FORTUNATO, JULIENNE L.

Agrarian Law and Social Legislation

2-C

HACIENDA LUISITA INC. V.

PRESIDENTIAL AGRARIAN REFORM COUNCIL (PARC), ET AL.
GR 171101 July 5 2011, Nov 22 2011
FACTS:
Hacienda Luisita, once a 6,443 hectare mixed agricultural-industrial-residential
expanse straddling several municipalities of Tarlac and owned by Tabacos de
Filipinas (Tabacelara).

In 1957, the Spanish owners of Tabacalera offered to sell Hacienda Luisita as well
as their controlling interest in the sugar mill within the hacienda- Central Azucarera
de Tarlac as indivisible transaction. The Tarlas Development Corporation (Tadeco),
then owned by Cojuangco was willing to buy.

In March 31, 1958, Tadeco fully paid the purchase price of Hacienda Luisita.
May 7, 1980, the martial law administration filed a case before the Manila RTC
against Tadeco, for them to surrender Hacienda Luisita to MAR (now DAR) so that
the land can be distributed to farmers at cost.
RTC ordered Tadeco to surrender the Hacienda Luisita to MAR.

In 1988, RA 6657 or the CARP law was passed.

In 1988, the OSG moved to dismiss the government’s case against TADECO. The CA
dismissed it, but the dismissal was subject to the condition that TADECO shall
obtain the approval of FWB (farm worker beneficiaries) to the SDP (Stock
Distribution Plan) and to ensure its implementation.

Sec 31 of the CARP Law allows either land transfer or stock transfer as two
alternative modes in distributing land ownership to the FWBs. Since the stock
distribution scheme is the preferred option of TADECO, it organized a spin-off
corporation, the Hacienda Luisita Inc., as vehicle to facilitate stock acquisition by
the farmers.

After conducting a follow-up referendum and revision of terms of the Stock

Distribution Option Agreement (SDOA) proposed by TADECO, the Presidential
Agrarian Reform Council (PARC), led by then DAR Secretary Miriam Santiago,
approved the SDP of TADECO/HLI through Resolution 89-12-2 dated Nov 21, 1989.
From 1989 to 2005, the HLI claimed to have extended those benefits to the
farmworkers. Such claim was subsequently contested by two groups representing
the interests of the farmers – the HLI Supervisory Group and the AMBALA. In 2003,
each of them wrote letter petitions before the DAR asking for the renegotiation of
terms and/or revocation of the SDOA. They claimed that they haven’t actually

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received those benefits in full, that HLI violated the terms, and that their lives
haven’t really improved contrary to the promise and rationale of the SDOA.
The DAR created a Special Task Force to attend to the issues and to review the
terms of the SDOA and the Resolution 89-12-2.

Adopting the report and the recommendations of the Task Force, the DAR Sec
recommended to the PARC
(1) the revocation of Resolution 89-12-2 and
(2) the acquisition of Hacienda Luisita through compulsory acquisition scheme.
Consequently, the PARC revoked the SDP of TADECO/HLI and subjected those lands
covered by the SDP to the mandated land acquisition scheme under the CARP law.
These acts of the PARC was assailed by Hacienda Luisita via Rule 65.

On the other hand, FARM, an intervenor, asks for the invalidation of Sec. 31 of RA
6657, insofar as it affords the corporation, as a mode of CARP compliance, to resort
to stock transfer in lieu of outright agricultural land transfer. For FARM, this
modality of distribution is an anomaly to be annulled for being inconsistent with
the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.

ISSUES:
1. Whether the PARC has the authority to revoke the Stock Distribution Plan or
SDP?
2. Whether the Court may exercise its power of judicial review over the
constitutionality of Sec 31 of RA 6657?
3. Whether Sec 31 of RA 6657 is consistent with the Constitution’s concept of
agrarian reform

Issue 1:
Whether the PARC has the authority to revoke the Stock Distribution Plan or SDP?
Yes.
Under Sec. 31 of RA 66571, as implemented by DAO 10, the authority to approve
the plan for stock distribution of the corporate landowner belongs to PARC. It may

1 SECTION 31. Corporate Landowners. —Corporate landowners may voluntarily transfer ownership over their
agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries,
under such terms and conditions, consistent with this Act, as they may agree upon, subject to confirmation by the DAR.
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to
purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company's total assets, under such terms and conditions as may be agreed upon by
them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be
reduced. The same principle shall be applied to associations, with respect to their equity or participation. Corporations
or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers
or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of the Act:
Provided, That the following conditions are complied with: a) In order to safeguard the right of beneficiaries who own
shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject
to periodic audit by certified public accountants chosen by the beneficiaries; b) Irrespective of the value of their equity
in the corporation or association, 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 corporation or association; and c) Any shares
acquired by such workers and beneficiaries shall have the same rights and features as all other shares. d) Any transfer
of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified
and registered beneficiary within the same corporation. If within two (2) years from the approval of this Act, the land or
stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC
within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act.

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be that RA 6657 or other executive issuances on agrarian reform do not explicitly
vest the PARC with the power to revoke/recall an approved SDP, but such power
or authority is deemed possessed by PARC under the principle of necessary
implication, a basic postulate that what is implied in a statute is as much a part of
it as that which is expressed.

Following this doctrine, the conferment of express power to approve a plan for
stock distribution of the agricultural land of corporate owners necessarily includes
the power to revoke or recall the approval of the plan.

Issue 2: Whether the Court may exercise its power of judicial review over the
constitutionality of Sec 31 of RA 6657
No.
First, the intervenor FARM failed to challenged the constitutionality of RA
6657, Sec 31 at the earliest possible opportunity. It should have been raised as early
as Nov 21, 1989, when PARC approved the SDP of HLI or at least within a reasonable
time thereafter.
Second, the constitutionality of RA 6657 is not the very lis mota of this case.
Before the SC, the lis mota of the petitions filed by the HLI is whether or not the
PARC acted with grave abuse of discretion in revoking the SDP of HLI. With regards
to the original positions of the groups representing the interests of the farmers,
their very lis mota is the non-compliance of the HLI with the SDP so that the the
SDP may be revoked. Such issues can be resolved without delving into the
constitutionality of RA 6657.
Hence, the essential requirements in passing upon the constitutionality of
acts of the executive or legislative departments have not been met in this case.

Issue 3: Whether Sec 31 of RA 6657 is consistent with the Constitution’s concept of

agrarian reform
Yes.
The wording of the Art XIII, Sec 4 of the Constitution2 is unequivocal: the farmers
and regular farmworkers have a right to own directly or collectively the lands they
till.
The basic law allows two (2) modes of land distribution: direct and indirect
ownership.
1. Direct transfer to individual farmers is the most commonly used method
by DAR and widely accepted.
2. Indirect transfer through collective ownership of the agricultural land is
the alternative to direct ownership of agricultural land by individual
farmers.
2
Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers
and regular farmworkers who are landless, to own directly or collectively the lands they till or, in the case
of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In determining retention limits, the State
shall respect the right of small landowners. The State shall further provide incentives for voluntary land-
sharing.

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Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be
found in the 1987 Constitution that disqualifies or prohibits corporations or
cooperatives of farmers from being the legal entity through which collective
ownership can be exercised.

The word collective is defined as indicating a number of persons or things

considered as constituting one group or aggregate, while collectively is defined as
in a collective sense or manner; in a mass or body. By using the word collectively,
the Constitution allows for indirect ownership of land and not just outright
agricultural land transfer. This is in recognition of the fact that land reform may
become successful even if it is done through the medium of juridical entities
composed of farmers.

The stock distribution option devised under Sec. 31 of RA 6657 hews with the
agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of
the Constitution. Albeit land ownership for the landless appears to be the dominant
theme of that policy, the Court emphasized that Sec. 4, Article XIII of the
Constitution, as couched, does not constrict Congress to passing an agrarian reform
law planted on direct land transfer to and ownership by farmers and no other, or
else the enactment suffers from the vice of unconstitutionality. If the intention
were otherwise, the framers of the Constitution would have worded said section in
a manner mandatory in character.

* The SC, through a resolution dated Nov 21 2011 of the motion for reconsideration
filed by HLI, affirmed the revocation of HLI’s SDP and the placing of Hacienda Luisita
under the compulsory land distribution scheme of the CARP law. It was also held
that the date of taking was Nov 21 1989, when the PARC, by Resolution 89-12-2,
approved the SDP of HLI.

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