LUZ FARMS, petitioner, vs.

THE HONORABLE SECRETARY OF THE

DEPARTMENT OF AGRARIAN REFORM, respondent.
Enrique M. Belo for petitioner.
DECISION
PARAS, J :
p

This is a petition for prohibition with prayer for restraining order and/or
preliminary and permanent injunction against the Honorable Secretary of the
Department of Agrarian Reform for acting without jurisdiction in enforcing the
assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure
Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the
same apply to herein petitioner, and further from performing an act in violation of
the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as
follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657,
which includes the raising of livestock, poultry and swine in its coverage (Rollo, p.
80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the
Guidelines and Procedures Implementing Production and Profit Sharing as
embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules
and Regulations implementing Section 11 of R.A. No. 6657 (Commercial Farms).
(Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock
and poultry business and together with others in the same business allegedly
stands to be adversely affected by the enforcement of Section 3(b), Section 11,
1

Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise
known as Comprehensive Agrarian Reform Law and of the Guidelines and
Procedures Implementing Production and Profit Sharing under R.A. No. 6657
promulgated on January 2, 1989 and the Rules and Regulations Implementing
Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp. 236).
Hence, this petition praying that aforesaid laws, guidelines and rules be
declared unconstitutional. Meanwhile, it is also prayed that a writ of preliminary
injunction or restraining order be issued enjoining public respondents from
enforcing the same, insofar as they are made to apply to Luz Farms and other
livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among
others, Luz Farms' prayer for the issuance of a preliminary injunction in its
Manifestation dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved
to grant said Motion for Reconsideration regarding the injunctive relief, after the
filing and approval by this Court of an injunction bond in the amount of
P100,000.00. This Court also gave due course to the petition and required the
parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131168).
On December 22, 1989, the Solicitor General adopted his Comment to the
petition as his Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they
are made to apply to it:

(a) Section 3(b) which includes the "raising of livestock (and poultry)" in the
definition of "Agricultural, Agricultural Enterprise or Agricultural Activity."
(b) Section 11 which defines "commercial farms" as "private agricultural
lands devoted to commercial, livestock, poultry and swine raising . . ."
(c) Section 13 which calls upon petitioner to execute a production-sharing
plan.
2

(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform
the authority to summarily determine the just compensation to be paid for
lands covered by the Comprehensive Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan mentioned in
Section 13
". . . (W)hereby three percent (3%) of the gross sales from
the production of such lands are distributed within sixty (60) days
of the end of the fiscal year as compensation to regular and
other farmworkers in such lands over and above the
compensation they currently receive: Provided, That these
individuals or entities realize gross sales in excess of five million
pesos per annum unless the DAR, upon proper application,
determine a lower ceiling.
In the event that the individual or entity realizes a profit, an
additional ten (10%) of the net profit after tax shall be distributed
to said regular and other farmworkers within ninety (90) days of
the end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13
and 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988),
insofar as the said law includes the raising of livestock, poultry and swine in its
coverage as well as the Implementing Rules and Guidelines promulgated in
accordance therewith.
The constitutional provision under consideration reads as follows:

ARTICLE XIII

xxx
xxx
xxx
AGRARIAN AND NATURAL RESOURCES REFORM
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
3

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 rights of small
landowners. The State shall further provide incentives for voluntary landsharing.
xxx
xxx
xxx"
Luz Farms contended that it does not seek the nullification of R.A. 6657 in its
entirety. In fact, it acknowledges the correctness of the decision of this Court in
the case of the Association of Small Landowners in the Philippines, Inc. vs.
Secretary of Agrarian Reform (G.R. 78742, 14 July 1989) affirming the
constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued
that Congress in enacting the said law has transcended the mandate of the
Constitution, in including land devoted to the raising of livestock, poultry and
swine in its coverage (Rollo, p. 131). Livestock or poultry raising is not similar to
crop or tree farming. Land is not the primary resource in this undertaking and
represents no more than five percent (5%) of the total investment of commercial
livestock and poultry raisers. Indeed, there are many owners of residential lands
all over the country who use available space in their residence for commercial
livestock and raising purposes, under "contract-growing arrangements," whereby
processing corporations and other commercial livestock and poultry raisers
(Rollo, p. 10). Lands support the buildings and other amenities attendant to the
raising of animals and birds. The use of land is incidental to but not the principal
factor or consideration in productivity in this industry. Including backyard raisers,
about 80% of those in commercial livestock and poultry production occupy five
hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry
raising is embraced in the term "agriculture" and the inclusion of such enterprise
under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International
Dictionary, Second Edition (1954), defines the following words:

"Agriculture the art or science of cultivating the ground and raising and
harvesting crops, often, including also, feeding, breeding and management of
livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
4

Livestock domestic animals used or raised on a farm, especially for profit.

Farm a plot or tract of land devoted to the raising of domestic or other
animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary task in
constitutional construction is to ascertain and thereafter assure the realization of
the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).
Ascertainment of the meaning of the provision of Constitution begins with the
language of the document itself. The words used in the Constitution are to be
given their ordinary meaning except where technical terms are employed in which
case the significance thus attached to them prevails (J.M. Tuazon & Co. vs. Land
Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which are
ambiguous or of doubtful meaning, the courts may consider the debates in the
constitutional convention as throwing light on the intent of the framers of the
Constitution. It is true that the intent of the convention is not controlling by itself,
but as its proceeding was preliminary to the adoption by the people of the
Constitution the understanding of the convention as to what was meant by the
terms of the constitutional provision which was the subject of the deliberation,
goes a long way toward explaining the understanding of the people when they
ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).
The transcripts of the deliberations of the Constitutional Commission of 1986
on the meaning of the word "agricultural," clearly show that it was never the
intention of the framers of the Constitution to include livestock and poultry
industry in the coverage of the constitutionally-mandated agrarian reform
program of the Government.
The Committee adopted the definition of "agricultural land" as defined under
Section 166 of R.A. 3844, as laud devoted to any growth, including but not limited
to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM,
August 7, 1986, Vol. III, p. 11).
5

The intention of the Committee is to limit the application of the word

"agriculture." Commissioner Jamir proposed to insert the word "ARABLE" to
distinguish this kind of agricultural land from such lands as commercial and
industrial lands and residential properties because all of them fall under the
general classification of the word "agricultural". This proposal, however, was not
considered because the Committee contemplated that agricultural lands are
limited to arable and suitable agricultural lands and therefore, do not include
commercial, industrial and residential lands (Record, CONCOM, August 7, 1986,
Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme Court
Justice), posed several questions, among others, quoted as follows:

xxx
xxx
xxx
"Line 19 refers to genuine reform program founded on the primary right of
farmers and farmworkers. I wonder if it means that leasehold tenancy is
thereby proscribed under this provision because it speaks of the primary right
of farmers and farmworkers to own directly or collectively the lands they till. As
also mentioned by Commissioner Tadeo, farmworkers include those who work
in piggeries and poultry projects.
I was wondering whether I am wrong in my appreciation that if somebody puts
up a piggery or a poultry project and for that purpose hires farmworkers
therein, these farmworkers will automatically have the right to own eventually,
directly or ultimately or collectively, the land on which the piggeries and poultry
projects were constructed. (Record, CONCOM, August 2, 1986, p. 618).
xxx
xxx
xxx
The questions were answered and explained in the statement of then
Commissioner Tadeo, quoted as follows:

xxx

xxx

xxx

"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan.

Ipinaaalam ko kay Commissioner Regalado na hindi namin inilagay ang
agricultural worker sa kadahilanang kasama rito ang piggery, poultry at
livestock workers. Ang inilagay namin dito ay farm worker kaya hindi kasama
6

ang piggery, poultry at livestock workers (Record, CONCOM, August 2, 1986,

Vol. II, p. 621).
It is evident from the foregoing discussion that Section II of R.A. 6657 which
includes "private agricultural lands devoted to commercial livestock, poultry and
swine raising" in the definition of "commercial farms" is invalid, to the extent that
the aforecited agro-industrial activities are made to be covered by the agrarian
reform program of the State. There is simply no reason to include livestock and
poultry lands in the coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in
Sections 13 and 32 of R.A. 6657 directing "corporate farms" which include
livestock and poultry raisers to execute and implement "production-sharing plans"
(pending final redistribution of their landholdings) whereby they are called upon to
distribute from three percent (3%) of their gross sales and ten percent (10%) of
their net profits to their workers as additional compensation is unreasonable for
being confiscatory, and therefore violative of due process (Rollo, p. 21).
It has been established that this Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a judicial
inquiry into such a question are first satisfied. Thus, there must be an actual case
or controversy involving a conflict of legal rights susceptible of judicial
determination, the constitutional question must have been opportunely raised by
the proper party, and the resolution of the question is unavoidably necessary to
the decision of the case itself (Association of Small Landowners of the
Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo,
G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July
1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when confronted
with constitutional issues, it will not hesitate to declare a law or act invalid when it
is convinced that this must be done. In arriving at this conclusion, its only criterion
will be the Constitution and God as its conscience gives it in the light to probe its
meaning and discover its purpose. Personal motives and political considerations
are irrelevancies that cannot influence its decisions. Blandishment is as
ineffectual as intimidation, for all the awesome power of the Congress and
7

Executive, the Court will not hesitate "to make the hammer fall heavily," where the
acts of these departments, or of any official, betray the people's will as expressed
in the Constitution (Association of Small Landowners of the Philippines, Inc. v.
Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico
v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary to declare what the
other branches of the government had assumed to do, as void. This is the
essence of judicial power conferred by the Constitution "(I)n one Supreme Court
and in such lower courts as may be established by law" (Art. VIII, Section 1 of the
1935 Constitution; Article X, Section I of the 1973 Constitution and which was
adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the
1987 Constitution) and which power this Court has exercised in many instances
(Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED.
Sections 3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the
raising of livestock, poultry and swine in its coverage as well as the Implementing
Rules and Guidelines promulgated in accordance therewith, are hereby
DECLARED null and void for being unconstitutional and the writ of preliminary
injunction issued is hereby MADE permanent.
SO ORDERED.

Association of Small Landowners vs. Sec. of agrarian reform

175 SCRA 343 Political Law Constitutional Law Bill of Rights Equal Protection
Valid Classification
Eminent Domain Just Compensation
These are four consolidated cases questioning the constitutionality of the
Comprehensive Agrarian Reform Act (R.A. No. 6657 and related laws i.e., Agrarian
Land Reform Code or R.A. No. 3844).

Brief background: Article XIII of the Constitution on Social Justice and Human Rights
includes a call for the adoption by the State of an agrarian reform program. 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. RA
3844 was enacted in 1963. P.D. No. 27 was promulgated in 1972 to provide for the
compulsory acquisition of private lands for distribution among tenant-farmers and to
specify maximum retention limits for landowners. In 1987, President Corazon
Aquino issued E.O. No. 228, declaring full land ownership in favor of the beneficiaries of
PD 27 and providing for the valuation of still unvalued lands covered by the decree as
well as the manner of their payment. In 1987, P.P. No. 131, instituting a comprehensive
agrarian reform program (CARP) was enacted; later, E.O. No. 229, providing the
mechanics for its (PP131s) implementation, was also enacted. Afterwhich is the
enactment of R.A. No. 6657, Comprehensive Agrarian Reform Law in 1988. This law,
while considerably changing the earlier mentioned enactments, nevertheless gives them
suppletory effect insofar as they are not inconsistent with its provisions.
[Two of the consolidated cases are discussed below]
G.R. No. 78742: (Association of Small Landowners vs Secretary)
The Association of Small Landowners in the Philippines, Inc. sought exception from the
land distribution scheme provided for in R.A. 6657. The Association is comprised of
landowners of ricelands and cornlands whose landholdings do not exceed 7 hectares.
They invoke that since their landholdings are less than 7 hectares, they should not be
forced to distribute their land to their tenants under R.A. 6657 for they themselves have
shown willingness to till their own land. In short, they want to be exempted from agrarian
reform program because they claim to belong to a different class.
G.R. No. 79777: (Manaay vs Juico)
Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228,
and 229) on the ground that these laws already valuated their lands for the agrarian
reform program and that the specific amount must be determined by the Department of
Agrarian Reform (DAR). Manaay averred that this violated the principle in eminent
domain which provides that only courts can determine just compensation. This, for

Manaay, also violated due process for under the constitution, no property shall be taken
for public use without just compensation.
Manaay also questioned the provision which states that landowners may be paid for
their land in bonds and not necessarily in cash. Manaay averred that just compensation
has always been in the form of money and not in bonds.
ISSUE:
1. Whether or not there was a violation of the equal protection clause.
2. Whether or not there is a violation of due process.
3. Whether or not just compensation, under the agrarian reform program, must be in
terms of cash.
HELD:
1. No. The Association had not shown any proof that they belong to a different class
exempt from the agrarian reform program. Under the law, classification has been
defined as the grouping of persons or things similar to each other in certain particulars
and different from each other in these same particulars. To be valid, it must conform to
the following requirements:
(1) it must be based on substantial distinctions;
(2) it must be germane to the purposes of the law;
(3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class.
Equal protection simply means that all persons or things similarly situated must be
treated alike both as to the rights conferred and the liabilities imposed. The
Association have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of other
properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that is
10

clearly visible except to those who will not see. There is no need to elaborate on this
matter. In any event, the Congress is allowed a wide leeway in providing for a valid
classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights. In the
contrary, it appears that Congress is right in classifying small landowners as part of the
agrarian reform program.
2. No. It is true that the determination of just compensation is a power lodged in the
courts. However, there is no law which prohibits administrative bodies like the DAR from
determining just compensation. In fact, just compensation can be that amount agreed
upon by the landowner and the government even without judicial intervention so long
as both parties agree. The DAR can determine just compensation through appraisers
and if the landowner agrees, then judicial intervention is not needed. What is
contemplated by law however is that, the just compensation determined by an
administrative body is merely preliminary. If the landowner does not agree with the
finding of just compensation by an administrative body, then it can go to court and the
determination of the latter shall be the final determination. This is even so provided by
RA 6657:
Section 16 (f): Any party who disagrees with the decision may bring the matter to the
court of proper jurisdiction for final determination of just compensation.
3. No. Money as [sole] payment for just compensation is merely a concept in traditional
exercise of eminent domain. The agrarian reform program is a revolutionary exercise of
eminent domain. The program will require billions of pesos in funds if all compensation
have to be made in cash if everything is in cash, then the government will not have
sufficient money hence, bonds, and other securities, i.e., shares of stocks, may be used
for just compensation.

Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform

Council (PARC), et al., G.R. No. 171101, July 5, 2011

DECISION
VELASCO, JR., J.:
11

I. THE FACTS
In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas
(Tabacalera) sold Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of
the hacienda, to the Tarlac Development Corporation (Tadeco), then owned and controlled
by the Jose Cojuangco Sr. Group. The Central Bank of the Philippines assisted Tadeco in
obtaining a dollar loan from a US bank. Also, the GSIS extended a PhP5.911 million loan in
favor of Tadeco to pay the peso price component of the sale, with the condition that the lots
comprising the Hacienda Luisita be subdivided by the applicant-corporation and sold at cost
to the tenants, should there be any, and whenever conditions should exist warranting such
action under the provisions of the Land Tenure Act. Tadeco however did not comply with
this condition.
On May 7, 1980, the martial law administration filed a suit before the Manila RTC
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of
Agrarian Reform (MAR) so that the land can be distributed to farmers at cost. Responding,
Tadeco alleged that Hacienda Luisita does not have tenants, besides which sugar lands of
which the hacienda consisted are not covered by existing agrarian reform legislations.
The Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the
MAR. Therefrom, Tadeco appealed to the CA.
On March 17, 1988, during the administration of President Corazon Cojuangco
Aquino, the Office of the Solicitor General moved to withdraw the governments case
against Tadeco, et al. The CA dismissed the case, subject to the PARCs approval of
Tadecos proposed stock distribution plan (SDP) in favor of its farmworkers. [Under EO 229
and later RA 6657, Tadeco had the option of availing stock distribution as an alternative
modality to actual land transfer to the farmworkers.] On August 23, 1988, Tadeco organized
a spin-off corporation, herein petitioner HLI, as vehicle to facilitate stock acquisition by the
farmworkers. For this purpose, Tadeco conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for
HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of the proposed
HLIs Stock Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally
entered into by Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR
Secretary Philip Juico. The SDOA embodied the basis and mechanics of HLIs SDP, which
was eventually approved by the PARC after a follow-up referendum conducted by the DAR
on October 14, 1989, in which 5,117 FWBs, out of 5,315 who participated, opted to receive
shares in HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR
approved the application on August 14, 1996, subject to payment of three percent (3%) of
the gross selling price to the FWBs and to HLIs continued compliance with its undertakings
under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of
stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted
12

area to the latter. Subsequently, Centennary sold the entire 300 hectares for PhP750 million
to Luisita Industrial Park Corporation (LIPCO), which used it in developing an industrial
complex. From this area was carved out 2 parcels, for which 2 separate titles were issued in
the name of LIPCO. Later, LIPCO transferred these 2 parcels to the Rizal Commercial
Banking Corporation (RCBC) in payment of LIPCOs PhP431,695,732.10 loan obligations to
RCBC. LIPCOs titles were cancelled and new ones were issued to RCBC. Apart from the
500 hectares, another 80.51 hectares were later detached from Hacienda Luisita and
acquired by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX)
complex. Thus, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to
HLI.
Such, was the state of things when two separate petitions reached the DAR in the
latter part of 2003. The first was filed by the Supervisory Group of HLI (Supervisory Group),
praying for a renegotiation of the SDOA, or, in the alternative, its revocation. The second
petition, praying for the revocation and nullification of the SDOA and the distribution of the
lands in the hacienda, was filed by Alyansa ng mga Manggagawang Bukid ng Hacienda
Luisita (AMBALA). The DAR then constituted a Special Task Force (STF) to attend to issues
relating to the SDP of HLI. After investigation and evaluation, the STF found that HLI has
not complied with its obligations under RA 6657 despite the implementation of the SDP. On
December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01,
recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that the subject lands be
forthwith placed under the compulsory coverage or mandated land acquisition scheme of
the CARP.
From the foregoing resolution, HLI sought reconsideration. Its motion
notwithstanding, HLI also filed a petition before the Supreme Court in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even before PARC
could rule or even read the motion for reconsideration. PARC would eventually deny HLIs
motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.
II. THE ISSUES
(1) Does the PARC possess jurisdiction to recall or revoke HLIs SDP?
(2) [Issue raised by intervenor FARM (group of farmworkers)] Is Sec. 31 of RA 6657, which
allows stock transfer in lieu of outright land transfer, unconstitutional?
(3) Is the revocation of the HLIs SDP valid? [Did PARC gravely abuse its discretion in revoking
the subject SDP and placing the hacienda under CARPs compulsory acquisition and
distribution scheme?]
(4) Should those portions of the converted land within Hacienda Luisita that RCBC and LIPCO
acquired by purchase be excluded from the coverage of the assailed PARC resolution? [Did
the PARC gravely abuse its discretion when it included LIPCOs and RCBCs respective
properties that once formed part of Hacienda Luisita under the CARP compulsory
acquisition scheme via the assailed Notice of Coverage?]

13

III. THE RULING

[The Court DENIED the petition of HLI and AFFIRMED the PARC resolution placing
the lands subject of HLIs SDP under compulsory coverage on mandated land acquisition
scheme of the CARP, with the MODIFICATION that the original 6,296 qualified FWBs were
given the option to remain as stockholders of HLI. It also excluded from the mandatory
CARP coverage that part of Hacienda Luisita that had been acquired by RCBC and LIPCO.]
(1) YES, the PARC has jurisdiction to revoke HLIs SDP under the doctrine of
necessary implication.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the
plan for stock distribution of the corporate landowner belongs to PARC. Contrary to
petitioner HLIs posture, PARC also has the power to revoke the SDP which it previously
approved. It may be, as urged, 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.
Such power or authority, however, is deemed possessed by PARC under the principle of
necessary implication, a basic postulate that what is implied in a statute is as much a part of
it as that which is expressed.
Following the doctrine of necessary implication, it may be stated that the conferment
of express power to approve a plan for stock distribution of the agricultural land of corporate
owners necessarily includes the power to revoke or recall the approval of the plan. To deny
PARC such revocatory power would reduce it into a toothless agency of CARP, because the
very same agency tasked to ensure compliance by the corporate landowner with the
approved SDP would be without authority to impose sanctions for non-compliance with it.
(2) NO, Sec. 31 of RA 6657 is not unconstitutional. [The Court actually refused to
pass upon the constitutional question because it was not raised at the earliest
opportunity and because the resolution thereof is not the lis mota of the case. Moreover,
the issue has been rendered moot and academic since SDO is no longer one of the
modes of acquisition under RA 9700.]
When the Court is called upon to exercise its power of judicial review over, and pass
upon the constitutionality of, acts of the executive or legislative departments, it does so only
when the following essential requirements are first met, to wit: (1) there is an actual case or
controversy; (2) that the constitutional question is raised at the earliest possible opportunity
by a proper party or one with locus standi; and (3) the issue of constitutionality must be the
very lis mota of the case.
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of
a small minority of 27 farmers, has yet to explain its failure to challenge the constitutionality
of Sec. 31 of RA 6657 as early as November 21, 1989 when PARC approved the SDP of
Hacienda Luisita or at least within a reasonable time thereafter, and why its members
received benefits from the SDP without so much of a protest. It was only on December 4,
2003 or 14 years after approval of the SDP that said plan and approving resolution were
14

sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner
AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec.
31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent
implementation of the SDP. Even the public respondents, as represented by the Solicitor
General, did not question the constitutionality of the provision. On the other hand, FARM,
whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31
only on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took
FARM some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were
derived. The Court cannot now be goaded into resolving a constitutional issue that FARM
failed to assail after the lapse of a long period of time and the occurrence of numerous
events and activities which resulted from the application of an alleged unconstitutional legal
provision.
The last but the most important requisite that the constitutional issue must be the
very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the
constitutional issue tendered not being critical to the resolution of the case. The unyielding
rule has been to avoid, whenever plausible, an issue assailing the constitutionality of a
statute or governmental act. If some other grounds exist by which judgment can be made
without touching the constitutionality of a law, such recourse is favored.
The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the Supervisory Group, is
the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its
revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse
of discretion when it ordered the recall of the SDP for such non-compliance and the fact that
the SDP, as couched and implemented, offends certain constitutional and statutory
provisions. To be sure, any of these key issues may be resolved without plunging into the
constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying
petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the
alleged application of the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7
of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: [T]hat after
June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and
compulsory acquisition. Thus, for all intents and purposes, the stock distribution scheme
under Sec. 31 of RA 6657 is no longer an available option under existing law. The question
of whether or not it is unconstitutional should be a moot issue.
(3) YES, the revocation of the HLIs SDP valid. [NO, the PARC did NOT gravely
abuse its discretion in revoking the subject SDP and placing the hacienda under
CARPs compulsory acquisition and distribution scheme.]
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines
of HLIs stock distribution violate DAO 10 because the minimum individual allocation of each
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original FWB of 18,804.32 shares was diluted as a result of the use of man days and the
hiring of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is
contrary to what Sec. 11 of DAO 10 prescribes.
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA
states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange
with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of
number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the
capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such
time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to
the THIRD PARTY.

[I]t is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at
the time of the approval of the SDP, suffered from watering down of shares. As determined
earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less
than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and
distribution of the HLI shares were based on man days or number of days worked by the
FWB in a years time. As explained by HLI, a beneficiary needs to work for at least 37 days
in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days,
the FWB, unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work in one
year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as
indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total
number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers,
which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI
shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the
minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a
result of the use of man days and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a
30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec.
11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved
stock distribution plan within three (3) months from receipt by the corporate landowner of
the approval of the plan by PARC. In fact, based on the said provision, the transfer of the
shares of stock in the names of the qualified FWBs should be recorded in the stock and
transfer books and must be submitted to the SEC within sixty (60) days from
implementation.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can veritably
evade compliance with agrarian reform by simply deferring to absurd limits the
implementation of the stock distribution scheme.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
pay the cost of the land thus awarded them to make it less cumbersome for them to pay the
government. To be sure, the reason underpinning the 30-year accommodation does not
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apply to corporate landowners in distributing shares of stock to the qualified beneficiaries,

as the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld [because of violations of] DAO 10. It bears stressing that under Sec. 49 of
RA 6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10 has the
force and effect of law and must be duly complied with. The PARC is, therefore, correct in
revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21,
l989 approving the HLIs SDP is nullified and voided.
(4) YES, those portions of the converted land within Hacienda Luisita that
RCBC and LIPCO acquired by purchase should be excluded from the coverage of the
assailed PARC resolution.
[T]here are two (2) requirements before one may be considered a purchaser in good
faith, namely: (1) that the purchaser buys the property of another without notice that some
other person has a right to or interest in such property; and (2) that the purchaser pays a full
and fair price for the property at the time of such purchase or before he or she has notice of
the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted land in
questionpurchasers in good faith for value entitled to the benefits arising from such
status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its transferor,
Centennary, or that any other person has a right to or interest in such property. In fact, at the
time LIPCO acquired said parcels of land, only the following annotations appeared on the
TCT in the name of Centennary: the Secretarys Certificate in favor of Teresita Lopa, the
Secretarys Certificate in favor of Shintaro Murai, and the conversion of the property from
agricultural to industrial and residential use.
The same is true with respect to RCBC. At the time it acquired portions of Hacienda
Luisita, only the following general annotations appeared on the TCTs of LIPCO: the Deed of
Restrictions, limiting its use solely as an industrial estate; the Secretarys Certificate in favor
of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to
guarantee the payment of PhP 300 million.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion
order was annotated at the back of the titles of the lots they acquired. However, they are of
the honest belief that the subject lots were validly converted to commercial or industrial
purposes and for which said lots were taken out of the CARP coverage subject of PARC
Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all,
Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands
previously covered by CARP land acquisition after the lapse of five (5) years from its award
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when the land ceases to be economically feasible and sound for agricultural purposes or
the locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes. Moreover, DAR notified all the affected
parties, more particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under
Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original
exclusive jurisdiction over all matters involving the implementation of agrarian reform. The
DAR conversion order became final and executory after none of the FWBs interposed an
appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question
on their honest and well-founded belief that the previous registered owners could legally sell
and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC
and LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for
value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of
PhP750 million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a
Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of
Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of
PhP431,695,732.10.
In relying upon the above-mentioned approvals, proclamation and conversion order,
both RCBC and LIPCO cannot be considered at fault for believing that certain portions of
Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of
CARP. The PARC, and consequently DAR, gravely abused its discretion when it
placed LIPCOs and RCBCs property which once formed part of Hacienda Luisita
under the CARP compulsory acquisition scheme via the assailed Notice of Coverage.
[The Court went on to apply the operative fact doctrine to determine what should be
done in the aftermath of its disposition of the above-enumerated issues:
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC
Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain
operative facts that had occurred in the interim. Pertinently, the operative fact doctrine
realizes that, in declaring a law or executive action null and void, or, by extension, no
longer without force and effect, undue harshness and resulting unfairness must be avoided.
This is as it should realistically be, since rights might have accrued in favor of natural or
juridical persons and obligations justly incurred in the meantime. The actual existence of a
statute or executive act is, prior to such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot always be erased by a new
judicial declaration.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP
are upheld, the revocation must, by application of the operative fact principle, give
way to the right of the original 6,296 qualified FWBs to choose whether they want to
remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in
1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the
SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From
1989 to 2005, the FWBs were said to have received from HLI salaries and cash benefits,
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hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from
agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land
and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were
distributed as of April 22, 2005. On August 6, 20l0, HLI and private respondents submitted a
Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of
agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs
indicated their choice of remaining as stockholders. These facts and circumstances tend to
indicate that some, if not all, of the FWBs may actually desire to continue as HLI
shareholders. A matter best left to their own discretion.]
[WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01
dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the
lands subject of HLIs SDP under compulsory coverage on mandated land acquisition
scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the original
6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall
immediately schedule meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which the FWBs will
be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or
placing their thumbmarks, as the case may be, over their printed names.]

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