Hacienda Luisita Incorporated vs Presidential Agrarian Reform

Council, et al., G.R. No. 171101 November 22, 2011

Facts:

In 1958, Tarlac Development Corporation (Tadeco), assisted by the Central Bank of the Philippines, purchased
Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of the hacienda, from the Spanish owners of
Compañia General de Tabacos de Filipinas (Tabacalera). Tadeco was then owned and controlled by the Jose
Cojuangco Sr. Group. 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. Tadeco alleged that Hacienda Luisita
is not covered by existing agrarian reform legislations for it does not have tenants. The argument did not convince
the Manila RTC, thus rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Tadeco
appealed the case to the CA.

On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government’s case
against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government
initially instituted and won against Tadeco, et al. The dismissal action was, however, made subject to the
abstention by Tadeco of the PARC’s approval of a stock distribution plan (SDP) that must initially be implemented
after such approval shall have been secured. On August 23, 1988, Tadeco organized a spin-off corporation, herein
petitioner HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco conveyed to
HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock. On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of the proposed HLI’s Stock
Distribution Option Plan (SODP).

From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI also filed a petition
before the Supreme Court in light of what it considers as the DAR’s hasty placing of Hacienda Luisita under CARP
even before PARC could rule or even read the motion for reconsideration. PARC would eventually deny HLI’s
motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.

The SC en banc voted 11-0 dismissing the petition filed by HLI Affirm with modifications the resolutions of
the Presidential Agrarian Reform Council (PARC for brevity) revoking Hacienda Luisita Inc. (HLI for brevity) Stock
Distribution Plan (SDP) and placing the subject land in HL under compulsory coverage of the CARP of the government.

Thereafter, the SC voting 6-5 averred that there are operative facts that occurred in the premises. The SC
thereat declared that the revocation of the SDP shall, by application of the operative fact principle, give the 5296
qualified Farmworkers Beneficiaries (FWBs for brevity) to choose whether they want to remain as HLI stockholders
 or choose actual land distribution. Considering the premises, DAR immediately scheduled a meeting regarding the
effects of their choice and therefrom proceeded to secret voting of their choice.

The parties, thereafter, filed their respective Motion for Reconsideration regarding the SC’s decision.

Issue:

1) Whether or not operative fact doctrine is applicable in the said case.

2) Whether or not Sec. 31 of R.A. 6657 unconstitutional.

3) Whether or not the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10,
1999, since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May 11, 1989, and
thus the qualified FWBs should now be allowed to sell their land interests in Hacienda Luisita to third parties,
whether they have fully paid for the lands or not?

4) Whether or not qualified FWBs shall be entitled to the option of remaining as stockholder be reconsidered.

Ruling:

1) Operative Fact Doctrine is applicable to the instant case. The court ruled that the doctrine is not limited only to invalid
or unconstitutional law but also to decisions made by the president or the administrative agencies that have the
force and effect of laws, especially if the said decisions produced acts and consequences that must be respected.
That the implementation of PARC resolution approving SDP of HLI manifested such right and benefits favorable to
the FWBs;

2) The SC said that the constitutionality of Sec. 31 of R.A. 6657 is not the lis mota of the case and it was not raised at
the earliest opportunity and did not rule on the constitutionality of the law;

3) The SC ruled that it has not yet lapsed on May 10, 1999, and qualified FWBs are not allowed to sell their land interest
in HL to third parties; That the start of the counting of the prohibitive period shall be ten years from the issuance
and registration of the Emancipation Patent (EP for brevity) or Certificate of Land Ownership Award (CLOA for
 brevity), and considering that the EPs and CLOAs have not yet been issued, the prohibitive period has not started
yet.

4) The SC ruled in the affirmative, giving qualified FWBs the option to remain as stockholder

YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to remain as stockholders of
HLI should be reconsidered.

[The Court reconsidered its earlier decision that the qualified FWBs should be given an option to remain as
stockholders of HLI, inasmuch as these qualified FWBs will never gain control [over the subject lands] given the
present proportion of shareholdings in HLI. The Court noted that the share of the FWBs in the HLI capital stock is
[just] 33.296%. Thus, even if all the holders of this 33.296% unanimously vote to remain as HLI stockholders, which
is unlikely, control will never be in the hands of the FWBs. Control means the majority of [sic] 50% plus at least one
share of the common shares and other voting shares. Applying the formula to the HLI stockholdings, the number of
shares that will constitute the majority is 295,112,101 shares (590,554,220 total HLI capital shares divided by 2 plus
one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control over HLI.]

The SC PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et al., The 6,296 original FWBs
shall forfeit and relinquish their rights over the HLI shares of stock issued to them in favor of HLI. The HLI Corporate
Secretary shall cancel the shares issued to the said FWBs and transfer them to HLI in the stocks and transfer book.
The 4,206 non-qualified FWBs shall remain as stockholders of HLI.