constitutionality, to which this Court ruled in the negative. Having
clarifiedthismatter,allotherpointsraisedbybothFARMandAMBALA
concerningtheconstitutionalityofRA6657deservescantconsideration.
555
VOL.660,
555
NOVEMBER22,
2011
HaciendaLuisita,
Incorporatedvs.
ReformCouncil
III.CoverageofCompulsoryAcquisition
FARMargues that this Court ignored certain material facts when it
limitedthemaximumareatobecoveredto4,915.75hectares,whereasthe
areathatshould,attheleast,becoveredis6,443hectares,26whichisthe
agriculturallandallegedlycoveredbyRA6657andpreviouslyheldby
TarlacDevelopmentCorporation(Tadeco).27
Wecannotsubscribetothisview.Sincewhatisputinissuebeforethe
CourtistheproprietyoftherevocationoftheSDP,whichonlyinvolves
4,915.75 has. of agricultural land and not 6,443 has., then We are
constrainedtoruleonlyasregardsthe4,915.75has.ofagriculturalland.
Moreover,asadmittedbyFARMitself,thisissuewasraisedforthe
firsttimebyFARMinitsMemorandumdatedSeptember24,2010filed
beforethisCourt.28 Inthisregard,itshouldbenotedthat[a]salegal
recourse, the special civil action of certiorari is a limited form of
review.29ThecertiorarijurisdictionofthisCourtisnarrowinscopeasit
is restricted to resolving errors of jurisdiction and grave abuse of
discretion,andnoterrorsofjudgment.30Toallowadditionalissuesatthis
stageoftheproceedingsisviolativeoffairplay,justiceanddueprocess.31
Nonetheless,itshouldbetakenintoaccountthatthisshouldnotprevent
theDAR,underitsmandateunderthe
_______________
26Id.,atp.52.
27Id.
28Id.
29Apostolv.CourtofAppeals,G.R.No.141854,October15,2008,569SCRA80,92;
citingAlmuetev.Andres,421Phil522,531;369SCRA619,628(2001).
30Id.;citingTolentinov.People,G.R.No.170396,August31,2006,500SCRA721,
724andSuyat,Jr.v.Torres,G.R.No.133530,October25,2004,441SCRA265,274275.
31SeeC.F.SharpCrewManagement,Inc.v.Espanol,Jr.,G.R.No.155903,September
14,2007,533SCRA424,438439.
556
556
Council
agrarianreformlaw,fromsubsequentlysubjectingtoagrarianreformother
agricultural lands originally held by Tadeco that were allegedly not
transferredtoHLIbutweresupposedlycoveredbyRA6657.
DAR, however, contends that the declaration of the area32 to be
awarded to each FWB is too restrictive. It stresses that in agricultural
landholdingslikeHaciendaLuisita,thereareroads,irrigationcanals,and
other portions of the land that are considered commonlyowned by
farmworkers,andthismaynecessarilyresultinthedecreaseofthearea
sizethatmaybeawardedperFWB.33 DARalsoarguesthattheJuly5,
2011DecisionofthisCourtdoesnotgiveitanyleewayinadjustingthe
areathatmaybeawardedperFWBincasethenumberofactualqualified
FWBsdecreases.34
Theargumentismeritorious.Inordertoensuretheproperdistribution
of the agricultural lands of Hacienda Luisita per qualified FWB, and
considering that matters involving strictly the administrative
implementationandenforcementofagrarianreformlawsarewithinthe
jurisdictionoftheDAR,35 itisthelatterwhichshalldeterminethearea
withwhicheachqualifiedFWBwillbeawarded.
(a)ConversionofAgriculturalLands
AMBALAinsiststhattheconversionoftheagriculturallandsviolated
theconditionsofRA6657andDAO10,statingthatkeepingtheland
intactandunfragmentedisoneoftheessentialconditionsof[the]SD[P],
RA6657andDAO10.36It
_______________
32WestatedinOurJuly5,2011DecisionthatifaqualifiedFWBwillchooseland
distribution, he or she will get 6,886.5 square meters of agricultural land in Hacienda
Luisita.
33DARMR,p.37.
34Id.
35SeeSorianov.Bravo,G.R.No.152086,December15,2010,638SCRA403,420.
36AMBALAMR,p.67.
557
VOL.660,
557
NOVEMBER22,
2011
HaciendaLuisita,
Incorporatedvs.
ReformCouncil
assertsthatthisprovisionorconditionalityisnotmeredecorationandis
intendedtoensurethatthefarmerscancontinuewiththetillageofthesoil
especiallysinceitistheonlyoccupationthatmajorityofthemknows.37
Wedisagree.AsWeamplydiscussedinOurJuly5,2011Decision:
Contrary to the almost parallel stance of the respondents, keeping Hacienda
LuisitaunfragmentedisalsonotamongtheimperativeimpositionsbytheSDP,RA
6657,andDAO10.
TheTerminalReportstatesthattheproposeddistributionplansubmittedin1989
tothePARCeffectivelyassuredtheintendedstockbeneficiariesthatthephysical
integrityofthefarmshallremaininviolate.Accordingly,theTerminalReportandthe
PARCassailed resolution would take HLI to task for securing approval of the
conversiontononagriculturalusesof500hectaresofthehacienda.Innottoomany
words,theReportandtheresolutionviewtheconversionasaninfringementofSec.
5(a)ofDAO10whichreads:a.thatthecontinuedoperationofthecorporationwith
itsagriculturallandintactandunfragmentedisviablewithpotentialforgrowthand
increasedprofitability.
ThePARCiswrong.
Inthefirstplace,Sec.5(a)justlikethesucceedingSec.5(b)ofDAO10on
increasedincomeandgreaterbenefitstoqualifiedbeneficiariesisbutoneofthe
statedcriteriatoguidePARCindecidingonwhetherornottoacceptanSDP.Said
Sec.5(a)doesnotexactfromthecorporatelandownerapplicanttheundertakingto
keepthefarmintact andunfragmented adinfinitum. AndthereislogictoHLIs

statedobservationthatthekeyphraseintheprovisionofSec.5(a)isviabilityof
corporateoperations:[w]hatisthusrequiredisnottheagriculturallandremaining
intactxxxbuttheviabilityofthecorporateoperationswithitsagriculturalland
being intact and unfragmented. Corporate operation may be viable even if the
corporateagriculturallanddoesnotremainintactor[un]fragmented.38
_______________
37Id.
38HLIConsolidatedReplyandOpposition,p.65.
558
558
Itis,ofcourse,anticlimactictomentionthatDARviewedtheconversionasnot
violativeofanyissuance,letaloneunderminingtheviabilityofHaciendaLuisitas
operation,astheDARSecretaryapprovedthelandconversionappliedforandits
disposition via hisConversionOrderdatedAugust14,1996pursuanttoSec.65of
RA6657whichreads:
Sec.65.ConversionofLands.Afterthelapseoffiveyearsfromits
award when the land ceases to be economically feasible and sound for
agriculturalpurposes,orthelocalityhasbecomeurbanizedandthelandwill
have a greater economic value for residential, commercial or industrial
purposes,theDARuponapplicationofthebeneficiaryorlandownerwithdue
noticetotheaffectedparties,andsubjecttoexistinglaws,mayauthorizethex
xxconversionofthelandanditsdispositions.xxx
Moreover,itisworthnotingthattheapplicationforconversionhadthe
backingof5,000orsoFWBs,includingrespondentsReneGalang,and
Jose Julio Suniga, then leaders of the AMBALA and the Supervisory
Group,respectively,asevidencedbytheManifestoofSupporttheysigned
and which was submitted to the DAR.39 If at all, this means that
AMBALA should be estopped from questioning the conversion of a
portionofHaciendaLuisita,whichitsleaderhasfullysupported.
(b)LIPCOandRCBCasInnocentPurchasersforValue
TheAMBALA,ReneGalangandtheFARMareinaccordthatRizal
Commercial Banking Corporation (RCBC) and Luisita Industrial Park
Corporation (LIPCO) are not innocent purchasers for value. The
AMBALA, in particular, argues that LIPCO, being a whollyowned
subsidiary ofHLI,is conclusively presumed to have knowledge of the

agrariandispute
_______________
39 Id.,atp.80,PetitionofHIL; id.,atp.944,ConsolidatedReplyofHLI; id.,atpp.
13271328.
559
VOL.660,
559
NOVEMBER22,
2011
HaciendaLuisita,
Incorporatedvs.
ReformCouncil
onthesubjectlandandcouldnotfeignignoranceofthisfact,especially
sincetheyhavethesamedirectorsandstockholders. 40Thisissecondedby
ReneGalangandAMBALA,throughthePILC,whichintimatethatalook
at the General Information Sheets of the companies involved in the
transfers of the 300hectare portion of Hacienda Luisita, specifically,
CentennaryHoldings,Inc.(Centennary),LIPCOandRCBC,wouldreadily
revealthattheirdirectorsareinterlockedandconnectedtoTadecoand
HLI.41 ReneGalangandAMBALA,throughthePILC,alsoallegethat
withtheclearcutinvolvementoftheleadershipofallthecorporations
concerned,LIPCOandRCBCcannotfeignignorancethattheparcelsof
landtheyboughtareunderthecoverageofthecomprehensiveagrarian
reformprogram[CARP]andthattheconditionsoftherespectivesalesare
imbuedwithpublicinterestwherenormalpropertyrelationsintheCivil
Lawsensedonotapply.42
Avowingthatthelandsubjectofconversionstillremainsundeveloped,
Rene Galang and AMBALA, through the PILC, further insist that the
conditionthat[t]hedevelopmentofthelandshouldbecompletedwithin
the period of five [5] years from the issuance of this Order was not
complied with. AMBALA also argues that since RCBC and LIPCO
merelysteppedintotheshoesofHLI,thentheymustcomplywiththe
conditionsimposedintheconversionorder.43
In addition, FARM avers that among the conditions attached to the
conversionorder,whichRCBCandLIPCOnecessarilyhaveknowledge
of,are(a)thatitsapprovalshallinnowayamend,diminish,oralterthe
undertakingandobligationsofHLIascontainedinthe[SDP]approvedon
November21,1989;and(b)thatthebenefits,wagesandthelike,re
_______________
40AMBALAMR,p.76.
41GalangMR,p.21.
42Id.,atp.22.
43AMBALAMR,p.72.
560
560
Council
ceivedbytheFWBsshallnotinanywaybereducedoradverselyaffected,
amongothers.44
Thecontentionsofrespondentsarewanting.Inthefirstplace,thereis
nodenyingthatRCBCandLIPCOknewthattheconvertedlandsthey
bought were under the coverage of CARP. Nevertheless, as We have
mentionedinOurJuly5,2011Decision,thisdoesnotnecessarilymean
thatbothLIPCOandRCBCalreadyactedinbadfaithinpurchasingthe
convertedlands.AsthisCourtexplained:
ItcannotbeclaimedthatRCBCandLIPCOactedinbadfaithinacquiringthe
lotsthatwerepreviouslycoveredbytheSDP.Goodfaithconsistsinthepossessors
beliefthatthepersonfromwhomhereceiveditwastheownerofthesameandcould
conveyhistitle.Goodfaithrequiresawellfoundedbeliefthatthepersonfromwhom
titlewasreceivedwashimselftheowneroftheland,withtherighttoconveyit.
Thereisgoodfaithwherethereisanhonestintentiontoabstainfromtakingany
unconscientiousadvantagefromanother.Itistheoppositeoffraud.
Tobesure,intervenorRCBCandLIPCOknewthatthelotstheybought
weresubjectedtoCARPcoveragebymeansofastockdistributionplan,asthe
DARconversionorderwasannotatedatthebackofthetitlesofthelotsthey
acquired.However,theyareofthehonestbeliefthatthesubjectlotswerevalidly
convertedtocommercialorindustrialpurposesandforwhichsaidlotswere
takenoutoftheCARPcoveragesubjectofPARCResolutionNo.89122and,
hence,canbelegallyandvalidlyacquiredbythem.Afterall,Sec.65ofRA6657
explicitlyallowsconversionanddispositionofagriculturallandspreviouslycovered
byCARPlandacquisitionafterthelapseoffive(5)yearsfromitsawardwhenthe
landceasestobeeconomicallyfeasibleandsoundforagriculturalpurposesorthe
localityhasbecomeurbanizedandthelandwillhaveagreatereconomicvaluefor
residential, commercial or industrial purposes. Moreover, DAR notified all the
affected parties, more particularly the FWBs, and gave them the opportunity to
commentoropposetheproposedconversion.DAR,aftergoingthroughthenecessary
processes,granted
_______________
44FARMMR,p.94.
561
VOL.660,
NOVEMBER22,2011
561
ReformCouncil
the conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdictionunderSec.50ofRA6657todetermineandadjudicateagrarianreform
matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and
executoryafternoneoftheFWBsinterposedanappealtotheCA.Inthisfactual
setting,RCBCandLIPCOpurchasedthelotsinquestionontheirhonestandwell
foundedbeliefthatthepreviousregisteredownerscouldlegallysellandconveythe
lots though these were previously subject of CARP coverage. Ergo, RCBC and
LIPCOactedingoodfaithinacquiringthesubjectlots.(Emphasissupplied.)
In the second place, the allegation that the converted lands remain
undevelopediscontradictedbytheevidenceonrecord,particularly,Annex
XofLIPCOsMemorandumdatedSeptember23,2010,45 whichhas
photographsshowingthatthelandhasbeenpartlydeveloped. 46Certainly,
itisageneralrulethatthefactualfindingsofadministrativeagenciesare
conclusive and binding on the Court when supported by substantial
evidence.47However,thisruleadmitsofcertainexceptions,oneofwhich
is when the findings of fact are premised on the supposed absence of
evidenceandcontradictedbytheevidenceonrecord.48
In the third place, by arguing that the companies involved in the
transfersofthe300hectareportionofHaciendaLuisitahaveinterlocking
directorsand,thus,knowledgeofonemayalreadybeimputeduponallthe
othercompanies,AMBALAandReneGalang,ineffect,wantthisCourtto
piercetheveilofcorporatefiction.However,piercingtheveilofcorporate
fictioniswarrantedonlyincaseswhentheseparatelegalentityisusedto
defeatpublicconvenience,justifywrong,
_______________
45Rollo,Vol.3,pp.32803323.
46Id.,atpp.34283468.
47Nicolasv.DelNaciaCorp.G.R.No.158026,April23,2008,552SCRA545,556.
48Bascos,Jr.v.Taganahan,G.R.No.180666,February18,2009,579SCRA653,674
675.
562
562
Council
protectfraud,ordefendcrime,suchthatinthecaseoftwocorporations,
thelawwillregardthecorporationsasmergedintoone.49Assuccinctly
discussedbytheCourtinVelardev.Lopez,Inc.:50
Petitionerarguesneverthelessthatjurisdictionoverthesubsidiaryisjustifiedby
piercing the veil of corporate fiction. Piercing the veil of corporate fiction is
warranted,however,onlyincaseswhentheseparatelegalentityisusedtodefeat
publicconvenience,justifywrong,protectfraud,ordefendcrime,suchthatinthe
caseoftwocorporations,thelawwillregardthecorporationsasmergedintoone.
The rationale behind piercing a corporations identity is to remove the barrier
betweenthecorporationfromthepersonscomprisingittothwartthefraudulentand
illegalschemesofthosewhousethecorporatepersonalityasashieldforundertaking
certainproscribedactivities.
Inapplyingthedoctrineofpiercingtheveilofcorporatefiction,thefollowing
requisitesmustbeestablished:(1)control,notmerelymajorityorcompletestock
control;(2)suchcontrolmusthavebeenusedbythedefendanttocommitfraudor
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonestactsincontraventionofplaintiffslegalrights;and(3)theaforesaidcontrol
andbreachofdutymustproximatelycausetheinjuryorunjustlosscomplainedof.
(Citationsomitted.)
Nowhere, however, in the pleadings and other records of the case can it be
gatheredthatrespondenthascompletecontroloverSkyVision,notonlyoffinances
butofpolicyandbusinesspracticeinrespecttothetransactionattacked,sothatSky
Visionhadatthetimeofthetransactionnoseparatemind,willorexistenceofits
own.Theexistenceofinterlockingdirectors,corporateofficersandshareholdersis
notenoughjustificationtopiercetheveilofcorporatefictionintheabsenceoffraud
orotherpublicpolicyconsiderations.
_______________
49Velardev.Lopez,Inc.,G.R.No.153886,January14,2004,419SCRA422,431432;
citing Tan Boon Bee & Co., Inc. v. Jarencio, 163 SCRA 205 (1988) and Yutivo Sons
HardwareCo.v.CTA,1SCRA160(1961).
50Id.
563
VOL.660,
563
NOVEMBER22,
2011
HaciendaLuisita,
Incorporatedvs.
ReformCouncil
Absent any allegation or proof of fraud or other public policy
considerations, the existence of interlocking directors, officers and
stockholders is not enough justification to pierce the veil of corporate
fictionasintheinstantcase.
Andinthefourthplace,thefactthatthisCourt,initsJuly5,2011
Decision,orderedthepaymentoftheproceedsofthesaleoftheconverted
land,andevenofthe80.51hectarelandsoldtothegovernment,through
the Bases Conversion Development Authority, to the qualified FWBs,
effectivelyfulfilstheconditionsintheconversionorder,towit:(1)thatits
approvalshallinnowayamend,diminish,oraltertheundertakingand
obligationsofHLIascontainedintheSDPapprovedonNovember21,
1989;and(2)thatthebenefits,wagesandthelike,receivedbytheFWBs
shallnotinanywaybereducedoradverselyaffected,amongothers.
Aviewhasalsobeenadvancedthatthe200hectarelottransferredto
LuisitaRealtyCorporation(LRC)shouldbeincludedinthecompulsory
coveragebecausethecorporationdidnotintervene.
Wedisagree.Sincethe200hectarelotformedpartoftheSDPthatwas
nullified by PARC Resolution 20053201,this Court is constrained to
makearulingontherightsofLRCoverthesaidlot.Moreover,the500
hectareportionofHaciendaLuisita,ofwhichthe200hectareportionsold
toLRCandthe300hectareportionsubsequentlyacquiredbyLIPCOand
RCBCwerepartof,wasalreadythesubjectoftheAugust14,1996DAR
ConversionOrder.Byvirtueofthesaidconversionorder,thelandwas
already reclassified as industrial/commercial land not subject to
compulsorycoverage.Thus,ifWeplacethe200hectarelotsoldtoLRC
undercompulsorycoverage,thisCourtwould,ineffect,bedisregarding
theDARConversionOrder,whichhaslongattaineditsfinality.Andas
this Court held in Berboso v. CA,51 Once final and executory, the
ConversionOrdercannolongerbequestioned.
_______________
51G.R.No.14159394,July12,2006,494SCRA583,602.
564
564
Council
Besides,todisregardtheConversionOrderthroughtherevocationofthe
approvaloftheSDPwouldcreateundueprejudicetoLRC,whichisnot
even a party to the proceedings below, and would be tantamount to
deprivationofpropertywithoutdueprocessoflaw.
Nonethess,theminorityisoftheadamantviewthatsinceLRCfailedto
interveneintheinstantcaseandwas,therefore,unabletopresentevidence
supportingitsgoodfaithpurchaseofthe200hectareconvertedland,then
LRCshouldbegivenfullopportunitytopresentitscasebeforetheDAR.
Thisminorityviewisacontradictioninitself.GiventhatLRCdidnot
interveneandis,therefore,notapartytotheinstantcase,thenitwouldbe
incongruoustoorderthemtopresentevidencebeforetheDAR.Suchan
order,ifissuedbythisCourt,wouldnotbebindingupontheLRC.
Moreover, LRC may be considered to have waived its right to
participateintheinstantpetitionsinceitdidnotinterveneintheDAR
proceedings for the nullification of the PARC Resolution No. 89122
whichapprovedtheSDP.
(c)Proceedsofthesaleofthe500hectareconvertedlandandofthe
80.51hectarelandusedfortheSCTEX
Aspreviouslymentioned,WeruledinOurJuly5,2011Decisionthat
sincetheCourtexcludedthe500hectarelotsubjectoftheAugust14,
1996ConversionOrderandthe80.51hectareSCTEXlotacquiredbythe
government from compulsory coverage, then HLI and its subsidiary,
Centennary,shouldbeliabletotheFWBsforthepricereceivedforsaid
lots.Thus:
Thereisaclaimthat,sincethesaleandtransferofthe500hectaresofland
subjectoftheAugust14,1996ConversionOrderandthe80.51hectareSCTEXlot
came after compulsory coverage has taken place, the FWBs should have their
correspondingshareofthelandsvalue.Thereismeritintheclaim.SincetheSDP
approvedbyPARCResolutionNo.89122hasbeennullified,thenallthe
565
VOL.660,
NOVEMBER22,2011
565
ReformCouncil
landssubjectoftheSDPwillautomaticallybesubjectofcompulsorycoverageunder
Sec.31ofRA6657.SincetheCourtexcludedthe500hectarelotsubjectofthe
August14,1996ConversionOrderandthe80.51hectareSCTEXlotacquiredbythe
governmentfromtheareacoveredbySDP,thenHLIanditssubsidiary,Centennary,
shallbeliabletotheFWBsforthepricereceivedforsaidlots.HLIshallbeliablefor
thevaluereceivedforthesaleofthe200hectarelandtoLRCintheamountofPhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300hectare lot sold to LIPCO for the consideration of PhP
750,000,000.Likewise,HLIshallbeliableforPhP80,511,500asconsiderationfor
thesaleofthe80.51hectareSCTEXlot.
We,however,notethatHLIhasallegedlypaid3%oftheproceedsofthesaleof
the500hectarelandand80.51hectareSCTEXlottotheFWBs.Wealsotakeinto
accountthepaymentoftaxesandexpensesrelatingtothetransferofthelandand
HLIs statement that most, if not all, of the proceeds were used for legitimate
corporatepurposes.Inordertodetermineonceandforallwhetherornotallthe
proceedswereproperlyutilizedbyHLIanditssubsidiary,Centennary,DARwill
engagetheservicesofareputableaccountingfirmtobeapprovedbythepartiesto
auditthebooksofHLItodetermineiftheproceedsofthesaleofthe500hectareland
and the 80.51hectare SCTEX lot were actually used for legitimate corporate
purposes,titlingexpensesandincompliancewiththeAugust14,1996Conversion
Order.ThecostoftheauditwillbeshoulderedbyHLI.Ifaftersuchaudit,itis
determined that there remains a balance from the proceeds of the sale, then the
balanceshallbedistributedtothequalifiedFWBs.
HLI, however, takes exception to the abovementioned ruling and

contendsthatitisnotpropertodistributetheunspentorunusedbalanceof
the proceeds of the sale of the 500hectare converted land and 80.51
hectareSCTEXlottothequalifiedFWBsforthefollowingreasons:(1)
the proceeds of the sale belong to the corporation, HLI, as corporate
capitalandassetsinsubstitutionfortheportionsofitslandassetwhich
weresoldtothirdparties;(2)todistributethecashsalesproceedsofthe
portionsofthelandassettotheFWBs,whoarestockholdersofHLI,isto
dissolve the corporation and distribute the proceeds as liquidating
dividendswithout
566
566
Council
evenpayingthecreditorsofthecorporation;and(3)thedoingofsaidacts
would violate the stringent provisions of the Corporation Code and
corporatepractice.52
Apparently,HLIseeksrecoursetotheCorporationCodeinorderto
avoiditsliabilitytotheFWBsforthepricereceivedforthe500hectare
convertedlotandthe80.51hectareSCTEXlot.However,asWehave
established in Our July 5, 2011 Decision, the rights, obligations and
remediesofthepartiesintheinstantcaseareprimarilygovernedbyRA
6657andHLIcannotshielditselffromtheCARPcoveragemerelyunder
theconvenienceofbeingacorporateentity.Inthisregard,itshouldbe
underscoredthattheagriculturallandsheldbyHLIbyvirtueoftheSDP
arenoordinaryassets.Thesearespecialassets,because,originally,these
shouldhavebeendistributedtotheFWBswereitnotfortheapprovalof
the SDP by PARC. Thus, the government cannot renege on its
responsibilityovertheseassets.Likewise,HLIisnoordinarycorporation
asitwasformedandorganizedpreciselytomakeuseoftheseagricultural
landsactuallyintendedfordistributiontotheFWBs.Thus,itcannotshield
itselffromthecoverageofCARPbyinvokingtheCorporationCode.As
explainedbytheCourt:
HLIalsoparlaysthenotionthatthepartiestotheSDOAshouldnowlooktothe
CorporationCode,insteadoftoRA6657,indeterminingtheirrights,obligationsand
remedies.TheCode,itadds,shouldbetheapplicablelawonthedispositionofthe
agriculturallandofHLI.
Contrary to the view of HLI, the rights, obligations and remedies of the
partiestotheSDOAembodyingtheSDPareprimarilygovernedbyRA6657.It
shouldabundantlybemadeclearthatHLIwaspreciselycreatedinordertocomply
withRA6657,whichtheOSGaptlydescribedasthemotherlawoftheSDOAand
theSDP.53Itis,thus,paradoxicalforHLItoshield
_______________
52HLIMR,pp.34.
53TSN,August24,2010,p.13.
567
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itself from the coverage of CARP by invoking exclusive applicability of the
CorporationCodeundertheguiseofbeingacorporateentity.
WithoutinanywayminimizingtherelevanceoftheCorporationCodesince
theFWBsofHLIarealsostockholders,itsapplicabilityislimitedastherightsof
thepartiesarisingfromtheSDPshouldnotbemadetosupplantorcircumvent
theagrarianreformprogram.
Without doubt, the Corporation Code is the general law providing for the
formation,organizationandregulationofprivatecorporations.Ontheotherhand,RA
6657isthespeciallawonagrarianreform.Asbetweenageneralandspeciallaw,the
latter shall prevailgeneralia specialibus non derogant.54 Besides, the present
impassebetweenHLIandtheprivaterespondentsisnotanintracorporatedispute
whichnecessitatestheapplicationoftheCorporationCode.Whatprivaterespondents
questioned before the DAR is the proper implementation of the SDP and HLIs
compliancewithRA6657.Evidently,RA6657shouldbetheapplicablelawtothe
instantcase.(Emphasissupplied.)
Consideringthatthe500hectareconvertedland,aswellasthe80.51
hectareSCTEXlot,shouldhavebeenincludedinthecompulsorycoverage
wereitnotfortheirconversionandvalidtransfers,thenitisonlybut
properthatthepricereceivedforthesaleoftheselotsshouldbegivento
thequalifiedFWBs.Ineffect,theproceedsfromthesaleshalltakethe
placeofthelots.
TheCourt,initsJuly5,2011Decision,however,takesintoaccount,
interalia,thepaymentoftaxesandexpensesrelatingtothetransferofthe
land,aswellasHLIsstatementthatmost,ifnotall,oftheproceedswere
used for legitimate corporate purposes. Accordingly, We ordered the
deductionofthe
_______________
54Korugav.Arcenas,G.R.Nos.168332and169053,June19,2009,590SCRA49,68;
citing In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod
(Benguet),Inc.,PDICv.BureauofInternalRevenue,G.R.No.158261,December18,2006,
511SCRA123,141.
568
568
Council
taxesandexpensesrelatingtothetransferoftitlestothetransferees,and
theexpendituresincurredbyHLIandCentennaryforlegitimatecorporate
purposes,amongothers.
On this note, DAR claims that the [l]egitimate corporate expenses
shouldnotbedeductedasthereisnobasisforit,especiallysinceonlythe
auditingtobeconductedonthefinancialrecordsofHLIwillrevealthe
amountstobeoffsetbetweenHLIandtheFWBs.55
Thecontentionisunmeritorious.Thepossibilityofanoffsettingshould
notpreventUsfromdeductingthelegitimatecorporateexpensesincurred
by HLI and Centennary. After all, the Court has ordered for a proper
auditing[i]nordertodetermineonceandforallwhetherornotallthe
proceedswereproperlyutilizedbyHLIanditssubsidiary,Centennary.In
this regard, DAR is tasked to engage the services of a reputable
accountingfirmtobeapprovedbythepartiestoauditthebooksofHLIto
determineiftheproceedsofthesaleofthe500hectarelandandthe80.51
hectareSCTEXlotwereactuallyusedforlegitimatecorporatepurposes,
titlingexpensesandincompliancewiththeAugust14,1996Conversion
Order.Also,itshouldbenotedthatitisHLIwhichshallshoulderthecost
ofaudittoreducetheburdenonthepartoftheFWBs.Concomitantly,the
legitimatecorporateexpensesincurredbyHLIandCentennary,aswillbe
determinedbyareputableaccountingfirmtobeengagedbyDAR,shallbe
amongtheallowabledeductionsfromtheproceedsofthesaleofthe500
hectarelandandthe80.51hectareSCTEXlot.
We,however,findthatthe3%productionshareshouldnotbededucted
fromtheproceedsofthesaleofthe500hectareconvertedlandandthe
80.51hectareSCTEXlot.The3%productionshare,likethehomelots,
was among the benefits received by the FWBs as farmhands in the
agriculturalenterpriseofHLIand,thus,shouldnotbetakenawayfromthe
FWBs.
_______________
55DARMR,p.33.
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Contrarily,theminorityisoftheviewthatasaconsequenceofthe
revocationoftheSDP,thepartiesshouldberestoredtotheirrespective
conditionspriortoitsexecutionandapproval,subjecttotheapplicationof
theprincipleofsetofforcompensation.Suchviewispatentlymisplaced.
Thelawoncontracts,i.e.mutualrestitution,doesnotapplytothecase
atbar.Toreiterate,whatwasactuallyrevokedbythisCourt,initsJuly5,
2011Decision,isPARCResolutionNo.89122approvingtheSDP.To
elucidate, it was the SDP, not the SDOA, which was presented for
approvalbyTadecotoDAR.56 TheSDPexplainedthemechanicsofthe
stockdistributionbutdidnotmakeanyreferencenorcorrelationtothe
SDOA.Thepertinentportionsoftheproposalread:
MECHANICSOFSTOCKDISTRIBUTIONPLAN
UnderSection31ofRepublicActNo.6657,acorporationowningagricultural
landmaydistributeamongthequalifiedbeneficiariessuchproportionorpercentage
of its capital stock that the value of the agricultural land actually devoted to
agriculturalactivities,bearsinrelationtothecorporationstotalassets.Conformably
withthislegalprovision,TarlacDevelopmentCorporationherebysubmitsfor
approval a stock distribution plan that envisions the following: 57 (Terms and
conditionsomitted;emphasissupplied)
xxxx
_______________
56AsstatedintheSDP:
Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land may
distributeamongthequalifiedbeneficiariessuchproportionorpercentageofitscapitalstockthat
thevalueoftheagriculturallandactuallydevotedtoagriculturalactivities,bearsinrelationtothe
corporationstotalassets.Conformablywiththislegalprovision,TarlacDevelopmentCorporation
herebysubmitsforapprovalastockdistributionplanthatenvisionsthefollowing:xxx(Rollo,p.
1322)
57Rollo,p.1322;AnnexAA.
570
570
Theabovestockdistributionplanisherebysubmittedonthebasisofallthese
benefitsthatthefarmworkerbeneficiariesofHaciendaLuisitawillreceiveunderits
provisionsinadditiontotheirregularcompensationasfarmhandsintheagricultural
enterprise and the fringe benefits granted to them by their collective bargaining
agreementwithmanagement.58
Also,PARCResolutionNo.89122readsasfollows:
RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF
TARLAC DEVELOPMENT COMPANY/HACIENDA LUISITA
INCORPORATED(TDC/HLI)
NOWTHEREFORE,onmotiondulyseconded,
RESOLVED,asitisherebyresolved,toapprovethestockdistributionplan
ofTDC/HLI.
UNANIMOUSLYAPPROVED.59(Emphasissupplied)
Clearly,whatwasapprovedbyPARCistheSDPandnottheSDOA.
Thereis,therefore,nobasisforthisCourttoapplythelawoncontractsto
therevocationofthesaidPARCResolution.
IV.JustCompensation
InOurJuly5,2011Decision,WestatedthatHLIshallbepaidjust
compensationfortheremainingagriculturallandthatwillbetransferredto
DARforlanddistributiontotheFWBs.Wealsoruledthatthedateofthe
takingisNovember21,1989,whenPARCapprovedHLIsSDPper
PARCResolutionNo.89122.
In its Motion for Clarification and Partial Reconsideration, HLI
disagreeswiththeforegoingrulingandcontendsthatthetakingshould
bereckonedfromfinalityoftheDecisionofthisCourt,orattheveryleast,
thereckoningperiodmaybe
_______________
58Id.,atpp.37473748.
59Id.,atpp.151.
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tacked to January 2, 2006,the date whenthe Notice of Coverage was
issued by the DAR pursuant to PARC Resolution No. 20063401
recalling/revokingtheapprovaloftheSDP.60
Fortheirpart,Mallari,etal.arguethatthevaluationofthelandcannot
bebasedonNovember21,1989,thedateofapprovaloftheSDP.Instead,
theyaverthatthedateoftakingforvaluationpurposesisafactualissue
bestlefttothedeterminationofthetrialcourts.61
Attheotherendofthespectrum,AMBALAallegesthatHLIshouldno
longer be paid just compensation for the agricultural land that will be
distributedtotheFWBs,sincetheManilaRegionalTrialCourt(RTC)
already rendered a decision ordering the Cojuangcos to transfer the
controlofHaciendaLuisitatotheMinistryofAgrarianReform,whichwill
distribute the land to small farmers after compensating the landowners
P3.988million.62Intheevent,however,thatthisCourtwillrulethatHLI
isindeedentitledtocompensation,AMBALAcontendsthatitshouldbe
peggedatfortythousandpesos(PhP40,000)perhectare,sincethiswasthe
samevaluethatTadecodeclaredin1989tomakesurethatthefarmerswill
notownthemajorityofitsstocks.63
Despitetheabovepropositions,Wemaintainthatthedateoftakingis
November21,1989,thedatewhenPARCapprovedHLIsSDPperPARC
ResolutionNo.89122,inviewofthefactthatthisisthetimethatthe
FWBs were considered to own and possess the agricultural lands in
HaciendaLuisita.Tobeprecise,theselandsbecamesubjectoftheagrarian
reform coverage through the stock distribution scheme only upon the
approvaloftheSDP,thatis,November21,1989.Thus,suchapprovalis
akin to a notice of coverage ordinarily issued under compulsory
acquisition.Further,any
_______________
60HLIMR,pp.1821.
61Mallari,etal.MR,pp.34.
62AMBALAMR,p.70.
63Id.,atp.71.
572
572
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doubtshouldberesolvedinfavoroftheFWBs.AsthisCourtheldin
PerezRosariov.CA:64
Itisanestablishedsocialandeconomicfactthattheescalationofpovertyisthe
drivingforcebehindthepoliticaldisturbancesthathaveinthepastcompromisedthe
peaceandsecurityofthepeopleaswellasthecontinuityofthenationalorder.To
subduetheseacutedisturbances,thelegislatureoverthecourseofthehistoryofthe
nationpassedaseriesoflawscalculatedtoaccelerateagrarianreform,ultimatelyto
raisethematerialstandardsoflivingandeliminatediscontent.Agrarianreformisa
perceivedsolutiontosocialinstability. Theedictsofsocialjusticefoundinthe
Constitution and thepublicpoliciesthat underwritethem,theextraordinary
nationalexperience,andtheprevailingnationalconsciousness,allcommandthe
greatdepartmentsofgovernmenttotiltthebalanceinfavorofthepoorand
underprivilegedwheneverreasonabledoubtarisesintheinterpretationofthe
law. But annexed to the great and sacred charge of protecting the weak is the
diametricfunctiontoputeveryefforttoarriveatanequitablesolutionforallparties
concerned:thejuralpostulatesofsocialjusticecannotshieldillegalacts,nordothey
sanctionfalsesympathytowardsacertainclass,noryetshouldtheydenyjusticeto
thelandownerwhenevertruthandjusticehappentobeonherside.Intheoccupation
ofthelegalquestionsinallagrariandisputeswhoseoutcomescansignificantlyaffect
societalharmony,theconsiderationsofsocialadvantagemustbeweighed,aninquiry
into the prevailing social interests is necessary in the adjustment of conflicting
demands andexpectations of thepeople, and thesocialinterdependence of these
interests,recognized.(Emphasissupplied.)
Theminoritycontendsthatitisthedateofthenoticeofcoverage,that
is,January2,2006,whichisdeterminativeofthejustcompensationHLIis
entitledtoforitsexpropriatedlands.Tosupportitscontention,itcited
numerouscaseswherethetimeofthetakingwasreckonedonthedateof
theissuanceofthenoticeofcoverage.
_______________
64G.R.No.140796,June30,2006,494SCRA66,9293.
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However,aperusalofthecasescitedbytheminoritywouldrevealthat
noneoftheminvolvedthestockdistributionscheme.Thus,saidcasesdo
notsquarelyapplytotheinstantcase.Moreover,itshouldbenotedthatit
is precisely because the stock distribution option is a distinctive
mechanismunderRA6657thatitcannotbetreatedsimilarlywiththatof
compulsorylandacquisitionasthesearetwo(2)differentmodalitiesunder
the agrarian reform program. As We have stated in Our July 5, 2011
Decision,RA6657providestwo(2)alternativemodalities, i.e.,landor
stocktransfer,pursuanttoeitherofwhichthecorporatelandownercan
complywithCARP.
Inthisregard,itshouldbenotedthatwhenHLIsubmittedtheSDPto
DARforapproval,itcannotbegainsaidthatthestockdistributionscheme
isclearlyHLIspreferredmodalityinordertocomplywithCARP.And
whentheSDPwasapproved,stocksweregiventotheFWBsinlieuof
landdistribution.Asaptlyobservedbytheminorityitself,[i]nsteadof
expropriating lands, what the government took and distributed to the
FWBsweresharesofstockofpetitionerHLIinproportiontothevalueof
theagriculturallandsthatshouldhavebeenexpropriatedandturnedover
totheFWBs.Itcannot,therefore,bedeniedthatupontheapprovalofthe
SDPsubmittedbyHLI,theagriculturallandsofHaciendaLuisitabecame
subjectofCARPcoverage.Evidently,theapprovaloftheSDPtookthe
placeofanoticeofcoverageissuedundercompulsoryacquisition.
Also,itissurprisingthatwhiletheminorityopinesthatunderthestock
distribution option, title to the property remains with the corporate
landowner, which should presumably be dominated by farmers with
majority stockholdings in the corporation, it still insists that the just
compensationthatshouldbegiventoHLIistobereckonedonJanuary2,
2006,thedateoftheissuanceofthenoticeofcoverage,evenafteritfound
thattheFWBsdidnothavethemajoritystockholdingsinHLIcontraryto
thesupposedavowedpolicyofthelaw.Ineffect,whattheminoritywants
is
574
574
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to prejudice the FWBs twice. Given that the FWBs should have had
majoritystockholdingsinHLIbutdidnot,theminoritystillwantsthe
government to pay higher just compensation to HLI. Even if it is the
governmentwhichwillpaythejustcompensationtoHLI,thiswillalso
affect the FWBs as they will be paying higher amortizations to the
governmentifthetakingwillbeconsideredtohavetakenplaceonlyon
January2,2006.
Theforegoingnotwithstanding,itbearsstressingthattheDARsland
valuation is only preliminary and is not, by any means, final and
conclusiveuponthelandowner.Thelandownercanfileanoriginalaction
with the RTC acting as a special agrarian court to determine just
compensation. The court has the right to review with finality the
determinationintheexerciseofwhatisadmittedlyajudicialfunction.65
A view has also been advanced that HLI should pay the qualified
FWBs rental for the use and possession of the land up to the time it
surrenderspossessionandcontrolovertheselands.Whatthisviewfailsto
consideristhefactthattheFWBsarealsostockholdersofHLIpriortothe
revocationofPARCResolutionNo.89122.Also,theincomeearnedby
the corporation from its possession and use of the land ultimately
redoundedtothebenefitoftheFWBsbasedonitsbusinessoperationsin
theformofsalaries,benefitsvoluntarilygrantedbyHLIandotherfringe
benefitsundertheirCollectiveBargainingAgreement.Thatbeingso,there
wouldbeunjustenrichmentonthepartoftheFWBsifHLIwillstillbe
requiredtopayrentfortheuseofthelandinquestion.
V.SaletoThirdParties
ThereisaviewthatsincetheagriculturallandsinHaciendaLuisita
wereplacedunderCARPcoveragethroughtheSDOAschemeonMay11,
1989,thenthe10yearperiodpro
_______________
65Heirs of Lorenzo and Carmen Vidad v. Land Bank of the Philippines, G.R. No.
166461,April30,2010,619SCRA609.
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hibitiononthetransferofawardedlandsunderRA6657lapsedonMay
10, 1999, and, consequently, the qualified FWBs should already be
allowed to sell these lands with respect to their land interests to third
parties,includingHLI,regardlessofwhethertheyhavefullypaidforthe
landsornot.
Thepropositioniserroneous.Sec.27ofRA6657states:
SEC.27.TransferabilityofAwardedLands.Landsacquiredbybeneficiaries
under this Act may not be sold, transferred or conveyed except through
hereditarysuccession,ortothegovernment,ortotheLBP,ortootherqualified
beneficiariesforaperiodoften(10)years:Provided,however,Thatthechildrenor
the spouse of the transferor shall have a right to repurchase the land from the
governmentorLBPwithinaperiodoftwo(2)years.Duenoticeoftheavailabilityof
thelandshallbegivenbytheLBPtotheBarangayAgrarianReformCommittee
(BARC) of the barangay where the land is situated. The Provincial Agrarian
CoordinatingCommittee(PARCCOM),ashereinprovided,shall,inturn,begiven
duenoticethereofbytheBARC.
Ifthelandhasnotyetbeenfullypaidbythebeneficiary,therighttotheland
maybetransferredorconveyed,withpriorapprovaloftheDAR,toanyheirofthe
beneficiaryor toanyotherbeneficiarywho,asaconditionforsuchtransferor
conveyance,shallcultivatethelandhimself.Failingcomplianceherewith,theland
shallbetransferredtotheLBPwhichshallgiveduenoticeoftheavailabilityofthe
landinthemannerspecifiedintheimmediatelyprecedingparagraph.
IntheeventofsuchtransfertotheLBP,thelattershallcompensatethebeneficiary
inonelumpsumfortheamountsthelatterhasalreadypaid,togetherwiththevalue
ofimprovementshehasmadeontheland.(Emphasissupplied.)
To implement the abovequoted provision, inter alia, DAR issued

AdministrativeOrderNo.1,Seriesof1989(DAO1)entitled Rulesand
ProceduresGoverningLandTransactions.SaidRulessetforththerules
onvalidityoflandtransactions,towit:
576
576
Council
II.RULESONVALIDITYOFLANDTRANSACTIONS
A.Thefollowingtransactionsarevalid:
1.Thoseexecutedbytheoriginallandownerinfavorofthequalifiedbeneficiaryfromamong
thosecertifiedbyDAR.
2.Thoseinfavorofthegovernment,DARortheLandBankofthePhilippines.
3.ThosecoveringlandsretainedbythelandownerunderSection6ofR.A.6657dulycertified
bythedesignatedDARProvincialAgrarianReformOfficer(PARO)asaretentionarea,
executed in favor of transferees whose total landholdings inclusive of the land to be
acquireddonotexceedfive(5)hectares;subject,however,totherightofpreemption
and/orredemptionoftenant/lesseeunderSection11and12ofR.A.3844,asamended.
xxxx
4.Thoseexecutedbybeneficiariescoveringlandsacquiredunderanyagrarianreformlawin
favorofthegovernment,DAR,LBPorotherqualifiedbeneficiariescertifiedbyDAR.
5.Those executed after ten (10) years from the issuance and registration of the
EmancipationPatentorCertificateofLandOwnershipAward.
B.Thefollowingtransactionsarenotvalid:
1.Sale, disposition, lease management contract or transfer of possession of private lands
executedbytheoriginallandownerpriortoJune15,1988,whichareregisteredonor
beforeSeptember13,1988,orthoseexecutedafterJune15,1988,coveringanareain
excessofthefivehectareretentionlimitinviolationofR.A.6657.
2.ThosecoveringlandsacquiredbythebeneficiaryunderR.A.6657andexecutedwithinten
(10)yearsfromtheissuanceandregistrationofanEmancipationPatentorCertificateof
LandOwnershipAward.
3.ThoseexecutedinfavorofapersonorpersonsnotqualifiedtoacquirelandunderR.A.
6657.
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4.Sale,transfer,conveyanceorchangeofnatureofthelandoutsideofurbancentersandcity
limitseitherinwholeorinpartasofJune15,1988,whenR.A.6657tookeffect,exceptas
providedforunderDARAdministrativeOrderNo.15,seriesof1988.
5.Sale,transferorconveyancebybeneficiaryoftherighttouseoranyotherusufructuary
rightoverthelandheacquiredbyvirtueofbeingabeneficiary,inordertocircumventthe
law.
xxxx(Emphasissupplied.)
Withoutadoubt,underRA6657andDAO1,theawardedlandsmay
onlybetransferredorconveyedafterten(10)yearsfromtheissuanceand
registration of the emancipation patent (EP) or certificate of land
ownershipaward(CLOA).ConsideringthattheEPsorCLOAshavenot
yet been issued to the qualified FWBs in the instant case, the 10year
prohibitiveperiodhasnotevenstarted.Significantly,thereckoningpoint
is the issuance of the EP or CLOA, and not the placing of the
agriculturallandsunderCARPcoverage.
Moreover,ifWemaintainthepositionthatthequalifiedFWBsshould
beimmediatelyallowedtheoptiontosellorconveytheagriculturallands
inHaciendaLuisita,thenalleffortsatagrarianreformwouldberendered
nugatorybythisCourt,since,attheendoftheday,theselandswilljustbe
transferredtopersonsnotentitledtolanddistributionunderCARP.As
aptly noted by the late Senator Neptali Gonzales during the Joint
Congressional Conference Committee on the Comprehensive Agrarian
ReformProgramBills:
SEN.GONZALES.Mypointis,asmuchaspossibleletthesaidlandsbe
distributedunderCARPremainwiththebeneficiariesandtheirheirs because
thatisthelessonthatwehavetolearnfromPDNo.27.Ifyouwilltalkwiththe
CongressmenrepresentingNuevaEcija,PampangaandCentralLuzonprovinces,law
ornolaw,youwillfindoutthatmorethanonethirdoftheoriginal,ofthelands
distributedunderPD27arenolonger
578
578
owned,possessedorbeingworkedbythegranteesortheawardeesofthesame,
somethingwhichweoughttoavoidundertheCARPbillthatwearegoingto
enact.66(Emphasissupplied.)
Worse,byraisingthatthequalifiedbeneficiariesmayselltheirinterest
back to HLI, this smacks of outright indifference to the provision on
retentionlimits67underRA6657,as
_______________
66JointCongressionalConferenceCommitteeontheComprehensiveAgrarianReform
ProgramBills,May26,1988,pp.4546.
67SEC.6.Retention Limits.Exceptas otherwise providedin this Act, no person
mayownorretain,directly,anypublicorprivateagriculturalland,thesizeofwhichshall
vary according to factors governing a viable familysized farm, such as commodity
produced,terrain,infrastructure,andsoilfertilityasdeterminedbythePresidentialAgrarian
Reform Council (PARC) created hereunder, but in no case shall the retention by the
landownerexceedfive(5)hectares.Three(3)hectaresmaybeawardedtoeachchildofthe
landowner,subjecttothefollowingqualifications:(1)thatheisatleastfifteen(15)yearsof
age;and(2)thatheisactuallytillingthelandordirectlymanagingthefarm:Provided,That
landownerswhoselandshavebeencoveredbyPresidentialDecreeNo.27shallbeallowed
tokeeptheareaoriginallyretainedbythemthereunder; Provided,further, Thatoriginal
homesteadgranteesordirectcompulsoryheirswhostillowntheoriginalhomesteadatthe
timeoftheapprovalofthisActshallretainthesameareasaslongastheycontinueto
cultivatesaidhomestead.
Therighttochoosetheareatoberetained,whichshallbecompactorcontiguous,shall
pertaintothelandowner:Provided,however,Thatincasetheareaselectedforretentionby
thelandowneristenanted,thetenantshallhavetheoptiontochoosewhethertoremain
therein or be a beneficiary in the same or another agricultural land with similar or
comparablefeatures.Incasethetenantchoosestoremainintheretainedarea,heshallbe
consideredaleaseholderandshalllosehisrighttobeabeneficiaryunderthisAct.Incase
thetenantchoosestobeabeneficiaryinanotheragriculturalland,heloseshisrightasa
leaseholdertothelandretainedbythelandowner.The tenantmustexercisethisoption
withinaperiod
579
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thisCourt,ineffect,wouldbeallowingHLI,thepreviouslandowner,to
ownmorethanfive(5)hectaresofagriculturalland,whichWecannot
countenance. There is a big difference between the ownership of
agricultural lands by HLI under the stock distribution scheme and its
eventual acquisition of the agricultural lands from the qualified FWBs
undertheproposedbuybackscheme.Theruleonretentionlimitsdoesnot
applytotheformerbutonlytothelatterinviewofthefactthatthestock
distribution scheme is sanctioned by Sec. 31 of RA 6657, which
specificallyallowscorporationstodivestaproportionoftheircapitalstock
thattheagriculturalland,actuallydevotedtoagriculturalactivities,bears
inrelationtothecompanystotalassets.Ontheotherhand,nospecial
rules exist under RA 6657 concerning the proposed buyback scheme;
hence,thegeneralrulesonretentionlimitsshouldapply.
Further,thepositionthatthequalifiedFWBsarenowfreetotransact
with third parties concerning their land interests, regardless of whether
they have fully paid for the lands or not, also transgresses the second
paragraphofSec.27ofRA6657,whichplainlystatesthat[i]ftheland
hasnotyetbeenfullypaidbythebeneficiary,therighttothelandmaybe
transferredorconveyed,withpriorapprovaloftheDAR,toanyheirofthe
beneficiaryortoanyotherbeneficiarywho,as
_______________
of one (1) year from the time the landowner manifests his choice of the area for
retention.
Inallcases,thesecurityoftenureofthefarmersorfarmworkersonthelandpriortothe
approvalofthisActshallberespected.
UpontheeffectivityofthisAct,anysale,disposition,lease,managementcontractor
transferofpossessionofprivatelandsexecutedbytheoriginallandownerinviolationof
thisActshallbenullandvoid: Provided,however, ThatthoseexecutedpriortothisAct
shallbevalidonlywhenregisteredwiththeRegisterofDeedswithinaperiodofthree(3)
monthsaftertheeffectivityofthisAct.Thereafter,allRegistersofDeedsshallinformthe
DARwithinthirty(30)daysofanytransactioninvolvingagriculturallandsinexcessoffive
(5)hectares.
580
580
Council
a condition for such transfer or conveyance, shall cultivate the land
himself.Failingcomplianceherewith,thelandshallbetransferredtothe
LBPx xx. Whenthe words andphrases in the statute are clear and
unequivocal,thelawisappliedaccordingtoitsexpressterms. 68 Verba
legisnonestrecedendum,orfromthewordsofastatutethereshouldbeno
departure.69
Theminority,however,positsthat[t]oinsistthattheFWBsrights
sleepforaperiodoftenyearsisunrealistic,andmayseriouslydeprive
themofrealopportunitiestocapitalizeandmaximizethevictoryofdirect
landdistribution.ByinsistingthatWedisregardthetenyearrestriction
underthelawinthecaseatbar,theminority,ineffect,wantsthisCourtto
engage in judicial legislation, which is violative of the principle of
separationofpowers.70ThediscoursebyRubenE.Agpalo,inhisbookon
statutoryconstruction,isenlightening:
Wherethelawisclearandunambiguous,itmustbetakentomeanexactlywhat
itsaysandthecourthasnochoicebuttoseetoitthatitsmandateisobeyed.Where
thelawisclearandfreefromdoubtorambiguity,thereisnoroomforconstructionor
interpretation.Thus,wherewhatisnotclearlyprovidedinthelawisreadintothe
lawbyconstructionbecauseitismorelogicalandwise,itwouldbetoencroach
uponlegislativeprerogativetodefinethewisdomofthelaw,whichisjudicial
legislation.Forwhetherastatuteiswiseorexpedientisnotforthecourtsto
determine.Courtsmustadministerthelaw,notas
_______________
68CommissionerofInternalRevenuev.CentralLuzonDrugCorp.,G.R.No.148512,June26,
2006,492SCRA575,581.
69PhilippineAmusement&GamingCorp.v.PhilippineGamingJurisdiction,Inc.,etal.,G.R.
No.177333,April24,2009,586SCRA658,664665.
70FortBonifacioDevelopmentCorporationv.CommissionerofInternalRevenue,G.R.Nos.
158885&170680,October2,2009,602SCRA159,169.
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they think it ought to be but as they find it and without regard to
consequences.71(Emphasissupplied.)
AndasaptlystatedbyChiefJusticeRenatoCoronainhisDissenting
OpinioninAngLadladLGBTPartyv.COMELEC:72
Regardless of the personal beliefs and biases of its individual members, this
CourtcanonlyapplyandinterprettheConstitutionandthelaws.Itspowerisnotto
createpolicybuttorecognize,revieworreversethepolicycraftedbythepolitical
departmentsifandwhenapropercaseisbroughtbeforeit.Otherwise,itwilltreadon
thedangerousgroundsofjudiciallegislation.
Considerably,thisCourtisleftwithnootherrecoursebuttorespectand
applythelaw.
VI.GroundsforRevocationoftheSDP
AMBALAandFARMreiteratethatimprovingtheeconomicstatusof
theFWBsisamongthelegalobligationsofHLIundertheSDPandisan
imperativeimpositionbyRA6657andDAO10.73FARMfurtherasserts
that[i]fthatminimumthresholdisnotmet,whyallow[stockdistribution
option] at all, unless the purpose is not social justice but a political
accommodationtothepowerful.74
ContrarytotheassertionsofAMBALAandFARM,nowhereinthe
SDP, RA 6657 and DAO 10 can it be inferred that improving the
economicstatusoftheFWBsisamongthelegalobligationsofHLIunder
the SDP or is an imperative imposition by RA 6657 and DAO 10, a
violationofwhich
_______________
71R.E.Agpalo,StatutoryConstruction125(5thedition,2003);citationsomitted.
72G.R.No.190582,April8,2010,618SCRA33.
73AMBALAMR,pp.6566;FARMMR,p.60.
74FARMMR,p.60.
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would justify discarding the stock distribution option. As We have
painstakinglyexplainedinOurJuly5,2011Decision:
IntheTerminalReportadoptedbyPARC,itisstatedthattheSDPviolatesthe
agrarianreformpolicyunderSec.2ofRA6657,asthesaidplanfailedtoenhancethe
dignityandimprovethequalityoflivesoftheFWBsthroughgreaterproductivityof
agriculturallands.Wedisagree.
Sec.2ofRA6657states:
SECTION2.DeclarationofPrinciplesandPolicies.Itisthepolicyof
theStatetopursueaComprehensiveAgrarianReformProgram(CARP).The
welfare of the landless farmers and farm workers will receive the highest
considerationtopromotesocialjusticeandtomovethenationtowardssound
rural development and industrialization, and the establishment of owner
cultivatorshipofeconomicsizedfarmsasthebasisofPhilippineagriculture.
Tothisend,amoreequitabledistributionandownershipofland,withdue
regardtotherightsoflandownerstojustcompensationandtotheecological
needsofthenation,shallbeundertakentoprovidefarmersandfarmworkers
withtheopportunitytoenhancetheirdignityandimprovethequalityof
theirlivesthroughgreaterproductivityofagriculturallands.
Theagrarianreformprogramisfoundedontherightoffarmersandregular
farmworkers,whoarelandless,toowndirectlyorcollectivelythelandsthey
till or, in the case of other farm workers, to receive a share of the fruits
thereof. To this end, the State shall encourage the just distribution of all
agriculturallands,subjecttotheprioritiesandretentionlimitssetforthinthis
Act, having taken into account ecological, developmental, and equity
considerations,andsubjecttothepaymentofjustcompensation.TheState
shallrespecttherightofsmalllandownersandshallprovideincentivesfor
voluntarylandsharing.
Paragraph 2 of the abovequoted provision specifically mentions that a more
equitabledistributionandownershipoflandxxxshallbeundertakentoprovide
farmersandfarmworkerswiththeopportunitytoenhancetheirdignityandimprove
thequalityof
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theirlivesthroughgreaterproductivityofagriculturallands.Ofnoteistheterm
opportunity which is defined as a favorable chance or opening offered by
circumstances.Consideringthis,bynostretchofimaginationcansaidprovisionbe
construedasaguaranteeinimprovingthelivesof theFWBs.Atbest,itmerely
providesforapossibilityorfavorablechanceofupliftingtheeconomicstatusofthe
FWBs,whichmayormaynotbeattained.
Pertinently,improvingtheeconomicstatusoftheFWBsisneitheramongthe
legalobligationsofHLIundertheSDPnoranimperativeimpositionbyRA6657and
DAO10,aviolationofwhichwouldjustifydiscardingthestockdistributionoption.
Nothinginthatoptionagreement,lawordepartmentorderindicatesotherwise.
Significantly,HLIdrawsparticularattentiontoitshavingpaiditsFWBs,during
theregimeoftheSDP(19892005),somePhP3billionbywayofsalaries/wagesand
higherbenefitsexclusiveoffreehospitalandmedicalbenefitstotheirimmediate
family.AndattachedasAnnexGtoHLIsMemorandumisthecertifiedtruereport
ofthefinancemanagerofJoseCojuangco&SonsOrganizationsTarlacOperations,
captionedasHACIENDALUISITA,INC.Salaries,BenefitsandCreditPrivileges
(in Thousand Pesos) Since the Stock Option was Approved by PARC/CARP,
detailingwhatHLIgavetheirworkersfrom1989to2005.Thesumtotal,asaddedup
bytheCourt,yieldsthefollowingnumbers:TotalDirectCashOut(Salaries/Wages&
Cash Benefits) = PhP 2,927,848; Total NonDirect Cash Out (Hospital/Medical

Benefits)=PhP303,040.Thecashoutfigures,asstatedinthereport,includethecost
ofhomelots;thePhP150millionorsorepresenting3%ofthegrossproduceofthe
hacienda;andthePhP37.5millionrepresenting3%fromtheproceedsofthesaleof
the500hectareconvertedlands.Whilenotincludedinthereport,HLI manifests
havinggiventheFWBs3%ofthePhP80millionpaidforthe80hectaresofland
traversedbytheSCTEX.Ontopofthese,itisworthrememberingthatthesharesof
stocksweregivenbyHLItotheFWBsforfree.Verily,theFWBshavebenefited
fromtheSDP.
ToaddressurgingsthattheFWBsbeallowedtodisengagefromtheSDPasHLI
hasnotanywayearnedprofitsthroughtheyears,itcannotbeoveremphasizedthat,
asamatterofcommonbusinesssense,nocorporationcouldguaranteeaprofitable
runallthetime.Ashasbeensuggested,oneofthekeyfeaturesofanSDPof
584
584
acorporatelandowneristhelikelihoodofthecorporatevehiclenotearning,or,worse
still,losingmoney.
TheCourtisfullyawarethatoneofthecriteriaunderDAO10forthePARCto
considertheadvisabilityofapprovingastockdistributionplanisthelikelihoodthat
the plan would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them
individually.Butasaptlynotedduringtheoralarguments,DAO10oughttohave
not,asitcannot,actuallyexactassuranceofsuccessonsomethingthatissubjectto
thewillofman,theforcesofnatureortheinherentriskynatureofbusiness. 75Just
likeinactuallanddistribution,anSDPcannotguarantee,asindeedtheSDOAdoes
notguarantee,acomfortablelifefortheFWBs.TheCourtcantakejudicialnoticeof
thefactthatthereweremanyinstanceswhereinafterafarmworkerbeneficiaryhas
beenawardedwithanagriculturalland,hejustsubsequentlysellsitandiseventually
leftwithnothingintheend.
Inall then,theonerousconditionoftheFWBs economicstatus,theirlifeof
hardship,ifthatreallybethecase,canhardlybeattributedtoHLIanditsSDPand
provideavalidgroundfortheplansrevocation.(Citationsomitted;emphasisinthe
original.)
ThisCourt,despitetheaboveholding,stillaffirmedtherevocationby
PARCofitsapprovaloftheSDPbasedonthefollowinggrounds:(1)
failureofHLItofullycomplywithitsundertakingtodistributehomelots
to the FWBs under the SDP; (2) distribution ofshares ofstock to the
FWBsbasedonthenumberofmandaysornumberofdaysworkedby
the FWB in a years time; and (3) 30year timeframe for the
implementationordistributionofthesharesofstocktotheFWBs.
Just the same, Mallari, et al. posit that the homelots required to be
distributedhaveallbeendistributedpursuanttotheSDOA,andthatwhat
merely remains to be done is the release of title from the Register of
Deeds.76Theyfurther
_______________
75TSN,August24,2010,p.125.
76Mallari,etal.MR,p.3.
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assertthattherehasbeennodilutionofsharesasthecorporaterecords
wouldshowthatifevernotallofthe18,804.32sharesweregiventothe
actualoriginalFWB,therecipientofthedifferenceisthenextofkinor
childrenofsaidoriginalFWB.77 Thus,theysubmitthatsincetheshares
weregiventothesamefamilybeneficiary,thisshouldbedeemedas
substantialcompliancewiththeprovisionsofSec.4ofDAO10. 78 Also,
theyarguethattherehasbeennoviolationofthethreemonthperiodto
implementtheSDPasmandatedbySec.11ofDAO,sincethisprovision
mustbereadinlightofSec.10ofExecutiveOrderNo.229,thepertinent
portionofwhichreads,TheapprovalbythePARCofaplanforsuch
stock distribution, and its initial implementation, shall be deemed
compliancewiththelanddistributionrequirementoftheCARP.79
Again, the matters raised by Mallari, et al. have been extensively
discussedbytheCourtinitsJuly5,2011Decision.Asstated:
OnTitlestoHomelots
UnderRA6657,thedistributionofhomelotsisrequiredonlyforcorporationsor
businessassociationsowningoroperatingfarmswhichoptedforlanddistribution.
Sec.30ofRA6657states:
SEC.30.HomelotsandFarmlotsforMembersofCooperatives.The
individual members of the cooperatives or corporations mentioned in the
precedingsectionshallbeprovidedwithhomelotsandsmallfarmlotsfortheir
familyuse,tobetakenfromthelandownedbythecooperativeorcorporation.
Theprecedingsectionreferredtointheabovequotedprovisionisasfollows:
SEC.29.FarmsOwnedorOperatedbyCorporationsorOtherBusiness
Associations.Inthecaseoffarmsownedor
_______________
77Id.
78Id.
79Id.
586
586
operatedbycorporationsorotherbusinessassociations,thefollowingrules
shallbeobservedbythePARC.
In general, lands shall be distributed directly to the individual worker
beneficiaries.
Incaseitisnoteconomicallyfeasibleandsoundtodividetheland,thenit
shall be owned collectively by the workerbeneficiaries who shall form a
workerscooperativeorassociationwhichwilldealwiththecorporationor
businessassociation.Untilanewagreementisenteredintobyandbetween
the workers cooperative or association and the corporation or business
association,anyagreementexistingatthetimethisActtakeseffectbetween
theformerandthepreviouslandownershallberespectedbyboththeworkers
cooperativeorassociationandthecorporationorbusinessassociation.
Noticeably,theforegoingprovisionsdonotmakereferencetocorporationswhich
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporationsarenotobligedtoprovideforitexceptbystipulation,asinthiscase.
UndertheSDP,HLIundertooktosubdivideandallocateforfreeandwithout
chargeamongthequalifiedfamilybeneficiariesxxxresidentialorhomelotsofnot
morethan240sq.m.each,witheachfamilybeneficiarybeingassuredofreceiving
andowningahomelotinthebarrioorbarangaywhereitactuallyresides,withina
reasonabletime.
Morethansixteen(16)yearshaveelapsedfromthetimetheSDPwasapproved
byPARC,andyet,itisstillthecontentionoftheFWBsthatnotallwasgiventhe
240squaremeterhomelotsand,ofthosewhowerealreadygiven,somestilldonot
havethecorrespondingtitles.
Duringtheoralarguments,HLIwasaffordedthechancetorefutetheforegoing
allegationbysubmittingproofthattheFWBswerealreadygiventhesaidhomelots:
Justice Velasco:x x x There is also an allegation that the farmer
beneficiaries,thequalifiedfamilybeneficiarieswerenotgiventhe240square
meterseach.So,canyoualso[prove]thatthequalifiedfamilybeneficiaries
werealreadyprovidedthe240squaremeterhomelots.
Atty.Asuncion:Wewill,yourHonorplease.
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Otherthanthefinancialreport,however,noothersubstantialproofshowingthat
allthequalifiedbeneficiarieshavereceivedhomelotswassubmittedbyHLI.Hence,
this Court is constrained to rule that HLI has not yet fully complied with its
undertakingtodistributehomelotstotheFWBsundertheSDP.
OnManDaysandtheMechanicsofStockDistribution
Inourreviewandanalysisofpar.3oftheSDOAonthemechanicsandtimelines
ofstockdistribution,Wefindthatitviolatestwo(2)provisionsofDAO10.Par.3of
theSDOAstates:
3. Attheendofeachfiscalyear,foraperiodof30years,theSECOND
PARTY[HLI]shallarrangewiththeFIRSTPARTY[TDC]theacquisition
anddistributiontotheTHIRDPARTY[FWBs]onthebasisofnumberof
daysworkedandatnocosttothemofonethirtieth(1/30)of118,391,976.85
sharesofthecapitalstockoftheSECONDPARTYthatarepresentlyowned
and held by the FIRST PARTY, until such time as the entire block of
118,391,976.85sharesshallhavebeencompletelyacquiredanddistributedto
theTHIRDPARTY.
Basedontheabovequotedprovision,thedistributionofthesharesofstocktothe
FWBs,albeitnotentailingacashoutfromthem,iscontingentonthenumberofman
days,thatis,thenumberofdaysthattheFWBshaveworkedduringtheyear.This
formuladeviatesfromSec.1ofDAO10,whichdecreesthedistributionofequal
numberofsharestotheFWBsastheminimumratioofsharesofstockforpurposes
ofcompliancewithSec.31ofRA6657.AsstatedinSec.4ofDAO10:
Section4.Stock Distribution Plan.The [SDP] submitted by the
corporatelandownerapplicantshallprovideforthedistributionofanequal
numberofshares ofthesameclassandvalue,withthesamerightsand
featuresasallothershares,toeachofthequalifiedbeneficiaries. This
distributionplaninallcases,shallbeatleasttheminimumratioforpurposes
ofcompliancewithSection31ofR.A.No.6657.
On top of the minimum ratio provided under Section 3 of this
Implementing Guideline, the corporate landownerapplicant may adopt
additionalstockdistributionschemestakingintoaccountfactorssuchas
rank,sen
588
588
iority, salary, position and other circumstances which may be deemed
desirableasamatterofsoundcompanypolicy.
Theaboveprovisogivestwo(2)setsorcategoriesofsharesofstockwhicha
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains,asearlierexplained,tothemandatoryminimumratioofsharesofstockto
bedistributedtotheFWBsincompliancewithSec.31ofRA6657.Thisminimum
ratiocontemplatesofthatproportionofthecapitalstockofthecorporationthat
theagriculturalland,actuallydevotedtoagriculturalactivities,bearsinrelation
tothecompanystotalassets.Itisthissetofsharesofstockwhich,inlinewith
Sec. 4 of DAO 10, is supposed to be allocated for the distribution of an equal
numberofsharesofstockofthesameclassandvalue,withthesamerightsand
featuresasallothershares,toeachofthequalifiedbeneficiaries.
Ontheotherhand,thesecondsetorcategoryofsharespartakesofagratuitous
extragrant,meaningthatthissetorcategoryconstitutesanaugmentationshare/sthat
the corporate landowner may give under anadditional stock distributionscheme,
takingintoaccountsuchvariablesasrank,seniority,salary,positionandlikefactors
whichthemanagement,intheexerciseofitssounddiscretion,maydeemdesirable.
Beforeanythingelse,itshouldbestressedthat,atthetimePARCapprovedHLIs
SDP,HLIrecognized 6,296 individualsasqualifiedFWBs.Andunderthe30year
stockdistributionprogramenvisagedundertheplan,FWBswhocameinafter1989,
new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodatedasevidencedbytheirreceiptofHLIshares.
Nowthen,byprovidingthatthenumberofsharesoftheoriginal1989FWBsshall
dependonthenumberofmandays,HLIviolatedtheaforequotedruleonstock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation,for,inneteffect,these6,296qualifiedFWBs,whotheoreticallyhad
givenuptheirrightstothelandthatcouldhavebeendistributedtothem,suffereda
dilution of their due share entitlement. As has been observed during the oral
arguments,HLIhaschosentousethesharesearmarkedforfarmworkersasreward
systemchipstowaterdownthesharesoftheoriginal6,296FWBs.Particularly:
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JusticeAbad:IftheSDOAdidnottakeplace,theotherthingthatwould
havehappenedisthattherewouldbeCARP?
Atty.DelaMerced:Yes,YourHonor.
JusticeAbad:ThatstheonlypointIwanttoknow
xxx.Now,buttheychosetoenterSDOAinsteadofplacingtheland
underCARP.Andforthatreasonthosewhowouldhavegottentheirsharesof
thelandactuallygaveuptheirrightstothislandinplaceofthesharesofthe
stock,isthatcorrect?
Atty.DelaMerced:Itwouldbethatway,YourHonor.
JusticeAbad:Rightnow,alsothegovernment,inaway,gaveupitsright
toownthelandbecausethatwaythegovernmenttakesown[sic]thelandand
distributeittothefarmersandpayfortheland,isthatcorrect?
JusticeAbad:Andthenyougavethirtythreepercent(33%)oftheshares
ofHLItothefarmersatthattimethatnumberedxxxthosewhosignedfive
thousandfourhundredninetyeight(5,498)beneficiaries,isthatcorrect?
Justice Abad:But later on, after assigning them their shares, some
workerscameinfrom1989,1990,1991,1992andtherestoftheyearsthat
yougaveadditionalshareswhowerenotintheoriginallistofowners?
JusticeAbad:Didthosenewworkersgiveupanyrightthatwouldhave
belongtothemin1989whenthelandwassupposedtohavebeenplaced
underCARP?
Atty.DelaMerced:Ifyouaretalkingorreferring(interrupted)
JusticeAbad:None!Youtellme.None.Theygaveupnorightstoland?
Atty.DelaMerced:Theydidnotdothesamethingaswedidin1989,
YourHonor.
JusticeAbad:No,iftheywerenotworkersin1989whatlanddidthey
giveup?None,iftheybecomeworkerslateron.
590
590
Atty.DelaMerced:None,YourHonor,Iwasreferring,YourHonor,to
theoriginal(interrupted)
JusticeAbad:Sowhyisitthattherightsofthosewhogaveuptheirlands
wouldbediluted,becausethecompanyhaschosentousethesharesasreward
systemfornewworkerswhocomein?Itisnotthatthenewworkers,ineffect,
become just workers of the corporation whose stockholders were already
fixed.TheTADECOwhohassharesthereaboutsixtysixpercent(66%)and
thefivethousandfourhundredninetyeight(5,498)farmersatthetimeofthe
SDOA?Explaintome.Why,whywillyouxxxwhatrightorwheredidyou
getthatrighttousethisshares,towaterdownthesharesofthosewhoshould
have been benefited, and to use it as a reward system decided by the
company?
Fromtheabovediscourse,itisclearasdaythattheoriginal6,296FWBs,who
werequalifiedbeneficiariesatthetimeoftheapprovaloftheSDP,sufferedfrom
wateringdownofshares.Asdeterminedearlier,eachoriginalFWBisentitledto
18,804.32HLIshares.TheoriginalFWBsgotlessthantheguaranteed18,804.32HLI
sharesperbeneficiary,becausetheacquisitionanddistributionoftheHLIshares
werebasedonmandaysornumberofdaysworkedbytheFWBinayearstime.
AsexplainedbyHLI,abeneficiaryneedstoworkforatleast37daysinafiscalyear
beforeheorshebecomesentitledtoHLIshares.Ifitfallsbelow37days,theFWB,
unfortunately, does not get any share at year end. The number of HLI shares
distributedvariesdependingonthenumberofdaystheFWBswereallowedtowork
inoneyear.Worse,HLIhiredfarmworkersinadditiontotheoriginal6,296FWBs,
suchthat,asindicatedintheCompliancedatedAugust2,2010submittedbyHLIto
theCourt,thetotalnumberoffarmworkersofHLIasofsaiddatestoodat10,502.All
thesefarmworkers,whichincludetheoriginal6,296FWBs,weregivensharesoutof
the 118,931,976.85HLI shares representing the 33.296% of thetotal outstanding
capital stockofHLI.Clearly,theminimumindividualallocationofeachoriginal
FWBof18,804.32shareswasdilutedasaresultoftheuseofmandaysandthe
hiringofadditionalfarmworkers.
Goingintoanotherbutrelatedmatter,par.3oftheSDOAexpresslyprovidingfor
a30yeartimeframeforHLItoFWBsstocktransferisanarrangementcontraryto
whatSec.11ofDAO10prescribes.SaidSec.11providesfortheimplementationof
theap
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provedstockdistributionplanwithinthree(3)monthsfromreceiptbythecorporate
landowneroftheapprovaloftheplanbyPARC.Infact,basedonthesaidprovision,
thetransferofthesharesofstockinthenamesofthequalifiedFWBsshouldbe
recordedinthestockandtransferbooksandmustbesubmittedtotheSECwithin
sixty(60)daysfromimplementation.Asstated:
Section11.Implementation/Monitoring of Plan.The approved stock
distributionplanshallbeimplementedwithinthree(3)monthsfromreceipt
by the corporate landownerapplicant of the approval thereof by the
PARC,andthetransferofthesharesofstocksinthenamesofthequalified
beneficiariesshallberecordedinstockandtransferbooksandsubmittedto
theSecuritiesand ExchangeCommission(SEC) withinsixty(60) days
fromthesaidimplementationofthestockdistributionplan.
Itisevidentfromtheforegoingprovisionthattheimplementation,thatis,the
distributionofthesharesofstocktotheFWBs,mustbemadewithinthree(3)months
fromreceiptbyHLIoftheapprovalofthestockdistributionplanbyPARC.While
neither of the clashing parties has made a compelling case of the thrust of this
provision,theCourt isof theviewandsoholdsthattheintentistocompelthe
corporatelandownertocomplete,notmerelyinitiate,thetransferprocessofshares
withinthatthreemonthtimeframe.Reinforcingthisconclusionisthe60daystock
transferrecording(withtheSEC)requirementreckonedfromtheimplementationof
theSDP.
TotheCourt,thereisapurpose,whichisatoncediscernibleasitispractical,for
thethreemonththreshold.Removethistimelineandthecorporatelandownercan
veritablyevadecompliancewithagrarianreformbysimplydeferringtoabsurdlimits
theimplementationofthestockdistributionscheme.
Theargumentisurgedthatthethirty(30)yeardistributionprogramisjustifiedby
thefactthat,underSec.26ofRA6657,paymentbybeneficiariesoflanddistribution
underCARPshallbemadeinthirty(30)annualamortizations.ToHLI,saidsection
providesajustifyingdimensiontoits30yearstockdistributionprogram.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplacedasthesaidprovisionclearlydealswithlanddistribution.
592
592
SEC.26.Payment by Beneficiaries.Lands awarded pursuant to this
ActshallbepaidforbythebeneficiariestotheLBPinthirty(30)annual
amortizationsxxx.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries.Ontheotherhand,intheinstantcase,asidefromthefactthatwhatis
involvedisstockdistribution,itisthecorporatelandownerwhohastheobligationto
distributethesharesofstockamongtheFWBs.
Evidently,thelandtransferbeneficiariesaregiventhirty(30)yearswithinwhich
topaythecostofthelandthusawardedthemtomakeitlesscumbersomeforthemto
paythegovernment.Tobesure,thereasonunderpinningthe30yearaccommodation
doesnotapplytocorporatelandownersindistributingsharesofstocktothequalified
beneficiaries,asthesharesmaybeissuedinamuchshorterperiodoftime.
Takingintoaccounttheabovediscussion,therevocationoftheSDPbyPARC
shouldbeupheldforviolatingDAO10.ItbearsstressingthatunderSec.49ofRA
6657, the PARC and the DAR have the power to issue rules and regulations,
substantiveorprocedural.Beingaproductofsuchrulemakingpower,DAO10has
theforceandeffectoflawandmustbedulycompliedwith.ThePARCis,therefore,
correctinrevokingtheSDP.Consequently,thePARCResolutionNo.89122dated
November 21, l989 approving the HLIs SDP is nullified and voided. (Citations
omitted;emphasisintheoriginal.)
Basedontheforegoingruling,thecontentionsofMallari, etal. are

eithernotsupportedbytheevidenceonrecordorareutterlymisplaced.
Thereis,therefore,nobasisfortheCourttoreverseitsrulingaffirming
PARCResolutionNo.20053201andPARCResolutionNo.20063401,
revokingthepreviousapprovaloftheSDPbyPARC.
VII.ControloverAgriculturalLands
Afterhavingdiscussedandconsideredthedifferentcontentionsraised
bythepartiesintheirrespectivemotions,Wearenowlefttocontendwith
onecrucialissueinthecaseatbar,
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thatis,controlovertheagriculturallandsbythequalifiedFWBs.
Upon a review of the facts and circumstances, We realize that the
FWBswillneverhavecontrolovertheseagriculturallandsforaslongas
theyremainasstockholdersofHLI.InOurJuly5,2011Decision,this
Courtmadethefollowingobservations:
Thereis,thus,nothingunconstitutionalintheformulaprescribedbyRA6657.
Thepolicyonagrarianreformisthatcontrolovertheagriculturallandmust
alwaysbeinthehandsofthefarmers.ThenitfallsontheshouldersofDARand
PARCtoseetoitthefarmersshouldalwaysownmajorityofthecommonshares
entitledtoelectthemembersoftheboardofdirectorstoensurethatthefarmerswill
haveaclearmajorityintheboard.BeforetheSDPisapproved,strictscrutinyofthe
proposedSDPmustalwaysbeundertakenbytheDARandPARC,suchthatthe
valueoftheagriculturallandcontributedtothecorporationmustalwaysbemorethan
50%ofthetotalassetsofthecorporationtoensurethatthemajorityofthemembers
oftheboardofdirectorsarecomposedofthefarmers.ThePARCcomposedofthe
PresidentofthePhilippinesandcabinetsecretariesmustseetoitthatcontroloverthe
boardofdirectorsrestswiththefarmersbyrejectingtheinclusionofnonagricultural
assetswhichwillyieldthemajorityintheboardofdirectorstononfarmers.Any
deviation,however,byPARCorDARfromthecorrectapplicationoftheformula
prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said
provisionconstitutionallyinfirm.Rather,itistheapplicationofsaidprovisionthat
canbechallenged.Ergo,Sec.31ofRA6657doesnottrenchontheconstitutional
policyofensuringcontrolbythefarmers.(Emphasissupplied.)
InlinewithOurfindingthatcontroloveragriculturallandsmustalways
beinthehandsofthefarmers,Wereconsiderourrulingthatthequalified
FWBs should be given an option to remain as stockholders of HLI,
inasmuch as these qualified FWBs will never gain control given the
presentproportionofshareholdingsinHLI.
594
594
Council
ArevisitofHLIsProposalforStockDistributionunderCARPandthe
StockDistributionOptionAgreement(SDOA)uponwhichtheproposal
wasbasedrevealsthatthetotalassetsofHLIisPhP590,554,220,while
thevalueofthe4,915.7466hectaresisPhP196,630,000.Consequently,
theshareofthefarmerbeneficiariesintheHLIcapitalstockis33.296%
(196,630,000 divided by 590,554.220); 118,391,976.85 HLI shares
represent33.296%.Thus,evenifalltheholdersofthe118,391,976.85
HLI shares unanimously vote to remain as HLI stockholders, which is
unlikely, control will never be placed in the hands of the farmer
beneficiaries.Control,ofcourse,meansthemajorityof50%plusatleast
oneshareofthecommonsharesandothervotingshares.Applyingthe
formulatotheHLIstockholdings,thenumberofsharesthatwillconstitute
themajorityis295,112,101shares(590,554,220dividedby2plusone[1]
HLIshare).The118,391,976.85sharessubjecttotheSDPapprovedby
PARC substantiallyfall short ofthe295,112,101sharesneededbythe
FWBstoacquirecontroloverHLI.Hence,controlcanNEVERbeattained
bytheFWBs.Thereisevennoassurancethat100%ofthe118,391,976.85
sharesissuedtotheFWBswillallbevotedinfavorofstayinginHLI,
takingintoaccountthepreviousreferendumamongthefarmerswheresaid
shareswerenotvotedunanimouslyinfavorofretainingtheSDP.Inlight
oftheforegoingconsideration,theoptiontoremaininHLIgrantedtothe
individualFWBswillhavetoberecalledandrevoked.
Moreover,bearinginmindthatwiththerevocationoftheapprovalof
theSDP,HLIwillnolongerbeoperatingunderSDPandwillonlybe
treated as an ordinary private corporation; the FWBs who remain as
stockholdersofHLIwillbetreatedasordinarystockholdersandwillno
longerbeundertheprotectivemantleofRA6657.
595
VOL.660,
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Incorporatedvs.
ReformCouncil
Inadditiontotheforegoing,inviewoftheoperativefactdoctrine,all
thebenefitsandhomelots80 receivedbyalltheFWBsshallberespected
withnoobligationtorefundorreturnthem,since,asWehavementioned
inourJuly5,2011Decision,thebenefitsxxxwerereceivedbythe
FWBsasfarmhandsintheagriculturalenterpriseofHLIandotherfringe
benefits were granted to them pursuant to the existing collective
bargainingagreementwithTadeco.
One last point, the HLI land shall be distributed only to the 6,296
originalFWBs.Theremaining4,206FWBsarenotentitledtoanyportion
oftheHLIland,becausetherightstosaidlandwerevestedonlyinthe
6,296originalFWBspursuanttoSec.22ofRA6657.
In this regard, DAR shall verify the identities of the 6,296 original
FWBs,consistentwithitsadministrativeprerogativetoidentifyandselect
theagrarianreformbeneficiariesunderRA6657.81
WHEREFORE,theMotionforPartialReconsiderationdatedJuly20,
2011filedbypublicrespondentsPresidentialAgrarianReformCouncil
andDepartmentofAgrarianReform,theMotionforReconsiderationdated
July19,2011filedbyprivaterespondentAlyansangmgaManggagawang
BukidsaHaciendaLuisita,theMotionforReconsiderationdatedJuly21,
2011 filed by respondentintervenor Farmworkers Agrarian Reform
Movement,Inc.,andtheMotionforReconsiderationdatedJuly22,2011
filed by private respondents Rene Galang and AMBALA are
PARTIALLYGRANTEDwithrespecttotheoptiongrantedtothe
originalfarmworkerbeneficiariesofHaciendaLuisitatoremain
_______________
80Rollo, p. 3738. These homelots do not form part of the 4,915.75 hectares of
agriculturallandinHaciendaLuisita.Thesearepartoftheresidentiallandwithatotalarea
of120.9234hectares,asindicatedintheSDP.
81SeeConchav.Rubio,G.R.No.162446,March29,2010,617SCRA22,31.
596
596
Council
with Hacienda Luisita, Inc., which is hereby RECALLED and SET
ASIDE.The MotionforClarificationandPartialReconsideration dated
July21,2011filedbypetitionerHLIandtheMotionforReconsideration
dated July 21, 2011 filed by private respondents Noel Mallari, Julio
Suniga,SupervisoryGroupofHaciendaLuisita,Inc.andWindsorAndaya
areDENIED.
ThefallooftheCourtsJuly5,2011Decisionisherebyamendedand
shallread:
PARC Resolution No. 20053201 dated December 22, 2005 and
ResolutionNo.20063401datedMay3,2006,placingthelandssubject
ofHLIsSDPundercompulsorycoverageonmandatedlandacquisition
scheme of the CARP, are hereby AFFIRMED with the following
modifications:
Allsalaries,benefits,the3%ofthegrosssalesoftheproductionofthe
agriculturallands,the3%shareintheproceedsofthesaleofthe500
hectareconvertedlandandthe80.51hectareSCTEXlotandthehomelots
alreadyreceivedbythe10,502FWBscomposedof6,296originalFWBs
andthe4,206nonqualifiedFWBsshallberespectedwithnoobligationto
refund or return them. The 6,296 original FWBs shall forfeit and
relinquishtheirrightsovertheHLIsharesofstockissuedtotheminfavor
ofHLI.TheHLICorporateSecretaryshallcancelthesharesissuedtothe
saidFWBsandtransferthemtoHLIinthestocksandtransferbook,which
transfersshallbeexemptfromtaxes,feesandcharges.The4,206non
qualifiedFWBsshallremainasstockholdersofHLI.
DARshallsegregatefromtheHLIagriculturallandwithanareaof
4,915.75hectaressubjectofPARCsSDPapprovingResolutionNo.89
122the500hectarelotsubjectoftheAugust14,l996ConversionOrder
andthe80.51hectarelotsoldto,oracquiredby,thegovernmentaspartof
theSCTEXcomplex.Afterthesegregationprocess,asindicated,isdone,
the remaining area shall be turned over to DAR for immediate land
distribution to the original 6,296 FWBs or their successorsininterest
whichwillbeidentifiedbytheDAR.The
597
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Incorporatedvs.
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4,206nonqualifiedFWBsarenotentitledtoanyshareinthelandtobe
distributedbyDAR.
HLIisdirectedtopaytheoriginal6,296FWBstheconsiderationof
PhP500,000,000receivedbyitfromLuisitaRealty,Inc.forthesaletothe
latterof200hectaresoutofthe500hectarescoveredbytheAugust14,
1996ConversionOrder,theconsiderationofPhP750,000,000receivedby
its owned subsidiary, Centennary Holdings, Inc., for the sale of the
remaining300hectaresoftheaforementioned500hectarelottoLuisita
IndustrialParkCorporation,andthepriceofPhP80,511,500paidbythe
governmentthroughtheBasesConversionDevelopmentAuthorityforthe
saleofthe80.51hectarelotusedfortheconstructionoftheSCTEXroad
network.FromthetotalamountofPhP1,330,511,500(PhP500,000,000+
PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be
deductedthe3%oftheproceedsofsaidtransfersthatwerepaidtothe
FWBs, the taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and Centennary

Holdings,Inc.forlegitimatecorporatepurposes.Forthispurpose,DARis
orderedtoengagetheservicesofareputableaccountingfirmapprovedby
thepartiestoauditthebooksofHLIandCentennaryHoldings,Inc.to
determineifthePhP1,330,511,500proceedsofthesaleofthethree(3)
aforementionedlotswereactuallyusedorspentforlegitimatecorporate
purposes.Anyunspentorunusedbalanceandanydisallowedexpenditures
asdeterminedbytheauditshallbedistributedtothe6,296originalFWBs.
HLIisentitledtojustcompensationfortheagriculturallandthatwillbe
transferredtoDARtobereckonedfromNovember21,1989whichisthe
date ofissuanceofPARC Resolution No.89122.DAR andLBPare
orderedtodeterminethecompensationduetoHLI.
DARshallsubmitacompliancereportaftersix(6)monthsfromfinality
ofthisjudgment.Itshallalsosubmit,aftersubmissionofthecompliance
report,quarterlyreportsonthe
598
598
Council
executionofthisjudgmentwithinthefirst15daysaftertheendofeach
quarter,untilfullyimplemented.
Thetemporaryrestrainingorderislifted.
SOORDERED.
Peralta,DelCastillo,AbadandPerez,JJ.,concur.
Corona(C.J.),Pleaseseeconcurringanddissentingopinion.
Carpio,J.,NoPart,priorinhibition.
LeonardoDeCastro,J.,IconcurwithJusticeVelascoandmaintain
myvehementdisagreementwithJusticeSerenosopinionwhichwillput
thelandbeyondthecapacityofthefarmerstopay,basedonherstrained
construction/interpretationofthelawre:dateoftaking.
Brion,J.,IcertifythatMr.JusticeBrionsubmittedaConcurringand
DissentingOpinion.
Bersamin,J.,WithConcurringandDissentingopinion.
Villarama,Jr.,J.,IjoinC.J.R.C.Coronasopinion.
Sereno,J.,SeeConcurringandDissentingOpinion.
Mendoza,J., Imaintainmypositionsinmyseparateopinionexcept
astothereckoneddateforjustcompensation.ItshouldbefromNovember
21,1989.
Reyes,J.,SubjecttoDissentingOpinionofJusticeBersamin.
PerlasBernabe,J.,SubjecttoJ.Bersaminsdissentingopinion.
599
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CONCURRINGANDDISSENTINGOPINION
CORONA,C.J.:
Thecompleteindependenceofthecourtsofjusticeispeculiarlyessentialtoa
limited Constitution. By a limited Constitution I understand one which
containscertainspecifiedexceptionstothelegislativeauthority....Limitations
of this kind can be preserved in practice no other way than through the
mediumofthecourtsofjustice,whosedutyitmustbetodeclareallacts
contrarytothemanifesttenoroftheConstitutionvoid.Withoutthis,all
thereservationsofparticularrightsorprivilegeswouldamounttonothing.1
ThefundamentalstandardofagrarianreformisSection4,ArticleXIII
oftheConstitution:
Section4.TheStateshall,bylaw,undertakeanagrarianreformprogram
foundedontherightoffarmersandregularfarmworkerswhoarelandless,to
owndirectlyorcollectivelythelandstheytillor,inthecaseofotherfarmworkers,
toreceiveajustshareofthefruitsthereof.Tothisend, theStateshallencourage
and undertake the just distribution of all agricultural lands, subject to such
prioritiesandreasonableretentionlimitsastheCongressmayprescribe,takinginto
account ecological, developmental, or equity considerations, and subject to the
paymentofjustcompensation.Indeterminingretentionlimits,theStateshallrespect
therightofsmalllandowners.TheStateshallfurtherprovideincentivesforvoluntary
landsharing.(Emphasissupplied)
ItisagainstthisstandardthatthefollowingprovisionofSection31of
RA 6657 (Comprehensive Agrarian Reform Law of 1988) should be
tested:
_______________
1Hamilton,Alexander,TheFederalistNo.78atpp.52122,CarlVanDorened.,1945.
600
600
Council
SEC.31.Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
PhilippinespursuanttoSection20hereofortoqualifiedbeneficiaries,undersuch
termsandconditionsconsistentwiththisAct,astheymayagreeupon,subjectto
confirmationbytheDAR.
UponcertificationbytheDAR, corporationsowningagriculturallandsmay
givetheirqualifiedbeneficiariestherighttopurchasesuchproportionofthe
capitalstockofthecorporationthattheagriculturalland,actuallydevotedto
agriculturalactivities,bearsinrelationtothecompanystotalassets,undersuch
terms and conditions as may be agreed upon by them. In no case shall the
compensationreceivedbytheworkersatthetimethesharesofstocksaredistributed
bereduced.Thesameprincipleshallbeappliedtoassociations,withrespecttotheir
equityorparticipation.
Corporationsorassociationswhichvoluntarilydivestaproportionoftheir
capitalstock,equityorparticipationinfavoroftheirworkersorotherqualified
beneficiaries under this section shall be deemed to have complied with the
provisionsofthisAct:Provided,Thatthefollowingconditionsarecompliedwith:
a)Inordertosafeguardtherightofbeneficiarieswhoownsharesofstocksto
dividendsandotherfinancialbenefits,thebooksofthecorporationorassociation
shall be subject to periodic audit by certified public accountants chosen by the
beneficiaries;
b)Irrespectiveofthevalueoftheirequityinthecorporationorassociation,the
beneficiaries shall be assured of at least one (1) representative in the board of
directors, or in a management or executive committee, if one exists, of the
corporationorassociation;
c)Anysharesacquiredbysuchworkersandbeneficiariesshallhavethesame
rightsandfeaturesasallothershares;and
d)Anytransferofsharesofstocksbytheoriginalbeneficiariesshallbevoid ab
initio unless said transaction is in favor of a qualified and registered beneficiary
withinthesamecorporation.
Ifwithintwo(2)yearsfromtheapprovalofthisAct,thelandorstocktransfer
envisioned above is not made or realized or the plan for such stock distribution
approvedbythePARCwithinthesame
601
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period,theagriculturallandofthecorporateownersorcorporationshallbesubjectto
thecompulsorycoverageofthisAct.
CourtsDutytoConfront
TheConstitutionalQuestion
Where a provision of a statute goes against the fundamental law,
specially if it impairs basic rights and constitutional values, the Court
shouldnothesitatetostrikeitdownasunconstitutional.Insuchacase,
refusaltoaddresstheissueofconstitutionalitysquarelyisneitherprudence
norrestraintbutevasionofjudicialdutyandabdicationoftheCourts
authority.
Withthisinmind,Iregistermydissenttotheponenciasresolutionof
themotionsforreconsiderationoftheJuly5,2011decisioninthiscase.
The ponencia persiststorejectaninquiryintotheconstitutionalityof
Section31ofRA6657ontwogrounds:theissueofconstitutionalityisnot
thelismotaofthecaseandtheissueisalreadymoot.
The Court should not decline to test the constitutional validity of
Section31ofRA6657onthebasisofeithertherequirementoflismotaor
thedoctrineofmootness.
The requirement of lis mota does not apply where the question of
constitutionalitywasraisedbythepartiesandaddressingsuchquestionis
unavoidable.2Itcannotbedisputedthatthepartiesininteresttothiscase
presented the question of constitutionality. Also, any discussion of the
stock distribution plan of petitioner Hacienda Luisita, Inc. (HLI)

necessarilyandinescapablyinvolvesadiscussionofitslegalbasis,Section
31 of RA 6657. While the said provision enjoys the presumption of
constitutionality, that presumption has precisely been challenged. Its
inconsistencywiththefundamentallawwasraisedspecificallyasanissue.
_______________
2Sottov.CommissiononElections,76Phil.516,522(1946).
602
602
Council
Moreimportantly,considerationsofpublicinterestrendertheissueofthe
constitutionality of Section 31 of RA 6657 inevitable. Agriculture is
historically significant in Philippine society and economy and agrarian
reform is historically imbued with public interest. Our constitutional
historyandtraditionshowthatagrarianreformhasalwaysbeenapillarof
socialjustice.Relevantly,therecordsoftheConstitutionalCommission
showthatHaciendaLuisitahasalwaysbeenviewedasanacidtestof
genuineagrarianreform.3
Furthermore,theConstitutionrecognizestheprimacyoftherightof
farmersandfarmworkerstodirectlyorcollectivelyownthelandstheytill.
Anyartificialorsuperficialsubstitutesuchasthestockdistributionplan
diminishestherightanddebasestheconstitutionalintent.IfthisCourthas
theauthoritytopromulgaterulesthatprotectandenforceconstitutional
rights,4 italsohasthedutytorenderdecisionsthatensureconstitutional
rightsarepreservedandsafeguarded,notdiminishedormodified.
Ontheotherhand,theinvocationofthedoctrineofmootnessdoesnot
provideSection31ofRA6657anunpierceableveilthatwillpreventthe
Courtfrompryingintoitsconstitutionality.Indeed,themootnessdoctrine
admitsofseveralexceptions.5Ihaveamplydiscussedwhythiscasefalls
under
_______________
3SeeRecordoftheConstitutionalCommission,Vol.II,pp.663664.
4Sec.5(5),ArticleVIII,Constitution.
5SeeProvinceofNorthCotabatov.GovernmentoftheRepublicofthePhilippines,G.R.
No.183591,14October2008,568SCRA402.[T]hemootandacademicprinciplenot
beinga magical formula thatautomaticallydissuades courts in resolving acase, itwill

decidecases,otherwisemootandacademic,ifitfindsthat(a)thereisagraveviolationof
theConstitution;(b)thesituationisofexceptionalcharacterandparamountpublicinterest
isinvolved;(c)theconstitutionalissueraisedrequiresformulationofcontrollingprinciples
toguidethebench,thebar,andthepublic;and(d)thecaseiscapableofrepetitionyet
evadingreview.
603
VOL.660,
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Incorporatedvs.
ReformCouncil
theexceptionsinmydissenttotheJuly5,2011decisioninthiscase:
First, a grave violation of the Constitution exists. Section 31 of RA 6657 runs
roughshodoverthelanguageandspiritofSection4,ArticleXIIIoftheConstitution.
ThefirstsentenceofSection4isplainandunmistakeable.Itgroundsthemandatefor
agrarianreformontherightoffarmersandregularfarmworkers,whoarelandless,toown
directlyorcollectivelythelandtheytill.Theexpresslanguageoftheprovisionisclearand
unequivocalagrarianreformmeansthatfarmersandregularfarmworkerswhoarelandless
shouldbegivendirectorcollectiveownershipofthelandtheytill.Thatistheirright.
Unlessthereislanddistribution,therecanbenoagrarianreform.Anyprogramthat
givesfarmersorfarmworkersanythinglessthanownershipoflandfailstoconformtothe
mandateoftheConstitution.Inotherwords,aprogramthatgivesqualifiedbeneficiaries
stockcertificatesinsteadoflandisnotagrarianreform.
Actuallanddistributionistheessentialcharacteristicofaconstitutionalagrarianreform
program.Thepolarstar,whenwespeakoflandreform,isthatthefarmerhasarightto
thelandhetills.Indeed,areadingoftheframersintentclearlyshowsthatthephilosophy
behindagrarianreformisthedistributionoflandtofarmers,nothingless.
MR.NOLLEDO.Andwhenwetalkofthephrasetoowndirectly,wemeanthe
principleofdirectownershipbythetiller?
MR.MONSOD.Yes.
MR.NOLLEDO.Andwhenwetalkofcollectively,wemeancommunalownership,
stewardshiporStateownership?
MS. NIEVA.In this section, we conceive of cooperatives; that is farmers

cooperativesowningtheland,nottheState.
MR. NOLLEDO.And when we talk of collectively, referring to farmers
cooperatives,dothefarmersownspecificareasoflandwheretheyonlyunitein
theirefforts?
MS.NIEVA.Thatisoneway.
604
604
Council
MR.NOLLEDO.BecauseIunderstandthattherearetwobasicsystemsinvolved:the
moshavetypeofagricultureandthekibbutz.Soarebothcontemplatedinthe
report?
MR.TADEO.Angdalawakasingpamamaraanngpagpapatupadngtunaynareporma
salupaayangpagmamayaringlupanahahatiinsaindividualnapagmamayari
directlyatangtinatawagnasamasamanggagawinngmgamagbubukid.Tuladsa
Negros, ang gusto ng mga magbubukid ay gawin nila itong cooperative or
collectivefarm.Angibigsabihinaysamasamanilangsasakahin.
MR.BENNAGEN.MadamPresident,naiskolangdagdaganiyongsagotniGinoong
Tadeo.xxxx
Kasi,doonsacollectiveownership,kasalidiniyongcommunalownership
ngmgaminorya.HalimbawasaTanay,noonggumawakamingisangpananaliksik
doon,nagtakasilakungbakitkailanganpangmagkaroonnglandreformnakung
saanaybibigyansilangtigiisangtitulo.AtsilangaaynagpuntasaMinistryof
Agrarian Reform at sinabi nila na hindi ito ang gusto nila; kasi sila naman ay
magkakamaganak. Anggustonilaaylupa athindinakailanganangtigiisang
titulo.MaramingganitongkasomulasaCordillerahanggangZambales,Mindoroat
Mindanao,kayatkasaliitosakonseptongcollectiveownership.
xxxxxxxxx
MR.VILLACORTA.xxxSection5givesthe opportunityfortillersofthesoilto
ownthelandthattheytill;xxx
xxxxxxxxx
MR.TADEO.xxx AngdahilanngkahirapannatinsaPilipinasngayonayang
pagtitipontiponngvasttractsoflandsakamayngiilan.Lupaangnagbibigay
ngbuhaysamagbubukidatsaibapangmanggagawasabukid.Kapaginalissa
kanilaanglupa,paranginalisannarinsilangbuhay.Kayakinakailangantalagang
magkaroonngtinatawagnajustdistribution.xxx
xxxxxxxxx
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MR. TADEO.Kasi ganito iyan. Dapat muna nating makita ang prinsipyo ng
agrarianreform,iyongmagingmayarisiyanglupanakaniyangbinubungkal.
Iyonangkaunaunahangprinsipyonito.xxx
xxxxxxxxx
MR.TINGSON.xxxWhenwespeakhereoftoowndirectlyorcollectivelythelands
theytill,isthislandforthetillersratherthanlandforthelandless?Before,weused
tohearlandforthelandless,butnowthesloganislandforthetillers.Isthat
right?
MR.TADEO.Angprinsipyongumiiralditoayiyong landforthetillers.Angibig
sabihinngdirectlyaytuladsaimplementasyonsariceandcornlandskungsaan
inaarinangmgamagsasakaanglupangbinubungkalnila.Angibigsabihin
namanngcollectivelyaysamasamangpaggawasaisanglupainoisangbukid,
katuladngsitwasyonsaNegros.
xxxxxxxxx
MR.BENNAGEN.Maaarikayangmagdagdagsapagpapaliwanagngprimacy?Kasi
may cultural background ito. Dahil agrarian society pa ang lipunang Pilipino,
maigting talaga ang ugnayan ng mga magsasaka sa kanilang lupa. Halimbawa,
sinasabi nila na ang lupa ay pinagbuhusan na ng dugo, pawis at luha. So land
acquiresasymboliccontentthatisnotsimplynegatedbygrowth,byproductivity,
etc.Theprimacyshouldbeseeninrelationtoanagrarianprogramthatleadstoa
laterstageofsocialdevelopmentwhichatsomepointintimemayalreadynegate
thiskindofattachment.Theassumptionisthattherearealreadycertainoptions
available to the farmers. Marahil ang primacy ay ang pagkilala sa
pangangailanganngmagsasakaangpagaaringlupa.Angassumptionayang
pagaarimismonglupabecomesthebasisforthefarmerstoenjoythebenefits,
thefruitsoflabor.xxx(678)
xxxxxxxxx
MR.TADEO.xxxKungsinasabinatingsiKristoayliberatingdahilangapiaylalayaat
angmgabihagaymangalilig
606
606
Council
tas,sinabirinniCommissionerFelicitasAquinonakunganghistoryay
liberating, dapat ding maging liberating ang Saligang Batas. Ang
magpapalayasaatinayangagrarianandnaturalresourcesreform.
Theprimary,foremostandparamountprinciplesandobjectivesarecontained
[i]nlines19to22:primacyoftherightsandoffarmersandfarmworkerstoown
directly or collectively the lands they till. Ito ang kaunaunahan at
pinakamahalagangprinsipyoatlayuninngisangtunaynarepormasalupa
naangnagbubungkalnglupaaymagingmayarinito.xxx(695696)
Theessentialthrustofagrarianreformislandtothetiller.Thus,tosatisfythemandate
of the constitution, any implementation of agrarian reform should always preserve the
controloverthelandinthehandsofitstillerortillers,whetherindividuallyorcollectively.
Consequently,anylawthatgoesagainstthisconstitutionalmandateoftheactualgrant
oflandtofarmersandregularfarmworkersmustbenullified.IftheConstitution,asitis
nowwordedandasitwasintendedbytheframersenvisagedanalternativetoactualland
distribution (e.g., stock distribution) such option could have been easily and explicitly
providedforinitstextorevenconceptualizedintheintentoftheframers.Absolutelyno
such alternative was provided for. Section 4, Article XIII on agrarian reform, in no
uncertainterms,speaksoflandtobeowneddirectlyorcollectivelybyfarmersandregular
farmworkers.
Byallowingthedistributionofcapitalstock,notland,ascompliancewithagrarian
reform,Section31ofRA6657directlyandexplicitlycontravenesSection4,ArticleXIIIof
theConstitution.Thecorporatelandownerremainstobetheowneroftheagriculturalland.
Qualifiedbeneficiariesaregivenownershiponlyofsharesofstock,notthelandstheytill.
Landlessfarmersandfarmworkersbecomelandlessstockholdersbutstilltillingthelandof
thecorporateowner,therebyperpetuatingtheirstatusaslandlessfarmersandfarmworkers.
Second,thiscaseisofexceptionalcharacterandinvolvesparamountpublicinterest.In
La BugalBLaan Tribal Association, Inc., the Court reminded itself of the need to
recognizetheextraor
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Incorporatedvs.
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dinarycharacterofthesituationandtheoverridingpublicinterestinvolved
inacase.Here,thereisanecessityforacategoricalrulingtoendthe
uncertainties plaguing agrarian reform caused by serious constitutional
doubtsonSection31ofRA6657.Whiletheponenciawouldhavethe
doubtslinger,strongreasonsoffundamentalpublicpolicydemandthatthe
issue of constitutionality be resolved now, before the stormy cloud of
doubtcancauseasocialcataclysm.
Attheriskofbeingrepetitive,agrarianreformisfundamentallyimbuedwithpublic
interestandtheimplementationofagrarianreformatHaciendaLuisitahasalwaysbeenof
paramountinterest.Indeed,itwasspecificallyandunequivocallytargetedwhenagrarian
reform was being discussed in the Constitutional Commission. Moreover, the Court
shouldtakejudicialcognizanceoftheviolentincidentsthatintermittentlyoccuratHacienda
Luisita,solelybecauseoftheagrarianproblemthere.Indeed,HaciendaLuisitaprovesthat,
forlandlessfarmersandfarmworkers,thelandtheytillistheirlife.
TheConstitutiondoesnotonlybestowthelandlessfarmersandfarmworkerstherightto
ownthelandtheytillbutalsoconcedesthatrighttothemandmakesitadutyoftheStateto
respect that right through genuine and authentic agrarian reform. To subvert this right
throughamechanismthatallowsstockdistributioninlieuoflanddistributionasmandated
bytheConstitutionstrikesattheveryheartofsocialjustice.Asagraveinjustice,itmustbe
struckdownthroughtheinvalidationofthestatutoryprovisionthatpermitsit.
Toleavethisissueunresolvedistoallowthefurthercreationoflaws,rulesororders
thatpermitpoliciescreating,unintentionallyorotherwise,meanstoavoidcompliancewith
theforemostobjectiveofagrarianreformtogivethehumblefarmerandfarmworkerthe
right to own the land he tills. To leave this matter unsettled is to encourage future
subversionorfrustrationofagrarianreform,socialjusticeandtheConstitution.
Third,theconstitutionalissueraisedrequirestheformulationofcontrollingprinciplesto
guidethebench,thebarandthepublic.Fundamentalprinciplesofagrarianreformmustbe
establishedinorderthatitsaimmaybetrulyattained.
Onesuchprinciplethatmustbeetchedinstoneisthatnolaw,ruleorpolicycansubvert
theultimategoalofagrarianreform,the
608
608
Council
actualdistributionoflandtofarmersandfarmworkerswhoarelandless.
Agrarianreformrequiresthatsuchlandlessfarmersandfarmworkersbe
givendirectorcollectiveownershipofthelandtheytill,subjectonlytothe
retentionlimitsandthepaymentofjustcompensation.Thereisnovalid
substitute to actual distribution of land because the right of landless
farmersandfarmworkersexpresslyandspecificallyreferstoa right to
ownthelandtheytill.
Fourth,thiscaseiscapableofrepetition,yetevadingreview.Aspreviouslymentioned,
if the subject provision is not struck down today as unconstitutional, the possibility of
passingfuturelawsprovidingforasimilaroptionisominouslypresent.Indeed,whatwill
stopourlegislatorsfromprovidingartificialalternativestoactuallanddistributionifthis
Court,inthefaceofanopportunitytodoso,doesnotdeclarethatsuchalternativesare
completelyagainsttheConstitution?
Moreover,therequirementof lismota andthemootnessdoctrineare

not constitutional requirements but simply prudential doctrines of
justiciabilityfashionedbytheCourtintheexerciseofjudicialrestraint.
ForifthesaidgroundshavebeenimposedbytheConstitutionitself,no
exceptioncouldhavebeencarvedbycourts(foreitherground)ascourts
onlyapplyandinterprettheConstitutionanddonotmodifyit.
Judicial review is particularly important in enjoining and redressing
constitutional violations inflicted by all levels of government and
government officers.6 Thus, this Court may not be hampered in the
performance of its essential function to uphold the Constitution by
prudentialdoctrinesofjusticiability.
Indeed,inthiscase,toavoidtheconstitutionalquestionwouldbeto
ignoreaviolationoftheConstitutionandtodisregardthetramplingof
basicrightsandconstitutionalvalues.
609
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ConstitutionalInfirmity
ofSection31ofRa6657
ImaintainmystancethatSection31ofRA6657isinvalid.Agrarian
reformsunderlyingprincipleistherecognitionoftherightsoffarmers
and farmworkers who are landless to own, directly or collectively, the
lands they till. Under the Constitution, actual land distribution to
qualified agrarian reform beneficiaries is mandatory. Anything that
promises something other than land must be struck down for being
unconstitutional.
Byallowingcorporatelandholderstocontinueowningthelandbythe
mereexpedientofdivestingaproportionoftheircapitalstock,equityor
participation in favor of their workers or other qualified beneficiaries,
Section31defeatstherightoffarmersandregularfarmworkerswhoare
landless,underSection4,ArticleXIIIoftheConstitution,toowndirectly
orcollectivelythelandstheytill.Section31ofRA6657doesnottherefore
servetheendsofsocialjusticeasenvisionedundertheagrarianreform
provisionsoftheConstitution.
Section31ofRA6657asimplementedunderthestockdistribution
option agreement merely entitles farmworkerbeneficiaries of petitioner
HLI to certificates of stocks which represent equity or interest in the
corporatelandowner,petitionerHLI,notinthelanditself.UnderSection
31 of RA 6657, the corporate landowner retains ownership of the
agriculturallandwhilethefarmworkerbeneficiariesbecomestockholders
butremainlandless.Whilefarmworkerbeneficiariesholdapieceofpaper
thatrepresentsinterestinthecorporationthathasownedandstillownsthe
land,thatpaperactuallydeprivesthemoftheirrightfulclaimwhichis
ownership of the land they till. Thus, Section 31 unduly prevents the
farmworkerbeneficiariesfromenjoyingthepromiseofSection4,Article
XIIIoftheConstitutionforthemtoowndirectlyorcollectivelythelands
theytill.
610
610
Council
CorporateownershipbythecorporatelandownerunderSection31does
notsatisfythecollectiveownershipenvisionedunderSection4,Article
XIIIoftheConstitution.Wherethefarmworkerbeneficiariesareneither
thecollectivenakedownersnorthecollectivebeneficialownersofthe
landtheytill,therecanbenovalidcompliancewiththeConstitutions
objectiveofcollectiveownershipbyfarmersandfarmworkers.Collective
ownershipoflandundertheagrarianreformprovisionsoftheConstitution
must operate on the concept of collective control of the land by the
qualifiedfarmerandfarmworkers.
Here,Section31ofRA6657deprivesthefarmworkerbeneficiariesnot
onlyofeithernakedtitletoorbeneficialownershipofthelandstheytill.It
alsopreventsthemfromexercisingeffectivecontrolbothofthelandand
ofthecorporatevehicleasitsimplyassuresbeneficiariesofatleastone
(1) representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association,
irrespectiveofthevalueoftheirequityinthecorporationorassociation.
Thus,whiletheyaregivenvoiceinthedecisionmakingprocessofthe
corporatelandownerwithrespecttotheland,thebeneficiarieshaveno
guaranteeofcontrol ofthelandsasthey arerelegatedto thestatus of
minorityshareholders.
ConcomitantRightsoftheFarm
workersandtheLandowner
InviewoftheunconstitutionalityofSection31ofRA6657andthe
consequentinvalidityofthestockdistributionoptionagreementwhichwas
basedonthesaidprovision,howshouldtherespectiverightsoftheparties
beaddressed?
Previously,Igrudginglyandqualifiedlyjoinedthemajorityinapplying
theoperativefactdoctrineinthiscase.Onfurtherreflection,however,I
believe that the operative fact doctrine should not be applied. The
operativefactdoctrineisaprinciplefundamentallybasedonequity.The
basisoftheapplica
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tionofthesaiddoctrineinthiscasewasthesupposedstatusofthestock
distribution option agreement as having been already implemented.
However,equityisextendedonlytoonewhocomestocourtwithclean
hands.Equityshouldberefusedtotheiniquitousandguiltyofinequity.
Forthisreason,petitionerHLImaynotbenefitonthegroundofequity
fromitsinvalidstockdistributionoptionagreementwiththefarmworker
beneficiariesasitwasfoundguiltyofbreachofseveralmaterialtermsand
conditionsofthesaidagreement.
AsSection31ofRA6657isunconstitutional,thestockdistribution
agreementbetweenpetitionerHLIanditsfarmworkerbeneficiarieshasno
leg to stand on and must perforce be annulled. This means that the
agricultural land of petitioner HLI should be deemed placed under
compulsorycoverageoflandreformonNovember21,1989,thedatethe
stock distribution option agreement between petitioner HLI and the
farmworkerbeneficiaries was approved by the Presidential Agrarian
ReformCouncil(PARC).WhilePARCcouldnothavevalidlyapproved
thestockdistributionoptionagreementforlackoflegalbasis(Section31
ofRA6657beingunconstitutional),theactionofPARCmanifestedthe
intentofthegovernmenttosubjectpetitionerHLIslandtothelandreform
program. In other words, the agricultural land of petitioner HLI was
subjectedtolandreformwithrespecttopetitionerHLI,thefarmworker
beneficiariesandthegovernmentthroughPARConNovember21,1989.
Whiletherecouldhavebeennovalidapprovalofthestockdistribution
agreement,thegovernmentsintenttobringthelandunderthecoverageof
landreformcouldnonethelessbedeemedimplementedbyitsactionasthe
subjectmatteroflandreformisbasicallytheredistributionofland.The
stockdistributionoptionagreementasaninvalidmeanstoimplementland
reform may be considered as simply an accessory to achieving the
principal objective of land reform to transfer ownership of land to the
farmworkerbeneficiaries.
612
612
Council
The principal objective and the manifestation of the governments
intenttoactthereonsubsistdespitetheinvalidityoftheaccessory.Thus,
onNovember21,1989,thegovernmentshouldrightlybeconsideredto
havepursuedtheobjectiveoflandreformandtransferredtheownershipof
the land to the farmworkerbeneficiaries. November 21, 1989 should
thereforebedeemedasthetimeoftakingofthelandfrompetitionerHLI,
aswellasthedatefromwhichtoreckonthejustcompensationpayableto
petitionerHLI.
Itmay,however,bearguedthattherecouldhavebeennotaking(inthe
sense of transferring ownership to the farmworkerbeneficiaries) on
November21,1989asthelandwasactuallyinthepossessionandcontrol
ofpetitionerHLI.True,petitionerHLImayhavecontinuedtopossessthe
landbutthisdidnotnegatetakingandtransferringofownershiptothe
farmworkerbeneficiaries on November 21, 1989. From that date,
petitionerHLIsstatusbecamethatofalawfulpossessororonewhoheld
thethingorrighttokeeporenjoyit,theownershippertainingtoanother
person,7 particularlythefarmworkerbeneficiaries.Moreover,petitioner
HLIshouldbedeemedasapossessoringoodfaith,oronethatisnot
awareofanyflawinhistitleormodeofacquisitionthereof.8Itsreliance
onthevalidityofSection31ofRA6657and,concomitantly,ofitsstock
distribution option agreement could be considered as a mistake on a

difficultquestionoflaw,afactwhichsupportsitspossessioningoodfaith.
Whilethestockdistributionoptionagreementwassupposedtocover
only4,195hectaresofpetitionerHLIsland,no
_______________
6Chemerinsky,Erwin,ConstitutionalLaw:PrinciplesandPolicies,3rdEdition(2006),
p.52.
7Article525,NewCivilCode:Thepossessionorthingsorrightsmaybehadinoneof
twoconcepts:eitherintheconceptofanowner,orthatoftheholderofthethingorrightto
keeporenjoyit,theownershippertainingtoanotherperson.
8 Article526,NewCivilCode:Heisdeemedapossessoringoodfaithwhoisnot
awarethatthereexistsinhistitleormodeofacquisitionanyflawwhichinvalidatesit.xxx
Mistakeuponadoubtfulordifficultquestionoflawmaybethebasisofgoodfaith.
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suchtermorconditionshouldbedeemedimposedonthecoverageofland
reformasofNovember21,1989.Thelimitationofthecoverageshallbe
determinedsubjectonlytosuchprioritiesandreasonableretentionlimits
prescribed by law, taking into account ecological, developmental, or
equityconsiderations.9TheDepartmentofAgrarianReform(DAR)shall
thereforedeterminetheareaproperlycoveredbylandreform,guidedby
the retention limits set by law and taking into account ecological,
developmentalorequityconsiderations.Upondeterminationofthearea
properly covered by land reform, the DAR should immediately and
actuallydistributethesametothefarmworkerbeneficiaries.Thisshall,
however,excludetheportionofconvertedlandtransferredtoLIPCOand
RCBC which shall remain with the said transferees as they were
transferees(buyers)ingoodfaith.Thelanddistributionshallalsoexclude
theportionexpropriatedbythegovernmentfortheSCTEX.
Fortheexcludedportions,however,thefarmworkerbeneficiariesshall
beentitledtotheportionoftheproceedsofthesaletoLIPCOandRCBC
correspondingtothemarketvaluethereofasofNovember21,1989.It
wouldbeunfairtoruleotherwiseasanyincreaseinvalueofthelandmay
reasonablybeattributedtotheimprovementsthereonmadebypetitioner
HLIandpetitionerHLIseffortstohavethesaidportionreclassifiedto
industrialland.Moreover,thiswouldbeinconsonancewiththerulethat
thepossessoringoodfaithisentitledtothefruitsreceivedbeforethe
possessionislegallyinterrupted.10
Theamountaccruingtothefarmworkerbeneficiariesshallalsobeless
the 3%ofthe proceedsalreadygiven tothem.Ontheother hand,the
proceedsoftheportionexpropriatedfortheSCTEXshallaccruetothe
farmworkerbeneficiaries.
_______________
9Section4,ArticleXIII,Constitution.
10Article544,NewCivilCode.
614
614
Council
Indeed, Section 4, Article XIII of the Constitution requires that the
landownerbegivenjustcompensation.Forthispurpose,theDARshall
determinethejustcompensationpayablebyeachfarmworkerbeneficiary
to petitioner HLI as it has jurisdiction in matters involving the
administrativeimplementationandenforcementofagrarianreformlaws.11
ThejustcompensationshallbebasedonthemarketvalueasofNovember
21,1989oftheentireportionthatmaybedeterminedbytheDAR as
subjecttothecoverageoflandreform.Theportionoftheproceedsofthe
portionsoldtoLIPCOandRCBCaswellastheproceedsoftheportion
expropriatedfortheSCTEXmaybethesubjectoflegalcompensationor
setoffforpurposesofthepaymentofjustcompensation.
Finally,thefarmworkerbeneficiariesshallreturnthesharesofstock
whichtheyreceivedtopetitionerHLIundertheinvalidstockdistribution
optionagreement.
WHEREFORE, I vote that the Courts July 5, 2011 decision be

RECONSIDERED.Section31ofRA6657shouldbedeclaredNULLand
VOIDforbeingunconstitutional.Consequently,thestockdistributionplan
ofpetitionerHLIshouldlikewisebedeclaredNULLandVOIDforbeing
unconstitutional.
ThelandofpetitionerHLIsubjecttoagrarianreform,asdeterminedby
the DAR, should be immediately and actually distributed to the
farmworkerbeneficiaries, except the (a) portion of converted land
transferred to LIPCO and RCBC which shall remain with the said
transferees as they were transferees (buyers) in good faith and the (b)
portionoflandexpropriatedbythegovernmentfortheSCTEX.
Thefarmworkerbeneficiariesshouldreturnthesharesofstockwhich
theyreceivedtopetitionerHLIundertheinvalidstockdistributionoption
agreement.EachofthemshouldalsobeliabletopaypetitionerHLIjust
compensationintheamounttobedeterminedbytheDARbasedonthe
fair market value of the land as of November 21, 1989. This may be
subjecttosetofforlegalcompensationwiththe
_______________
11SeeSorianov.Bravo,G.R.No.152086,15December2010,638SCRA403.
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amountsaccruingtothefarmworkerbeneficiaries,namely,(a)theportion
of theproceeds ofthesaleto LIPCO andRCBC correspondingto the
marketvaluethereofasofNovember21,1989and(b)theproceedsofthe
portion expropriated for the SCTEX shall accrue to the farmworker
beneficiaries.
SEPARATECONCURRING
ANDDISSENTINGOPINION
BRION,J.:
IntheCourtsDecisiondatedJuly5,2011,thecrucialquestionsthat
the Courtresolvedwere: (1)whetherthe PresidentialAgrarian Reform
Council(PARC)hasthepowertorevokeorrecallitsapprovalofastock
distribution option entered into between a corporate landowner and its
farmworkersbeneficiaries(FWBs),underSection31ofRepublicActNo.
6657 or the Comprehensive Agrarian Reform Law (CARL); and (2)
whetherthePARChasagroundtorevokeorrecallthestockdistribution
plan(SDP)betweenpetitionerHaciendaLuisita,Incorporated(HLI)and
itsFWBs.
TheCourtwasunanimousindeclaringthatthePARCsexpresspower
toapprovetheplanforstockdistributionofcorporatelandowners,under
Section 31 of the CARL, includes the implied power to revoke its
approval.InthecaseofHLI,themajorityoftheCourt,myselfincluded,
foundthatthePARChassolidbasestorevokeitsapprovalofHLIsSDP.1
_______________
1 ThemajorityruledthattheSDP/StockDistributionOptionAgreementiscontraryto
lawduetothemandaysmethoditadoptedincomputingthenumberofsharesthateach
FWBshallbeentitledto,andtheextendedperiodof30yearstocompletethedistributionof
shares;seeJuly5,2011Decision,pp.6772.
616
616
Council
In view of this ruling, the corollary issue of the effects of the
revocation arose, and it was at this point that I diverged from the
majoritysposition.ThemajorityspeakingthroughJusticeVelasco
founditequitabletorecognizetheexistenceofcertainoperativefacts,
notwithstandingtherevocationoftheSDP.Hence,themajoritygavethe
qualifiedFWBstheoptionofchoosingwhetherornottoremainasHLI
stockholders.Onthesameprinciple,themajorityauthorizedtheFWBsto
retainallbenefitsreceivedundertheSDP.ThedispositiveoftheJuly5,
2011Decision,thus,decreedthat:
1.thequalifiedFWBs,totaling6,296,aregiventheoptiontochoose
whethertoremainasstockholdersofHLIornot.Shouldtheychoose
toremain,theyareentitledto18,804.32shareseach;otherwise,they
areentitledtolanddistribution.ThenonqualifiedFWBstotaling
4,206,however,arenotgiventhisoption,butareallowedtoretain
thesharesalreadyreceived;
2.allthe10,502FWBsareentitledtoretainthefollowingitemsthey
receivedonaccountoftheSDP:
a.salariesandbenefits,
b.3%productionshare,
c.3%shareoftheproceedsofthesaleofthe500hectaresof
converted land and the 80hectare SubicClarkTarlac
Expressway(SCTEX)lot,and
d.6,886.5squaremeterhomelotsthateachFWBreceived;
3.Fromthe4,915.75hectaresofagriculturallandshallbesegregated:
a.the 500 hectares of converted land acquired by Luisita
IndustrialParkCorporation(LIPCO)/
RizalCommercialBankingCorporation
617
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(RCBC)andLuisitaRealtyCorporation(LRC);
b.the80hectaresoflandexpropriatedbythegovernmentfor
theSCTEX;and
c.the aggregate area of homelots of FWBs who choose to
remainasHLIstockholders.2
Aftersegregation,theremainingareasshallbeturnedoverbyHLI
totheDepartmentofAgrarianReform(DAR)forlanddistributionto
qualifiedFWBswhopreferlanddistributionoverstockownership.
4.HLIisdirectedtoturnovertheconsiderationof
a.P500millionfromthesaleofthe200hectaresofconverted
landtoLRC,
b.P750millionfromthesaleofthe300hectaresofconverted
landtoCentennaryHoldings,Inc.(Centennary),and
c.P80 million from the expropriation of 80 hectares for the

SCTEX.
FromthesumtotalofP1.33billionshallbededucted
a.the3%productionshare,
_______________
2TheJuly5,2011Decision,pp.8889referredtotheaggregateareaof6,886.5square
metersofindividuallotsthateachFWBisentitledtoundertheCARPhadheorshe not
optedtostayinHLIasstockholderasamongthosetobesegregatedfromthe4,915.75
hectaresofland(andthusnotsubjecttocompulsorylanddistribution).Ibelievethatthe
ponencia was referring instead 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 composed of 6,886.5square meter lots allotted to the FWBs who
stayedwiththecorporationshallformpartoftheHLIassets.
618
618
Council
b.the3%shareintheproceedsofthesaleofthe500hectare
convertedlandandexpropriationofthe80hectareland,
c.thetaxesandexpensesrelatingtothetransferoftitles,and
d.the expenditures incurred by HLI for legitimate corporate
purposes.
The remaining balance shall be distributed among the qualified
FWBs,and
5.HLIshallbepaidjustcompensationfortheagriculturallandthat
willbesubjecttolanddistribution,theamountofwhichshallbe
determinedbytheDAR.
I dissented from the majoritys determination of the effects of the
revocation,objectingprimarilytotheirapplicationoftheoperativefact
doctrinetojustifytheoptiongiventotheFWBsonwhetherornotto
remainasHLIstockholders.IopinedthattherevocationofthePARCs
approval of the SDP carried with it the nullification of the Stock
Distribution Option Agreement (SDOA) betweenHLIand the qualified
FWBs. Asaconsequenceofthenullification,restitutionshouldtake
place,andthepartiesaretoaccountandrestorewhattheyreceived
fromoneanother.Subjecttocertainadjustments,Imaintainthesame
viewregardingtheinapplicabilityoftheoperativefactdoctrinetothe
presentcase.Basedonthisperspective,Iproposetodisposeofthecaseas
discussedbelow.
TheapplicationoftheOperative
FactDoctrinetoExecutiveActs
Theponenciamisappliestheoperativefactdoctrine.Imaintainthe
viewthatthedoctrineisapplicableonlyinconsideringtheeffectsofa
declarationofunconstitutionalityofa law (agenerictermthatincludes
statutes,rulesand
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regulationsissuedbytheexecutivedepartmentandareaccordedthesame
statusasastatute).Thedoctrineslimitedapplicationisapparentfroma
reviewofitsorigins.
ThedoctrineofoperativefactisofAmericanorigin,firstdiscussedin
the1940caseof ChicotCountyDrainageDist.v.BaxterStatesBank.3
ChicotCountrysoughttoresisttheBaxterStatesBanksclaimbyraisinga
debt readjustment decree issued by a district court pursuant to a law
enactedbytheUSCongress.4TheBaxterStatesBankcounteredthatthe
readjustmentdecreewasnolongerbinding,asthelawuponwhichthe
decree was based has been declared unconstitutional. The lower court
sustainedtheBaxterStatesBanksargument,followingthevoidabinitio
doctrine5laiddowninthe1886caseofNortonv.ShelbyCounty.6TheUS
SupremeCourtreversedthedecisionandorderedtheremandofthecase,
rejectingthebroadapplicationofthevoid abinitio doctrinethroughthis
rationalization:
[T]he effect of a determination of unconstitutionality must be taken with
qualifications.Theactualexistenceofastatute,priortosuchadetermination,is
anoperativefactandmayhaveconsequenceswhichcannotjustlybeignored.
Thepastcannotalwaysbeerasedbyanewjudicialdeclaration.Theeffectofthe
subsequentrulingastoinvaliditymayhavetobeconsideredinvariousaspectswith
respect to particular relations, individual and corporate, and particular conduct,
privateandofficial.Questionsofrightsclaimedtohavebecomevested,ofstatus,of
priordeterminationsdeemedtohavefinalityandacteduponaccord
_______________
3308US317,318319,60S.Ct.317.
4Inparticular,theActofMay24,1934(48Stat.798),amendingtheBankruptcyActofJuly1,
1898,seeAshtonv.CameronCountyWaterImp.Dist.No.1,298U.S.513(1936).
5 Thevoid abinitio doctrinedeclaresthatanunconstitutionalactisnotalaw;itconfersno
rights;itimposesnoduties;itaffordsnoprotection;itcreatesnooffice;itis,inlegalcontemplation,
asinoperativeasthoughithadneverbeenpassed;infranote6.
6118US425,442.
620
620
ingly,ofpublicpolicyinthelightofthenaturebothofthestatuteandofitsprevious
application,demandexamination.Thesequestionsareamongthemostdifficultof
those which have engaged the attention of courts x x x and it is manifest from
numerous decisions that an allinclusive statement of a principle of absolute
retroactiveinvalidityc
Notably,Chicotandthenumerouscasesthatfolloweditsleadappliedthe
operativefactdoctrineonlyinconsideringtheeffectsofadeclaration
ofunconstitutionalityofastatute.
DeAgbayaniv.PhilippineNationalBank(PNB),7promulgatedinthis
jurisdiction in 1971, was the first instance when the operative fact
doctrine was extended to consider the effects of a declaration of
unconstitutionalityofanexecutiveact.TheponenciacitesDeAgbayani
(aswellassubsequentcasesthatechoedtheoperativefactprinciple)to
supportitsposition,butthisrelianceproceedsfromamisreadingofthe
contextinwhichDeAgbayaniusedthetermexecutiveact.
TheexecutiveactreferredtoinDeAgbayaniwasExecutiveOrderNo.
32(EO32)issuedbythenPresidentSergioOsmeainMarch10,1945,
whichimposedadebtmoratorium.SincetheCourt(inthecaseofRutter
v. Esteban8) already declared EO 32 unconstitutional, Francisco de
AgbayanicontendedthatthePNBsactionforforeclosureagainsthimhad
already prescribed. The Court was then confronted with the issue of
whether to give effect to EO 32 prior to the declaration of its
unconstitutionality.TheCourt,perJusticeEnriqueFernando,resolvedthe
issueinthismanner:
Thedecisionnowonappealreflectstheorthodoxviewthatanunconstitutional
act,forthatmatteranexecutiveorderoramunicipalordinancelikewisesuffering
fromthatinfirmity,cannotbethesourceofanylegalrightsorduties.Norcanit
justifyanyofficialacttakenunderit.Itsrepugnancytothefundamentallawonce
judi
_______________
7No.L23127,April29,1971,38SCRA429.
893Phil.68(1953).
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ciallydeclaredresultsinitsbeingtoallintentsandpurposesamerescrapofpaper.
AsthenewCivilCode[Article7]putsit:"Whenthecourtsdeclarealawtobe
inconsistentwiththeConstitution,theformershallbevoidandthelattershallgovern.
[] Administrativeorexecutiveacts,ordersandregulations shallbevalidonly
whentheyarenotcontrarytothelawsoftheConstitution.Itisunderstandablewhyit
should be so, the Constitution being supreme and paramount. Any legislative or
executiveactcontrarytoitstermscannotsurvive.
Suchaviewhassupportinlogicandpossessesthemeritofsimplicity.Itmaynot
however be sufficiently realistic. It does not admit of doubt that prior to the
declarationofnullitysuchchallengedlegislativeorexecutiveactmusthavebeen
inforceandhadtobecompliedwith.Thisissoasuntilafterthejudiciary,inan
appropriatecase,declaresitsinvalidity,itisentitledtoobedienceandrespect.Parties
mayhaveactedunderitandmayhavechangedtheirpositions.Whatcouldbemore
fittingthanthatinasubsequentlitigationregardbehadtowhathasbeendonewhile
suchlegislativeorexecutiveactwasinoperationandpresumedtobevalidinall
respects.Itisnowacceptedasadoctrinethatpriortoitsbeingnullified,itsexistence
asafactmustbereckonedwith.Thisismerelytoreflectawarenessthatprecisely
becausethejudiciaryisthegovernmentalorganwhichhasthefinalsayonwhetheror
notalegislativeorexecutivemeasureisvalid,aperiodoftimemayhaveelapsed
beforeitcanexercisethepowerofjudicialreviewthatmayleadtoadeclarationof
nullity.Itwouldbetodeprivethelawofitsqualityoffairnessandjusticethen,if
therebenorecognitionofwhathadtranspiredpriortosuchadjudication.9
Whentheseparagraphsarereadtogether,thephrasesuchchallenged
legislativeorexecutiveactquiteobviouslypertainstotheadministrative
orexecutive acts,ordersandregulationsmentionedinArticle7ofthe
CivilCode.Thus, thecontextinwhichthetermexecutiveactwas
usedinDeAgbayanireferredtoonlyexecutiveissuances(acts,orders,
rulesandregulations)thathavetheforceandeffectoflaws;itwasnot
usedtorefertoanyact
_______________
9Id.,atpp.434435.
622
622
Council
performedbytheExecutiveDepartment. DeAgbayanis extensionof
the operative fact doctrine, therefore, more properly refers only to the
recognition of the effects of a declaration of unconstitutionality of
executiveissuances,andnottoallexecutiveactsastheponencialoosely
construestheterm.Thelimitedconstructionofanexecutiveact, i.e.,
executiveissuances,isactuallymoreconsistentwiththerationalebehind
the operative fact doctrine: the presumption of constitutionality of
laws. Accordingly, it is only to this kind of executive action that the
operativefactdoctrinecanapply.
In my separate opinion to the July 5, 2011 Decision, I raised the
propriety of applying the operative fact doctrine to the present case,
primarilytoobjecttotheoptiongrantedbytheponenciatothequalified
FWBsofwhethertoremainasHLIstockholdersornot.Althoughinthe
presentResolution,theponenciareconsideredandhasnowwithdrawnthe
optiongiventothequalifiedFWBstoremainasHLIstockholders,itstill
reliedontheoperativefactdoctrinetojustifytheFWBsretentionof
certainbenefitsarisingfromtherevokedSDP:
Withtheapplicationoftheoperativefactdoctrine,saidbenefits,homelotsandthe
3%productionshareandthe3%sharefromthesaleofthe500hectareand
SCTEXlotsshallberespectedwithnoobligationtorefundorreturnthem.The
receiptofthesethingsisanoperativefactthatcannolongerbedisturbedorsimply
ignored.10(emphasisours)
Becauseofthiscontinued(andmistaken)relianceontheoperativefact
doctrine, I regretfully have to register my continued objection to the
mannerbywhichtheponenciaproposestodisposeofthiscase.
Indeed,muchoftheconfusionthataroseinthedispositionofthiscase
stemmedfromthevaryingperspectivestakenbythemembersoftheCourt
onwhataretheeffectsofthe
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10Resolution,p.11.
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revocationandwhentheseeffectsshouldaccrue.Therevocationofthe
SDPamountstothenullificationoftheSDOA,andthelogicalandlegal
consequence of this should be the restoration of the parties to their
respective situations prior to the execution of the nullified agreement.
ThereshouldbenoquestionthatthePARCsrevocationoftheapprovalof
theSDPcarriedwithitthenullificationoftheSDOAbecausethePARCs
approval is necessary to the validity of the SDOA 11; accordingly, the
effects of the revocation should be deemed to have taken place on
November 21, 1989, the date when PARC Resolution No. 89122
approvingtheSDPwasissued.Toconsideranyotherdate(eitheratthe
timePARCResolutionNo.20053201,revokingitsapprovaloftheSDP,
wasissuedoratthetimethisCourtsdecisionbecomesfinal)isnotonly
iniquitousforthepartiesbutalsopreposterousunderthelaw.Hence,to
accomplishacomplete,orderly,andfairdispositionofthecase,wehave
to consider the effects ofthe revocation to accrue from November 21,
1989.TheCourtshoulddecreethatcompulsoryComprehensiveAgrarian
Reform Program coverage should start at this point in time, and then
proceed to adjust the relations of the parties with due regard to the
interveningeventsthattranspired.12
_______________
11ThisisinferablefromSection31oftheCARL,therelevantportionofwhichdeclares,
Ifwithintwo(2)yearsfromtheapprovalofthisAct,thelandorstocktransferenvisioned
aboveisnotmadeorrealizedor theplanforsuchstockdistributionapprovedbythe
PARCwithinthesameperiod,theagriculturallandofthecorporateownersorcorporation
shallbesubjecttothecompulsorycoverageofthisAct.
12 IhavepreviouslydeclaredMay11,1989(thedatewhenHLI,TADECOandthe
qualified FWBs executed the SDOA) as the starting point to reckon the effects of the
revocation of the SDP (Separate Concurring and Dissenting Opinion, pp. 3839). Upon
closerstudyoftheCARLandtherelevantDARissuances,Ihavereconsideredmyposition
andproposethatthestartingpointshouldbeNovember21,1989.
624
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TreatmentoftheSaleoftheConvertedLand
Sincetheeffectsoftherevocationaredeemedtohavetakenplaceon
November 21, 1989, the entire 4,915.75 hectares of agricultural land
shouldbeconsideredasplacedundercompulsorycoverageasofthistime.
Todeclare(asthe ponencia does13)that500hectaresofthesubjectland
can no longer be included under the CARLs compulsory coverage
becauseithadalreadybeenconvertedintoindustrialland 14 iserroneous,
asthisimpliesthatthelandwasplacedundercompulsorycoverageonly
whenrevocationoftheSDPwasdeclared,notin1989.Ifthiswasthecase
then,theFWBsshouldnotbeentitledtoanyoftheproceedsofthesaleof
the500hectaresofconvertedlandbecausetheirrighttotheseproceeds
stemsfromtheirrighttoownthelandwhichaccruesonlywhenthelandis
placedundercompulsorycoverage.Oddlyenough,theponenciatakesan
inconsistentpositionbysubsequentlydeclaringthat
Considering that the 500hectare converted land, as well as the 80.51
hectareSCTEXlot,shouldhavebeenincludedinthecompulsorycoveragewere
itnotfortheirconversion andvalidtransfers,thenitisonlybutproperthatthe
pricereceivedforthesaleoftheselotsshouldbegiventothequalifiedFWBs.In
effect,theproceedsfromthesaleshalltaketheplaceofthelots.
_______________
13Theponencia(p.24)said:
the500hectareportionofHaciendaLuisita,ofwhichthe200hectareportionsoldtoLRCand
the300hectareportionsubsequentlyacquiredbyLIPCOandRCBCwerepartof,wasalready
subjectoftheAugust14,1996DARConversionOrder.Byvirtueofthesaidconversionorder,
thelandwasalreadyreclassifiedasindustrial/commerciallandnotsubjecttocompulsory
coverage.(emphasisours)
14ConversionfromagriculturaltoindustriallandtookplaceonAugust14,1996throughDAR
ConversionOrderNo.03060174764(95).
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xxxx
xxx.WemaintainthatthedateoftakingisNovember21,1989,thedate
whenPARCapprovedHLIsSDPperPARCResolutionNo.89122,inviewofthe
factthatthisisthetimethattheFWBswereconsideredtoownandpossessthe
agriculturallandsinHaciendaLuisita.Tobeprecise,theselandsbecamesubject
oftheagrarianreformcoveragethroughthestockdistributionschemeonlyuponthe
approvaloftheSDP,thatis,November21,1989.Thus,suchapprovalisakintoa
notice of coverage ordinarily issued under compulsory acquisition.15 (emphases,
italics,andunderscoringours)
Toreconciletheseinconsistentpositions,Iventuretoguessthatwhatthe
ponenciaperhapsmeantwasthat,onaccountoftherevocation,theentire
4,915.75 hectares were deemed placed under compulsory coverage on
November21,1989;however,despitetheinclusion,portionsoftheland
(specifically,the500hectaresofconvertedlandandthe80hectaresofthe
SCTEX land) can no longer be distributed among the qualified FWBs
underSection22oftheCARL16 becauseofthevalidtransfersmadein
favorofthirdparties.Thus,itwasnottheconversionofthe500hectare
landthatexcludeitfrom compulsorycoverage asitwasalreadydeemed
includedinthecompulsorycoveragesince1989;itwastherecognitionof
thevalidtransfersoftheselandstothirdpartiesthatexcludedthemfrom
theactuallanddistributionamongthequalifiedFWBs.
The ponencia itselfrecognizesthislegalrealitybycitingthevalid
transfersofthelandasbasisforexclusion.Yet,thisispreciselywhatis
lacking in LRCs case. By failing to intervene in this case, LRC was
unabletopresentevidencesupportingitsgoodfaithpurchaseofthe200
hectarecon
_______________
15Supranote10,atpp.27,29.
16 Sec.22.Qualified Beneficiaries.The lands covered by the CARP shall be
distributedasmuchaspossibletolandlessresidentsofthesamebarangay,orintheabsence
thereof,landlessresidentsofthesamemunicipality[.]
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vertedland.The ponencias conclusionthattherewasavalidtransferto
LRCofthe200hectaresofconvertedland,therefore,lacksbothfactual
andbasis.
Thus,Ipropose, asIdidinmyseparateopiniontotheJuly5,2011
Decision,thatLRCbegivenfullopportunitytopresentitscasebeforethe
DARxxxthefailureof[LRC]toactivelyinterveneatthePARClevel
andbeforethisCourtdoesnotreallyaffecttheintrinsicvalidityofthe
transfermadeinitsfavorifindeeditissimilarlysituatedasLIPCOand
RCBC. xxx[A]definitiverulingonthetransferofthe200hectaresto
[LRC] is premature to make. The FWBs right to the 200hectare
convertedlanditselforonlytotheproceedsofthesale(amountingto
P500million17)canbedeterminedonlyafterLRChaspresenteditscase
beforetheDAR.
Ontheotherhand,LIPCO/RCBCsacquisitioningoodfaithhasbeen
adequatelyproven.Thus,althoughthe300hectareconvertedlandshould
belongtotheFWBsonaccountoftherevocationoftheSDP,thevalid
transfertoLIPCO/RCBCentitlesthemonlytotheproceedsofthesale.
The ponencia,however,decreesthattheentireP750millionpaidforthe
200hectareconvertedlandshouldbepaidtotheFWBs.
Idisagreewiththisposition,asitfailstotakeintoaccountthatitwas
HLI which invested in and caused the conversion of the land from
agriculturaltocommercial/industrial:
SincethesaleandtransferoftheseacquiredlandscameafterthecompulsoryCARP
coveragehadtakenplace,theFWBsareentitledtobepaidforthe300hectaresof
landtransferredtoLIPCObasedonitsvaluein1989,notontheP750millionselling
pricepaidbyLIPCOtoHLI[throughitssubsidiary,Centennary]asproposedbythe
ponencia.Thisoutcomerecognizestherealitythatthevalueoftheselandsincreased
duetotheimprovementsintroducedbyHLI,specificallyHLIsmovetohavethese
portionsreclassifiedasindustriallandwhiletheywereunderitspossession.Thus,
unlessitisproventhattheP750millionisequivalenttothevalueofthelandas
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17Supranote10,atp.47.
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of[November21,1989]andexcludesthevalueofanyimprovementsthatmayhave
beenintroducedbyHLI,Imaintainthatthelands1989value,asdeterminedbythe
DAR, should be the price paid to the FWBs for the lands transferred to
LIPCO/RCBC.18
IncasetheLRCisabletoproveitsgoodfaithpurchaseofthe200hectare
convertedlandbeforetheDAR,thetreatmentoftheproceedsofthesaleof
this land shall be the same as those of LIPCO/RCBCs 300hectare
convertedlandtheFWBswillbeentitledonlytothelandsvalueasof
November21,1989,andthebalanceshallbefortheHLIascompensation
foranyimprovementsintroduced.
Withrespecttotheproceedsofthesaleofthe80hectarelandtothe
governmentfortheSCTEX,theFWBsareentitledtobepaidthefull
amountofjustcompensationthatHLIreceivedfromthegovernmentfor
the80hectaresofexpropriatedlandformingtheSCTEXhighway.What
wastransferredinthiscasewasaportionoftheHLIpropertythatwasnot
coveredbyanyconversionorder.Thetransfer,too,cameaftercompulsory
CARPcoveragehadtakenplaceandwithoutanysignificantintervention
from HLI. Thus, the whole of the just compensation paid by the
governmentshouldaccruesolelytotheFWBsasowners.19
AmountstobeDeductedfromthe
ProceedsoftheSaleoftheLands
HLIclaimedthatithadalreadypaidout3%oftheproceedsofthesale
ofthelandstotheFWBs.Thisamountshouldthusbedeductedfromthe
totalproceedsthatshouldbereturnedtothequalifiedFWBs.Thetaxes
andexpensesrelatedtothetransferoftitlesshouldlikewisebededucted,
sincethesameamountswillbeincurredregardlessoftheseller(HLIor
theFWBs).Theponenciaproposesthatthe3%
_______________
18SeparateConcurringandDissentingOpinion,pp.4041.
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productionshareandtheexpendituresincurredbyHLIandCentennaryfor
legitimate corporate purposes should also be deducted from the total
proceedsofthesale.
Inproposingthatthe3%productionsharebedeductedfromthetotal
proceedsofsaletobereturnedtotheFWBs,theponenciahaseffectively
reverseditsowninsistentdeclarationthatallthebenefitsreceivedbythe
FWBsshallberespectedwithnoobligationtorefundorreturnthem. 20
Its reliance on the operative fact doctrine to authorize the FWBs
retentionofallthebenefitswouldthusbefornaught; whattheponencia
hasgivenwithitsrighthand,ittakesawaywithitslefthand.
Also,IdonotfindanylegitimatebasisforallowingHLItodeductfrom
theproceedsofthesaletobeturnedovertotheFWBstheamountsitused
forlegitimatecorporatepurposes.Itisirrelevantfortheponenciatoorder
theDARtodetermineiftheproceedsofthesaleofthe500hectareland
andthe80hectareSCTEXlotwereactuallyusedforlegitimatecorporate
purposes.21TheFWBsareentitledtotheproceedsofthesaleofthe300
hectare land in lieu of the actual land which they are deemed to have
acquiredundertheCARLsince1989.Theponencianeverexplainedwhy
theFWBsshouldbearsuchportionoftheproceedsofthesalethatHLI
usedtofinanceitsoperations.
TransferabilityofAwardedLands
The ponencia denies the applicability of Section 27 of the CARL,
whichstates:
Sec.27.Transferability of Awarded Lands.Lands acquired by
beneficiariesunderthisActmaynotbesold,transferredorconveyedexcept
throughhereditarysuccession,ortothegovernment,ortotheLBP,ortoother
qualifiedbene
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19Id.,atp.41.
20Supranote10,atp.11.
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ficiariesforaperiodoften(10)years:Provided,however,Thatthechildrenorthe
spouseofthetransferorshallhavearighttorepurchasethelandfromthegovernment
orLBPwithinaperiodoftwo(2)years.Duenoticeoftheavailabilityoftheland
shallbegivenbytheLBPtotheBarangayAgrarianReformCommittee(BARC)of
the barangay where the land is situated. The Provincial Agrarian Coordinating
Committee (PARCCOM), as herein provided, shall, in turn, be given due notice
thereofbytheBARC.
Ifthelandhasnotyetbeenfullypaidbythebeneficiary,therighttothelandmay
be transferred or conveyed, with prior approval of the DAR, to any heir of the
beneficiary or to any other beneficiary who, as a condition for such transfer or
conveyance,shallcultivatethelandhimself.Failingcomplianceherewith,theland
shallbetransferredtotheLBPwhichshallgiveduenoticeoftheavailabilityofthe
landinthemannerspecifiedintheimmediatelyprecedingparagraph.
IntheeventofsuchtransfertotheLBP,thelattershallcompensatethebeneficiary
inonelumpsumfortheamountsthelatterhasalreadypaid,togetherwiththevalue
ofimprovementshehasmadeontheland.
The ponencia opposestheapplicationoftheaboveprovisionbydenying

theFWBstherighttosellthelandtothirdparties,includingHLI.Citing
DARAdministrativeOrderNo.1,seriesof1989(DARAO189),itstates
that the awarded lands may only be transferred or conveyed [to third
persons] after ten (10) years from the issuance and registration of the
emancipationpatent(EP)orcertificateoflandownershipaward(CLOA).
Considering that the EPs or CLOAs have not yet been issued to the
qualified FWBs x x x, the 10year prohibitive period has not even
started.22
I agree with the ponencias declaration, but only to the extent of
prohibitingthequalifiedFWBsfromsellingthelanddirectlytoHLI(or
othernonqualifiedpurchasers).Properlyconstrued,thelawmeansthat,
as a general rule, the FWBs are prohibited from transferring or
conveying
_______________
22Id.,atp.32.
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Council
thelandswithin10yearsfromtheissuanceoftheEPsorCLOAs,
except if the transfer or conveyance is made in favor of (a) a
hereditarysuccessor,(b)thegovernment,(c)theLandBankofthe
Philippines (LBP), or (d) other qualified beneficiaries; transfers or
conveyancesmadeinfavorofanyofthoseenumerated,evenwithin
the10yearsperiod,arenotprohibitedbylaw.Acontraryinterpretation
wouldpreventthebeneficiarysheirfrominheritingthelandintheevent
that the beneficiary dies within the 10year period, and put the lands
ownershipinlimbo.Thus,underSection27oftheCARL,theFWBswho
arenolongerinterestedinowningtheirproportionateshareoftheland
mayopttosellittothegovernmentortheLBP,whichinturncansellitto
HLIortheLRC(ifitisunabletoproveitsgoodfaithpurchaseofthe200
hectareconvertedland),inordernottodisrupttheirexistingoperations.
DistributionoflandtoFWBsandpayment
ofjustcompensationtoHLI
AsaconsequenceoftherevocationoftheSDP,the4,915.75hectares
of agricultural land subject of the SDP are deemed placed under the
CARLscompulsorycoveragesinceNovember21,1989.Corollary,the
takingisdeemedtohaveoccurredatthistimeandHLIisentitledtojust
compensationbasedonthevalueoftheentire4,915.75hectarelandin
1989.23 Inlightofthisconclusion,thequestionthatbegsforadefinitive
responseis:isHLIentitledtointerestfrom1989uptothepresenton
theamountofjustcompensationitshouldreceive?
Inseveralcases,theCourtawardedinterestswhenthereisdelayinthe
paymentofjustcompensation.Theunderlying
_______________
23Thevalueofthe300hectarelandconveyedtoLIPCO/RCBCandthe80hectareland
forSCTEXshouldnotbeexcludediftheCourtistorulethattheFWBsareentitledtothe
proceedsoftheseconveyances.
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rationalefortheawardistocompensatethelandownernotsimplyforthe
delay,butfortheincomethelandownerwouldhavereceivedfromthe
landhadtherebeennoimmediatetakingthereofbythegovernment.24
Thisprinciple,however,doesnotapplytothepresentcasebecauseHLI
neverlostpossessionandcontroloftheland;alltheincomesthattheland
generatedwereappropriatedbyHLI.Nolossofincomefromtheland(that
should be compensated by the imposition of interest on the just
compensationdue)thereforeresulted.Onthecontrary,itisthequalified
FWBs who have been denied of income due to HLIs possession and
controlofthelandsince1989.Thus,HLIshouldpaythequalifiedFWBs
rentalfortheuseandpossessionofthelanduptothetimeitsurrenders
possessionandcontrolovertheselands.TheDAR,astheagencytaskedto
implementagrarianreformlaws,shallhavetheauthoritytodeterminethe
appropriaterentalduefromHLItothequalifiedFWBs.Inrecognition,
however,ofanyimprovementsthatHLImayhaveintroducedonthese
lands,HLIisentitledtooffsettheirvaluefromtherentsdue.
Applicationoftheprincipleofsetoff
TheconsequenceoftherevocationoftheSDP,asIhaverepeatedly
stated,istherestorationofthepartiestotheir
_______________
24 See Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No. 164195,
October12,2010,632SCRA727.SeealsoLandBankofthePhilippines(LBP)v.Soriano,
G.R.Nos.180772and180776,May6,2010,620SCRA347,wheretheCourtdeclaredthat
Theconceptofjustcompensationembracesnotonlythecorrectdeterminationof
the amount to be paid to the owners of the land, but also payment within a
reasonabletimefromitstaking.Withoutpromptpayment,compensationcannotbe
considered just inasmuch as the property owner is made to suffer the
consequencesofbeingimmediatelydeprivedofhislandwhilebeingmadetowait
foradecadeormorebeforeactuallyreceivingtheamountnecessarytocopewithhis
loss.
632
632
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respectiveconditionspriortoitsexecutionandapprovalthus,theyare
boundtorestorewhatevertheyreceivedonaccountoftheSDP.However,
this does not prevent the application of the principle of setoff or
compensation.Theretention,eitherbythequalifiedFWBsortheHLI,of
someofthebenefitsreceivedpursuanttotherevokedSDPisbasedonthe
applicationoftheprincipleofcompensation,notonthemisapplicationof
theoperativefactdoctrine.
DISPOSITIVEPORTION
Accordingly,ImaintainmyvotetoDENYHLIspetitionandAFFIRM
the PARCs Resolution Nos. 20053201 and 20063401 revoking the
SDP.
Theentire4,915.75hectaresoflandaredeemedPLACED UNDER
COMPULSORY COVERAGE of the CARL AS OF NOVEMBER 21,
1989,andthe6,296qualifiedFWBsshallbedeemedtohaveacquired
rightsoverthelandasofthisdate.TheDARshallDISTRIBUTEtheland
amongthe6,296qualifiedFWBs,EXCLUDING:
a.the300hectaresofconvertedlandacquiredbyLIPCO/RCBC;and
b.the 80 hectares of land expropriated by the government for the

SCTEX.
TheLRCshallbeentitledtoprovebeforetheDARthattherewasvalid
transferofthe200hectaresofconvertedland.IftheDARfindsthatLRC
isapurchaseringoodfaithandforvalue,the200hectaresofconverted
landshalllikewisebeexcludedfromthelandtobedistributedamongthe
qualifiedFWBs.
TheDARisORDEREDtodeterminetheamountofjustcompensation
thatHLIisentitledtofortheentire4,915.75hectaresofagriculturalland,
basedonthevalueatthetimeoftakingNovember21,1989,andno
interest shall be imposed on this amount. The DAR is FURTHER
ORDEREDtodeterminetheamountofRENTALSthatHLImustpayto
the
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qualified FWBs for the use and possession of the land beginning
November 21, 1989, until possession is turned over to the DAR, for
distribution (with due adjustment for the portions conveyed to
LIPCO/RCBC,thegovernmentfortheSCTEX,and,iffoundbytheDAR
tobeavalidtransfer,LRC).HLI,however,isentitledtoDEDUCTfrom
the rentals due the value of the improvements it made over the land
(excludingthosesoldtoLIPCO/RCBCandLRC,iftheDARfindsthat
therewasavalidtransfer).
HLIshallPAYtotheFWBsthevalueofthe
a.300hectaresofconvertedlandconveyedtoLIPCO/RCBC,based
onitsNovember21,1989value,asdeterminedbytheDAR;and
b.iftheDARfindsthattherewasavalidtransfer,200hectaresof
convertedlandconveyedtoLRC.
HLIshallalsoPAYthequalifiedFWBsjustcompensationreceived
from the government for the 80 hectares of expropriated land for the
SCTEX.
From the total amount of the proceeds of the sale and the just
compensationtobepaidbyHLItothequalifiedFWBs,theDARshall
DEDUCTtheP150million,representingthe3%productionshareandthe
aggregatevalueofthehomelotsthatthequalifiedFWBsreceivedfrom
HLI.Theamountofthe3%productionshareshalldependontheamount
actuallyreceivedbytheFWBsfromHLI,tobedeterminedbytheDAR.
AlltheFWBsshallreturntoHLIthe59millionsharesofstock.They
are,however,entitledtoretainallthesalaries,wagesandotherbenefits
receivedasemployeesofHLI.
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BERSAMIN,J.:
IconcurwiththeResolutiontheCourtissuestodaybywayofresolving
thevariousmotionsfiledagainstthedecisiondatedJuly21,2011.
Irespectfullydissentontwoaspects,however,andIhumblyopinethat:
one, the reckoning date for purposes of determining just compensation
shouldbelefttotheDARandLandBank,and,ultimately,totheSpecial
AgrarianCourt(SAC)todetermine;and two,thelandownershouldbe
compensatedforthevalueofthehomelotsgrantedtothefarmworkers
beneficiaries(FWBs)pursuanttothediscreditedstockdistributionplan
(SDP).
Letmeexplainmyposition.
I
InthedecisionofJuly5,2011,theCourtupheldthePARCsassailed
resolutions placing the agricultural lands subject of the SDP under
compulsory coverage of the Comprehensive Agrarian Reform Program
(CARP),anddeclaredHLIentitledtojustcompensationtobereckoned
fromNovember21,1989.
Todays Resolution continues to follow the same reckoning date of

November21,1989duetoitsbeingthedatewhenPARCapprovedHLIs
SDPandtherebyplacedtheaffectedagriculturallandsunderthecoverage
ofCARP.TheResolutionexplainsthatitwasupontheapprovalofthe
SDPthatthefarmworkerbeneficiaries(FWBs)hadcometobeconsidered
toownandpossesstheaffectedagriculturallands.
Thedeterminationofwhenthetakingoccurredisanintegralandvital
part of the determination and computation of just compensation. The
nature and character of land at the time of its taking are the principal
criteriatodeterminejust
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compensationtothelandowner.1InNationalPowerCorporationv.Court
ofAppeals,2theCourtemphasizedtheimportanceofthetimeoftakingin
fixingtheamountofjustcompensation,thus:
xxx[T]heCourtxxxinvariablyheldthatthetimeoftakingisthecriticaldatein
determininglawfulorjustcompensation.Justifyingthisstance,Mr.Justice(later
Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La
Carlotavs.TheSpousesFelicidadBaltazarandVicenteGan,said,xxxtheowneras
istheconstitutionalintent,ispaidwhatheisentitledtoaccordingtothevalueofthe
propertysodevotedtopublicuseasofthedateofthetaking.Fromthattime,hehad
beendeprivedthereof.Hehadnochoicebuttosubmit.Heisnot,however,tobe
despoiled of such a right. No less than the fundamental law guarantees just
compensation.Itwouldbeaninjusticetohimcertainlyiffromsuchaperiod,he
couldnotrecoverthevalueofwhatwaslost.Therecouldbeontheotherhand,
injusticetotheexpropriatorifbyadelayinthecollection,theincrementinprice
wouldaccruetotheowner.ThedoctrinetowhichthisCourthasbeencommittedis
intendedpreciselytoavoideithercontingencyfraughtwithunfairness. 3 (emphasis
supplied)
Itismyhumblesubmission,therefore,thatthefactualissueofwhenthe
takinghadtakenplaceastotheaffectedagriculturallandsshouldnotbe
separated from the determination of just compensation by DAR, Land
BankandSAC.Accordingly,IurgethattheCourtshouldleavethematter
ofthereckoningdatetobehereafterdeterminedbytheDARandLand
BankpursuanttoSection18ofRepublicActNo.6657.4Shouldtheparties
disagreethereon,theproperSAC
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1 Republicv.Cancio,G.R.No.170147,January30,2009,577SCRA346; National
PowerCorporationv.Henson,G.R.No.129998,December29,1998,300SCRA751,756.
2G.R.No.113194,March11,1996,254SCRA577.
3Id.,atp.589.
4Section18.ValuationandModeofCompensation.TheLBPshallcompensatethe
landownerinsuchamountasmaybe
636
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Council
willthenresolvetheirdisagreementasanintegralpartofapetitionfor
determination of just compensation made pursuant to Section 57 of
RepublicActNo.6657,towit:
Section57.Special Jurisdiction.The Special Agrarian Courts shall have
original and exclusive jurisdiction over all petitions for the determination of just
compensationtolandowners,andtheprosecutionofallcriminaloffensesunderthis
Act.
TheRulesofCourtshallapplytoallproceedingsbeforetheSpecialAgrarian
Courts,unlessmodifiedbythisAct.
TheSpecialAgrarianCourtsshalldecideallappropriatecasesundertheirspecial
jurisdictionwithinthirty(30)daysfromsubmissionofthecasefordecision.
II
ItappearstomethatthehomelotsgrantedtotheFWBsundertheSDP
donotformpartofthetotalareaoftheagriculturallandstobeturnedover
toDARfordistributiontothequalifiedFWBsforwhichthelandowner
willbejustlycompensated.Ifmyimpressioniscorrect,Ifearthatthe
resultwillbeunfairshouldthelandownernotbejustlycompensatedfor
the value of the homelots. In such a situation, the taking will be

confiscatoryandunconstitutional.
I submit, therefore, that HLI as the landowner should be justly
compensatedalsoforthehomelots.
SERENO,J.:
At the outset, I have maintained that the nullity of the Stock
DistributionOptionAgreement(SDOA)inHaciendaLuisitashouldlead
to the immediate distribution of the agricultural lands to the 6,296
qualifiedfarmerbeneficiaries
_______________
agreeduponbythelandownerandtheDARandLBPorasmaybefinallydeterminedby
thecourtasjustcompensationfortheland.
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(FWBs). The first draft of the ponencia of the original Decision was
circulatedamongtheMembersoftheCourton11February2011.The
draftponencia,whicheventuallybecamethemajorityDecision,saidthat
thenullityoftheSDOAnotwithstanding,effectsofitsapprovalhavetaken
placeandcannotbeundoneundertheoperativefactsdoctrineandthus
directedtheholdingofasecretvotingamongtheFWBsonwhetherthey
will opt to remain as stockholders of petitioner Hacienda Luisita, Inc.
(HLI).Shortlythereafter,on25March2011,thefirstdraftofmyopinion
objectingtothegrantofthesecretvotingoptiontotheFWBstostaywith
the SDOA was circulated. Other draft dissenting opinions against the
proposedponenciaweresubsequentlyreleased.Afterthepromulgationof
theDecisiondated05July2011andaftercarefullyreviewingtheinstant
motions for reconsideration, my initial position remains the samethe
SDOA is illegal and land distribution should immediately be directed
under Section 33 of Republic Act No. 6657, or the Comprehensive

AgrarianReformLaw(CARL).
Iwelcomethechangeinthepositionofthemajority,andvotingwith
them, this Court is now unanimously directing immediate land
distribution.However,Idisagreewithitsidentificationofthereckoning
dateofthetakingofthelandsorderedtobedistributedforthepurpose
ofeventuallydeterminingjustcompensation.Ontheinstantmotionsfor
reconsideration, the ponencia talks of the possibility of rendering it
impossiblefortheFWBstopayforthelandsifthereckoningdatewere
the date of Notice of Coverage, or on 02 January 2006. It holds that
regardlessoftheuniformrulingsoftheCourtIenumeratedinthisOpinion
totheeffectthatthetakingisthedateoftheNoticeofCoverage,itis
creatinganewrulethatforSDOAsthatarenullified,thecompensation
forthevalueofthelandsthatwillbedistributedaretobereckonedattheir
fairmarketvalueatthetimeoftheapprovalofthenullifiedSDOA.
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Inmyview,suchanapproachispartiallyconfiscatoryasitmakesan
unjustifiedexceptiontothelonglineofjurisprudencethattheCourthas
laid down regarding the time of taking of agrarian reform lands for
purposes of just compensation. It would have been preferable, from a
policypointofview,thatatthetimethattheCARLwaspassedin1989,
Congresshadchosenoneoftwooptions:(a)eithertheStatesubsidizethe
differencebetweenthefairmarketvalueatthetimeofthetakingandwhat
the farmers can afford to pay, which some of the 1986 Constitutional
Commissionerssaidshouldhappen;or(b)authorizetheconfiscationofa
part of the price of the fair market value under a radical but rational
interpretation of the social justice clause of the 1987 Constitution.
Congresschoseneitheroptionandoptedforpaymentofthefairmarket
valueatthetimeofthetakingasjustcompensationtobeamortizedbythe
farmers for 30 years. This Court has invariably sustained that policy
choice. This in large part accounts for the confessed lack of financial
viabilitytomakelandreformagenuinesuccess.
The choice having been thusly made, this Court has no alternative
except to apply the rule uniformly, otherwise, this will result in a
discriminatoryandpartiallyconfiscatorytreatmentoftheHaciendaLuisita
lands.ThatisalsowhyIwasproposingthatthelandstobedistributedto
thequalifiedFWBsbedeclaredtobeimmediatelyandfreelytransferable.
Afterall,the10yearprohibitionagainstthetransfereffectivelylapsedon
thetenthyearoftheeffectivityoftheCARL.TheFWBscansellpartand
retain part of the lands, and can best determine how to make optimal
economicuseofthem.
MyviewresonateswiththeopinionofJusticeArturoD.Brion,who
reckonedthevalueofthelandstothetimetheSDOAwasapprovedon21
November 1989, but at the same time recognized petitioner HLIs
entitlementtothevalueoftheimprovementstotheland.Helamentsthe
factthatpetitionerHLIwillbeuncompensatedforalltheimprovementsit
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hasintroducedasabuilderingoodfaithfrom21November1989until
now.Iagreewithhimonthispoint.
TheFiveApproachestoResolvingthisPetition
There are before the Court five major approaches to resolving the
agrarian legal problems involving Hacienda Luisita. Each approach
advances operative solutions to two standing issues: (a) whether to
distributetheagriculturallandstotheFWBsorallowthemtosecretlyvote
toremainasstockholders;and(b)howmuchcompensation,ifany,isdue
tothecorporatelandowner.
Thefirstapproach,whichhasnowbeenabandoned,isthatorderedby
theCourtsquestionedDecisiondated05July2011,andassuggestedby
ChiefJusticeRenatoC.CoronainhisDissentingOpinionofthesame
date. A secret voting will take place in which FWBs want to indicate
whethertheywillretaintheirstockholdinginpetitionerHLIinlieuoftheir
individualrighttoadirectshareintheland,orwhethertheywantdirect
land ownership. In cases where direct land ownership is selected,
petitionerHLIshallbepaidthevalueofthelandsasof21November
1989,whichwasthedatewhenthePARCapproveditsSDOAwiththe
FWBs.
The secondapproach isthatproposedbyJusticeArturoD.Brionin
his earlier Separate Concurring and Dissenting Opinion, which Justice
MartinS.Villarama,Jr.,joinedin.Theapproachistoorderdirectland
distributiontoalltheFWBsofthe4,916hectaresofland.Thedateofthe
takingwillbepeggedto11May1989(thedateoftheSDOA),andthejust
compensationwillalsobepeggedtothattime.Therewillbenointereston
the just compensation and petitioner HLI will be required to pay back
rentalsasofthatdate.
Thethirdapproachislikethefirstapproach,butmodifiedbythelegal
consequencesofthestatementmadebythemajorityinthebodyofthe
Decisionthatastockoptionarrangementcanonlybevalidifmajority
controlofthecorpora
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tionisinthehandsoftheFWBs.Thus,theCourtmustcategoricallydirect
(a)arevaluationoftheassetsofHLI;(b)thisrevaluationmustresultinat
least51%controlofthevotingstockandthebeneficialinterest;and(c)
thisrestructuringmustbecompletedbeforethereferendumfortheFWBs
is undertaken by public respondent Department of Agrarian Reform
(DAR).
The fourth approach is a suggested modification of the second
approach.Thetakingandthevalueofthejustcompensationispeggedto
11May1989,buttheTarlacDevelopmentCorporation(TADECO)and/or
petitionerHLI(a)mustbecompensatedfor(i)interestonthevalueofthe
justcompensationatthattimeonwards;(ii)andimprovementsthathave
been introduced to the lands with interest on the value of the
improvements since these improvements were utilized; (b) may be
requiredtopayrentalsfortheuseofthelandintheirstateasof11May
1989adjudicatedbyareasonableannualrateapplicabletothelandsin
suchstate;and(c)cannotbemadetoreturntheentireP750,000,000paid
byLuisitaIndustrialParkCorporation(LIPCO)topetitionerHLIforthe
300hectarelands,theP80,000,000paidbythenationalgovernmentforthe
84 hectares expropriated for the SubicClarkTarlacExpressway
(SCTEX),butonlythevalueofthe300hectaresandthe84hectaresasof
11May1989,plusinterestonthesameatthesameratethatwillbegiven
infavorofpetitionerHLIunderitem(a)above.
Thefifthapproachrequiresdirectlanddistribution.Thetakingand
the value of the just compensation is pegged according to law and
prevailingjurisprudence.Thejustcompensationispeggedtothedateof
actualtaking,anditsvalueisapproximatelyatfairmarketvalue.
Thefirstapproachiscontrarytolawandunjusttothefarmers.The
second approach is contrary to prevailing jurisprudence on just
compensationandisconfiscatoryoftherightofthelandowners.Itwould
have been legally supportable under the initial interpretation of just
compensationin
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agrarian reform cases when socialized taking was contemplated, but
since 1989, law and jurisprudence prevents this approach from being
adopted.Thethirdapproach,whilestilllegallywrong,mitigatesmuchof
the injustice that will be perpetrated by the first approach. The fourth
approachwillcontradictjurisprudenceonjustcompensationandrequire
a lot of accounting exercises, but is less harsh to the farmers and the
landowners.Thefifthapproachislogicallyconsistent,butrequiresmuch
creativedesigningbypublicrespondentDAR.Thelastthreeapproaches
would not work too great an injustice on either the FWBs or the
landowners.
LandDistributionv.SecretVoting
TheCourthasunanimouslystruckalethalblowtotheSDOAbetween
petitioner Hacienda Luisita, Inc., (HLI) and the signatory farmworker
beneficiaries(FWBs),sinceitsprovisionswerefoundtobeinviolationof
the Comprehensive Agrarian Reform Law (CARL). Despite the
unequivocal invalidation of the SDOA, the Court was divided on the
various approaches in dealing with the aftermath of the declaration in
accordancewiththepromisesofagrarianreformundertheConstitution.
Tomymind,nootheroptionispermissibleunderthelawotherthan
theimmediateanddirectlanddistributiontotheFWBsasprovided
forundertheCARL.Therejectionofthesecretvotingoptionbythe
ponente,JusticePresbiteroJ.Velasco,Jr.,inhisResolutionofthevarious
MotionsforClarification/Reconsiderationbythemainconcernedparties,
as well as by Chief Justice Corona in his Separate Opinion, is a very
positiveturnofevents.
Asthenewponenciapointsout,thedistributionofthestocksunderthe
SDOA is evidently iniquitous because the FWBs will continue to be
relegatedasminoritystockholders
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holding,atbest,33.29%ofthevotesinthecorporation. 1 Underthefirst
approach,thesecretvotingoptionwould,infact,furtheraggravatethe
minoritypositionoftheFWBsinpetitionerHLIsincethosewhooptfor
direct land distribution would have to surrender their stockholdings.
ShouldpetitionerHLIscurrentcorporatestructureoflandstototalassets
ratiobemaintained,FWBswhowillopttoremainasstockholderswill
findthemselveswithadecreasedvotingpowerbaseandplacedataneven
greater disadvantage with the exodus of other FWBs who will opt for
individualdistributionofland.
TheoutcomeoftheSDOAinHaciendaLuisitamayhavebeendifferent
hadtheFWBsbeengivenmajorityorevenfullcontrolofpetitionerHLI
attheoutset,whichistherationaleofthethirdapproach.Thesecretvoting
optionwouldhavebeenlessunjust,ifmajoritycontrolofthecorporation
is first handed to the FWBs, before they decide whether to remain as

stockholdersoroptforlanddistribution.Thethirdapproachrecognizesthe
constitutionalmandatetohandoverownershipandcontrolofagricultural
landstothefarmersorfarmworkers,whetherdirectlythroughindividual
ownership or indirectly through collective ownership. Considering that
stockdistributionoptionspersehavenotbeendeclaredasunconstitutional
mechanismsinagrarianreform,theCourtmustatpresentgivelifetothe
intention of the legislature in opening up that option to corporate
landowners,butnotattheexpenseofrelegatingtheFWBstominority
status. The presence of this solution also avoids having to pronounce
Section28oftheCARLvoid,apreferred
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1 Under the SDOA, the FWBs are entitled to the equivalent of the value of the
agriculturallandscomparedwiththetotalassetsofpetitionerHLI.Inthiscase,thevalueof
petitionerHLIsagriculturallandispeggedatP196,630,000;whileitsclaimedtotalassets
areworthP590,554,220.Thus,theFWBswouldbeabletoholdatmaximum33.296%of
petitionerHLIsshares.
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approachtostatutoryconstructionthatthisCourtisboundtoobserveby
judicialreviewdoctrines.
JustCompensationv.ModifiedCompensation
Since there is now unanimity in ordering the distribution of the
agriculturallandstotheFWBsinthiscase,theCourtnowcontendswith
the quantum ofcompensation duetopetitioner HLIwith respect toits
expropriated farm lands. It is not surprising that the issue of just
compensation that has plagued the members of the Constitutional
CommissionandCongresshasagainreareditsheadinthepresentlegal
controversy, involving the peculiar mechanism of a stock distribution
optionundertheCARL.Fortunately,thewealthofjurisprudenceinthe
yearsfollowingthepassageofthelandmarklawuptothepresentoffers
some guidance in arriving at a solution that conforms with the
constitutionalmandateofagrarianreformandsocialjustice.
Whiledistributionoflandwastheprevailingideologyincraftingour
agrarianreformpoliciesintheConstitution,theothersideofthespectrum
istherecognitionoftherightsofthelandownerspecificallytherightof
justcompensation.2Theaimofredistributingagriculturallandsunderthe
Constitution was primarily to correct the unjust social structures then
prevailinginordertoachieveanequitabledistributionofwealthfromthe
landedfewinfavorofthelandlessmajority.Yet,inrecognizingthesocial
functionofthelandsandthedemandsofsocialjustice,theframersnever
lostsightofthepropertyrightsoflandowners,asaninherentlimitationto
theexerciseoftheStatespowerofeminentdomainorexpro
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2Tothisend,theStateshallencourageandundertakethejustdistributionofall
agriculturallands,subjecttosuchprioritiesandreasonableretentionlimitsastheCongress
mayprescribe,takingintoaccountecological,developmental,orequityconsiderations,and
subjecttothepaymentofjustcompensation.(Constitution,Art.XIII,Sec.4)
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priation, even in cases of agrarian reform. Concomitant with the
fundamentalrightnottobedeprivedofpropertywithoutdueprocessof
law3 istheconstitutionalprovisionthat[p]rivatepropertyshallnotbe
taken for public use without just compensation. 4 Hence, the policy
underlyingtheprovisionforeminentdomainistomaketheprivateowner
wholeafterhispropertyistakenbytheState.5
Thetakingofprivatelandsundertheagrarianreformprogrampartakes
ofthenatureofanexpropriationproceeding.6Forpurposesoftakingunder
theagrarianreformprogram,theframersoftheConstitutionexpressly
made its intention known that the owners of the land should not
receivelessthanthemarketvaluefortheirexpropriatedproperties
and drew parallelisms with the ordinary understanding of just
compensationinnonlandreformexpropriation.7Indeed,thematterof
justcompensationwasnevermeanttoinvolveaseverediminutionofwhat
the land owner gets.8 The aim of just compensation in terms of
expropriation,eveninagrarianreform,shouldbe
_______________
3Nopersonshallbedeprivedoflife,liberty,orpropertywithoutdueprocessoflaw,
norshallanypersonbedeniedtheequalprotectionofthelaws.(Constitution,Art.III,Sec.
1)
4Constitution,Art.III,Sec.9.
5DissentingOpinionofChiefJusticeRenatoC.Corona,inRepublicofthePhilippines
v. Gingoyon, G.R. No. 166429, 19 December 2005, 478 SCRA 474, citing State by
DepartmentofHighwaysv.McGuckin,242Mont81,788P2d926.
6Gabatinv.LandBankofthePhilippines,G.R.No.148223,25November2004,444
SCRA176.
7FR.BERNAS:ButisittheintentionoftheCommitteethattheownershouldreceive
lessthanthemarketvalue?
MR.MONSOD:ItisnottheintentionoftheCommitteethattheownershouldreceive
less than the just compensation. (Minutes of the Deliberations of the Constitutional
Commission,[17August1986],p.17)
8MinutesoftheDeliberationsoftheConstitutionalCommission,Fr.JoaquinBernas,S.
J.(04August1986),p.648.
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justtotheownerthatwhichapproximatesthemarketvalue. 9Hence,the
Courtacknowledgedtheothersideoftheagrarianreformcoinandruled:
TheComprehensiveAgrarianReformProgramwasundertakenprimarilyforthe
benefitofourlandlessfarmers.However,theundertakingshouldnotresultinthe
oppressionoflandownersbypeggingthecheapestvaluefortheirlands.Indeed,
thetakingofpropertiesforagrarianreformpurposesisarevolutionarykindof
expropriation,butnotattheundueexpenseoflandownerswhoarealsoentitled
toprotectionundertheConstitutionandagrarianreformlaws.10(Emphasis
supplied)
IntheseminalcaseAssociationofSmallLandownersinthePhilippines
v. Secretary of Agrarian Reform,11 the Court, speaking through retired
Justice Isagani Cruz, eloquently expounded on the inherent right of
landownerstojustcompensation,inthiswise:
Justcompensationisdefinedasthefullandfairequivalentofthepropertytaken
fromitsownerbytheexpropriator.IthasbeenrepeatedlystressedbythisCourt
thatthemeasureisnotthetakersgainbuttheownersloss.Thewordjustis
usedtointensifythemeaningofthewordcompensationtoconveytheideathatthe
equivalenttoberenderedforthepropertytobetakenshallbereal,substantial,full,
ample.
It bears repeating that the measures challenged in these petitions contemplate
morethanamereregulationoftheuseofprivate
_______________
9FR.BERNAS.Thesenseis,itmustbejusttotheowner.
MR.TREAS.Precisely.
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 Deliberations of the
ConstitutionalCommission,[17August1986],p.18)
10LBPv.Chico,G.R.No.168453,13March2009,581SCRA226.
11G.R.Nos.78742,79310,79744,and79777,14July1989,175SCRA343.
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lands under the police power. We deal here with an actual taking of private
agriculturallandsthathasdispossessedtheownersoftheirpropertyanddeprived
them of all its beneficial use and enjoyment, to entitle them to the just
compensationmandatedbytheConstitution.
Asheldin RepublicofthePhilippinesv.Castellvi,thereiscompensabletaking
when the following conditions concur: (1) the expropriator must enter a private
property;(2)theentrymustbeformorethanamomentaryperiod;(3)theentrymust
beunderwarrantorcoloroflegalauthority;(4)thepropertymustbedevotedto
publicuseorotherwiseinformallyappropriatedorinjuriouslyaffected;and(5) the
utilizationofthepropertyforpublicusemustbeinsuchawayastooustthe
owner and deprive him of beneficial enjoyment of the property. All these
requisitesareenvisionedinthemeasuresbeforeus.
Since the farm lands in Hacienda Luisita are to be the subject of

distribution, petitioner HLI or Tarlac Development Corporation
(TADECO),aslandowners,areentitledtojustcompensation,whichisan
indispensible legal requirement in agrarian reform expropriations.12The
issuenowliesinthereckoningperiodinwhichthejustcompensationshall
be computed, as illustrated bythe second, fourth and fifth approaches.
CrucialtotheCourtsresolutionofthismatteristhetimeofthetakingby
thegovernmentofthefarmlandsinHaciendaLuisita.
Just compensation in cases of expropriation is ordinarily to be
ascertainedasofthetimeofthetaking.13Incomputingthe
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12 Agrarianreformisarevolutionarykindofexpropriation.Therecognizedrulein
expropriationis thattitle totheexpropriatedpropertyshallpassfromthe ownertothe
expropriator only upon full payment of the just compensation. Thus, payment of just
compensation to the landowner is indispensable. (Land Bank of the Philippines v.
Dumlao,G.R.No.167809,27November2008,572SCRA108)
13B.H.Berkenkotter&Co.v.CourtofAppeals,G.R.No.89980,14December1992,
216SCRA584,citing LandBankofthePhilippinesv.CourtofAppeals,258SCRA404
(1996)andAssociationof
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justcompensationforexpropriationproceedings,itisthevalueofthe
landatthetimeofthetaking,notatthetimeoftherenditionofjudgment,
which should be taken into consideration.14 Hence, in determining the
valueofthelandforthepaymentofjustcompensation,thetimeoftaking
shouldbethebasis.15Theconceptoftakinginbothlandreformandnon
land reform expropriations is wellsettled. There is taking of private
property by the State in expropriation proceedings when the owner is
ousted from his property and deprived of his beneficial enjoyment

thereof.16 The time of taking is the moment when landowners are
deprivedoftheuseandbenefitoftheproperty.17
Three reckoning periods are for consideration of the Court. First,
JusticeVelasco,whoisnowjoinedbyJusticeBrion,proposesthatthe
amountofjustcompensationtobepaidshouldbebasedonthedatethat
thePARCapprovedthe
_______________
SmallLandownersinthePhilippines,Inc.v.SecretaryofAgrarianReform,175SCRA
343(1989).
14B.H.Berkenkotter&Co.v.CourtofAppeals,id.,citingRepublicofthePhilippines
v.KerandCompanyLimited,383SCRA584(2002)andAssociationofSmallLandowners
inthePhilippines,Inc.v.SecretaryofAgrarianReform,175SCRA343(1989).
15B.H.Berkenkotter&Co.v.CourtofAppeals,id.
16Takingunderthepowerofeminentdomainmaybedefinedgenerallyasentering
uponprivatepropertyformorethanamomentaryperiod,and,underthewarrantorcolorof
legal authority, devoting it to a public use, or otherwise informally appropriating or
injuriouslyaffectingitinsuchawayassubstantiallytoousttheowneranddeprivehimof
allbeneficialenjoymentthereof.(RepublicofthePhilippinesv.vda.deCastellvi,G.R.
No.L20620,15August1974,157Phil.329,citing26Am.Jur.2nded.,Sec.157)
17Itisremindedtoadherestrictlytothedoctrinethatjustcompensationmustbevalued
atthetimeoftaking.Thetimeoftakingisthetimewhenthelandownerwasdeprivedof
theuseandbenefitofhisproperty,suchaswhentitleistransferredtotheRepublic.(Land
BankofthePhilippinesv.Livioco,G.R.No.170685,22September2010,citingEusebiov.
Luis,603SCRA576,586587[2009])
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SDOA,oron21November1989(dateofthePARCapproval).Second,
thedatetheSDOAwassigned,18May1989,(dateoftheSDOA)was
also considered as a reckoning point of the valuation period. Lastly, I
submitthatthevaluationbemadebasedonthecurrentfairmarketvaluein
accordance with established laws, rules and jurisprudence; or more
specifically, at the time that petitioner HLI was issued a Notice of
Coverageon02January2006(dateofNoticeofCoverage).Withalldue
respecttomycolleagues,thethirdreckoningperiodalonesatisfiesthe
constitutional directive to give real, substantial, full and ample
compensation to the landowner in recognition of the latters right to
property and of the express limitation on the States power of
expropriation.
The period of valuation of the property cannot be reckoned by
consideringthefirsttwodatesasthetimethattheagriculturallandswere
taken, precisely because petitioner HLI and the FWBs resorted to the
mechanism of a stock distribution option. This was a distinctive
mechanismundertheagrarianreformscheme,bywhichsharesofstockof
thecorporatelandowner,insteadofagriculturallands,weredistributedto
thefarmers.Thesingularadvantageofthesaidscheme,unlikeadirect
land transfer to individual farmers or cooperatives, is that title to the
propertyremainswiththecorporatelandowner,whichshouldpresumably
bedominatedbyfarmerswithmajoritystockholdingsinthecorporation.
Thereasonbehindthe1989reckoningperiods(thedateofSDOAor
thedateofPARCapproval)isthattheagriculturallandsaremadethe
subjectoftheCARL,andarethusconsideredtohavebeenexpropriated
privatepropertyundertheagrarianreformprogram.However,theuseof
these periods ignores the fact that petitioner HLI, as the corporate
landowner,exactlyavaileditselfofthestockdistributionoptionunderthe
CARL, which resulted in the title remaining in the hands of private
persons. Instead of expropriating lands, what the government took and
distributed to the FWBs were shares of stock of petitioner HLI in
proportiontothevalueof
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theagriculturallandsthatshouldhavebeenexpropriatedandturnedover
totheFWBs.
Hence,notakingofagriculturallandscanbeconsideredeitheratthe
time the SDOA was signed or at the time PARC approved it, since
petitioner HLI retained full ownership and use of the lands thereafter.
Despitethechangeinstockholders,petitionerwasneveroustedfromor
deprivedofthebeneficialenjoymentoftheagriculturallandsinHacienda
Luisita.Thiswastheveryreasonwhythestockdistributionoptionwasthe
mode specifically preferred by the corporate landowner in this case.
Indeed, petitioner freely exercised ownership of the property in the
interim,whenitappliedfortheconversionofthelandsandsoldthemto
third parties. Even Justice Brion acknowledged this fact in his earlier
SeparateOpinion,inwhichhesaid:HLIneverlostpossessionandcontrol
ofthelandunderthetermsoftheSDOA.Itappearsiniquitoustoreckon
thevaluationofthenowexpropriatedfarmlandsinHaciendaLuisitaby
their1989levels,whenthepropertyhadnotyetbeenactuallytakenor
expropriatedbythegovernmentatthattime.
TheCARL,asamended,hadexpresslyidentifiedthefactorsinarriving
atjustcompensationforlandownerswhosepropertieshavebeensubjectto
landreformexpropriation:
Indeterminingjustcompensation,thecostofacquisitionoftheland,thevalue
ofthestandingcrop,thecurrentvalueoflikeproperties,itsnature,actualuse
and income, the sworn valuation by the owner, the tax declarations, the
assessmentmadebygovernmentassessors,andseventypercent(70%)ofthe
zonalvaluationoftheBureauofInternalRevenue(BIR),translatedintoabasic
formulabytheDARshallbeconsidered,subjecttothefinaldecisionoftheproper
court. The social and economic benefits contributed by the farmers and the
farmworkersandbytheGovernmenttothepropertyaswellasthenonpaymentof
taxesorloanssecuredfromanygovernment
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financinginstitutiononthesaidland shallbeconsideredasadditionalfactorsto
determineitsvaluation.18
Pursuant to its rulemaking powers, the Department of Agrarian

Reform (DAR) reduced these factors into a basic general formula that
computesthevalueofthelandsubjectofagrarianreforminthismanner:19
LandValue=(CNIx0.6)+(CSx0.3)+(MVx0.1)
Where
CNI=CapitalizedNetIncome
CS=ComparableSales
MV=MarketValueperTaxDeclaration
Inalonglineofcases,theCourthasgivenjudicialimprimaturtothe
aboveformulationmadebytheDAR.Thefollowingcasesdemonstrate
judicialfealtytothisformula:LBPv.SpousesBanal,G.R.No.143276,20
July2004,434SCRA543;LBPv.Celada,G.R.No.164876,23January
2006,479SCRA495; Lubricav.LBP,G.R.No.170220,20November
2006,507SCRA415;LBPv.Lim,G.R.No.171941,02August2007,529
SCRA129;LBPv.Suntay,G.R.No.157903,11October2007,535SCRA
605; SpousesLeev.LBP,G.R.No.170422,07March2008,548SCRA
52;LBPv.HeirsofEleuterioCruz,G.R.No.175175,29September2008,
567SCRA31;LBPv.Dumlao,G.R.No.167809,27November2008,572
SCRA108;LBPv.Gallego,Jr.,G.R.No.173226,20January2009,576
SCRA680;LBPv.KumassiePlantation,G.R.No.177404and178097,25
June2009,591SCRA1;LBPv.Rufino,G.R.No.175644and175702,02
October2009,602
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18RepublicActNo.6657,Sec.17,asamendedbyRepublicActNo.9700.
19DARAdministrativeOrderNo.0692dated30October1992,asamendedbyDAR
AdministrativeOrderNo.1194dated13September1994; seealso DARAdministrative
OrderNo.0598dated15April1998andDARAdministrativeOrderNo.0209dated15
October2009.
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SCRA399; LBPv.Luciano,G.R.No.165428,25November2009,605
SCRA 426; LBP v. Dizon, G.R. No. 160394, 27 November 2009, 606
SCRA66;HeirsofLorenzoandCarmenVidadv.LBP,G.R.No.166461,
30April2010,619SCRA609; LBPv.Soriano,G.R.No.180772and
180776,06May2010,620SCRA347;LBPv.Barrido,G.R.No.183688,
18August2010,628SCRA454;LBPv.Colarina,G.R.No.176410,01
September2010,629SCRA614; LBPv.Livioco,G.R.No.170685,22
September2010,631SCRA86; LBPv.Escandor,G.R.No.171685,11
October 2010, 632 SCRA 504; LBP v. Rivera, G.R. No. 182431, 17
November2010,635SCRA285;LBPv.DAR,G.R.No.171840,04April
2011. Inallthesecases,theformulaapproximatelyreflectsthefair
marketvalueofthepropertyatthetimeoftheNoticeofCoverageto
estimate the loss suffered by the landowner, whose property was the
subjectofexpropriation.
Thus, under the uniform rulings of this Court, the notice of
coverage commences the process of acquiring private agricultural
lands covered by the CARP.20 The date of the notice of coverage is
thereforedeterminativeofthejustcompensationpetitionerHLIisentitled
toforitsexpropriatedlands.Incomputingcapitalizednetincomeunder
the DAR formula, one should use the average gross production of the
latestavailable12monthsimmediatelypreceding thedateofnoticeof
coverage,incaseofcompulsoryacquisition,andtheaveragesellingprice
ofthelatestavailable12monthspriortothedateofreceiptoftheclaim
folderbytheLandBankofthePhilippinesforprocessing.21
Therationaleforpeggingtheperiodofcomputingthevaluesocloseor
nearthepresentmarketvalueatthetimeofthetakingistoconsiderthe
appreciationofthepropertybroughtaboutbyimprovementsthereinand
otherfactors.Thenature
_______________
20DLRAdministrativeOrderNo.0405dated02August2005.
21LBPv.Rufino,G.R.No.175644and175702,02October2009,602SCRA399.
652
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Council
andcharacterofthelandatthetimeofitstakingistheprincipalcriterion
for determining how much just compensation should be given to the
landowner.22 All the facts as to the condition of the property and its
surroundings, as well as its improvements and capabilities, should be
considered.23Forthecompensationtobejusttotheownerofacommercial
farmland,thefacilitiesandimprovementsintroducedbythelandowner
not just the landshall also be taken into consideration.24 It is but
equitable to extend to the landowner compensation arising from the
appreciationofthepropertyduetotheimprovementsintroducedtherein.
To simply disregard the changes, appreciation or improvements in the
agriculturallandsofHaciendaLuisitabypeggingthepropertytoits1989
valueistoresorttoexpropriationthatisconfiscatoryconsideringthatit
will be the sole exception to a long line of jurisprudenceand not
compensatorywhichisprescribedundertheConstitutionasafundamental
rightofalandowner.
Indeed, the previous decisions of this Court dealt with voluntary or
compulsorycoverageundertheCARL.Itwouldappearthatthisisthefirst
instancethattheCourtisconfrontedwiththequestionofdeterminingjust
compensation for cases where the landowners and farmworker
beneficiariesresortedtoastockdistributionoptionthathadfailedandwas
nullified.Unlikevoluntaryorcompulsorycoveragewherethe
_______________
22 NationalPowerCorporationv.Tiangco,G.R.No.170846,06February2007,514
SCRA674,citingNationalPowerCorporationv.Chiong,404SCRA527(2003).
23NationalPowerCorporationv.Tiangco,id.,citingExportProcessingZoneAuthority
v.Dulay,149SCRA305(1987).
24Determinationofjustcompensationforcommercialfarmsshallincludenotonlythe
landbutalsothefacilitiesandimprovementsintroducedbythelandowner.Itmaytakeinto
accountthetypeofcommercialcropsplanted(e.g.banana,pineapple,rubber)andsuch
other relevant factors consistent with agrarian laws, rules and regulations; (DAR
AdministrativeOrderNo.0998dated23December1998,Art.1,Sec.2[f])
653
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Incorporatedvs.
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payment of just compensation was roughly speaking executed together

withthetaking,thestockdistributionoptioninthepresentscenariohas
time complication. Although the lands were subjected the stock
distributionmechanismin1989,thePARCsdecisiontonullifytheSDOA
and its Notice of Coverage ordering immediate land distribution came
about only in 2006. The Court is confronted with the judicial task of
determiningstandardstoreconcilethevariouslegalcontentionsonthis
time difference, considering other existing stock distribution schemes
acrossthecountrythatarealsosubjectofsimilarlegalchallenges.
Ibelievethereisnoreasonwhythosesameprinciplesandstandardsin
determining just compensation in voluntary or compulsory acquisition
should not be equally applicable to a stock distribution scheme. The
Constitution, the CARL and even our own jurisprudence have been
consistentinapproximatingafairvaluationofthepropertiesexpropriated
bytheStateunderitsagrarianreformprogram,andmustcontinuetodoso
inthecaseofafailedstockdistributionscheme.
With the equal protection clause in mind, it is simply wrong for
landownerstohavetheirrealproperties,subjectofexpropriation,valued
several years or even decades behind, considering the upward trend in
propertyvalues.TheCourtexplainedthisinherentunfairnesswhenitwas
confronted by a nonland reform expropriation case, in which the trial
courtandtheappellatecourtfixedthevaluationofthepropertyatits1984
and1993values,respectively,inthiswise:
Ineminentdomaincases,thetimeoftakingisthefilingofthecomplaint,ifthere
wasnoactualtakingpriorthereto.Hence,inthiscase,thevalueofthepropertyat
thetimeofthefilingofthecomplaintonNovember20,1990shouldbeconsidered
indeterminingthejustcompensationduetherespondents.Soitisthatin National
PowerCorporationv.CourtofAppeals,etal.,weruled:
Normally, the time of the taking coincides with the filing of the
complaintforexpropriation.Hence,manyrulingsofthisCourthaveequated
justcompensationwiththe
654
654
valueofthepropertyasofthetimeoffilingofthecomplaintconsistentwith
theaboveprovisionoftheRules.Sotoo,wheretheinstitutionoftheaction
precedesentryintotheproperty,thejustcompensationistobeascertainedas
ofthetimeofthefilingofthecomplaint.
Thetrialcourtfixedthevalueofthepropertyatits1984value,whiletheCA,
atits1993worth.Neitherofthetwodeterminationsiscorrect.Forpurposesofjust
compensation,therespondentsshouldbepaidthevalueofthepropertyasofthetime
ofthefilingofthecomplaintwhichisdeemedtobethetimeoftakingtheproperty.
Itwascertainlyunfairforthetrialcourttohaveconsideredapropertyvalue
severalyearsbehinditsworthatthetimethecomplaintinthiscasewasfiledon
November20,1990.Thelandownersarenecessarilyshortchanged,considering
that,asarule,landvaluesenjoysteadyupwardmovement.Itwaslikewiseerroneous
fortheappellatecourttohavefixedthevalueofthepropertyonthebasisofa1993
assessment. NPC would be paying too much. Petitioner corporation is correct in
arguingthattherespondentsshouldnotprofitfromanassessmentmadeyearsafter
thetaking.
The expropriation proceedings in this case having been initiated by NPC on
November20,1990,propertyvaluesonsuchmonthandyearshouldlaythebasisfor
theproperdeterminationofjustcompensation.InAssociationofSmallLandowners
inthePhilippines,Inc.v.SecretaryofAgrarianReform,theCourtruledthatthe
equivalenttoberenderedforthepropertytobetakenshallbesubstantial,full,ample
and,asmustapplytothiscase,real.Thismustbetakentomean,amongothers,that
thevalueasofthetimeoftakingshouldbethepricetobepaidthepropertyowner.
Justcompensationisdefinedasthefullandfairequivalentofthepropertytaken
fromitsownerbytheexpropriator.Inthiscase,thissimplymeansthepropertysfair
marketvalueatthetimeofthefilingofthecomplaint,orthatsumofmoneywhicha
persondesirousbutnotcompelledtobuy,andanownerwillingbutnotcompelledto
sell,wouldagreeonasapricetobegivenandreceivedtherefor.Themeasureis
notthetakersgain,buttheownersloss.
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Inthedeterminationofsuchvalue,thecourtisnotlimitedtotheassessedvalueof
thepropertyortothescheduleofmarketvaluesdeterminedbytheprovincialorcity
appraisalcommittee;thesevaluesconsistbutonefactorinthejudicialvaluationof
theproperty.Thenatureandcharacterofthelandatthetimeofitstakingisthe
principalcriterionfordetermininghowmuchjustcompensationshouldbegiven
to the landowner. All the facts as to the condition of the property and its
surroundings, as well as its improvements and capabilities, should be
considered.
Neither of the two determinations made by the courts below is therefore
correct. A new one must be arrived at, taking into consideration the foregoing
pronouncements.25(Emphasissupplied)
InApoFruitsCorporation,etal.,v.LandBankofthePhilippines,26the
Courtenbancawarded12%interesttopetitionersApoFruitsCorporation
and Hijo Plantation, Inc., for prime agricultural farmlands voluntarily
offeredtothefarmerswaybackin1995.Weunderscoredthenthevalue
forvalue exchange dictated by just compensation in land reform
expropriations,sothatthelandownerwouldnotbeshortchanged:
Underthecircumstancesofthepresentcase,weseenocompellingreasonto
departfromtherulethatRepublicfirmlyestablished. Letitberememberedthat
shornofitseminentdomainandsocialjusticeaspects,whattheagrarianland
reformprograminvolvesisthepurchasebythegovernment,throughtheLBP,
of agricultural lands for sale and distribution to farmers. As a purchase, it
involves an exchange of valuesthe landholdings in exchange for the LBP's
payment. In determining the just compensation for this exchange, however, the
measuretobeborneinmindisnotthetakersgainbuttheownerslosssincewhatis
involvedisthetakeoverofprivatepropertyundertheStates
_______________
25NationalPowerCorporationv.Tiangco, G.R.No.170846,06February2007,514SCRA
674.
26G.R.No.164195,12October2010,632SCRA727.
656
656
coercive power. As mentioned above, in the valueforvalue exchange in an
eminent domain situation, the State must ensure that the individual whose
property is taken is not shortchanged and must hence carry the burden of
showing that the just compensation requirement of the Bill of Rights is
satisfied.
Theownersloss,ofcourse,isnotonlyhispropertybutalsoitsincomegenerating
potential. Thus, when property is taken, full compensation of its value must
immediatelybepaidtoachieveafairexchangeforthepropertyandthepotential
incomelost.Thejustcompensationismadeavailabletothepropertyownersothathe
mayderiveincomefromthiscompensation,inthesamemannerthathewouldhave
derivedincomefromhisexpropriatedproperty.Iffullcompensationisnotpaidfor
propertytaken,thentheStatemustmakeupfortheshortfallintheearningpotential
immediatelylostduetothetaking,andtheabsenceofreplacementpropertyfrom
whichincomecanbederived;interestontheunpaidcompensationbecomesdueas
compliance with the constitutional mandate on eminent domain and as a basic
measureoffairness.(Emphasissupplied)
Intheseminalcase LandBankofthePhilippinesv.Natividad,27 the

CourtrejectedoutrightthecontentionofLandBankofthePhilippines
that the compensation for property, subject of agrarian reform
expropriation,shouldbebasedontheeffectivityofthepreviouslaw
(PresidentialDecreeNo.27)on21October1972.TheCourt ruledthat
thecompensationshouldbepeggedtothetimethepropertywastaken
inpossessionin1993underthenewCARL:
Land Banks contention that the property was acquired for purposes of
agrarianreformonOctober21,1972,thetimeoftheeffectivityofPD27,ergo
justcompensationshouldbebasedonthevalueofthepropertyasofthattime
andnotatthetimeofpossessionin1993,islikewiseerroneous.InOfficeofthe
President,Malacaang,Manilav.CourtofAppeals,weruled
_______________
27G.R.No.127198,16May2005,458SCRA411.
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thattheseizureofthelandholdingdidnottakeplaceonthedateofeffectivityofPD
27butwouldtakeeffectonthepaymentofjustcompensation.
Underthefactualcircumstancesofthiscase,theagrarianreformprocessis
stillincompleteasthejustcompensationtobepaidprivaterespondentshasyet
tobesettled.ConsideringthepassageofRepublicActNo.6657(RA6657)before
thecompletionofthisprocess,thejustcompensationshouldbedeterminedandthe
processconcludedunderthesaidlaw.Indeed,RA6657istheapplicablelaw,with
PD27andEO228havingonlysuppletoryeffect,conformablywithourrulingin
Parisv.Alfeche.
Section17ofRA6657whichisparticularlyrelevant,providingasitdoesthe
guidepostsforthedeterminationofjustcompensation,readsasfollows:
Sec.17.Determination of Just Compensation.In determining just
compensation,thecostofacquisitionoftheland,thecurrentvalueoflike
properties, its nature, actual use and income, the sworn valuation by the
owner,thetaxdeclarations,andtheassessmentmadebygovernmentassessors
shall be considered. The social and economic benefits contributed by the
farmersandthefarmworkersandbytheGovernmenttothepropertyaswell
asthenonpaymentoftaxesorloanssecuredfromanygovernmentfinancing
institution on the said land shall be considered as additional factors to
determineitsvaluation.
Itwouldcertainlybeinequitabletodeterminejustcompensationbasedonthe
guidelineprovidedbyPD27andEO228consideringtheDARsfailuretodetermine
thejustcompensationforaconsiderablelengthoftime. Thatjustcompensation
shouldbedeterminedinaccordancewithRA6657,andnotPD27orEO228,is
especiallyimperativeconsideringthatjustcompensationshouldbethefulland
fairequivalentofthepropertytakenfromitsownerbytheexpropriator,the
equivalentbeingreal,substantial,fullandample.
In this case, the trial court arrived at the just compensation due private
respondents for their property, taking into account its nature as irrigated land,
locationalongthehighway,marketvalue,assessorsvalueandthevolumeandvalue
ofitsproduce.ThisCourtisconvincedthatthetrialcourtcorrectlydeterminedthe
amountof
658
658
justcompensationdueprivaterespondentsinaccordancewith,andguidedby,RA
6657andexistingjurisprudence.28(Emphasissupplied)
Appliedtotheinstantcase,themorejustandequitablesolutionisto
reckontheperiodofthetakingfromthedateofthenoticeofcoverage
underthefifthapproach,sincethiswasthetimethatpetitionerHLIwas
putonnoticethatitsstockdistributionoptionwasdefectiveandthatits
agriculturallandsthereinwouldbesubjecttocompulsorycoverageand
directlanddistributionundertheCARL.Itisarguedthatthetimethe
SDOA was signed and/or the PARC Resolution was issued could be
considered as the time petitioner HLI was given due notice that its
agriculturallandswouldbesubjectofagrarianreform.Thisargumentis
undeniablyunfairandcontrarytouniformjurisprudenceinterpretingthe
constitutional dictum that just compensation in expropriations should
approximate equivalent value that is real, substantial, full and ample.
Landownerswouldbeshortchangediftheirrealpropertiesaretakenbythe
Stateinexchangeforcompensationthatispeggedatvaluestwodecades
prior. In this case, unwarranted discrimination would be committed
against
_______________
28SeealsoLandBankv.Livioco,G.R.No.170685,22September2010,631SCRA86;
LandBankv.J.L.JocsonandSons,G.R.No.180803,23October2009,604SCRA373;
LandBankv.HeirsofAsuncionAonuevovda.deSantos,etal., G.R.No.179862,03
September2009,598SCRA115;DARv.Tongson,G.R.No.171674,04August2009,595
SCRA181; LandBankv.CarolinaB.vda.deAbello,etal., G.R.No.168631,07April
2009,584SCRA342;LandBankv.Chico,G.R.No.168453,13March2009,581SCRA
226;LandBankv.PacitaAgriculturalMultiPurposeCooperative,Inc.,G.R.No.177607,
19January2009,576SCRA291;LandBankv.Dumlao,G.R.No.167809,27November
2008, 572 SCRA 108; Land Bank v. Heirs of Eleuterio Cruz, G.R. No. 175175, 29
September2008,567SCRA31;LandBankv.HeirsofAngelDomingo,G.R.No.168533,
04February2008,543SCRA627;LandBankv.SpousesHermosa,G.R.No.166777,10
July2007,527SCRA181; Lubricav.LandBank,G.R.No.170220,20November2006,
507SCRA415.
659
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HaciendaLuisita,
Incorporatedvs.
ReformCouncil
petitionerHLIiftheagriculturallandstobedistributedtotheFWBsareto
bevaluedattheir1989levels.
Tobesure,thefourthapproachexplainedabovemayapproximatethe
valueofthepropertyatthedateoftheNoticeofCoverage,butwould
unnecessarily call for meticulous accounting and valuation of
improvements.Althoughthefourthapproachwouldcontinuetopegthe
valueoftheagriculturallandtoits1989level,itrecognizesthepassageof
aninordinatelengthoftimeandhopestomitigateitsunjusteffectsby
addingthepaymentofinterest.Theawardofinterestmayalleviatethe
hardshipcausedbydeprivingpetitionerHLIofthecurrentandfairmarket
valueofthepropertyundertheprevailinglawsandrules,buttheorderfor
ittopayrentalsforthelandsfrom198929wouldnegatethebenefitofany
interest,ifnotpossiblysaddleitwithaheavierfinancialburden.
AlthoughJusticeBrionreckonedtheperiodforthevaluationoftheland
to21November1989,herecognizedpetitionerHLIsentitlementtothe
valueoftheimprovementsthatithasintroducedintotheagriculturallands
for the past twenty years. The proposition is akin to the Civil Code30
situation
_______________
29SincelandreformcoverageandtherighttothetransferoftheCARLcoveredlands
accruedtotheFWBsasofMay11,1989,HLIwhichcontinuedtopossessandtocontrol
thecoveredlandshouldpaythequalifiedFWBsyearlyrentalfortheuseandpossession
andcontrolovertheselands.Asadetailoflandreformimplementationtheauthorityto
determinetheappropriaterentalsbelongstotheDARusingestablishednormsandstandards
forthepurpose.Properadjustment,ofcourse,shouldbemadeforthesaleoftheacquired
landstoLIPCOandtothegovernmentasnorentalscanbeduefortheseportionsaftertheir
sale.(SeparateOpinionofJusticeBrion)
30Theownerofthelandonwhichanythinghasbeenbuilt,sownorplantedingood
faith,shallhavetherighttoappropriateashisowntheworks,sowingorplanting,after
paymentoftheindemnityprovidedforinArticles546and548,ortoobligetheonewho
builtorplantedtopaythepriceoftheland,andtheonewhosowed,
660
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Council
where a landowner opts to acquire the improvements introduced by a
builder in good faith and must necessarily pay their value.31 Hence,
althoughthelandofpetitionerHLIisexpropriatedbythegovernment,
thereisaneedforcompensationfortheintroductionoftheimprovements
actuallyinstalledbypetitionerHLI,suchasroadsandotherinfrastructure,
whichhaveevidentlyimprovedthevalueoftheproperty,asidefromits
appreciation over time. In recognizing the necessity for compensating
petitionerHLIfortheirimprove
_______________
theproperrent.However,thebuilderorplantercannotbeobligedtobuythelandifits
valueisconsiderablymorethanthatofthebuildingortrees.Insuchcase,heshallpay
reasonablerent,iftheownerofthelanddoesnotchoosetoappropriatethebuildingortrees
afterproperindemnity.Thepartiesshallagreeuponthetermsoftheleaseand,incaseof
disagreement,thecourtshallfixthetermsthereof.(CivilCode,Art.448)
Necessaryexpensesshallberefundedtoeverypossessor;butonlythepossessoringood
faithmayretainthethinguntilhehasbeenreimbursedtherefor.(CivilCode,Art.546)
Usefulexpensesshallberefundedonlytothepossessoringoodfaithwiththesame
rightofretention,thepersonwhohasdefeatedhiminthepossessionhavingtheoptionof
refundingtheamountoftheexpensesorofpayingtheincreaseinvaluewhichthethingmay
haveacquiredbyreasonthereof.(CivilCode,Art.546)
31Wherethebuilder,planterorsowerhasactedingoodfaith,aconflictofrightsarises
betweentheowners,anditbecomesnecessarytoprotecttheowneroftheimprovements
withoutcausinginjusticetotheowneroftheland.Inviewoftheimpracticabilityofcreating
astateofforcedcoownership,thelawhasprovidedajustsolutionbygivingtheownerof
the land the option to acquire the improvements after payment of the proper
indemnity,ortoobligethebuilderorplantertopayforthelandandthesowertheproper
rent.Hecannotrefusetoexerciseeitheroption.Itistheownerofthelandwhoisauthorized
toexercisetheoption,becausehisrightisolder,andbecause,bytheprincipleofaccession,
heisentitledtotheownershipoftheaccessorything.(HeirsoftheLateJoaquinLimense,
v.Vda.DeRamos,G.R.No.152319,28October2009,604SCRA599citing Rosalesv.
Castelltort,472SCRA144,161[2005]).
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HaciendaLuisita,
Incorporatedvs.
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ments, pegging the values to its 1989 levels will not be as severely
confiscatory,ifthevaluewillbeincludedaspartofthejustcompensation
tobepaid.Iwouldevenbewillingtoaccepttheformulationproposedby
JusticeBrionsinceitwould,toalesseramount,approximatesafairmarket
value of the property. But to simply evaluate the propertys worth to
outdated levels and exclude entirely the improvements made and the
marketappreciationofthelandsinallthe17yearsthatpetitionerHLI
investedinthelandsisnotevensupportablebytheCivilCode.
Furthermore, identifying and valuing the improvements in Hacienda
LuisitaintroducedbypetitionerHLImayposeanothersourceofconflict
thatmayprotractthecasefurther.Inaddition,theirnakedcostsandbook
valuesmayfailtoaccountfortheintangibleeffectsandtheappreciationof
valuesthatmayresultfromimprovements,suchasroads.Toobviatethese
possibledeficienciesinapproximatingthefairvalueofthefarmlands,
theirrealvalueatthetimeofthenoticeofcoverage,followingtheDARs
formula,wouldrenderabetteraccountingresultandprecludecomplicated
calculations.
The approximation of fair value of the expropriated lands as just
compensation is not meant to increase the burdens of payment by the
qualified FWBs. When the framers of the Constitution originally
determined that just compensation, as understood in prevailing
jurisprudence, was to be given to landowners in agrarian reform
expropriation,thepointwasclarifiedthattheamountstobeawarded
tothelandownerswerenottheexactfiguresthatwouldinturnbe
paidbythefarmers,inotherwordsitshouldbesubsidized:
MR.RODRIGO:IwasabouttosaywhatCommissionerConcepcionsaid.Ijust
wanttoaddthatthephrasejustcompensationalreadyhasadefinitemeaningin
jurisprudence. And, of course, I would like to reiterate the fact that just
compensationhereisnottheamountpaidbythefarmers.Itistheamountpaid
tothe
662
662
owner,andthisdoesnotnecessarilyhavetocomefromthefarmer.TheState
should subsidize this and pay a just compensation to the owner and let the
tenantfarmerpaythestateinaccordancewiththecapacityofthefarmer.If
there is a difference let the State subsidize the difference. (Emphasis

supplied)32
Thus, the original intention was that there should be no strict

correspondencebetweenthejustcompensationduetothelandownerand
theamountstobepaidbythefarmworkers:
MR.MONSOD:However,asfarasthesourceoftherepaymentisconcerned,it
maybethatthefamerisnotabletoaffordthejustcompensation.Thisisaproper
areawheretheStatecancomein,ifitintendstogivesupportorsubsidy.Thatmaybe
calledforinorderthatthefarmerwillgetachancetoownapieceofland.Besides,
theremightnotbeastrictcorrespondencebetweenajustcompensationforthe
landownerandthecapacityofthefarmertopay.
MR.DAVIDE:Asamatteroffact,theopeningsentenceofmyproposalstates:It
isthedutyoftheState.ThismeansthattheStateshouldfirstexpropriate,distribute
and thenthegovernmentwilldealwiththefarmersorfarmworkersastothe
modeofreimbursementorrefundingtheamountthatthegovernmenthadpaid
tothelandowner,whichshouldbeamorejustandequitablearrangementfor
thefarmersandthefarmworkers.Itisnowaduty.
MR.MONSOD:ThatiswhyIbelievethathisisconsistentwiththecommentsof
CommissionerTadeobecausetheobjectiveoftheagrarianreformisequity.Itis
reallynotefficiencyorproduction,butthefirstobjectiveisequity.Inthatsense,the
Statemayhavetostepintohelpthefarmerpayfortheland.(Emphasissupplied)33
_______________
32MinutesoftheDeliberationsoftheConstitutionalCommission,(07August1986),at
pp.1718.
33MinutesoftheDeliberationsoftheConstitutionalCommission,(05August1986),p.
703.
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Hence,therewasanacknowledgementofthelimitedcapacityofthe
farmerstopayforvalueoftheexpropriatedlandsunderawillingbuyer
willingsellerformulation.Thus,theobligationwasimposedontheState
tosubsidizepaymentsinordertosupportthefinancialarrangementsofthe
countrysagrarianreformprogram.Thefairvaluepaidtothelandowner
forthedistributedlandsistobeshoulderedbytheState,inlinewiththe
right to just compensation and the limitations on the state power of
expropriation.However,adifferentprinciplegovernswhenitistheState
thatwillreceiveamortizationpaymentsfromthefarmersforexpropriated
lands,namelythepolicyofsocialjustice.Hence,theStatesfunctionisto
subsidizetherepaymentschemesandoffertermsthatareaffordabletothe
farmersconsideringtheirlimitedcapacitytopay.Theburdenisnowon
theStatetoconsiderprogramsthataremorefinanciallyviableinorderto
balancetherightsofthelandownerstojustcompensationwiththesocial
justice demands of the poor farmworkers with limited capabilities to
simultaneouslypursueagriculturalenterprisesandpayforthelands.
PetitionerHLI,asacorporatelandowner,mustundoubtedlysharethe
costs and burdens of the countrys type of agrarian reform scheme by
surrenderingtheagriculturallandstothegovernmentfordistributiontothe
qualifiedFWBs.Butinordertocomewithintheconstitutionaldirectives
oneminentdomainandjustcompensation,itssacrificecannotbemadeto
beoverlyburdensomeastoforcethemtoreceivebutasmallfractionof
current market values for its expropriated properties. In ruling for the
paymentofjustcompensationtopetitionerHLIunderthefifthapproach
whichispeggedtothedateofnoticeofcoverageundertheprevailing
laws, rules and jurisprudencethe Court will perform its obligation to
upholdthedictatesofsocialjusticeindistributingthelandsinHacienda
LuisitatothequalifiedFWBs,butnottotheextentofsacrificingtheright
ofland
664
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Council
ownersandconsigningthemtoacceptthecheapestvaluefortheirlands.In
LandBankofthePhilippinesv.Chico,34theCourt,throughretiredJustice
EduardoNachura,succinctlysummarizedthispointinthiswise:
TheComprehensiveAgrarianReformProgramwasundertakenprimarilyfor
thebenefitofourlandlessfarmers.However,theundertakingshouldnotresultin
the oppression of landowners by pegging the cheapest value for their lands.
Indeed,thetakingofpropertiesforagrarianreformpurposesisarevolutionarykind
ofexpropriation,butnotattheundueexpenseoflandownerswhoarealsoentitledto
protectionundertheConstitutionandagrarianreformlaws.Verily,topayrespondent
onlyP10,000.00perhectareforhislandtoday,afterhewasdeprivedofitsince1994,
wouldbeunjustandinequitable.(Emphasissupplied)
SaleofDistributedLandstoThirdParties
InmyearlierDissentingOpinion,Iforwardedthepositionthatoncethe
agriculturallandsaretransferredandawardedtothequalifiedFWBs,they,
asabsolutelandowners,shouldbeabletomakefulluseoftheproperties,
including the right to sell them, considering the lapse of the tenyear
prohibitionundertheCARL:
Inaddition,consideringthelapseoftheprohibitiveperiodforthetransferof
agriculturallands,nothingpreventstheFWBs,asdirectownerbeneficiariesofthe
HaciendaLuisitalands,fromsellingtheirownershipinterestbacktopetitionerHLI,
ortoanyotherinterestedthirdparty,suchasbutnotlimitedtothegovernment,LBP,
orotherqualifiedbeneficiaries,amongothers.ConsideringthattheHaciendaLuisita
lands were placed under CARP coverage through the SDOA scheme of
petitionerHLIon11May1989andthelapseofthetwoyearperiodforthe
approvalofitscompliance,theperiodprohibitingthetransferofawardedlands
under CARL has undeniably lapsed. As landownerbeneficiaries, the qualified
FWBsarenowfreetotransactwiththird
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34G.R.No.168453,13March2009,581SCRA226.
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partieswithrespecttotheirlandinterests,regardlessofwhethertheyhavefullypaid
forthelandsornot.
TomakethequalifiedFWBsofHaciendaLuisitawaitanother10yearsfromthe
issuance of the Certificate of Land Ownership Award (CLOA) or Emancipation
Patent(EP)beforebeingallowedtotransferthelandisundulyprohibitiveinthe
instantcase.TheprohibitiveperiodundertheCARLwasmeanttoprovideCARP
beneficiariessufficienttimetoprofitfromtheawardedlandsinordertosustaintheir
dailyliving,payofftheyearlyamortization,andearnmodestsavingsforotherneeds.
This period protected them from being influenced by dire necessity and short
sightedness and consequently, selling their awarded lands to a willing buyer
(oftentimesthepreviouslandowner)inexchangeforquickmoney.Thisreasoning
ordinarily may have been availing during the first few years of the CARL, but
becomesanunreasonableobstructionforthequalifiedFWBsofHaciendaLuisita,
whohavebeenmadetoendureanullandvoidSDOAformorethan20years.
Undeniably,someofthelandsundercompulsorycoveragehavebecomemore
viablefornonagriculturalpurposes,asseenfromtheconvertedlandsofLIPCOand
RCBC.Infact,thethenMunicipalityofTarlachadunanimouslyapprovedtheLuisita
LandUsePlancovering3,290hectaresofagriculturallandsinHaciendaLuisita,
owned by, among others, petitioner HLI; and reclassifying them for residential,
commercial,industrialorinstitutionaluse.Thedevelopmentofthesekindsoflandin
HaciendaLuisitawouldbetterservethelocalcommunitiesthroughtheincreasein
economicactivitiesintheareaandthecreationofmoredomesticemployment.
Similarly,qualifiedFWBsshouldbeaffordedthesamefreedomtohavethelands
awarded to them transferred, disposed of, or sold, if found to have substantially
greater economic value as reclassified lands. The proceeds from the sale of
reclassifiedlandsinafree,competitivemarketmaygivethequalifiedFWBsgreater
optionstoimprovetheirlives.Thefundssourcedfromthesalemayopenupgreater
andmorediverseentrepreneurialopportunitiesforthemasopposedtosimplytying
themtotheawardedlands.Severelyrestrictingtheoptionsavailabletothemwith
respecttotheuseordispositionoftheawardedlandswillonlyprolongtheirbondage
tothelandinsteadoffreeingthemfromeconomicwant.Hence,intheinterestof
equity,thetenyearprohibitiveperiodforthetransferoftheHaciendaLuisitalands
coveredundertheCARLshallbedeemed
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tohavebeenlifted,andnothingshallpreventqualifiedFWBsfromnegotiatingthe
saleofthelandstransferredtothem.(Emphasissupplied)
Concernshavebeenexpressedthatsuchareadingoftheprovisionsof
theCARLshowsanindifferencetotheretentionlimitsimposed,andthat
strictadherencetothelawandtheruleswoulddictatethatthetenyear
periodshouldcommenceonlyupontheissuanceandregistrationofthe
emancipation patent or certificate of land ownership award. However,
considering the protracted litigation in this case and the years that the
FWBs have been made to wait, I maintain that absolute ownership be
immediately transferred to them in this case, with the full freedom to
transferorselltheproperties,iftheysochoose.
Therationaleforthe10yearprohibitiononthesaleofthetransferred
land may have been laudable at the starting point of the CARL but it
comesclosetooppressingagrarianreformbeneficiaries20yearshence.
Theaimoftheprohibitionthenwastoensurethatagriculturallandswould
beretainedbythosewhowereawardedbygovernmentandtoensuretheir
continuedpossessionandenjoymentofthepropertyforthepurposeof
cultivation.35 It was to preclude farmers from becoming easy prey to
thosewhowouldliketotempt[them]withcashinexchangeforinchoate
titleoverthesameandthusallownontillersofthesoiltoacquiretitle
overagriculturallands.36Hence,landsacquiredundertheCARLwere
_______________
35Theobjectofagrarianreformistovestinthefarmerbeneficiary,totheexclusionof
others, the rights to possess, cultivate and enjoy the landholding for himself; hence, to
insurehiscontinuedpossessionandenjoymentthereof,heisprohibitedbylawtomakeany
formoftransferexceptonlytothegovernmentorbyhereditarysuccession.(Maylemv.
Ellano,G.R.No.162721,13July2009,592SCRA440,citing Torresv.Ventura,187
SCRA96[1990])
36EstateoftheLateEncarnacioVda.dePanliliov.Dizon,G.R.Nos.148777&157598,
18October2007,citingTorresv.Ventura,187SCRA96(1990).
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soughttoberetainedforadecadeaspropertiesforpurposesofagricultural
cultivation, even when they were transferred or sold to other owners.
However,significanttimehaspassedandconsiderabledevelopmentshave
occurredintheneighboringareasofformerlyexclusiveagriculturallands,
thusrequiringareviewoftheinitialassumptions.Aretheacquiredlands
moreeconomicallybeneficialorfeasibleasagriculturallands?Willthese
propertiesbecomemorefinanciallyviableforothereconomicuses?Dothe
FWBswanttoremainasfarmersforever,ordotheywanttobranchoutto
otherprofitableenterprisesorinterests?Withthesecompellingquestions,
the current realities confronting the FWBs require a careful and
considerate study of the application and interpretation of the laws that
wouldextendtheirmaximumbenefitandupholdtheirwelfare.
ThequalifiedFWBsinHaciendaLuisitashouldnotonlybeconfinedto
atenyearlicensetofarmthedistributedlands,butshouldbeabletoenjoy
alltherightstothelandandfruitsthereof.Asfullowners,thequalified
FWBswhowouldbeawardedlandsmustbeaffordedtheentiregamutof
opportunities to make use of the land as their circumstances and
capabilities see fit. Nothing prevents them from continuing to till the
agriculturalland,whetherindividuallyorasacollective,asinthecaseofa
cooperative.However,thesamefreedomshouldbeaffordedtothemwhen
theyseethatthebesteconomicallyandfinanciallyadvantageoususeofthe
propertyistosellportionsoftheproperty,especiallyinthiscaseinwhich
developments in the neighboring lots have greatly enhanced the value
thereof.
ToprolongforadecadetheFWBsenjoymentoftherighttotransfer
anddisposeofportionsoftheagriculturallandsistocontinuetobindthem
totheland.Withoutanyassistancefromthegovernmentorothercivic
organizations,FWBsmaybeawardedapossiblepyrrhiclegalvictory,in
which they own the land but without the financial means to till and
cultivateit.Freeingthemfromthestrictapplicationofthetenyear
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prohibitionundertheCARL,willallowthemfulldiscretiontodisposeand
transferportionsofthepropertyastheyseefitandasaresuitabletotheir
needs. This will release lockedup capital in the soil and enable the
qualifiedFWBstousetheproceedsthereofinotherproductiveenterprises
orintheprocurementofotherassetsnecessaryfortillingtheremaining
land.
ToinsistthattherightsoftheFWBsleepforaperiodoftenyearsis
unrealistic and may seriously deprive them of real opportunities to
capitalize on and maximize the victory of direct land distribution. The
restriction will limit their access to credit markets, as studies in land
reformhaveshown.InaWorldBankPolicyResearchReport, 37 Klaus
Deininger identified the counterproductive effects of transferability
restrictions:
Governmentshavefrequentlyimposedrestrictionsonthetransferabilityofland
throughthesalesmarketonbeneficiariesoflandreformorsettlersonformerlystate
ownedlandtopreventthemfromsellingormortgagingtheirland.Sucharestriction
could be justified as a temporary measure to prevent the beneficiaries of a land
reform program from selling their land based on inadequate information or in
response to temporary imperfections in product and financial markets. Even
temporaryrestrictionsonlandmortgagescanbecounterproductive,however,as
theywoulddeprivebeneficiariesfromaccessingcreditduringtheestablishment
phase when they need it the most. The literature has reported cases where
farmerswereforcedtoresorttolessefficientarrangements,suchasusufruct
mortgaginganduseofwagelabor,togainaccesstocredit.Investigatorshavealso
notedthisprobleminKoreaand inthePhilippines,whererestrictionsonland
marketactivityhavelimitedinvestment.Landreceivedunderlandreformin
Chilewasfreelytrans
_______________
37KlausDeninger,LandPoliciesforGrowthandPovertyReduction(June2003),pp.122124
available
at
http://www
wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2003/08/08/000094946_0307250
400474/Rendered/PDF/multi0page.pdflastvisitedon11November2011.
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ferable,andJarvis(1985)viewsthisasoneofthekeyingredientsofitssuccess.
Precludinglandreformbeneficiariesfromsalesinthemediumtermwouldreduce
efficiencybypreventingadjustmentsinresponsetodifferentialbeneficiaryabilities,
and could, if combined with rental restrictions, cause large tracts of land to be
underutilized. The danger of beneficiaries undervaluing their land could be
reducedthroughothermeans,andthegoalofpreventingsmalllandownersfrom
sellingoutinresponsetotemporaryshockswouldbebetterservedbyensuring
thattheyhaveaccesstooutputandcreditmarketsandtotechnicalassistance,
andbyprovidingsafetynetsduringdisasterstoavoiddistresssales.
Restrictionsonlandsalesmarketscanincreasethecostsassociatedwithcertain
actions, but if the rewards from circumventing them are high enough, will not
eliminatethem.Forexample,ownerswhohavenodesiretofarmtendtodisregard
thetemporaryprohibitionoflandsalesinNicaraguaandcircumventitbylongterm
rentalswiththepromisetosell,whichbecauseoftheassociatedinsecurityleadsto
muchlowerlandprices.
A number of countries have combined initial privatization of land with a
moratoriumonlandsalestopreventthepossibilitythat,afterdecadesofcollectivism,
newlandownersexposuretolandsalesmarketsmaycausethemtodisposeoftheir
assets without being aware of their true value, leading to negative social
consequencesandconcentrationoflandinthehandsofspeculators.Theexampleof
someCIScountriessuggeststhatsuchconcernsmaynotbecompletelyunfounded.
Moratoriumsmaybejustifiedasawayofallowingnewlandownerstoacquirebetter
knowledge of their assets and prevent quick selloffs at unrealistic prices in an
environmentwheremarketsworkimperfectly.InAlbaniathisrestrictionhasbeen
combinedwitharightoffirstrefusal,wherebybeforeconsummatingalandsaletoan
outsider,neighborsorvillagemembersmustbegiventheopportunitytoacquirethe
landatthesamepriceforsomeperiod.Thishasfewadverseconsequencesandcan
helpallaycommunitiesfearsofbeingboughtoutbyoutsiders.
General imposition of restrictionsonthetransferabilityof landbysaleis
unlikelytobeenforceableorbeneficial. Inmanysituationssuchrestrictionswill
havelittleimpactinpracticebecauseoftheabsenceoflandorcreditmarkets.Where
appropriateinstitutionsforintragroupdecisionmakingareavailable,permitting
670
670
thecommunitytolimitsalesandgivingittherighttodecidewhethertoeventually
allow sales to outsiders may be an acceptable compromise between equity and
efficiencyconcerns.Restrictionsonthemarketabilityoflandarecommoninmany
developingcountries,andmanycustomaryorcommunalsystemsprohibitthesaleof
landtooutsiders.Somecountries,suchasBolivia,haveaminimumholdingsizethat
cannotbemortgagedoralienated.Whiletheseregulationsimposesomelossesin
terms of foregone credit market access, theycan also help toreduce undesirable
socialexternalitiesfromdrivingsomepeopleintodestitution.Aslongastheyarethe
productofaconsciouschoicebythegroupandthegrouphasclearandtransparent
mechanismsforchangingthelandtenureregime,theyareunlikelytobeharmful.As
traditionalsocialtiesloosenortheefficiencylossfromthesalesrestrictionbecomes
too high, groups are likely to allow sales to outsiders in some form. The recent
constitutionalreformofthelandrightssysteminMexicoallowsforfreesalesand
rental within all ejidos and for decisionmaking by majority vote on whether to
eliminatetherestrictiononsalestooutsiders.Aninitialevaluationofthereforms
suggeststhatwithappropriatetechnicalassistancecommunitiesareclearlyableto
makesuchdecisions.(Emphasissupplied;citationsomitted)
Imposingatenyearrestrictionwilldecreasethedesirabilityofthese
farmlandsascollateralandwillevenincreasethetransactioncostsfor
privatecreditorstoextendfarmloanstothesmallqualifiedFWBs.Infact,
in the experience of other countries like Venezuela, the governments
impositionoftransferabilityrestrictionshavecompelleddesperatefarmers
toresorttosellingtheirawardedfarmlandsintheblackmarketwaybelow
theirfairvalueandhavemadepoorfarmersevenpoorer:
Forexample,inanattempttocurbformerlylandlesspeasantssellingtheirnewly
acquiredlandsbacktothelargelandowners,theINTI[NationalLandInstitute]will
holdthelandtitleinanescrowaccountforthreeyears.Oncethreeyearshavepassed,
withthenewlandownerlivingandcultivatingthelandduringthattimeperiod,title
willpasstothelandownerfreefromanygovernmentenactedrestrictionsthatinitially
madethelandinalienable.AccordingtocriticsoftheChavezadministration,these
governmentrestrictions
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onlandtransfersaretantamounttoprovidingonlylicensestofarmtheland,rather
thanactualownershipofit.Moreover,excessiverestrictionsonthealienabilityof
land may actually burden the new farmers more, especially since they will be
deprivedofaccesstocredittoimprovetheirlandandexpanditssizewhenitis
economically prudent. Desperate farmers will have to resort to selling their
farmlandat40to60percentbelowitsfairmarketvalueontheblackmarket
duetothegovernmentrestrictionscurrentlyinplace.Andwithpoorfarmers
havingtoselltheirlandatsuchalowlevel,suchaprovisionmadetoassistthe
destitutewillunintentionallyleadtomakingpoorfarmersevenpoorerthan
theyotherwisewouldbe.38(Emphasissupplied;citationsomitted)
Consideringtheperceivedinadequacyofpublicfundstoprovidethe
qualifiedFWBsaccesstofarmcreditsandloanstofinancethecultivation
of the awarded lands, it is necessary to afford them the prospect of
solicitingprivatefundsandloanstocultivateanddeveloptheirlandsby
freeingthemfromthe10yearprohibitionperiod.Atthisdelayedstagein
the agrarian reform program covering Hacienda Luisita after the failed
stock distribution mechanism, the protection afforded by inflexible
restrictiononthealienabilityoftheawardedlandsisgreatlyoutweighed
by the market opportunities available to the qualified FWBs if full
ownershipisgiventothem.
The agrarian reform policies placed in the Constitution and as
implementedintheCARLwerelaudableeffortstoaddresssocialinjustice.
However, Fr. Joaquin Bernas, S. J., a member of the Constitutional
Commission, compared the previous attempts at agrarian reform and
underscoredthecrucialroleofeffectivepublicfinancinginthesuccessof
theprogram.39As
_______________
38AndyMielnik,HugoChavez:VenezuelasNewBanditorZorro,14L.&Bus.Rev.
Am.591(2008).
39FR. BERNAS: I do not see the possibility of massive land reform unless the
governmentsomehowgetsinvolvedinthefinancings;andIthinkoneofthereasonsthe
pastlandreformprogram
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aptly captured by then Senator Heherson Alvarez, funding became the

defining line that would determine whether the promises of agrarian
reformwouldremainadreamorbecomeareality:
Wherewillthefundingcomefrom?Withoutgoingtoaninvolvedaccountinglet
me say that funding for this program will come from various sources already
identified, among which are proceeds from the Assets Privatization Trust, the
Presidential Commission on Good Government, the Economic Support Fund,
PAGCOR,PhilippineCharitySweepstakesOffice,thesalesofgovernmentproperties
inTokyoandifneedbe,fromforeignsourcesorforeignborrowings.
Funding and cost were thoroughly considered in this bill in weeks, even
months,asitbecameclearthatimplementabilitywenthandinhandwithcost,
ourCommittee,incollaborationwithfinancinginstitutionsoftheGovernment,
studiously pored over details that drew the line between keeping agrarian
reformadreamandmakingitareality.40(Emphasissupplied)
Afterthefallofthemartiallawregimeandatthestartofthenew
democraticsociety,awindowofopportunitywaspresentedtotheState
to determine and adopt the type of land and agrarian reform to be
implemented.41Thenewlyformed
_______________
didnothavethesuccessthatitgavetheimpressionofhavingwaspreciselythefactthat
therewasnoeffectivefinancingsystemforit.
Soallofthesewillhave tobe necessarilypackagedintothe landreformprogram.
(MinutesoftheDeliberationsoftheConstitutionalCommission,[04August1986],p.648)
40SponsorshipspeechofSen.HehersonAlvarez,chairpersonoftheCommitteeonLand
Reform,RecordsoftheSenatedated26June1988,pp.29752977.
41Successful land reforms in this century have had many common characteristics.
Oftenthereisawindowofopportunitywherelandreformispossible.Landreformefforts
necessitatesignificantpoliticalwilltocommittochange.Inaddition,grassrootssupportof
thepopulaceandthreatofviolentuprisingcanbeanimpetusforreform.Thegovernment
mustalsohaveadequatefinancialresourcesorexternalsupportfortheprogram.Successful
land
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administration enjoyed a strong mandate from the people, who desired
change and would support a sweeping agrarian reform measure to
distribute lands. In this scenario, the State could have chosen a more
revolutionary approach, introducing into its agrarian reform program a
more confiscatory element.42 Following the examples of other
revolutionary governments, the State could have resorted to simply
confiscatingagriculturallandsundertheclaimofsocialjusticeandthe
social function of lands, with little need of payment of full just
compensation.43
However,theframersoftheConstitutionandthelegislatorsatthattime
choseadifferentpathandemployedatraditionallandreformprogram,
wherelandownersarepaidap
_______________
reforms,suchasthoseinJapan,Taiwan,SouthKorea,Mexico,andcertainstatesin
India,haveinvolvedthemandatoryexpropriationofland,butwithreasonable(althoughnot
fullmarketvalue)compensationtothelandowner.(KristenMitchell,MarketAssisted
LandReforminBrazil:ANewApproachtoAddressanOldProblem,22N.Y.L.SCh.J.
Intl&Comp.L.557[2003])
42The banks mission also called attention to the problem of just compensation
arguingthatsuccessfulagrarianreformprogrammeshavealwaysincludedaconfiscatory
element. (James Putzel, A Captive Land: The Politics of Agrarian Reform in the
Philippines[AteneodeManilaUniversityPress1992]p.288)
43The most successful land reforms have been traditional programs that used a
mandatoryredistributionmechanism,andtheyoftenoccurredduringperiodsofpolitical
instability.Inthesesituations,authoritariangovernmentshavebeenabletoforciblyremove
property from wealthy landowners. Based on this history, some scholars question the
feasibility of mandatory redistribution in a full democracy. In particular, scholars have
beguntoquestionthecontemporaryapplicabilityofthetraditionallandreformmodelin
manydevelopingcountrieswheregovernmentscannotaffordexpensivesocialprograms,
andwherepeace,industrialization,andforeigninvestmentareseenasmoreimportantthan
shifting the power balances within the country. (Andre Sawchenko, Choosing a
MechanismforLandDistributioninthePhilippines,9Pac.RimL.&PolyJ.681[2000])
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proximatelythefullandfairmarketvalueoftheirexpropriatedproperties.
The competing interests of the influential landowners and the peasant
agrarianunrestposedseriousdilemmastothenationsleadersand,inthe
end,resultedinanagrarianreformprogramthatsatisfiedneithergroup:
This campaign against agrarian reform placed Aquino in a very difficult
situation.IfinthefirstthreemonthsoftheyearAquinohadbeenforcedtomove
morerapidlyonlandreforminresponsetopeasantdemands,theserecenteventshad
forced her to hesitate. Aquino was thus facedwith a dilemma: either she decree
agrarianreformandfacetheimmediatethreatofdestabilizationbythoseopposedto
landreform,orsheleavethetasktoCongressandperhapsforfeitlegitimacyamong
theruralpoortherebyprecipitatingthelongtermdestabilizationofhergovernment
byfuelinginsurgency.44
Thecountrythusbounditselftofinanceanambitiousandexpensive
landacquisitionandredistributionschemewithoutthenecessarypublic
resourcestofundit.Thepolicychoicewasmadebasedontheexamplesof
land reformin Japan,Taiwan,andSouthKorea, 45 which hadadequate
financial resources to fund a distributive land reform program. 46
Unfortunately,thecountryatthattimewasheavilyburdenedbyforeign
debtduetotheexcessiveborrowingsmadeduringthe
_______________
44Simeon Gilding, Agrarian Reform and CounterReform under the Aquino
Administration:StudyinPostMarcosPolitics(1993),p.11.
45MR.OPLE:Weallknow,thosewhohavetakenaglanceatthehistoryofland
reforminJapan,TaiwanandKorea,thattheeconomicmiraclesthathavetakenplacein
thosecountriesandhavecompelledtheadmirationofthewholeworld,toalargeextent,
wererootedintheearlierlandreformprogrampursuedbytheirgovernments.(Minutes
oftheDeliberationsoftheConstitutionalCommission,[08August1986],p.83)
46Kristen Mitchell, MarketAssisted Land Reform in Brazil: A New Approach to
AddressanOldProblem,22N.Y.L.Sch.J.Intl&Comp.L.557(2003).
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Marcos regime. Worse, legislators pinned their hopes of the financial
sustainabilityoftheprogramonthefutureproceedsofMarcosillgotten
wealth to be recovered by the Presidential Commission on Good
Government.Thatthecountryisstillintheprocessofidentifyingandfully
recoveringthesemoneysfromMarcosandhiscroniesonlyspeakofthe
inadequateviabilityoftheagrarianreformprogram.Theunrealisticand
nave expectations of financial selfsufficiency doomed the full
implementationofaredistributivelandreform.
FortheCourttosuddenlyshifttheburdentolandowners20yearsafter
thegovernmenthaschosenmarketvaluecompensationoverpartialortotal
confiscationistotreatpetitionerHLIwithanunevenhand.TheCourt
cannotsimplyreckonthevaluationoftheHaciendaLuisitapropertiesfrom
its1989levelsbasedontheunspokenpremisethatthegovernmentdoes
notpossesssufficientpublicresourcestopaytheapproximatefairmarket
value of the expropriated lands. The framers of the Constitution, the
legislators, and even this Court have long defined the concept of just
compensationwhentheStateexerciseseminentdomainthatshouldapply
squarelyinlandreformexpropriation.Theonlyplausiblejustificationfor
antedating the valuation of the land to its 1989 levels would be the
inabilityoftheStatetoshouldersuchamount.Yet,neitherthePARCnor
theDARhasshownintheirMotionforReconsiderationinthiscasethat
theStatehasutterlackofavailableresourcestoshouldersuchcostsoris
without any available schemes that would permit a staggered and
affordablepaymentofjustcompensationtothelandowner.LettheCourt
not prejudge the ability or willingness of the government to pay just
compensationunderthesameformulathelatterappliedtootheragrarian
reformcases.
Withoutanyexceptionalreasonorcircumstanceobtaining,asidefroma
supposed lack of government funds (which has not been alleged by
government),thereisnoapparentjustificationfordenyingpetitionerHLI
thefairmarketvalueofits
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property.TomateriallyuplifttheconditionsofqualifiedFWBswhohave
been awarded agricultural lands, at the expense of imposing upon
petitionerHLIoldandlowvaluationlevels,mayhavebeenpermissible
during those revolutionary times of 1987, but it has now become
unacceptable due to standards that Congress and this Court itself have
uniformlyapplied.
InapplicabilityoftheOperativeFactsDoctrine
Abriefdisgression.Theresorttothesecretvotingoptionunderthefirst
orthirdapproachispremisedonamisapplicationoftheoperativefacts
doctrine.Themajorityhasnowabandonedtheactualapplicationofthe
operativefactsdoctrinetotheHLISDOAafterrealizingthatindeed,asI
hadearlierstated,themostthattheFWBscanhopetocontrolinHLIisa
third of the shares. Considering the outcome of the new voting, any
discussiononthe operative facts doctrinewouldthereforebeprimarily
academic.Butthenewponenciacontinuestoinsistthatitsdescriptionof
theoperativefactsdoctrineiscorrect.Aclarificationmustbemadeto
correctlyplacetheapplicationofthedoctrine.
Thegeneralruleisthatanunconstitutionallawhasnoforceandeffect
itproducesnorights,imposesnodutiesandaffordsnoprotection. 47
Hence,thepronouncementofunconstitutionalitybytheCourtretroactsto
all acts undertaken between the effectivity of the law and the
declarationofitsinvalidity.
Thedoctrineofoperativefactsservesasan exception tothisgeneral
rule.48Thedeclarationofalaworanexecutiveactasunconstitutionalis
given limited retroactive application in cases in which acts or
circumstancesmayhave
_______________
47 PlantersProducts,Inc.v.FertiphilCorp., G.R.No.166006,14March2008,548
SCRA485.
48Yapv.ThenamarisShipsManagementandIntermareMaritimeAgencies,Inc.,G.R.
No.179532,30May2011,649SCRA369.
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arisenintheoperationoftheinvalidatedlawpriortothepronouncementof
invalidity.Considerationsofequitywouldaverttheinjusticeofnullifying
the interim effects of a persons good faith reliance on the laws
provisions. The cases involving the unconstitutionality of the debt
moratorium laws and the nonpayment of debts during the suspensive
period prior to the declaration best exemplify the application of the
exceptional doctrine of operative facts.49 In these instances, equity
interestsofthepartiessurpasstheconcernovertheretroactiveapplication
ofthelawsunconstitutionality.
TheapplicationoftheoperativefactsdoctrinetotheinvalidatedSDOA
isbeingjustifiedonthegroundthatwhatisbeingnullifiedisthePARCs
priorapprovaloftheSDOA,whichisanexecutiveact.Accordingtothe
argument,sincepetitionersHLIandtheFWBshavereliedforthepasttwo
decadesonthevalidityoftheSDOAandaccumulatedbenefitstherefrom,
itwouldbeprejudicialtotheirinterestsiftheirprioractswouldbewiped
cleanbythenullificationoftheSDOA.Thereasoningisstrained.
Nolaworexecutiveactwithrespecttostockdistributionoptionshas
been declared unconstitutional by the Court. For the operative facts
doctrinetohavebeenapplied,alaworanexecutiveactthatwasmade
effectiveforatemporaryperiodshouldhavebeeninvalidatedbytheCourt
forbeinginherentlyincontraventionoftheConstitutionand,thus,without
forceandeffectfromitsveryinception.ExceptforthepreviousSeparate
Opinions of Chief Justice Renato Corona and Justice Jose Mendoza, a
majorityoftheCourtgenerallyrefrainedfrommakinganydeclarationas
totheconstitutionalvalidityofastockdistributionoptionontheground
thatitis
_______________
49ManilaMotorCo.,Inc.,v.Flores,G.R.No.L9396,16August1956,99Phil.738;
DeAgbayaniv.PhilippineNationalBank,G.R.No.L23127,29April1971,38SCRA429;
Republicv.Herida,G.R.No.L34486,27December1982,119SCRA411; Republicv.
CourtofFirstInstance,G.R.No.L29725,27January1983,120SCRA154.
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notthe lismota ofthepresentPetition,andthatthechallengewasnot
timelymade,amongothers.
What the Court invalidated was the SDOA, which was simply an
applicationofthelaw,andnotanystatuteorexecutiveact,onthebasisof
itshavingviolatedthespiritandintentoftheexistinglaw.Theinvalidated
PARCResolutionthatapprovedtheSDOAofHaciendaLuisitadidnot
rise to the level of a legislative statute or executive act, in which the
operativefactsdoctrinewouldbecomeapplicable.
In Municipality of Malabang v. Benito,50 the Court recognized the
applicability of the operative facts doctrine to an executive order
(Executive Order No. 386) issued by then President Carlos P. Garcia,
creating the municipality of Balabagan out of sitios and barrios of the
municipalityofMalabang,51 basedonearlierjurisprudenceholdingthat
theexecutivedidnothaveauthoritytocreatemunicipalcorporations.52
_______________
50G.R.No.L28113,28March1969,27SCRA533.
51ExecutiveOrder386creatednooffice.Thisisnottosay,however,thattheacts
donebythemunicipalityofBalabaganintheexerciseofitscorporatepowersareanullity
becausetheexecutiveorderis,inlegalcontemplation,asinoperativeasthoughithadnever
beenpassed.FortheexistenceofExecutiveOrder386isanoperativefactwhichcannot
justlybeignored.(Id.)
52Then, also, the power of control of the President over executive departments,
bureaus or offices implies no more than the authority to assume directly the functions
thereofortointerfereintheexerciseofdiscretionbyitsofficials.Manifestly,suchcontrol
doesnotincludetheauthorityeithertoabolishanexecutivedepartmentorbureau,orto
create a new one. As a consequence, the alleged power of the President to create
municipalcorporationswouldnecessarilyconnotetheexercisebyhimofanauthority
even greater than that of control which he has over the executive departments,
bureausoroffices.Inotherwords,Section68oftheRevisedAdministrativeCodedoesnot
merelyfailtocomplywiththeconstitutionalmandateabovequoted.Insteadofgivingthe
Presidentlesspoweroverlocalgovernmentsthanthatvestedinhimovertheexecutive
departments,bureausoroffices,it
679
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In his Concurring Opinion, then Justice Enrique Fernando made
explicittheapplicationofthedoctrineofoperativefactsonlytoexecutive
acts that are quasilegislative in nature, specifically in the creation of
municipalcorporationsbytheexecutiveandthesubsequentdeclarationof
unconstitutionalitybythejudiciary:
Nothingcanbeclearerthereforeinthelightofthetwoabovecasesthanthata
previous declaration of invalidity of legislative acts would not be bereft of legal
results.Wouldthatviewholdtrueofnullificationofexecutiveacts?Theremight
havebeendoubtsastothecorrectanswerbefore.Thereisnonenow.
Ajudicialdecisionannullingapresidentialexerciseofauthorityisnotwithoutits
effecteither.Thatmuchisevidentfromtheholdingnowreached.Theactstricken
down, whether proceeding from the legislature or the Executive, could in the
language of the Chicot County case, be considered, prior to the declaration of
invalidity,asanoperativefactandmayhaveconsequenceswhichcannotjustlybe
ignored.
Thusthefrontiersofthelawhavebeenextended,adoctrinewhichtosome
may come into play when a statute is voided is now considered equally
applicabletoaPresidentialactthathasmetasimilarfate.Sucharesultshould
notoccasionsurprise.Thatistobeexpected.
Therewouldbeunjustifieddeviationfromthedoctrineofseparationofpowersif
aconsequenceattachedtotheannulmentofastatuteisconsideredasnotoperative
where an executive order is involved. The doctrine of coequal or coordinate
departmentswould
_______________
reversestheprocessanddoestheexactopposite,byconferringuponhimmorepowerover
municipalcorporationsthanthatwhichhehasoversaidexecutivedepartments,bureausoroffices
.
WHEREFORE,theExecutiveOrdersinquestionareherebydeclarednullandvoidabinitioand
therespondentpermanentlyrestrainedfrompassinginauditanyexpenditureofpublicfundsin
implementationofsaidExecutiveOrdersoranydisbursementbythemunicipalitiesabovereferred
to.Itissoordered.(Pelaezv.AuditorGeneral,G.R.No.L23825,24December1965,15SCRA
569)
680
680
bemeaninglessifadiscriminationoftheabovesortwereconsideredpermissible.The
cognizance taken of the prior existence of an enactment subsequently declared
unconstitutionalappliesaswelltoaPresidentialactthereaftersuccessfullyassailed.
Therewasatimewhenittoodidexistand,assuch,afacttobereckonedwith,
thoughaninfirmsourceofalegalright,if,assubsequentlyheld,considered
violativeofaconstitutionalcommand.(Emphasissupplied)
ThePARCResolution,whileanexecutiveact,isnotanexerciseofa
quasilegislativepowerbytheexecutive,butamerewrongfulapplication
of the law on stock distribution options under the CARL. The CARL
providedthenormsusedtoevaluateanystockdistributionoptionandthis
was applied by the PARC in deciding whether to approve the SDOA.
Hence,itwastheinterpretationofthePARCwhenitmistakenlyapproved
theSDOAofpetitionerHLIandtheFWBsthathasbeendeclaredinvalid,
andnottheenablinglawitself.Thesourceofinfirmityinthiscaseliesnot
intheprovisionsoftheCARLallowingstockdistributionoptions,butin
theerroneousapprovalpreviouslygrantedbythePARC.Thegoodfaith
relianceofpetitionerHLIwithrespecttotheapproval(albeiterroneous)of
itsSDOAdoesnotjustifytheoperationofthedoctrine,sincenolessthan
thisCourthasfoundthattheSDOAanditsapprovalwereinutterviolation
oftheintentoftheCARLonstockdistributionoptions.
Furthermore, it would be incongruous to avoid the constitutionality
issueofthestockdistributionmechanismundertheCARPontheground
thatitisnotthe lismota ofthecase,yetatthesametime,invokethe
operativefactsdoctrine.Thereissimplynoroomfortheapplicationof
operativefactsdoctrine,absentanunconstitutionallyinvalidlegislativeor
executiveact.
Theoperativefactsdoctrinecanonlycomeintoplayasaruleofequity
incaseswherethereisavacuuminthelawcreatedbythesubsequent
declarationofnullitybytheCourt.Inthoseinstanceswheretheoperative
factsdoctrinewas
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used (i.e., debt moratorium cases), the unraveling of the effects of the
declarationofunconstitutionalityresortedtoadearthinthelawandthe
needforthecourtstoprovideguidanceastoitsretroactiveapplication.In
thiscase,nosuchvacuumexists,asinfacttheCARLitselfprovides
fortheultimateconsequencewhenastockdistributionplanoroption
is eventually invalidateddirect land distribution.53 The Court
thereforeneednotexerciseitsequityjurisdiction.
GuidingPrinciplesfortheOperationalSteps
Imaintainthattheoutrightdistributionoftheagriculturallandsin
HaciendaLuisitatothequalifiedFWBsshouldbeimmediatelyordered
owing to the absolute nullification of the SDOA. Considering the
multilayeredissuesofimplementationsurroundingthecaseandimposed
ontheDAR,itisbesttooffersomeguidingprinciplesandvalueswhen
executingtheCourtsordersinthislandmarkcase.
1.ScopeofCoveredLands
DAR shall first determine which of the lands in Hacienda Luisita
previously owned by both petitioner HLI and TADECO should be
includedinthecompulsorycoverage,includingtheidentificationofthe
improvementspreviouslyintroducedbythecorporatelandowners.
_______________
53Ifwithintwo(2)yearsfromtheapprovalofthisAct,thelandorstocktransfer
envisionedaboveisnotmadeorrealizedortheplanforsuchstockdistributionapprovedby
the PARC within the same period, the agricultural land of the corporate owners or
corporationshallbesubjecttothecompulsorycoverageofthisAct.(CARL,Sec.31)
682
682
Council
Aspreviouslydiscussed,54 thenullificationoftheSDOAbringsinto
questionthepreliminaryarrangementsmadebypetitionerHLI,TADECO
andthequalifiedFWBs,specificallytheunilateraldecisionofTADECO
tosegregateandselectwhichofitslands(totaling6,443hectares)willbe
transferredtopetitionerHLIforpurposesoftheSDOA(4,916hectares),
andwhichofthoseitwillkeepforitself(1,527hectares).Whetherthe
sizeableareaof1,527hectaresoffarmlandsshouldhavebeenexcluded
from the SDOA at the time of its execution on 11 May 1989, is best
determinedbytheDAR.
The lands determined by the DAR to be subject of compulsory
coverageshall,nonetheless,excludethefollowinglands:
_______________
54However, as pointed out by private respondent FARM, there were other lots in
HaciendaLuisitathatwerenotincludedinthestockdistributionscheme,butshouldhave
been covered under the CARP. TADECO, as the previous agricultural landowner,
preemptedthedeterminationofthelandstobecoveredundertheCARPbyselectingwhich
oftheagriculturallandsitwouldtransfertopetitionerHLIandconsequently,subjecttothe
SDOA.TheDARneverapprovedtheexclusionoftheotherlandsthatTADECOkeptfor
itself. It seems incongruous to the intention of the CARP under a stock distribution
agreement,toletthecorporatelandownerchooseandselectwhichofitsagriculturallands
wouldbeincludedandwhichonesitwouldretainforitself.Seriousdoubtsareentertained
with respect to the process of inclusion and exclusion of agricultural lands for CARP
coverageemployedbythecorporatelandowner,especiallysincetheexcludedlandarea
(1,527hectares)involvesonethirdthesizeofthelandTADECOsurrenderedfortheSDOA
(4,916hectares).TheexclusionofasubstantialamountoflandfromtheSDOAishighly
suspiciousanddeservesareviewbytheDAR.Whethertheselandswereproperlyexcluded
shouldhavebeensubjecttotheDARsdeterminationandvalidation.Thus,theDARis
taskedtodeterminethebreadthandscopeoftheportionoftheagriculturallandholdingsof
TADECOandpetitionerHLIthatshouldhavebeenthesubjectofCARPcoverageatthe
timeoftheexecutionoftheSDOAon11May1989.(DissentingOpinion)
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Incorporatedvs.
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a.The300outofthe500hectaresofconvertedlands,whicharenow
titled in the names of LIPCO and RCBC, both of whom are
consideredinnocentpurchasersingoodfaith;
b.The 80 hectares of land purchased and acquired by the Bases
ConversionDevelopmentAuthorityfortheconstructionofaportion
oftheSubicClarkTarlacExpressway;and
c.AllhomelotsalreadyawardedtothequalifiedFWBs.
2.PreliminaryValuationoftheLands
Basedonitsownrulesandformula,DARshallgiveapreliminaryand
objectivevaluationofthecoveredlands,whosevaluesshallbepeggedto
the time of the Notice of Coverage issued on 02 January 2006. This
valuationis,ofcourse,subjecttoadeterminationofjustcompensationby
thepropercourtincaseofdisagreement.
AccountingandCompensation
Thereafter,DARshallalsomakeafactualdeterminationofthevalues
andamountsofbenefitsactuallyreceivedbythequalifiedFWBsunderthe
SDOA,includingbutnotlimitedtothefollowing:
a.Threepercent(3%) totalgrosssalesfromthe production ofthe
agriculturallands
b.HomelotsactuallyawardedtoqualifiedFWBs
c.AnydividendsreceivedbyqualifiedFWBs
d.Theproceeds ofthesaleofthe 300hectare converted landand
SCTEXland,ifany,distributedtotheFWBs
However,petitionerHLIshallhavenoclaimoveranysalary,wageor
benefitgiventothefarmworker,andneithershallthelatter,qualifiedor
otherwise, be required to return the same, since they received those
benefitsforservicesren
684
684
Council
deredinanemployeeemployerrelationship,andnotundertherelationship
establishedundertheSDOA.However,allFWBsshallsurrenderalltheir
shareholdingsinpetitionerHLItothecorporation.
Thereafter,the DAR shall calculatethe amountsdueto eachofthe
parties,namely,petitionerHLI,LuisitaRealtyCorporation(LRC)andthe
qualifiedFWBs.Theseamountsshallbeoffsetoneanotherforpurposesof
convenienceinordertoarriveatasingleamounttobepaid:
Amountsdueto
petitioner
HLI/LRC
Amountsdueto
qualified
FWBs
a.The value of the

total lands subject of
compulsory coverage,
excluding the 300
hectare converted
lands of LIPCO and
RCBC and the 80
hectares of SCTEX
lands;
b.The value of the
200hectare converted
lands, which shall be
awardedtoLRC;
c.The 3% of the
purchase price of the
300hectare converted
landsgiventoFWBs;
a.The purchase
price of the 300
hectare converted
lands;and
d.The 3% of the
purchase price of the
SCTEXlands,andthe
cost of titling and
otherexpenses;
b.Thepricepaidby
the government for
the
80hectare
SCTEXlands.
e.The 3% of total
gross sales from the
production
of
agricultural lands
giventotheFWBs;
f.The values of the
homelots awarded to
theFWBs;
g.Any dividend
actually received by
theFWBs.
685
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After determining the just compensation due to petitioner HLI,
TADECOandLRC,theDARshallsettletheamountwiththequalified
FWBsunderanaffordableprogramorschemethattakescognizanceof
theirabilitytopay,undertheexistingrulesandprocedures.
3.SupportServices
InordertoensurethatthequalifiedFWBscanmaximizetheuseofthe
landsawardedtothem,theDAR,intheperformanceofitsmandate,shall
providesupportservicestothem,includingbutnotlimitedtoadequate
agricultural credit, technical assistance, and enhanced market
infrastructures to improve the delivery and sale of their agricultural
produce.
Trueagrarianreformmustnotbelimitedtotheequitableredistribution
of lands, but shall encompass the extension of supplemental public
services that will enable the FWBs of Hacienda Luisita to realize and
capitalizeonthefullpotentialofthelandsgiventothem.
EPILOGUE
TwentyyearsaftertheCARLwasissuedandthehopeoffarmersand
farmworkers across the country was renewed, the fulfillment of the
promiseofasweepingagrarianreformprograminthecountrytospur
agriculturalandeconomicgrowthhasremainedelusive.Althoughthere
havebeeninstancesofasuccessfulredistributionofland,theyaretoofew
tohavehadapositiveandappreciableimpactinupliftingfarmersacross
the nation. The main obstacles to the success of our agrarian reform
programareitslackoffinancialviabilityandthelackofadequatepublic
resourcestoensurefullimplementation.
Thewidegapbetweenthejustcompensationduetothelandownerandthe
abilityofthefarmerbeneficiariestopay
686
686
Council
wasintendedtobesubsidizedbytheState.55Despitetheidentificationof
the public resources that would be used by the government under the
CARL,56theseprovedelusiveorinsuf
_______________
55MR.RODRIGO:IwasabouttosaywhatCommissionerConcepcionsaid.Ijust
want to add that the phrase just compensation already has a definite meaning in
jurisprudence.And,ofcourse,Iwouldliketoreiteratethefactthatjustcompensationhere
isnottheamountpaidbythefarmers.Itistheamountpaidtotheowner,andthisdoesnot
necessarilyhavetocomefromthefarmer.TheStateshouldsubsidizethisandpayajust
compensationtotheownerandletthetenantfarmerpaythestateinaccordancewith
thecapacityofthefarmer.IfthereisadifferencelettheStatesubsidizethedifference.
(MinutesoftheDeliberationsoftheConstitutionalCommission,[07August1986],at
pp.1718)
56TheinitialamountneededtoimplementthisActfortheperiodoften(10)years
upon approval hereof shall be funded from the Agrarian Reform Fund created under
Sections20and21ofExecutiveOrderNo.229.
Additionalamountsareherebyauthorizedtobeappropriatedasandwhenneededto
augmenttheAgrarianReformFundinordertofullyimplementtheprovisionsofthisAct.
Sourcesoffundingorappropriationsshallincludethefollowing:
a)ProceedsofthesalesoftheAssetsPrivatizationTrust;
b) Allreceiptsfromassetsrecoveredandfromsalesofillgottenwealthrecovered
throughthePresidentialCommissiononGoodGovernment;
c)ProceedsofthedispositionofthepropertiesoftheGovernmentinforeigncountries;
d) PortionofamountsaccruingtothePhilippinesfromallsourcesofofficialforeign
grantsandconcessionalfinancingfromallcountries,tobeusedforthespecificpurposesof
financingproductioncredits,infrastructures,andothersupportservicesrequiredbythisAct;
e)Othergovernmentfundsnototherwiseappropriated.
All funds appropriated to implement the provisions of this Act shall be considered
continuingappropriationsduringtheperiodofitsimplementation.(CARL,Sec.63)
687
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ficienttosuccessfullyfinancethecostlyagrarianreformprograminthe
entire country. The result was the stifling of crucial developments in
agricultureintheruralareas,andcontinuingagrarianunrestamongthe
farmerbeneficiaries,whohaveremaineddestituteandunabletoimprove
theirfamiliesqualityoflife.
IndoingrightbythequalifiedFWBsinHaciendaLuisitabyordering
thedistributionofthelandinthiscase,thegovernmentmustnowfacethe
currenteconomicdifficultiesanddevisecreativesolutionsandprograms
for moving forward. The legal victory that the qualified FWBs have
securedfromthisCourtinawardingthemthelandsthattheyhavetilled
willonlybefeltiftheState,especiallytheDAR,extendsallthenecessary
supportthatwillallowthemtomaximizetheagriculturaloutputsofthe
lands.Longtermvision,responsiveactionplansandstrongpoliticalwill
arenecessarytorealizethesocialjusticetenetsoftheConstitutioninthe
countrys agrarian reform program. These tenets are aimed at ending
economic disparities in the rural areas and affording Filipino farmer

beneficiariesthetoolsrequiredtobecomemoreproductivecitizens.There
isnobetteropportunitytostartonthispaththanwithfullsupportforthe
qualified FWBs of Hacienda Luisita. This support should include full
freedomtomakeuseofthelandbyallowingthequalifiedFWBstodeal
withthemasanypropertyownercan,includingtherighttoimmediately
transferthesame.
DISPOSITIVEPORTION
AlthoughIagreewiththemajoritywithrespecttotherevocationofthe
StockDistributionOptionAgreement,theimmediatecompulsorycoverage
of the agricultural lands in Hacienda Luisita under the Comprehensive
AgrarianReformLaw,andtheirimmediatedistributiontothequalified
farmworkerbeneficiaries,Imaintainmydissentregardingthefollowing:
(a)theamountofjustcompensationtobeawardedtopetitionerHacienda
Luisita,Inc.,andTarlacDevelopment
688
688
Council
Corporationshouldbereckonedfromthefairmarketvalueunderthelaw,
rulesandjurisprudence,specificallyasofthedateoftheissuanceofthe
NoticeofCoverageon02January2006;(b)the10yearlimitationonthe
transferabilityoftheawardedagriculturallandsisnolongerapplicable,
andthequalifiedfarmworkerbeneficiariesshouldbeallowedtosellor
transfertheproperties,iftheysodesire;and(c)thatthebenefitsreceived
bythequalifiedFWBsbeoffsetbytheamountofjustcompensationdueto
petitionerHaciendaLuisita,Inc.,TarlacDevelopmentCorp.,andLuisita
Realty,Corp.
Thus,ImaintainmypreviousOpiniononthefollowingpoints:
1.AgriculturallandscoveredbytheComprehensiveAgrarianReform
Law and previously held by the Tarlac Development Corp., including
thosetransferredtopetitionerHaciendaLuisita,Inc.,shallbesubjectto
compulsory coverage and immediately distributed to the 6,296 original
qualified farmworkerbeneficiaries who signed the Stock Distribution
OptionAgreement;or,ifdeceased,theirheirs,subjecttothedispositionof
theconvertedlandsexpressedintheparagraphafterthenext,butshall
necessarilyexcludeonlythefollowing:
a.300outofthe500hectaresofconvertedlands,nowinthenameof
Luisita Industrial Park Corp., (LIPCO) and Rizal Commercial
Banking,Corp.,(RCBC);
b.80hectaresofSubicClarkTarlacExpressway(SCTEX)land;and
c.homelotsalreadyawardedtothequalifiedFWBs.
2.Petitioner HLI and Luisita Realty, Inc., shall be entitled to the
payment of just compensation for the agricultural lands and the 200
hectareconvertedlands,whichshallbebasedontheirfairmarketvalueas
of 02 January 2006, to be determined by the Department of Agrarian
Reform;petitionerHLIshallnotbeheldliableforthepaymentofany
rentalsfor
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theuseofthepropertywithfinalturnoverofthelandstothequalified
FWBs.
3.AllsharesofstockofpetitionerHLIissuedtothequalifiedFWBs,
asbeneficiariesofthedirectlandtransfer,arenullified;andallsuchshares
arerestoredtothenameofTADECO,insofarasittransferredassetsand
liabilities to petitioner HLI as the spinoff corporation; but the shares
issued to nonqualified FWBs shall be considered as additional and
variableemployeebenefitsandshallremainintheirnames.
4.PetitionerHLIshallhavenoclaimoveranyofthesalaries,wages
and benefits given to farmworkers; and neither shall the farmworkers,
qualifiedornot,berequiredtoreturnthesame,havingreceivedthemfor
servicesrenderedinanemployeremployeerelationship.
5.PetitionerHLIshallbeliabletothequalifiedFWBsforthevalue
received for the sale or transfer of the 300 out of the 500 hectares of
convertedlands,specificallytheequivalentvalueof12,000,000sharesof
CentennaryHoldings;forthe300hectarelandassigned,butnotlessthan
P750,000,000;andthemoneyreceivedfromthesaleoftheSCTEXland,
lesstaxesandotherlegitimateexpensesnormallyassociatedwiththesale
ofland.
6.Petitioner HLIs liability shall be offset by payments actually
receivedbyqualifiedFWBsundertheSDOA,namely:
a.Threepercent(3%) totalgrosssalesfromthe production ofthe
agriculturallands;
b.ThevalueofthehomelotsawardedtoqualifiedFWBs;
c.AnydividendgiventoqualifiedFWBs;and
d.Proceedsofthesaleofthe300hectareconvertedlandandSCTEX
land,ifany,distributedtotheFWBs.
690
690
Council
TheDARisDIRECTEDtodeterminethescopeofTADECOsand/or
petitionerHLIsagriculturallandsthatshouldhavebeenincludedunder
thecompulsorycoverageofCARLatthetimetheSDOAwasexecutedon
11May1989,butexcludingthosedirectedtobeexcludedasstatedabove.
ThismeansthattheunilateraldesignationofthoselandsbyTADECO,of
whichonly4,916hectareswerecountedasthefarmersagriculturalland
contributiontotheSDOistobedisregardedandanewassessmentistobe
madebytheDAR.
The DAR is also ORDERED to monitor the land distribution and
extendsupportservicesthatthequalifiedfarmworkerbeneficiariesmay
needinchoosingthemostappropriateandeconomicallyviableoptionfor
landdistribution,andisfurtherREQUIREDtorenderacompliancereport
onthismatteronehundredeighty(180)daysafterreceiptofthisOrder.
ThecompliancereportshallincludeadeterminationofHaciendaLuisitas
exactlandareathatshallbesubjecttocompulsorycoverageinaccordance
withtheDecision.
PetitionerHLIisREQUIREDtorenderacompleteaccountingandto
submit evidentiary proof of all the benefits given and extended to the
qualifiedFWBsunderthevoidSDOAincludingbutnotlimitedtothe
dividendsreceived,homelotsawarded,andproceedsofthesalesofthe
lands, which shall serve as bases for the offset of petitioner HLIs
liabilitiestothequalifiedFWBs,anditsaccountingshallbesubjectto
confirmationandverificationbytheDAR.
Alltitlesissuedoverthe300hectareconvertedland,includingthose
underthenamesofpetitionersininterventionRizalCommercialBanking
CorporationandLuisitaIndustrialParkCorporationandthoseawardedas
homelots,areherebyAFFIRMEDandEXCLUDEDfromtheNoticeof
Compulsory coverage. The 200hectare converted lands transferred to
LuisitaRealty,Inc.,bypetitionerHaciendaLuisita,Inc.isdeemedcovered
bythedirectlandtransferundertheCARPinfavorofthequalifiedFWBs,
subjecttothepaymentofjustcompensation.
691
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Incorporatedvs.
ReformCouncil
MotionforPartialReconsiderationdatedJuly20,2011,Motionfor
ReconsiderationdatedJuly19,2011,MotionforReconsiderationdated
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. 20053201 dated
December22,2005andResolutionNo.20063401datedMay3,2006
affirmedwithmodifications.
Note.Justcompensationisdefinedasthefullandfairequivalentof
thepropertytakenfromitsownerbytheexpropriation.(LandBankofthe
Philippinesvs.Orilla,556SCRA102[2006])
o0o

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Hacienda Luisita, Incorporated vs. Presidential Agrarian Reform Council

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G.R.No.171101.November22,2011.

HACIENDA LUISITA, INCORPORATED, petitioner, LUISITA

the existence of interlocking directors, officers and stockholders is not enough

Constitutional Law; Judicial Review; Where a provision of a statute goes

to theownerthat which approximates the market value.The takingof private

ONLY THE [PARCS] APPROVAL OF HLIs PROPOSAL FOR STOCK

Mallari, etal.,ontheotherhand, advancethefollowinggroundsin

and effect. Thus, he asserts, any evidence obtained pursuant thereto is

of unconstitutionality, although properly presented, if the case can be

keepthefarmintact andunfragmented adinfinitum. AndthereislogictoHLIs

subsidiary ofHLI,is conclusively presumed to have knowledge of the

HLI, however, takes exception to the abovementioned ruling and

To implement the abovequoted provision, inter alia, DAR issued

Cash Benefits) = PhP 2,927,848; Total NonDirect Cash Out (Hospital/Medical

Basedontheforegoingruling,thecontentionsofMallari, etal. are

transferees, and the expenditures incurred by HLI and Centennary

stock distribution plan of petitioner Hacienda Luisita, Inc. (HLI)

beinga magical formula thatautomaticallydissuades courts in resolving acase, itwill

MS. NIEVA.In this section, we conceive of cooperatives; that is farmers

Moreover,therequirementof lismota andthemootnessdoctrineare

distribution option agreement could be considered as a mistake on a

WHEREFORE, I vote that the Courts July 5, 2011 decision be

c.P80 million from the expropriation of 80 hectares for the

The ponencia opposestheapplicationoftheaboveprovisionbydenying

b.the 80 hectares of land expropriated by the government for the

Todays Resolution continues to follow the same reckoning date of

the value of the homelots. In such a situation, the taking will be

under Section 33 of Republic Act No. 6657, or the Comprehensive

is first handed to the FWBs, before they decide whether to remain as

Since the farm lands in Hacienda Luisita are to be the subject of

ousted from his property and deprived of his beneficial enjoyment

Pursuant to its rulemaking powers, the Department of Agrarian

payment of just compensation was roughly speaking executed together

Intheseminalcase LandBankofthePhilippinesv.Natividad,27 the

there is a difference let the State subsidize the difference. (Emphasis

Thus, the original intention was that there should be no strict

aptly captured by then Senator Heherson Alvarez, funding became the

a.The value of the

economic disparities in the rural areas and affording Filipino farmer

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