G.R. No. 171101 – (Hacienda Luisita v. Presidential Agrarian Reform Council, Secretary Nasser Pangandaman of the Department of Agrarian Reform, Alyansa ng mga Mangagawang Bukid ng Hacienda Luisita, Rene Galan, Noel Mallari, and Julio Zuniga and his Supervisory Group of the Hacienda Luisita, Inc., and Windsor Andaya)

Promulgated:

July 5, 2011

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DISSENTING OPINION

SERENO, J.

What the majority has created by its Decision are several legal and operational aberrations that will only set back the long-term resolution of the agrarian conflicts involving Hacienda Luisita and create even more havoc in our legal system. Instead of definitively putting the multi-angled issues to rest, the majority has only succeeded in throwing back the agrarian problem to the farmers, the original landowners and the Department of Agrarian Reform (DAR).

First, the majority Decision ruled in categorical language to (a) deny the Petition of Hacienda Luisita, Inc. (HLI), (b) affirm PARC Resolution No. 2005-32-01 dated 22 December 2005 and Resolution No. 2006-34-01 dated 03 May 2006, which revoked the approval of the HLI Stock Distribution Plan (SDP); and (c) pronounce that PARC Resolution No. 89-9-12 approving the HLI’s Stock Distribution Plan (SDP), “is nullified and voided.” However, without any legal basis left to support the SDP after the pronouncement of the complete nullity of the administrative approval thereof, the majority proceeded to allow the farmworker-beneficiaries (FWBs) of Hacienda Luisita the option to choose a completely legally baseless arrangement. It is legally baseless because an SDP and its operating agreement, a Stock Distribution Option Agreement (SDOA), can only be valid with the corresponding PARC approval. There is not a single legal twig on which the order to proceed with the voting option can hang, except the will of this Court’s majority.

Second, they ruled that the SDOA dated 11 May 1989 between petitioner HLI, Tarlac Development Corporation (TADECO) and the farmworker-beneficiaries (FWBs) is illegal for two violations: (a) the distribution of shares of stock based on the number of man-days worked, and (b) the prolonged thirty-year time frame for the distribution of shares; additionally, they ruled that these two arrangements have worked an injustice on the FWBs, contrary to the spirit and letter of agrarian reform. Yet, the majority will allow them to remain in such a prejudicial arrangement if they so decide. To allow the FWBs, the disadvantaged sector sought to be uplifted through agrarian reform, to remain in an illegal arrangement simply because they choose to so remain is completely contrary to the mandatory character of social justice legislation.

Third, while the majority states that a stock distribution option agreement can only be valid if the majority of the shares or the control of the corporation is in the hands of the farmers, they still ruled that the doctrine of operative facts led them to unqualifiedly validate the present corporate arrangement wherein the FWBs control only 33% of the shares of petitioner HLI, without ordering in the dispositive portion of the Decision a condition precedent to the holding of the referendum – the restructuring of HLI whereby majority control is firmly lodged in the FWBs.

Fourth, the majority employ the doctrine of operative facts to justify the voting option, even if jurisprudence allows this doctrine to be applied only in the extreme case in which equity demands it. The doctrine of operative facts applies only to prevent a resulting injustice, if the courts were to deny legal effect to acts done in good faith, pursuant to an illegal legislation or perhaps even executive action, but prior to the judicial declaration of the nullity of the government action. Here, there is no room for the application of the equity jurisdiction of the Court, when the CARL, in Section 31, categorically provides for direct land distribution in the event a stock distribution is not completed.

Fifth, assuming equity were to be applied, then it should be applied in favor of the FWBs by ordering direct land distribution, because that is the inequity that continues to fester – that the FWBs who have been promised ownership of the lands they till are denied the same, twenty-three years after the passage of CARL.

Sixth, the majority ruled that the issue of constitutionality of the stock distribution option under Section 31 of the Comprehensive Agrarian Reform Law, Republic Act No. 6657, is not the lis mota of the case; hence, the issue of constitutionality should be avoided if there is another basis for the court to rule on the case. Yet, the majority proceeded to discuss and even rule in favor of its constitutionality.

Should there be no reversal of the above aberrant ruling allowing the FWBs to vote to remain in HLI, the only way for the ruling to not work too grave an injustice is if petitioner HLI is required to be restructured in such a way: (1) that the correct valuation of the lands vis-à-vis non-land assets be made, and (2) that no less than 51% of the controlling shares, as well as the beneficial ownership of petitioner HLI, be in the hands of qualified FWBs. Unless this is done, DAR should not even proceed to conduct a referendum giving the FWBs the choice to stay in a corporation of which they have no control.

I posit, as Justice Arturo D. Brion does, that FWBs be immediately empowered to dispose of the lands as they so deem fit. I disagree with the majority that those who will opt to leave the SDOA can only dispose of their lands no less than ten (10) years after the registration of the certificate of land ownership award (CLOA) or the emancipation patent (EP) and not until they have fully paid the purchase price to the Land Bank of the Philippines (LBP). These farmers have waited for decades for the recognition of their rights under the Comprehensive Agrarian Reform Law (CARL). Whether we use Justice Brion’s starting point of 11 May 1989, or my starting point of 11 May 1991, twenty years have lapsed and the land has been locked under agricultural use all that time, with no opportunity to exploit its value for other purposes. We should allow the farmers the chance to ride on the crest of economic progress by giving them the chance to engage in the market, not only as entrepreneurs, as corporate or cooperative farmers, but also as lessors or even as real estate sellers. The Court should allow the DAR to devise a mechanism that would enable direct land transfer to buyers or co-development partners, so that the lands and the farmers can truly be free. This is where the Court’s equity jurisdiction can weigh in favor of the farmers – to cut down the bureaucratic red tape so that genuine economic freedom on their part can be realized. Nothing can be more economically stifling than to condemn the use of the land to only one – agricultural – and to deny the FWBs the best economic use of the land for such a prolonged period of time.

We must also not lose sight of the fact that 3,290 hectares of the Hacienda Luisita lands have already been reclassified into non-agricultural uses – industrial, commercial and residential – by the then municipality of Tarlac (which is now a city). If there would again be any application of the equity jurisdiction of the court, it is here where equity can be applied, and the farmers must be allowed to take advantage of this upgraded classification.

I have also proposed that the just compensation to TADECO/HLI be fixed at the current fair market value, as defined by laws, regulations and jurisprudence, which is at the time of the taking. This is the only logical conclusion from the ponencia of Justice Presbitero J. Velasco, Jr. and the opinion of Justice Brion – both of them, and I would require petitioner HLI, to return to the FWBs the proceeds from the sale of the lands sold or transferred at the then prevailing market rates. The Decision and those Opinions therefore fix the just compensation at “fair market value,” at the time when the transfer transaction took place, precisely for the reason that they recognize that the purchase price is the just compensation. It is not fair to require TADECO or petitioner HLI to accept less than fair market value if what is being required from them is the payment to the qualified FWBs of the proceeds of the sale of those lands earlier sold or disposed of at fair market value. There is an objection that to peg the just compensation at fair market value would mean HLI lands would be prohibitively expensive for the FWBs to acquire and thus they can never pay off the purchase price therefor. But to rule otherwise is unjust to HLI and contrary to the statutory requirement of payment to landowners of just compensation at fair market value. It is for DAR to facilitate all kinds of economic arrangements whereby the farmers can ultimately pay off the value of the land, including the direct transfer of the land to buyers.

I did not go the route proposed by Justice Brion that the just compensation be fixed as of 11 May 1989, and that TADECO or petitioner HLI not be awarded any interest on the amount they should have been paid. There would be injustice in such a proposal, because not only is this approach inconsistent with Justice Brion’s position that the market price paid by LIPCO be given to the FWBs, there have already been many improvements introduced by TADECO or petitioner HLI since that time, and to deny them compensation for the value either of those industrial fruits (the improvements) or of the civil fruits (interest on the just compensation) would be seriously unjust. Regardless of the history of the land, improvements have been introduced by TADECO/HLI for which this Court must allow compensation.

It is not right for this Court to distinguish between two classes of persons whose lands the law has subjected to expropriation – by virtue of either compulsory acquisition under CARL or other lawful confiscatory power such as eminent domain – and then to condemn CARL original landowners to an inferior position by denying them compensation at fair market value vis-a-vis others whose properties are subjected to compulsory acquisition, but not by land reform. Let this be an acid test for the government – whether it wants and is able to abide by a standard of fairness applicable to all kinds of landowners.

Factual Antecedents

On 15 June 1988, the CARL took effect.[1] The CARL was enacted to promote social justice for landless farmers and provide “a more equitable distribution and ownership of land with due regard to the rights of landowners to just compensation and to the ecological needs of the nation.”[2] The CARL is “a social justice and poverty alleviation program which seeks to empower the lives of agrarian reform beneficiaries through equitable distribution and ownership of the land based on the principle of land to the tiller.”[3] It was designed to “liberate the Filipino farmer from the shackles of landlordism and transform him into a self-reliant citizen who will participate responsibly in the affairs of the nation.”[4]

Under the CARL, corporations that own agricultural lands have two options:

(a) Land transfer option - voluntarily transfer the ownership of the land to the government or to qualified beneficiaries; or

(b) Stock distribution option - divest or give qualified beneficiaries capital stocks in proportion to the value of the agricultural lands devoted to agricultural activities relative to the company’s total assets.[5]

Tarlac Development Corporation (TADECO), a domestic corporation principally engaged in agricultural pursuits, owned and operated a farm, known as Hacienda Luisita, which was covered under the CARL.[6] Hacienda Luisita is a 6,443-hectare agricultural land[7] that straddles the municipalities of Tarlac, Concepcion and La Paz in Tarlac province.[8] At the time, there were 6,296 farm workers, who were qualified as beneficiaries (hereinafter FWBs) under the CARL.[9]

The management of TADECO and the FWBs, allegedly, agreed to a stock distribution plan instead of a land transfer. To facilitate the plan, both parties agreed to create a spin-off corporation that would receive the agricultural lands and farm related-properties from TADECO.[10] In exchange, FWBs would be given shares in the spin-off corporation in proportion to the value of the agricultural lands.[11]

Thus, TADECO formed and organized a spin-off corporation – Hacienda Luisita, Inc., (HLI), which is the petitioner in the instant case.[12] Petitioner HLI’s primary purpose was to engage in and carry on the business of planting, cultivation, production, purchase, sale, barter or exchange of all agricultural products and to own, operate, buy, sell, and receive as security lands to raise such products or as reasonably and necessarily required by the transaction of the lawful business of the corporation.[13]

On 22 March 1989, TADECO assigned and conveyed to petitioner HLI approximately 4,916 hectares of agricultural lands[14] and other properties related to the former’s agricultural operations in exchange for shares of stock in the spin-off corporation.[15]

On 11 May 1989, petitioner HLI and TADECO entered into a Memorandum of Agreement with the FWBs for a stock distribution option with respect to the agricultural lands in Hacienda Luisita.[16] The SDOA provides that:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [petitioner HLI] is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.

2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY.

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY [TADECO] the acquisition and distribution to the THIRD PARTY 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.

4. The SECOND PARTY shall guarantee to the qualified beneficiaries of the stock distribution plan that every year they will receive, on top of their regular compensation, an amount that approximates the equivalent of three (3%) percent of the total gross sales from the production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both.

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD PARTY, the FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of the said year which will empower the THIRD PARTY or their representative to vote in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to.

6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge among the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not more than 240 sq.m. each, with each family-beneficiary being assured of receiving and owning a homelot in the barangay where it actually resides on the date of the execution of this Agreement.

7. This Agreement is entered into by the parties herein in the spirit of the Comprehensive Agrarian Reform Program (C.A.R.P.) of the government and with the supervision of the Department of Agrarian Reform, with the end in view of improving the lot of the qualified beneficiaries of the stock distribution plan and obtaining for them greater benefits. (Emphasis supplied)

In brief, the FWBs were entitled to 33.29% of the total capital stock of petitioner HLI, the equivalent of the value of the agricultural lands compared with its total assets.[17] Since petitioner HLI’s outstanding capital shares of stock amounted to a total of 355,531,462, the FWBs were entitled to 118,391,976.85 shares under the SDOA.[18] These shares were to be distributed for free at the end of each fiscal year for a period of thirty years to qualified FWBs on the basis of “man-days.”[19]

On 28 September 1989, the government conducted a consultative meeting for the benefit of the leaders of the FWBs in Hacienda Luisita, where they were presented with the various options available under the Comprehensive Agrarian Reform Program (CARP) and the salient features of the possible business arrangements under the land distribution option.[20] Subsequently, an information campaign was conducted in the ten affected barangays to explain to the FWBs the different schemes of ownership under the land transfer option and other options available under the CARP.[21]

The SDOA was signed by 5,898 FWBs out of a total work force of 6,296 FWBs, or 92.9% of the FWBs.[22] Subsequently, a referendum was conducted by public respondent Department of Agrarian Reform (DAR) where 5,117 out of the 5,315 FWBs participating voted in favor of the stock distribution; only 132 FWBs preferred land transfer.[23] Thereafter, petitioner HLI submitted the SDOA for approval to the DAR.[24]

On 06 November 1989, public respondent Presidential Agrarian Reform Council (PARC), through then DAR Secretary Miriam Defensor-Santiago, informed petitioner HLI of the favorable endorsement of the SDOA, but identified some issues for the latter’s consideration and revision such as the mechanics of the stock distribution and the matter of the dilution of the shares.[25]

On 14 November 1989, petitioner HLI, in response, clarified to then DAR Secretary Defensor-Santiago several matters regarding the SDOA, specifically the dilution of the shares of FWBs, the mechanics for the distribution of the shares, the actual number of board seats, the distribution of home lots, and the three percent cash dividend.[26]

On 21 November 1989, public respondent PARC unanimously approved the SDOA of TADECO and petitioner HLI for the Hacienda Luisita farm.[27]

According to petitioner HLI,[28] from the time the SDOA was implemented in 1989, the FWBs received the following benefits under the stock distribution plan:

a. Three billion pesos – Salaries, wages and fringe benefits from 1989 – 2004;

b. Fifty-nine million pesos – Shares of stock in petitioner HLI given for free in fifteen (15) years, instead of thirty (30) years;[29]

c. One hundred fifty million pesos – Three percent (3%) share in the gross sales of the production of the agricultural lands of petitioner HLI;

d. Thirty-seven million five hundred thousand pesos – Three percent (3%) share from the proceeds of the sale of lands;

e. Home lots of two hundred forty square meters each to 3,274 families of FWBs for free;[30] and

f. Other benefits.[31]

On 10 August 1995, petitioner HLI applied for the conversion of five hundred (500) hectares of agricultural lands, which were part of the 4,916 hectares in the Hacienda Luisita farm, subject of the SDOA.[32]

The affected FWBs filed their statement of support for the application for conversion with the DAR.[33] The application was also unanimously approved by the four directors in the Board of petitioner HLI, who represented the stockholder FWBs.[34] On 01 September 1995, the Sangguniang Bayan of Tarlac approved the integration and/or inclusion of the Luisita Land Use Plan in the general zoning map of the then Municipality of Tarlac and thus reclassified three thousand two hundred ninety (3,290) hectares of the Hacienda Luisita land from agricultural to commercial, industrial and residential purposes, the land reclassification being required before approval of the application for conversion.[35]

On 14 August 1996, the DAR approved the application for conversion and reclassified 500 hectares of Hacienda Luisita agricultural lands into industrial use.[36]

Petitioner HLI transferred and sold two hundred (200) hectares of the converted industrial lands to Luisita Realty Inc.,[37] for a total amount of ₱500,000,000.[38]

Meanwhile, the old titles covering the remaining 300 hectares of converted lands were cancelled and a new consolidated title was issued in the name of petitioner HLI over that portion of the land.[39] On 13 December 1996, petitioner HLI assigned the same 300-hectare property[40] to Centennary Holdings, Inc., in exchange for 12,000,000 shares in the latter’s company.[41] A new certificate of title was subsequently issued in the name of Centennary Holdings.[42]

Thereafter, petitioner HLI entered into a Joint Venture Agreement with other corporate entities[43] to form Luisita Industrial Park Corporation (LIPCO), which was envisioned to be the corporate vehicle that would purchase and develop the converted industrial land in Hacienda Luisita.[44] After it was created and organized, LIPCO agreed to develop the 300-hectare property into a first-class industrial estate[45] and purchased the property from Centennary Holdings for ₱750,000,000.[46]

Under the contract of sale, Centennary Holdings guaranteed that there were no third parties with any right or claim over the property[47] and that it had duly obtained a valid conversion of the property for use as an industrial estate.[48] Moreover, LIPCO alleged that at the time it acquired the property from Centennary Holdings, the only annotations found in the title were the Secretary’s Certificate in favor of Teresita Lopa, the Secretary’s Certificate in favor of Shintaro Murai and the conversion of the property from agricultural to industrial and residential use.[49]

Pursuant to the sale, a new title was issued in the name of LIPCO covering the 300 hectare property.[50] This title was later on amended to account for the partial subdivision of the 300 hectare property into two separate lots of 180 hectares and 4 hectares covered by two separate titles.[51] The remaining 115 hectares of the original property remained under LIPCO’s original title.[52]

In October 1996, LIPCO mortgaged its property in Hacienda Luisita to Rizal Commercial Banking Corporation (RCBC) to guaranty the payment of a ₱300,000,000 loan, which was annotated in LIPCO’s title over the property.[53]

The entire 300-hectare industrial estate was thereafter designated by then President Fidel Ramos as a special economic zone (the Luisita Industrial Park II) by virtue of his powers under the Special Economic Zone Act of 1995.[54] The same industrial estate project of LIPCO over the 300-hectare land in Hacienda Luisita was also endorsed and supported by the Sangguniang Bayan of the Municipality of Tarlac.[55]

LIPCO claims that from 1998 to 2001, it made developments to the 300-hectare property through its contractor, Hazama Philippines, Inc., which included main roads and sub-roads with proper drainage, a power control house, deep well and water tanks, a drainage reservoir and sewerage treatment plant, a telecommunication system, underground electrical distribution lines, concrete perimeter security fences, and a security house.[56] LIPCO further alleges that it paid US$14,782,956.20 to its contractor for the said improvements and developments to the land.[57]

On 25 November 2004, LIPCO assigned and transferred through a dacion en pago the two subdivided lands in Hacienda Luisita to RCBC as full payment for its loan amounting to ₱431,695,732.10.[58] LIPCO’s titles to these two subdivided lots were subsequently transferred to RCBC.[59] At the time of the dacion en pago, RCBC claimed that there was no annotation in the titles of the two subdivided properties which showed that there was any controversy or adverse claim, except for the deed of restrictions and its own real estate mortgage over the properties.[60]

In November 2009, the Bases Conversion Development Authority (BCDA) acquired approximately 84 hectares of the property as a right-of-way for a segment of the SCTEX (Subic-Clark-Tarlac-Expressway).[61] An interchange was also constructed on a portion of the Tarlac-Clark segment traversing petitioner’s landholdings, for which the government paid ₱80,000,000 as just compensation to petitioner HLI.[62] The legal issue relevant to this portion of the land and its use and expropriation by the government was never expounded in full in the proceedings of the case, but petitioner HLI introduced the matter by manifesting that it in fact distributed 3% of the ₱80,000,000 to the FWBs. This assertion, however, is not included in the certified true report submitted by Jose Cojuangco & Sons Organizations - Tarlac Operations,[63] as the report detailed all the amounts HLI gave to its workers only from 1989 to 2005.[64]

Proceedings in the PARC

On 14 October 2003, the Supervisory Group of HLI (Supervisory Group) filed a “Petition/Protest” with public respondent PARC, praying for the renegotiation of the SDOA, or alternatively, the distribution of petitioner HLI’s agricultural lands to the FWBs.[65] The petition/protest of the Supervisory Group, led by Jose Julio Zuñiga and Windsor Andaya, contained sixty-two signatures of persons, who claimed to be supervisors in Hacienda Luisita and who held shares in petitioner HLI.[66]

Petitioner HLI filed an Answer dated 04 November 2004,[67] resisting the demands of the Supervisory Group and reiterating that the SDOA is “impervious to any nullification, termination, abrogation, or renegotiation” since the provisions of the law and the rules have been complied with.[68]

On 04 December 2003, private respondent Alyansang Mangagawang Bukid ng Hacienda Luisita (AMBALA) filed a separate “Petisyon” in the Department of Agrarian Reform.[69] Private respondent AMBALA made a similar prayer for the revocation of the SDOA in Hacienda Luisita. Rene Galang and Noel Mallari, who were the President and Vice President of AMBALA, respectively, signed the petition.[70] Petitioner HLI consequently filed an Answer to the AMBALA petition.[71]

On 22 November 2004, then DAR Secretary Rene Villa created a Special Task Force on the Hacienda Luisita stock distribution option plan to review the terms and conditions of the SDOA, and evaluate the compliance reports and the merits of the two petitions.[72] On 15 August 2005, the DAR created a Special Team to reinforce the Special Task Force.

On 22 September 2005, the DAR’s Special Team issued the Terminal Report, where it found that petitioner HLI had not complied with its obligations under the law on the implementation of the stock distribution plan.[73] Specifically, the Terminal Report identified the following defects and violations:[74] (a) absence of the certificate of compliance since the stock distribution option plan had yet to be fully completed; (b) the prolonged implementation of the distribution of shares to FWBs for a thirty-year period; (c) conversion of portions of the Hacienda Luisita farm (500 hectares) for non-agricultural uses; and (d) distribution of shares based on the number of days worked by the FWBs.

On 30 September 2005, the DAR Secretary, using the Terminal Report as basis, recommended to the PARC Executive Committee the recall/revocation of the approval of the SDOA and the compulsory acquisition of petitioner HLI’s agricultural lands. In reply to the DAR Secretary’s recommendations, the PARC Executive Committee created a PARC ExCom Validation Committee to review and validate the DAR Secretary’s findings.[75]

On 12 October 2005, fourteen FWBs allegedly filed their position paper before the PARC assailing its failure to tackle the constitutionality of Section 31 of the CARL and limiting its basis for invalidating the SDOA for violating the said provision and its implementing rules.[76]

On 29 November 2005, private respondents Supervisory Group and AMBALA, through Atty. Jobert Pahilga of the Sentro Para sa Tunay na Repormang Agraryo Foundation (SENTRA), filed their Memorandum arguing that the SDOA with petitioner HLI was a “big mistake and a monumental failure.”[77] The constitutionality of the CARL’s provisions allowing for the stock distribution option itself was, however, not raised.

On 22 December 2005, after conducting hearings and receiving the memoranda filed by the parties, the PARC issued Resolution No. 2005-32-01 (the questioned PARC Resolution), which affirmed the recommendation to recall/revoke the stock distribution plan of TADECO and petitioner HLI, and placed their lands under compulsory coverage or mandated land acquisition scheme of the CARP. The dispositive portion of the questioned PARC Resolution reads:

NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation Committee affirming the recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under compulsory coverage or mandated land acquisition scheme of the Comprehensive Agrarian Reform Program.[78] (Emphasis supplied)

Pursuant to the questioned PARC Resolution, then DAR Secretary Nasser Pangandaman (public respondent Pangandaman) ordered the acquisition and distribution of the entire agricultural landholdings of petitioner HLI under the compulsory acquisition scheme of the CARL.[79]

On 02 January 2006, petitioner HLI moved for a reconsideration of the PARC Resolution.[80] Private respondents Supervisory Group and AMABALA, together with the United Luisita Worker’s Union (ULWU) as intervenor, consequently filed their opposition to petitioner HLI’s motion for reconsideration.[81]

The DAR subsequently issued several notices of coverage over the lands in Hacienda Luisita in the name of TADECO/HLI:

Table of Covered Lands of Hacienda Luisita

Location	Pasajes, Municipality of Concepcion[82]	San Miguel, Luisita, Ungot and Bantog in Tarlac[83]	Dumarals, Sierra, Lapaz[84]
Grand Total of Areas under the Titles (in hectares)	1,909.5365	2,736.6949	1,291.9457
Cancelled	98.7511	690.1578	236.8159
Canal/Road	1.1736	6.8949	30.5083
Capable	1,809.6118	2,069.6422[85]	1,024.6215

The Hacienda Luisita lands in these notices of coverage also embraced the 300-hectare lot that was earlier converted by the DAR for industrial use and now titled in the name of LIPCO, including the two titles transferred to RCBC through a dacion en pago.[86] However, the DAR motu propio desisted from implementing the order of compulsory coverage over the said lands, in spite of the notices of coverage.[87]

Acting on the pending motion for reconsideration, the PARC Excom Validation Committee – headed by Undersecretary Ernesto Pineda of the Department of Justice – recommended the dismissal of petitioner HLI’s motion.[88] This recommendation was adopted in toto by the PARC Council.[89]

Thereafter, 5,364 individuals claiming to be bona fide FWBs signed and filed with the DAR hundreds of separate petitions.[90] All of them claimed that they had freely entered the SDOA with petitioner HLI and prayed that the SDOA not be cancelled by the DAR.

Proceedings in the Court

On 01 February 2006, without awaiting the resolution of its pending motion for reconsideration, petitioner HLI filed the instant Rule 65 Petition to nullify the questioned PARC Resolution.[91] Petitioner HLI included in the Petition a prayer for a temporary restraining order to hold the implementation of the questioned PARC Resolution, and to prevent compulsory coverage of the lands under the CARL. Despite the DAR’s own order to cease and desist from implementing the Notices of Coverage, petitioner HLI, nevertheless, alleges that the DAR was still bent on implementing the questioned PARC Resolution.[92]

On 14 June 2006, the Court granted petitioner HLI’s preliminary prayer for a temporary restraining order and enjoined public respondents from implementing the questioned PARC Resolution.[93]

On 13 July 2006, public respondents, through the Office of the Solicitor General, filed their Comment.[94]

On 05 December 2006, private respondent Noel Mallari filed a Manifestation and Motion with Comment Attached.[95] Private respondent Mallari manifested that he and other members of AMBALA had left the organization and founded the Farmworkers Agrarian Reform Movement, Inc. (FARM). Respondent Mallari was joined and supported by some other FWBs, who affixed their signatures in the Petition.[96] They prayed that the new organization be allowed to enter its appearance and/or intervene in the instant case, and that the instant Petition be dismissed. Respondent Mallari subsequently filed a supplement to the earlier comment, raising therein as a substantive issue the unconstitutionality of the stock distribution option under Section 31 of the CARL.[97]

On 22 December 2006, private respondents Supervisory Group[98] and AMBALA (Galang Group)[99] filed their own Comment/Opposition, through their counsel, Atty. Pahilga of SENTRA, who had earlier represented them in the PARC proceedings below.[100]

On 30 May 2007, petitioner HLI filed a Consolidated Reply[101] to the comments filed by the two private respondents[102] and public respondents.[103] Petitioner assailed the fact that private respondents did not actually represent bona fide FWBs, as shown by the numerous and separate petitions signed by 5,364 FWBs filed in the PARC, who had expressed their desire to maintain the SDOA.[104]

On 30 October 2007, petitioner-in-intervention RCBC moved to intervene in the instant case considering that the two subdivided lots of Hacienda Luisita that were transferred to it by virtue of the dacion en pago were included in the notices of coverage issued under the authority of the questioned PARC Resolution.[105] On 27 November 2007, LIPCO likewise moved to intervene in the instant case, considering that the DAR’s notices of coverage also included the balance of 115 hectares of converted industrial land under TCT No. 310986, which remained under its name.[106]

Public respondents filed their consolidated comment to the petitions-in-intervention of RCBC and LIPCO, arguing inter alia that the two intervenor corporations were not innocent purchasers of land and that TADECO and petitioner HLI reneged in this commitment to keep Hacienda Luisita “intact and unfragmented.”[107] In contrast, petitioner HLI raised no objection to the intervention of RCBC and LIPCO. Thereafter, RCBC and LIPCO filed their respective replies to public respondent’s consolidated comment.[108]

The Court then required: (a) petitioner HLI to submit certified true copies of the stock and transfer books submitted to the Securities and Exchange Commission showing compliance with the SDOA; and (b) the DAR Secretary to submit the list of qualified FWBs in Hacienda Luisita at the time the SDOA was signed on 11 May 1989.[109] In compliance, petitioner HLI submitted a summary of stock distribution to beneficiaries from 1989-1990 to 2003-2004, as follows:[110]

Summary of Shares of Stock Distribution CY – 1989-1990 to CY – 2003-2004
Status	CTR	Distributed Shares of Stock	Accelerated Shares of Stock	Total Shares of Stock
Fortnightly	882	11,309,418	11,309,418	22,618,836
Weeklies	8,597	47,948,819	47,948,819	95,897,638
Trash Project	2,476	104,374	104,374	208,748
TOTAL	11,955[111]	59,362,611	59,362,611	118,725,222[112]

Public respondents likewise presented to the Court a list of qualified FWBs who signed the SDOA on 11 May 1989.[113]

On 11 August 2010, petitioner HLI and private respondents AMBALA (principally through one of its factions, the “Mallari Group”),[114] the Supervisory Group[115] and the ULWU,[116] with the concurrence of TADECO, submitted to the Court a proposed compromise agreement for approval.[117] Under the proposed compromise agreement, the parties would respect the individual decisions of the FWBs as to whether they would stay with the stock distribution contained in the SDOA, or would proceed with land distribution.[118] Petitioner HLI subsequently manifested that based on a “census” conducted on 6-8 August 2010 among the allegedly 10,502 qualified FWBs, 7,302 voted for stock distribution and 139 voted for land distribution.[119]

On 11 August 2010, the three groups that signed the proposed compromise agreement, namely, AMBALA-Mallari Group, the Supervisory Group and ULWU, terminated the services of Atty. Pahilga of SENTRA. On 13 August 2010, Atty. Carmelito Santoyo entered his appearance as the new counsel for the three groups.

Private respondent AMBALA, now represented by Rene Galang (AMBALA-Galang Group), through the same Atty. Pahilga of SENTRA, submitted its opposition to the compromise agreement and argued that it was entered into without authority from the FWBs and contained stipulations contrary to law and public policy.[120] Thereafter, Atty. Capulong of the Public Interest Law Center[121] also entered his appearance as lead counsel for Rene Galang and as collaborating Counsel for AMBALA-Galang Group.[122]

Subsequently, the FARM group, through its counsel Atty. Christian Monsod of the Rights Network, moved to intervene in the instant case and sought permission to file their comment-in-intervention.[123] Although it participated through the manifestation and motion[124] previously filed by Noel Mallari, the FARM Group’s latest comment-in-intervention was now signed by its officers and members led by Renato Lalic,[125] and excluded Mallari, who had apparently switched sides back to the AMBALA-Mallari Group and joined in the proposed compromise agreement with petitioner HLI.[126] FARM adopted by reference the earlier manifestation filed on its behalf by Mallari, and prayed for the dismissal of the instant petition.[127] It likewise asked that Section 31 of CARL allowing for stock distribution to farmer beneficiaries be declared unconstitutional. In its Resolution dated 17 August 2010, the Court deferred action on the FARM Group’s latest request for intervention.

The Court heard the parties on oral arguments on 18[128] and 24 August 2010.[129]

The Court also created a Special Committee to mediate between the contending parties.[130] However, they failed to reach an acceptable settlement. It must be emphasized that the creation of this Committee should not serve as an indicator of any Court policy on whether mediation can still be ordered in cases filed before it or where oral arguments have already been conducted. To clarify, the Court has no existing policy on such matters.

After the oral arguments, the Court required parties to submit their respective memoranda and documents relative thereto.[131] The parties filed the following:

a. Petitioner HLI’s Memorandum dated 23 September 2010, praying for the reversal of the questioned PARC Resolution and declaring the notice of coverage null and void;[132]

b. Private respondents AMBALA-Mallari Group, ULWU (Eldifonso Pingol) and Supervisory Group (Zuñiga and Andaya) Memorandum dated 12 September 2010, through Atty. Santoyo, which prayed that the questioned PARC Resolution also be declared null and void and set aside, and the Compromise Agreement dated 06 August 2010 be approved;[133]

c. Private respondent AMBALA-Galang Group’s Memorandum dated 21 September 2010, through Atty. Pahilga of SENTRA, praying for the affirmance of the questioned PARC Resolution and ordering the actual distribution of the agricultural lands to the FWBs;[134]

d. Private respondent AMBALA-Galang Group’s Memorandum to Discuss Prejudicial Issues dated 23 September 2010, through Atty. Capulong of the Public Interest Law Center, praying that the Court disregard the compromise agreement and/or referendum and order the distribution of the land to the qualified beneficiaries;[135]

e. Respondent-intervenor FARM Group’s Memorandum dated 24 September 2010, through Atty. Monsod of the Rights Network, praying for the declaration of Section 31 of the CARL as unconstitutional and the dismissal of the instant Petition;[136]

f. Public respondents PARC and DAR Memorandum dated 23 September 2010, though the Office of the Solicitor General, praying for the dismissal of the instant Petition;[137]

g. Petitioner-in-intervention LIPCO’s Memorandum dated 23 September 2010, arguing that it is an innocent purchaser for value of the lands subject of compulsory coverage under the CARL and that its title cannot be collaterally attacked;[138] and

h. Petitioner-in-intervention RCBC’s Memorandum dated 23 September 2010 praying for the reversal and setting aside of the questioned PARC Resolution and exclusion of their lands from the notice of compulsory coverage under the CARL.[139]

Issues

Taking cognizance of the arguments espoused by all of the parties, the Court has simplified the various factual and legal controversies raised and will limit its disposition to the following matters:

I. Whether the parties, specifically private respondents Supervisory Group, AMBALA, FARM and ULWU, have a real interest in the present controversy involving the coverage of the Hacienda Luisita land;

II. Whether we may rule on the constitutional challenge against the validity of a stock distribution plan under Section 31 of the CARL;

III. Whether the PARC or the SEC has jurisdiction over the issue of validity of the SDOA and, consequently, the authority to affirm or revoke the same;

IV. Whether there is a legal and factual basis to revoke the SDOA; and

V. Whether the purchasers or transferees of the converted lands in Hacienda Luisita are qualified to be innocent purchasers for value.

Ruling

I.

Private respondents Supervisory Group AMBALA, FARM and ULWU, representing qualified farm worker beneficiaries entitled to the benefits under the SDOA, are real parties in interest in the instant case.

To qualify a person to be a real party in interest in whose name an action must be prosecuted,[140] he must appear to be the present real owner of the right sought to be enforced.[141] Interest within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest.[142] It is distinguished from a mere expectancy or a future, contingent or subordinate.[143]

In filing the Petition/Protest with the DAR, private respondent Supervisory Group primarily sought the renegotiation of the SDOA with petitioner HLI. Private respondent claimed that its members were entitled to the rights and privileges under the SDOA but were not able to enjoy most of them.[144]

With respect to the Supervisory Group, it appears the sixty-two (62) signatories of private respondent Supervisory Group’s Petition/Protest in the DAR were awarded a total of 1,073,369 shares, as detailed in the signature sheet.[145] The list submitted by petitioner HLI to the Court confirmed that private respondent Supervisory Group’s spokespersons – Jose Julio Zuñiga and Windsor Andaya – were beneficiaries and recipients of shares under the SDOA from 1989-2004.[146] Public respondents’ records even show that Zuñiga was one of the FWBs who originally signed the SDOA in 1989.[147] Having been recipients of the shares of stock and other benefits under the SDOA, private respondent Supervisory Group and its members clearly have a real interest in the validity and/or implementation of the SDOA. As real parties in interest under the Rules, they have standing to raise questions regarding the same and pursue an action with the proper authority.

With respect to AMBALA (both the Mallari and Galang Group), private respondent AMBALA filed the “Petisyon” in the DAR as qualified FWBs entitled to receive benefits under the SDOA. Rene Galang and Noel Mallari (President and Vice-President of private respondent AMBALA) represented themselves as leaders of qualified FWBs. They demanded from petitioner HLI, among others, the payment of their shares from the sale of converted lands and alternatively, the distribution of the Hacienda Luisita lands under compulsory acquisition in the CARL. Similar to Mr. Zuñiga of private respondent Supervisory Group, Mr. Mallari’s standing to question the SDOA arises from his status as one of the original signatories thereto.[148] Clearly, their substantial and material interest derives from the fact that they were entitled to benefits under the SDOA, which they had previously agreed to and signed.

The representatives of private respondent AMBALA were also recipients of shares of stock under the SDOA.[149] Even if Galang, as head of private respondent AMBALA, allegedly started his employment with the company only in June 1990 after the SDOA was signed,[150] he still possesses a real interest in the agreement because he was identified as one of the beneficiaries of the stock distribution option. Therefore, any ruling on the SDOA with respect to its validity or implementation will invariably affect their rights and that of other members of private respondent AMBALA, who have claims under the said agreement.

In any case, petitioner HLI has expressly acknowledged that private respondents AMBALA and Supervisory Group are real parties-in-interest with respect to filing the petition before the DAR.[151] Petitioner HLI’s acknowledgement of private respondents’ interest in the case may have been precipitated by their proposed compromise agreement submitted for approval to the Court.[152] Regardless of the Court’s resolution of the proposed compromise agreement, petitioner HLI’s admission foreclosed the issue as to private respondents’ interest and/or rights as qualified FWBs in the present action to question the SDOA.

The members of the AMABALA Galang Group, which opposed the compromise agreement with petitioner HLI, likewise claim rights under the SDOA as FWBs and, hence, also possess a real interest in this case. It will be recalled that the group is represented by Rene Galang, who was the President of AMBALA at the time the complaint before the PARC proceedings was filed.[153] Thereafter, the private respondent AMBALA split into two factions (Mallari Group and Galang Group), presumably arising from their disagreement with respect to the proposed compromise agreement and the change of counsel. The AMBALA Mallari Group, which was represented by Atty. Santoyo, favored the approval of the compromise agreement, while the AMBALA Galang Group, insisted on land distribution and retained its previous counsel, Atty. Pahilga of SENTRA.[154] In any event, Rene Galang, similar to Noel Mallari, also received shares of stocks from petitioner HLI under the SDOA,[155] and thus, has a real interest in the outcome of the case.

On the other hand, FARM was the break-away group from AMBALA, which was headed by Noel Mallari when it first entered its appearance in the Court’s proceedings.[156] When Mallari returned to AMBALA, the officers and members of the FARM continued to intervene in the proceedings headed by Renato Lalic, and were represented by Atty. Monsod of the Rights Network. Members of the FARM all claim to have been long-term occupants, residents of and workers at the Hacienda Luisita lands, and that they also own shares of petitioner HLI and homelots arising from the SDOA.[157] As beneficiaries under the SDOA, members of FARM are also real parties in interest since they will be directly affected by the validity or invalidity of the SDOA.

Finally, ULWU first intervened in the proceeding at the PARC level, when it joined the Supervisory Group and AMBALA in opposing petitioner HLI’s motion for reconsideration of the questioned PARC resolution.[158] However, ULWU, together with the other two groups joined petitioner HLI in seeking the Court’s approval of the proposed compromise agreement. There is no denying that ULWU also has standing in the instant case, since it not only received benefits under the SDOA, but also dealt with petitioner HLI in entering into a compromise agreement.

Ultimately, qualified FWBs who originally consented to the SDOA or those who are entitled to and/or received benefits under the said agreement have a substantial interest in the adjudication of the status and legitimacy of the SDOA.

Petitioners-in-Intervention RCBC and LIPCO are Real Parties in Interest.

Petitioners-in-intervention RCBC and LIPCO have a legal and substantial interest as the present owners of the converted lands subject of compulsory coverage under the questioned PARC Resolution.[159] The rights of petitioners-in-intervention over the converted lands, which were transferred to them by petitioner HLI and Centennary Holdings, will be affected by the revocation of the SDOA and the subsequent inclusion of the transferred properties in compulsory acquisition. Their interest stems from being owners of land that was included in the notice of compulsory coverage. Their rights over portions of the Hacienda Luisita lands, previously owned by petitioner HLI and converted into industrial lands by the DAR, will be directly affected if the DAR is permitted to expropriate the same for distribution to qualified FWBs under the CARL. Hence, they have a substantial and material interest in the outcome of the questioned PARC Resolution insofar as it may possibly deprive them of their rights over the lands they purchased.

II.

The constitutional validity of the stock distribution option under the CARL was not timely raised and is not the lis mota in this case.

Respondent-intervenor FARM questioned the validity of the stock distribution option of a corporate landowner under Section 31 of the CARL on the ground that it is in violation of the constitutional provision on agrarian reform, specifically the distribution of land to the farmers.[160] Respondent-intervenor argued that the stock distribution option was not one of the modes intended by the agrarian reform policy in giving “land to the landless.” In response, petitioner HLI countered that the issue of the CARL’s constitutionality cannot be collaterally attacked.[161]

Before the Court can exercise its power to pass upon the issue of constitutionality, the following requisites must be present:

1. There must be an actual case or controversy calling for the exercise of judicial power;

2. The person challenging the act must have the standing to question the validity of the subject act or issuance; otherwise stated, he must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement;

3. The question of constitutionality must be raised at the earliest opportunity; and

4. The issue of constitutionality must be the very lis mota of the case.[162]

Although the first two requisites are present, FARM has not shown compliance with the remaining two requisites.

With respect to the timeliness of the issue, respondent-intervenor FARM did not raise the constitutional question at the earliest possible time. The petitions filed in the PARC, which precipitated the present case, did not contain any constitutional challenge against the stock distribution option under the CARL. As previous members of private respondent AMBALA, nothing prevented respondent-intervenor FARM from arguing on the purported constitutional infirmity of a stock distribution option as opposed to a direct land transfer, in the AMBALA Petition in the PARC proceedings below.

Respondent-intervenor FARM would argue that it raised the constitutionality issue in its position paper at the level of the PARC.[163] However, this is a late attempt on its part to remedy the situation and comply with the foregoing requisite on timeliness in the exercise of judicial review. Nothing in the initiatory petitions of private respondents Supervisory Group and AMBALA assailed the inherent invalidity of stock distribution options as provided in Section 31 of the CARL.

Respondent-intervenor FARM posits that it fully complied with the requirement of timeliness under the doctrine of judicial review since the earliest possible opportunity to raise the issue must be with a court with the competence to resolve the constitutional question, citing as basis Serrano v. Gallant Maritime Services, Inc.[164] This case is significantly different from Serrano as to render the latter’s legal conclusions inapplicable to the present situation.

In Serrano, the question of the validity of the money claims clause of the Migrant Workers and Overseas Filipinos Act of 1995[165] was timely raised at the very first instance in a competent court, namely in Antonio Serrano’s petition for certiorari filed with the Court of Appeals.[166] In sharp contrast, the question of the constitutionality of the CARL in this case was belatedly included in respondent-intervenor FARM’s supplemental comment[167] after an earlier manifestation and motion had already been filed. Thus, respondent-intervenor’s earliest opportunity to raise the constitutionality of Section 31 of the CARL was in the very first pleading it filed in this Court, and not in a supplemental comment.

Even assuming arguendo that the rule requiring the timeliness of the constitutional question can be relaxed, the Court must refrain from making a final determination on the constitutional validity of a stock distribution option at this time because it is not the lis mota of the present controversy and the case can be disposed of on some other ground.

The Court will not touch the issue of constitutionality unless it is truly unavoidable and is the very lis mota or crux of the controversy.[168] In the seminal case of Garcia v. Executive Secretary, the Court explained the concept of lis mota as a requirement of judicial review in this wise:

Lis mota - the fourth requirement to satisfy before this Court will undertake judicial review - means that the Court will not pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the application of the statute or the general law. The petitioner must be able to show that the case cannot be legally resolved unless the constitutional question raised is determined. This requirement is based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative.[169]

A court should not pass upon a constitutional question and decide a law to be unconstitutional or invalid unless such question is raised by the parties; when raised, if the record presents some other ground upon which the court may rest its judgment, the latter course will be adopted and the constitutional question will be left for consideration until a case arises wherein a decision upon such question will be unavoidable.[170] The Court will not shirk its duty of wielding the power of judicial review in the face of gross and blatant acts committed by other branches of government in direct violation of the Constitution; but neither will it be overly eager to brandish it when there are other available grounds that would avoid a constitutional clash.

It will be recalled that what the qualified beneficiaries assailed in the PARC proceedings was the failure on the part of petitioner HLI to fulfill its obligations under the SDOA, and what they prayed for was for the lands to be the subject of direct land transfer. The question of constitutionality of a stock distribution option can be avoided simply by limiting the present inquiry on the provisions of the SDOA and its implementation. Whether the PARC committed grave abuse of discretion in recalling or revoking the approval of the SDOA need not involve a declaration of unconstitutionality of the provisions of the CARL on stock distribution.

There is no “paramount public interest” that compels this Court to rule on the question of constitutionality. As a legislative act, the CARL enjoys the presumption of constitutionality.[171] Absent any glaring constitutional violation or evident proof thereof, the Court must uphold the CARL. Indeed, paramount public interest is better served by precluding a finding on the CARL at this point, since such finding could unfairly impact other corporate landowners and farmer beneficiaries under a stock distribution option in other parts of the country[172] who are not parties to the instant case.

While we do not rule on the constitutionality of stock distribution option, we also need to state that there appears to be no clear and unequivocal prohibition under the Constitution that expressly disallows stock distribution option under the provisions on agrarian reform:

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.[173]

The primary constitutional principle is to allow the tiller to exercise rights of ownership over the lands, but it does not confine this right to absolute direct ownership. Farmworkers are even allowed to simply have a share in the fruits of the land they till for as long as what they receive is just and fair. The framers of the Constitution established the right of landless farmers and regular farmworkers to own the lands they till directly or collectively, but left the identification of the means of ownership to Congress. This was an important decision, considering that Congress has the better facilities and faculties to adjudge the most appropriate and beneficial methods for the exercise of the constitutional right in cases where dividing a small landholding among a multitude of qualified FWBs would result in parceling out patches of land not viable for individual farming. Whether stock distribution is a valid method identified by Congress for lands owned by a corporation, or whether it is a “loophole” in the CARL to evade land distribution in contravention of the intent of the Constitution, is a question that need not be answered now.

III.

The PARC has jurisdiction over the question of the validity of and/or compliance with the SDOA.

Petitioner HLI assails the jurisdiction of the PARC to recall the SDOA. It argues that the PARC’s authority is limited to approval or disapproval of a stock distribution proposal made by a corporate landowner and qualified FWBs; purportedly, this does not include a revocation of the agreement, especially after it has already been implemented. It theorizes that the agreement, once approved by the PARC, “ascends” to the level of an ordinary civil contract and thus any action to annul the same must be through the regular courts and not the PARC.[174]

The PARC was created primarily to coordinate the implementation of the comprehensive agrarian reform program (CARP) and to ensure the timely and effective delivery of the necessary support services.[175] It was tasked to “formulate and/or implement the policies, rules and regulations necessary to implement each component of the CARP, and may authorize any of its members to formulate rules and regulations concerning aspects of agrarian reform falling within their area of responsibility.”[176]

With respect to the stock distribution option under the CARL, one of the PARC’s powers is to approve a stock distribution plan of corporate land owners.[177] After the DAR Secretary evaluates the stock distribution plan, he shall forward it together with the supporting documents and his recommendations to the PARC, which shall decide whether or not to approve the same.[178]

Petitioner’s argument is not persuasive, since it espouses a deprivation of the PARC’s authority to effectively implement the policies, rules and regulations of the CARL.

Under the CARL, the stock distribution option would ordinarily necessitate an outright delivery of the shares to qualified FWBs. This method of distributing shares would be effected within a short period, in much the same speed as that of lands transferred under the first option. In a stock distribution scheme, government approval is necessary in two instances:

1. Approving the proposal for stock distribution option plan or agreement arrived at between the corporate landowner and qualified FWBs (approval of the agreement); and

2. Approving compliance by all the concerned parties of the terms and conditions of the plan or agreement (approval of the compliance).

The first involves a conceptual and theoretical authorization that the terms of the stock distribution are in accordance with the law and agrarian reform policy. The failure to obtain approval of the agreement does not preclude the parties from renegotiating the agreement and submitting it again for approval, especially if the PARC raises concerns regarding some of the terms.

The second instance determines whether the parties faithfully implemented and complied with their obligations under the approved agreement. Hence, the failure to obtain approval of the compliance demonstrates a defect in the fulfillment of the parties of their responsibilities. This situation occurs if, for example, after a few months from the approval of the agreement, not a single share has been received by any of the qualified FWBs or recorded in the books of the corporate landowner. In fact, the law expressly provides that should the stock transfer not materialize, then the agricultural land of the corporate owners or corporation shall be subject to compulsory coverage.[179]

Petitioner HLI does not question the authority of the PARC with respect to the approval of the agreement,[180] but it raises an issue as to whether the approval of the compliance remains within the authority of the PARC. Although the CARL is silent on the latter authority, it is more logical and efficient for this necessary power to remain lodged with the PARC.

Jurisdiction over a subject matter is conferred by law.[181] Section 50 of the CARL and Section 17 of Executive Order No. 229 vests in the DAR the primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all matters involving the implementation of agrarian reform.[182] The DAR’s primary and exclusive jurisdiction includes authority over agrarian disputes, which also covers “disputes on the terms and conditions of the transfer of ownership from landowners to agrarian reform beneficiaries.”[183] Congress provides the exclusive jurisdiction of the DAR in agrarian disputes, in this language:

SECTION 50-A. Exclusive Jurisdiction on Agrarian Dispute. — No court or prosecutor's office shall take cognizance of cases pertaining to the implementation of the CARP except those provided under Section 57 of Republic Act No. 6657, as amended. If there is an allegation from any of the parties that the case is agrarian in nature and one of the parties is a farmer, farmworker, or tenant, the case shall be automatically referred by the judge or the prosecutor to the DAR which shall determine and certify within fifteen (15) days from referral whether an agrarian dispute exists: Provided, That from the determination of the DAR, an aggrieved party shall have judicial recourse. In cases referred by the municipal trial court and the prosecutor's office, the appeal shall be with the proper regional trial court, and in cases referred by the regional trial court, the appeal shall be to the Court of Appeals. …”[184] (Emphasis supplied)

Since a stock distribution option is an alternative method of transferring ownership of agricultural land to FWBs, any controversy regarding compliance with the approved terms and conditions of such transfer is necessarily an agrarian dispute that is within the primary and exclusive jurisdiction of the DAR, and necessarily the PARC. The function of requiring approval of the compliance of the SDOA is precisely to ensure compliance with the earlier approval. The CARL could not have tolerated a situation where qualified FWBs would be without any recourse against a landowner who failed to live up to its promises under a stock distribution agreement.

General jurisdiction over agrarian disputes over stock distribution agreements necessarily implies a specific authority to monitor and enforce implementation of the same. As distinguished from express powers, implied powers are those that can be inferred or are implicit in the wordings or conferred by necessary or fair implication of the enabling act.[185] Public respondents correctly identified the explanation of Chavez v. National Housing Authority,[186] on the doctrine of necessary implication in administrative law, in this wise:

Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on its charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a government agency or office by express provisions of law. On the other hand, implied powers are those that can be inferred or are implicit in the wordings of the law or conferred by necessary or fair implication in the enabling act. In Angara v. Electoral Commission, the Court clarified and stressed that when a general grant of power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred by necessary implication. It was also explicated that when the statute does not specify the particular method to be followed or used by a government agency in the exercise of the power vested in it by law, said agency has the authority to adopt any reasonable method to carry out its functions. (Emphasis supplied)

It must be clarified that the power to revoke or recall approval of the agreement resides only in the PARC, and does not extend to the DAR. The DAR itself recognized the primacy of the PARC’s evaluation and assessment of a stock distribution plan.[187] The continuing authority of the PARC to monitor and ensure proper implementation of a stock distribution option is consistent with its power to order the forfeiture of agricultural lands in case of the landowner’s failure to distribute the stocks. The CARL expressly provides for the compulsory coverage of the agricultural lands if there is no distribution of the stocks to qualified FWBs.[188] In fact, the PARC is duty bound to subject the agricultural lands of the landowner to compulsory coverage if stock distribution does not materialize.

In the instant case, the complaints of the qualified FWBs were properly lodged with the PARC, which had earlier given its approval of the agreement but has yet to render approval of the compliance. It must be noted that the SDOA under question is extraordinary since it provided a longer period of thirty years for the distribution of the shares to the qualified FWBs. Rather than immediately awarding the entire lot of shares of stock, petitioner HLI opted to spread out and prolong the distribution. The PARC was not in a position to immediately render approval of the compliance since petitioner HLI still had three decades before it could implement a complete stock distribution in favor of the qualified FWBs.

Disputes Over the SDOA Are Inherently Agrarian in Nature.

Although petitioner HLI will not deny qualified FWBs a remedy against any claim of non-fulfillment of obligations under the SDOA, it asserts that such remedy is of a class of suits that is not within the ambit of the CARL, but instead falls under the laws on civil contracts[189] or even the Corporation Code.[190] Petitioner HLI is not correct.

The nature of the dispute of the petitions filed in the PARC is inherently agrarian in nature and not simply contractual or corporate.[191] Undeniably, the parties were compelled to agree on an acceptable mode of transfer of land ownership by the pronouncements of the CARL. This was, however, not an ordinary civil contract entered into between two parties standing on equal footing, as in fact land distribution was constitutionally sanctioned to balance the prevailing inequity between rich land owners and poor farmers.

The determination of whether the dispute under a stock distribution option is agrarian, civil or corporate in nature relies on the allegations of the complaint, the purported relationship between the contending parties and the rights sought to be enforced.[192] In this case, petitioner HLI and the farm workers share multiple relationships that can be the source of rights and obligations between them. Primarily, petitioner HLI’s relationship with the farm workers is that of a corporate landowner and qualified beneficiary under the CARL. But they also share an employer-employee relationship, insofar as the farm workers receive salaries and benefits from the corporation. There is likewise a tri-partite civil and contractual relationship arising from the SDOA between petitioner HLI (the spin-off corporation), TADECO (the original corporate landowner), and the qualified FWBs. Finally, the farm workers are also stockholders of petitioner HLI, having been awarded shares under the SDOA. Indeed, these various relationships give rise to distinct rights and prescribe separate remedies under the law.

However, the overriding consideration for the stock distribution agreement under the CARL is the relationship of landowner-farm worker, which was the legal basis for the parties to have entered into the SDOA in the first place. Petitioner HLI and TADECO signed the SDOA precisely because the farm workers who agreed thereto were identified as qualified FWBs entitled to the benefits under the CARL. Similarly, the farm workers’ acquisition of the additional status of stockholders of petitioner HLI arose out of their original status as qualified FWBs. Hence, all disputes arising from the stock distribution must be viewed in light of this principal juridical tie of corporate landowner and qualified FWBs. Parties cannot invoke other incidental relationships (civil or corporate) to deprive the PARC of its primary and exclusive jurisdiction over complaints filed by qualified FWBs against a stock distribution agreement, which is invariably an agrarian dispute.

Granting the PARC jurisdiction over disputes involving stock distribution agreements does not diminish the jurisdiction of regular or commercial courts or the SEC; it is merely a recognition of its special competence over the matter of implementation of the CARL, especially when it comes to stock distribution agreements with FWBs. It is absurd to deprive the PARC of jurisdiction simply because civil or corporate causes of action are included and in this case, belatedly, by petitioner HLI.

Considering the several capacities involved under a stock distribution option between a corporate landowner and qualified FWBs, the better rule now is that all disputes arising from their stock distribution agreement and/or its implementation shall be within the jurisdiction of the PARC in accordance with its primary and exclusive jurisdiction under the CARL over agrarian disputes.[193]

IV.

There is legal and factual basis to recall/revoke the approval of the SDOA and order the compulsory coverage of the agricultural lands of Hacienda Luisita.

Proceeding to the substantial merits of the case, questioned PARC resolution should be affirmed insofar as it found factual and legal basis to revoke/recall approval of the SDOA between petitioner HLI and the qualified FWBs.

Violating the Integrity of the Pool of the qualified FWBs; Variability in their Number of Shares

The SDOA grossly violated the provisions of the CARL with respect to the stock distribution option when its basis for distributing the shares was made on the ground of its continuing determination of the man-hours served by the qualified FWBs. The rolling policy of petitioner HLI is contrary to the intent of stock distribution option under the CARL.

The CARL provides that a corporate land owner may give its 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.[194] In qualifying the ratio of shares to be received by each of the qualified FWBs, the DAR explained that, as a minimum, each of the qualified FWBs would receive an equal number of shares of stock of the same class and value, with the same rights and features as all other shares.[195] Although the DAR allowed shares of stock to be distributed based on other factors, such as rank, seniority, salary or position, this distribution is in addition to the minimum ratio earlier described, which guarantees a base number of shares for all types of qualified FWBs.[196] Hence, the minimum ratio under a stock distribution scheme is a fixed value that should be equally received by all qualified FWBs; meanwhile, the additional shares are variable depending on an agreed upon criteria.

The SDOA also provided for a moving distribution of shares of stock based on the “number of days” worked by qualified FWBs, which is undeniably a variable criterion, in violation of the fixed minimum ratio.[197]

There is no error in identifying the qualified FWBs based on the payroll of petitioner HLI as of a fixed point in time. Under the fixed minimum ratio in a stock distribution scheme, persons would be identified as qualified beneficiaries[198] based on whether they appear on the corporate landowner’s payroll as farmworkers,[199] regardless of whether they are regular or seasonal or whether they receive compensation in a daily, weekly, monthly or “pakyaw” basis. In this case, there were 6,296 farmworkers as of 11 May 1989, who were qualified as beneficiaries at the time of the signing of the SDOA. Thus, each of these farmworkers should have received an equal number of the total shares distributed by petitioner HLI.[200]

However, contrary to above-mentioned fixed minimum ratio, petitioner HLI adopted a wholly variable and mobile criterion – the number of shares would be based on the number of man-days each qualified FWB logged in every year.[201] Instead of receiving an equal amount, farmworkers under the SDOA would receive varying number of shares depending on the man-days rendered. [202] Thus, if some of the 6,296 farmworkers served more man-days than the others, then they would be entitled to more shares. The scheme is in clear violation of the policy of equal number of shares as a minimum ratio for all qualified FWBs.

Worse, the qualified FWBs’ entitlement to receipt of shares was made on a rolling basis at the end of each year for the next thirty years. The number of shares was not only variable depending on the number of man-days served, but also on the time period when these man-days were served. Under the SDOA, there would be a yearly and partial distribution of shares to the qualified FWBs based on the annual number of man-days performed. Hence, qualified FWBs who worked in a previous year, but failed to get the same number of man-days or failed to work at all in the succeeding year, would not receive an equivalent number of shares at the end of the year. Moreover, persons who were not part of the original 6,296 farmworkers, but were subsequently employed by petitioner HLI, would still be entitled to annual proportionate shares of stock under the SDOA.[203] Thus, the original FWBs were deprived of their guaranteed equal shareholdings by the proportional allocation of stocks to farmworkers who were not even employed at the time of the signing of the SDOA.[204] The variable determination of the number of shares to which qualified FWBs were entitled resulted in the dilution of their shares, since the number of recipients “ballooned” through time (10,502 FWBs) but the number of stocks to be distributed remained the same.

In fact, the policy of “no-work-no-share-of-stock”[205] becomes patently burdensome in its operation, since it was found that petitioner HLI had control of the number of man-days to be given to the qualified FWBs, which in turn determined the number of shares they were to receive under the SDOA. In its Terminal Report, the DAR Special Team found that:

“FGD/OCI finding that the number of shares of stock to be received by the FWBs, depends on their designation (i.e., permanent, casual or seasonal) and on the number of man days. Retired and retrenched workers are not given shares of stocks and cease as share holders. Indisputedly (sic), the setup under the MOA is one-sided in favor of HLI. The work schedule, upon which the extent of entitlement to be granted shares of stock is wholly within the prerogative and discretion of HLI management that a FWB can still be denied thereof by the simple expediency of not giving him any working hours/days. And this is made possible by the fact that [there] are more farmers/farmworkers in its employ than what is, according to HLI, necessary to make it operational.”[206]

“2. The matter of issuance/distribution [of] shares of stocks in lieu of actual distribution of the agricultural land involved, was made totally dependent on the discretion/caprice of HLI. Under the setup, the agreement is grossly onerous to the FWBs as their man days of work cannot depart from whatever management of HLI unilaterally directs.”[207]

“They can be denied the opportunity to be granted a share of stock by just not allowing them to work altogether under the guise of rotation. Meanwhile, within the 30-year period of bondage, they may already reach retirement, or, worse, get retrenched for any reason, then, they forever lose whatever benefit he (sic) could have received as regular agrarian beneficiary under the CARP if only the SDP of HLI were not authorized and approved.” [208] (Emphasis supplied)

Petitioner HLI retained control as to who would be granted the opportunity to become farmworkers in any given year and the number of man-days they would serve. It likewise had the discretion to determine who would be granted the annual benefit as well as the number of shares to be awarded. Qualified FWBs were thus, subject to the discretion or caprice of petitioner HLI, who could dilute or outrightly deny their entitlement to the shares of stocks.[209] It could play favorites and award man-days only to qualified FWBs who supported management while troublesome FWBs could be penalized by not allocating any man-days, thereby minimizing their entitlement to the shares.

Petitioner HLI’s intent to reward the services of the farmworkers through the distribution of shares, which is also an incentive system to increase production is understandable. However, this scheme is more appropriate in the distribution of variable additional shares –not for the fixed minimum ratio necessary under a stock distribution option. Distribution of shares of stock based on the man-days rendered by the farmworker is more akin to additional compensation to an employee for services rendered. However, the CARL speaks of stock distribution as an alternative method to substitute direct land distribution and not as an added benefit to its employees.

The determination of qualified FWBs’ shares based on the rolling criterion of man-days resulted in an expanded list of beneficiaries. Had the 6,296 qualified FWBs opted for direct land transfer, they would not have worried about sharing their titles to the land with other farm workers who came to work in Hacienda Luisita after the SDOA. Under the land transfer option, the finite parcel of land is directly awarded to identified FWBs with titles and documents to evidence their individual ownership to the exclusion of others. In contrast, the SDOA allowed the number of beneficiaries to balloon to 10,502 stockholder-beneficiaries (and growing) for as long as they performed work in the farm. Regardless of whether they were original residents in the area or migrants from nearby provinces, subsequent farm workers could be included and thus, expand the number of recipients. This in turn diluted the rights and benefits the original FWBs should have enjoyed under the SDOA vis-à-vis the newer stockholders. On this ground alone, there is sufficient basis to recall and/or revoke the SDOA since it is contrary to the intent of a stock distribution to existing and qualified FWBs.

Prolonged Period of Distribution

The CARL provides in Section 31:

“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.” (Emphasis supplied)

The two year period from the approval of the CARL contemplates three situational deadlines with respect to the agricultural landholdings of a corporate landowner: (1) the realization of a land transfer to qualified FWBs; (2) the realization of the stock transfer to qualified FWBs; and (3) the approval of the PARC of the stock distribution. The instant situation falls under number (3) above, but the question that was not clearly answered by the law is how many years after the PARC’s approval of the stock distribution should it take before the stock transfer is actually completed. Whatever the timeframe may be, the thirty year period for the distribution of stocks is patently unreasonable and is not within the intent of a stock distribution option provided for by the CARL.

The piecemeal distribution of the shares over thirty years is an oppressive form of diminishing the value of the shares and is prejudicial to the interests of the FWBs. Apportioning the number of shares to the FWBs over a prolonged period reduces their capacity to enjoy their rights completely and immediately. For example, if petitioner HLI had declared cash dividends of ₱1.00 per share in the fifteenth year of distribution, then qualified FWBs would enjoy only half of the dividends owed them since they had yet to receive the other half of the shares allotted to them (assuming, of course, that they were to receive the same number of shares each year).[210] Rather than enjoy the full benefit of the shares of stock due and owed them, the FWBs are made to wait for three decades before they can appreciate the full benefits as a stockholder-beneficiary of petitioner HLI.

The inequity of the thirty-year period is highlighted when it is compared to the situation of an immediate land transfer. In a land transfer, a FWB can immediately feel the full benefit of land redistribution under the CARL upon the award of an emancipation patent or certificate of land ownership award and his actual physical possession of the land.[211] In sharp contrast to the SDOA, the qualified FWBs were deprived of full ownership of the entire shareholdings due them under the staggered stock distribution scheme. Qualified FWBs, regardless of their age or health conditions, had to continue working for petitioner HLI for a period of thirty years if they wanted to realize the complete benefits of the SDOA. The protracted award of stocks nurtured a culture of forced dependency upon petitioner HLI on the part of the qualified FWBs.

No other conclusion can be drawn from the two year period provided for in the land and stock transfer under the CARL except that full transfer of benefits to the landless farmers under the land reform program should be immediate. The shortened period for distribution should likewise apply in cases of the PARC approval of the stock distribution scheme. It would, thus, be reasonable to expect that all the shares of petitioner HLI allocated to the qualified FWBs would have been completely and absolutely distributed to them within two years from the PARC’s approval of the SDOA, or no later than 14 November 1991. In fact, the DAR was more exacting when it required the approved stock distribution plan be implemented within three months from receipt of the PARC approval.[212] It was wrong for the DAR Special Team to allow implementation within ten years.[213] The two-year period is reasonably sufficient to realize the full transfer of shares and for qualified FWBs to understand and familiarize themselves with their rights and privileges as corporate stockholders.

Although operational and practical considerations may possibly permit some impediment to the automatic and complete transfer of shares, the gradual build-up[214] of shares of stock for a period of thirty years is simply wrong and defeats the objective of actual redistribution of land ownership to the farmers. The CARL never envisioned the unreasonable delay in qualified FWBs’ enjoyment of the benefits, which would have prolonged their suffering as landless farmers, especially when compared to the promptness of a land transfer option. That petitioner HLI suddenly accelerated the distribution of the shares on 22 April 2005, more than fifteen years after the SDOA was signed,[215] only shows that no operational difficulty could have prevented the prompt receipt by the qualified FWBs of their shares. That the accelerated distribution was approved by petitioner HLI fortuitously almost a year after private respondents filed their protests with the PARC[216] raises the suspicion that its benevolence was targeted precisely to mitigate opposition to the SDOA,[217] foreclosing rejection of the agreement due to the completion of the distribution of the shares. [218]

There is no justification, contrary to what petitioner HLI proposes, to compare the thirty-year period for distributing the stocks to the thirty annual amortizations, to be paid to the Landbank of the Philippines (LBP) the land transfer, required of the FWBs.[219] The thirty annual amortization payments to be made by the qualified FWBs are beneficial to the farmers, insofar as the LBP allows a prolonged period of time for them to pay for the lands transferred to them under preferable rates. In the case of amortization payments, the longer the period of payment, the better for the farmer since the obligation to pay is broken down to manageable installments. It also allows the farmers the full and complete use of the land, in order to immediately earn income, from which to source his amortization payments to LBP.[220] In sharp contrast, the thirty-year period of distributing shares under the SDOA is detrimental to the qualified FWBs; they are unable to enjoy their entitlement under a stock distribution scheme, since they have to wait several years before full transfer of all the shares due and owing to them.[221] Agrarian reform and land distribution was made to benefit the farmer by allowing immediate use of the redistributed land or rights thereunder while stretching the financial obligations or commitments out over manageable periods of time. The SDOA achieves the complete opposite by delaying the FWBs’ acquisition of full rights as stockholders, and thus, must be struck down.

Valuation of the Land

The identification and valuation of the corporate assets of petitioner HLI, as a spin-off corporation, was not subjected to verification and audit examination by the DAR and resulted in the undervaluation of the shares due to the qualified FWBs.

The value ascribed to the assets of the corporate landowner, especially the agricultural lands, is crucial as it determines the number of shares to be distributed to the qualified FWBs. Under a stock distribution option, the qualified FWBs are entitled to a proportion of the shares in accordance with the value of the agricultural lands actually devoted to agricultural activities in relation to the company's total assets.[222] The determination of the number of shares each qualified FWB should receive can be reduced to this mathematical formula:

Value of Agricultural Lands	X	No. of Total Outstanding Shares of Stock	=	No. of shares of stock for every qualified FWB.
Value of the Company’s Total Assets		No. of qualified FWBs

If the valuation given to the agricultural land is decreased the number of shares of each qualified FWB decreases. Moreover, the number of shares for each qualified FWB will decrease if the value of the company’s total assets increases without a corresponding increase in the value of its agricultural lands. Given the significance of the valuation to the dynamics of stock distribution, the DAR required that the valuation of the corporate assets under the stock distribution plan be subject to verification and audit examination by the DAR and based on the DAR’s own valuation guidelines.[223]

In this case, the values of the agricultural land or petitioner HLI’s assets were never subjected to DAR verification or audit examination. When TADECO transferred the agricultural land together with other assets and liabilities, there was only the “imprimatur of the Securities and Exchange Commission by reason of its approval of the increase in the authorized capital stock” of petitioner HLI.[224] Petitioner HLI did not demonstrate that the values ascribed therein, especially to the agricultural land, were verified and audited by the DAR based on its own guidelines.

The absence of the DAR verification and audit of the values of the agricultural lands and petitioner HLI’s total assets creates suspicion on the correctness of the number of shares distributed under the SDOA. Aside from the agricultural land, petitioner HLI included other non-land assets, such as machineries, land improvements and long term receivables, to increase the value of the total assets. However, inclusion of these other non-land assets served to diminish the ratio of the agricultural land to the total assets, and consequently decreased the proportional share to which the qualified FWBs were entitled to.

The assets and liabilities transferred by TADECO to petitioner HLI are broken down as follows:[225]

ASSETS TRANSFERRED			CAPITAL STOCK AND LIABILITIES
Description	Value in ₱	%	Description	Value in ₱	%
1. Agricultural Lands (169 parcels of 4,915.7466 has., at ₱40,000 per hectare)	196,360,000	33.27%	CAPITAL STOCK: (355,131,462 shares to petitioner HLI)	355,131,462	60.14%
2. Machinery and Equipment (Heavy equipment, farm tractors and farm implements	43,932,600	7.44%	LIABILITIES: A. Notes Payable	62,334,106	10.56%
3. Current Assets (cash accounts receivables, inventories, growing crops and prepaid insurance)	162,638,993	27.55%	B. Accrued Expenses	11,854,547	2.01%
4. Land Improvements (roads, culverts, bridges, irrigation canals, equipment and appurtenant structures)	31,886,300	5.40%	C. Accounts Payable	86,873,899	14.71%
5. Unappraised Assets (railroad system and equipment, furniture and fixtures, communication and utility, other equipment, and construction in progress)	8,805,910	1.49%	D. Current Portion of LTD	9,560,000	1.62%
6. Long Term Notes Receivables	28,063,417	4.75%	E. Income Tax Payable	24,126,946	4.09%
7. Residential Land (11 lots of 120.9234 has., at ₱500,000 per hectare)	60,462,000	10.24%	F. Due to Affiliated Companies	4,533,260	0.77%
8. Lands used for roads, railways, canals, lagoons, parks, eroded portion, cemetery and water reservoir (187 lots consisting of 265.7495 has.)	58,135,000	9.85%	G. Long Term Debt	36,140,000	6.12%
TOTAL Assets	590,284,220	100%	TOTAL Capital Stock and Liabilities	590,284,220	100%

Based on the values of the assets and liabilities transferred, petitioner HLI’s agricultural land of 4,915.7466 hectares was only 33.3% of its total assets, which means that the qualified FWBs were entitled to the same proportion with respect to the total capital stocks, or to 118,391,976.85 shares only.[226]

However, as pointed out by private respondent FARM, there were other lots in Hacienda Luisita that were not included in the stock distribution scheme, but should have been covered under the
CARP.[227] TADECO, as the previous agricultural landowner, preempted the determination of the lands to be covered under the CARP by selecting which of the agricultural lands it would transfer to petitioner HLI and consequently, subject to the SDOA. The DAR never approved the exclusion of the other lands that TADECO kept for itself. It seems incongruous to the intention of the CARP under a stock distribution agreement, to let the corporate landowner choose and select which of its agricultural lands would be included and which ones it would retain for itself. Serious doubts are entertained with respect to the process of inclusion and exclusion of agricultural lands for CARP coverage employed by the corporate landowner, especially since the excluded land area (1,527 hectares) involves one-third the size of the land TADECO surrendered for the SDOA (4,916 hectares). The exclusion of a substantial amount of land from the SDOA is highly suspicious and deserves a review by the DAR. Whether these lands were properly excluded should have been subject to the DAR’s determination and validation. Thus, the DAR is tasked to determine the breadth and scope of the portion of the agricultural landholdings of TADECO and petitioner HLI that should have been the subject of CARP coverage at the time of the execution of the SDOA on 11 May 1989.

Private respondent also alleged that there was an undervaluation of the agricultural land and cited sources that would identify different valuations of the lands ranging from ₱55,000 per hectare to ₱500,000 per hectare. Assuming that these cited values were accurate, the claimed valuation of the agricultural land at ₱40,000 per hectare is very low and grossly disproportionate to the total assets.[228] Although no conclusive findings on the correctness of the valuations alleged is made for the mean time, as this is properly a function of the DAR, the exclusion of the DAR from the process of valuation of the agricultural lands to determine the qualified FWBs’ proportional share in petitioner HLI is unacceptable. In fact, the Special Team noted that even the FWBs did not participate in the valuation of the agricultural land.[229]

It is doubtful that the qualified FWBs had sufficient appreciation of the significance of the pooling of the agricultural lands and non-land assets transferred to petitioner HLI. Even assuming that the DAR approves the value of the agricultural land assigned by petitioner HLI and TADECO under the SDOA arrangement, the reality is that other non-land assets were included in the mix of corporate assets given by TADECO to petitioner HLI. Whether intentional or accidental, these additional non-land assets, which were almost twice the value of the agricultural lands affected, in all likelihood watered down the proportional share of the qualified FWBs under the SDOA. Qualified FWBs were thus relegated to being minority stockholders in petitioner HLI, without any real corporate strength to take effective control of the management of the corporation. In effect, TADECO obligingly transferred the agricultural land in paper to the qualified FWBs through the proportional delivery of shares of stock, but succeeded in retaining dominion over the real property by holding an almost two-thirds majority over petitioner HLI. The SDOA’s arrangement of relegating the qualified FWBs to the status of minority stockholders is simply irreconcilable with the objective of empowering the qualified FWBs as stockholders in lieu of direct land distribution, as Justice Presbitero Velasco, Jr., illustrated during the oral arguments:

JUSTICE VELASCO:

I tend to agree with the statement made by Justice Perez that it is possible that it is the application of Section 31 that is erroneous and that it should have been the DAR and PARC that should have applied it correctly. What I am trying to point out is the fact that in this [S]DOA of HLI, the farmer beneficiaries were made only minority stockholders but in order to achieve the policy behind the CARL to distribute income and wealth to the landless farmers then it must be a condition for the approval of the SDOA that the farmer beneficiaries should be the majority stockholders, or more importantly, that they should be the only stockholders of the corporation. Meaning, to say they have full control over the use of the landholdings of the corporation. In such a situation it is as if the landholdings are being owned and managed by a cooperative of farmer beneficiaries or a farmer organization owns it and in such a situation the policies, goals behind the CARL can still be achieved, do you agree with that?[230] (Emphasis supplied)

To illustrate, corporate control of petitioner HLI would have been different if only the agricultural lands were transferred by TADECO. In that case, since the agricultural lands composed the only assets of the new corporate entity (petitioner HLI) without any liabilities, then the entirety of the shares of stocks would belong to the qualified FWBs.[231] Thus, the landless farmer beneficiaries would have full, absolute and collective control and management of the corporation, and thus exercise effective “owner-like” rights over the agricultural lands, similar to a land transfer option but under a different scheme. Taking the illustration a step further, a partnership of equality between the qualified FWBs and the corporate landowners could have at least been achieved if the value of the other assets transferred were equal to or less than the value of the agricultural lands. In this scenario, the former corporate land owner and the qualified FWBs would have equal say on how petitioner HLI’s business would be managed, such as with regard to purchasing properties and machineries for its business, introducing improvements on the lands, entering into loan agreements, mortgaging their lands as security, or even applying for conversion of idle lands.

In this case, however, TADECO was solely responsible for choosing which assets and liabilities it would transfer to petitioner HLI. Thus, it effectively designated how many shares qualified FWBs would receive vis-à-vis the ratio of the agricultural lands to the value of the total assets transferred. This arrangement created opportunities for TADECO to dilute the qualified FWBs’ shareholdings by either “undervaluing the land assets or overvaluing the non-land assets.”[232] It bears stressing that the incorporation of petitioner HLI and the subsequent transfer of the agricultural lands and other assets were undertaken by TADECO even before the qualified FWBs had agreed to the SDOA.[233] Furthermore, the SDOA was signed before the DAR had conducted a massive information campaign and conducted a referendum among the qualified FWBs.[234] Not only was there an issue as to the propriety of the valuations ascribed to the conveyed assets, serious doubts are entertained as to whether the qualified FWBs completely understood the effect of increasing the asset pool to their shareholdings, much less that they were agreeing to a diminished or minority role in the running of petitioner HLI under the SDOA.[235]

Even the combined and unified 33.296% vote of all qualified FWBs would not significantly sway major corporate decisions of petitioner HLI. Regardless of how the minority directors of the qualified FWBs were to vote, the majority would be able to railroad any corporate act it deems fit. The authority the qualified FWBs would have over the corporate affairs of petitioner HLI[236] would be a mere token representation, lacking effective control in determining the direction of the corporate entity having ownership and possession of the agricultural land. The inequity is made more apparent if it is remembered that the main asset of the corporation – the agricultural land – could have been entirely under the FWBs’ names under a land distribution scheme.

Agrarian reform was instituted under the Constitution to liberate ordinary farmers from their dependency on the landowners, but not at the expense of exchanging their bondages for corporate serfdom[237] under a meaningless stock distribution scheme. In this case, although no express pronouncement as to the validity of a stock distribution scheme under the CARL is made, the stock distribution arrangement in Hacienda Luisita is fatally flawed on the basis of the three grounds discussed earlier and must be struck down.

No Violation of Due Process or the Non-Impairment Clause

Petitioner HLI’s broad invocation of violation of its rights to due process and the non-impairment clause is without merit.[238]

First, petitioner HLI assails the failure on the part of public respondent PARC to afford it an opportunity to submit evidence to support its case. However, the records show that petitioner HLI was able to present its opposition to private respondents’ petitions in the proceedings below. Public respondent PARC even issued an order requesting petitioner HLI to submit comments and/or oppositions to the petitions filed by private respondents Supervisory Group and AMBALA and also furnishing it copies of the said petitions.[239] In fact, the Technical Working Group even met with the legal counsel of petitioner HLI to discuss the extent of petitioner HLI’s compliance with the SDOA and to clarify some of the SDOA’s provisions.[240]

Petitioner HLI likewise assails the failure of the questioned PARC Resolution to state the facts and the law on which the ruling is based.[241] The questioned PARC Resolution adopted the recommendations of the PARC Executive Committee to revoke/recall the approval of the SDOA and to cause the agricultural lands in Hacienda Luisita to be subject to compulsory coverage. It is not per se wrong for an administrative agency, such as the PARC, to adopt wholesale the reports of its representatives or designated teams, which were specifically mandated to conduct an investigation of the matter, and which possessed the competence to perform the task. In this case, the Terminal Report of the DAR Special Team outlined the allegations of the petitions and petitioner HLI’s defenses, and clearly set forth its findings with respect to its recommendation to recall/revoke the SDOA. Unless there is a blatant factual error or misapplication of the law or its rules, nothing prevents the administrative agency from affirming the delegated authority’s recommendations in toto.

Although public respondent PARC failed to attach a copy of the Terminal Report and recommendation of the PARC Executive Committee, this lapse in procedure is not so grave as to warrant absolute nullification of the questioned PARC Resolution. In any case, petitioner HLI was subsequently furnished said documents, which were used as well in furthering the instant petition before the Court.

Second, petitioner HLI’s insistence on the non-impairment clause is misplaced, as it deals with a fundamental right against the exercise of legislative power, and not of judicial or quasi-judicial power.

In Lim v. Secretary of Agriculture, the Court explained the scope of the non-impairment clause thus:

For it is well-settled that a law within the meaning of this constitutional provision has reference primarily to statutes and ordinances of municipal corporations. Executive orders issued by the President whether derived from his constitutional power or valid statutes may likewise be considered as such. It does not cover, therefore, the exercise of the quasi-judicial power of a department head even if affirmed by the President. The administrative process in such a case partakes more of an adjudicatory character. It is bereft of any legislative significance. It falls outside the scope of the non-impairment clause.[242] (Emphasis supplied)

In the instant case, the recall/revocation of the SDOA is necessarily an exercise of the PARC’s quasi-judicial power. Public respondent PARC was made to decide conflicting claims based on petitioner HLI’s purported violations of the provisions of the SDOA. There was an adjudication of the respective rights of the parties to the SDOA, as well as the validity of the SDOA. The questioned PARC resolution was not a legislative act or an administrative order that prescribed regulations applicable to all kinds of stock distribution options; it was a decision on the competing allegations of non-performance under the SDOA, which was sought to be enforced. No less than petitioner HLI’s counsel concedes that the assailed acts of public respondent PARC were not legislative in nature for purposes of invoking the non-impairment clause under the Constitution.[243]

Petitioner HLI also argues that it has substantially complied with and performed the obligations under the SDOA for the past sixteen (16) years; thus, public respondent PARC is precluded from reviewing the agreement and ordering its nullification. As earlier discussed, the SDOA was subject to approval of compliance by public respondent PARC, in order to ensure that the obligations of the corporate landowner would not become hollow promises. What is contemplated in the CARL is conferment on the qualified FWBs of their full rights as stockholders, in the same manner as title and ownership of the land are absolutely transferred to the farmer-beneficiary in a land transfer scheme. In fact, no less than the Section 31 of the CARL allows for compulsory coverage of agricultural lands in the event that the stock transfer is not made or realized. Piecemeal and delayed distribution of shares should likewise result in the same penalty.

In arguing that it has substantially complied with the CARL, petitioner HLI would seek to capitalize on the benefits it extended to the qualified FWBs in terms of salaries, wages, fringe benefits, free hospital and medical services, vacation and sick leaves, amelioration bonus, school bus allowances for dependents, emergency relief allowances, maternity benefits, financial benefits due to old age/death and various loans. However, these benefits were derived from the employer-employee relationship between petitioner HLI and the farmworkers. Petitioner HLI gave farmworkers their salaries and extended other employment benefits for the man-days that the latter rendered in favor of the company, and not because they were qualified FWBs. The obligations of the corporate landowner to give salaries and benefits to farmworkers are founded on different legal bases as opposed to its obligation to provide the benefits of a genuine stock distribution option to qualified FWBs. Indeed, the CARL provides that nothing in the implementation of the stock distribution scheme shall justify the reduction or diminution of the benefits received or enjoyed by the worker/beneficiaries.[244]

Petitioner HLI’s enumeration of the benefits is out of place in the present controversy surrounding the stock distribution option, since these were granted in exchange for the services rendered by the farmworkers to the former. Petitioner HLI cannot claim magnanimity in extending these benefits, when it received a fair day’s labor from the farmworkers.

Neither can petitioner HLI have the petitions dismissed on the ground of the ten-year prescriptive period for actions for specific performance or cancellation of civil contracts.[245] Allowing the distribution of the shares to stretch for a period of thirty years before the SDOA can be deemed completely implemented tolls the prescriptive period for an action to cancel it. Hence, the mere lapse of 10 years should not preclude qualified FWBs from questioning the 30-year SDOA, especially if the violation was committed or discovered in the eleventh or subsequent years. It would be prejudicial to the interests of qualified FWBs to deny them a remedy for the continued non-performance of petitioner HLI’s obligations, when these obligations have not yet been completely satisfied and remain to be continuing obligations for thirty years.

THE WAY FORWARD

Reversion of Hacienda Luisita Lands to Compulsory Coverage

Since the SDOA was patently void and failed to properly distribute the shares of petitioner HLI to the 6,296 original qualified FWBs, the questioned PARC Resolutions revoking the SDOA and ordering the compulsory coverage of the entire Hacienda Luisita agricultural lands under the CARL should be affirmed.

The change of modality, from the alternative mode of stock distribution option to the general rule of direct land redistribution[246] under compulsory coverage, is explicitly sanctioned under Section 31 of the CARL.

Section 29 should also be recalled herein:

In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC:

In general, lands shall be distributed directly to the individual worker-beneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a workers' cooperative or association which will deal with the corporation or business association. Until a new agreement is entered into by and between the workers' cooperative or association and the corporation or business association, any agreement existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the workers' cooperative or association and the corporation or business association.

In exchange, petitioner HLI as the previous landowners is entitled to the payment of just compensation of the value of the land at the time of the taking. Since the award of direct land transfer is being settled by the Court only now, then the value of the property should be similarly pegged at this point. The constitutional limitation of “just compensation” is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition; or the fair value of the property as between one who receives and one who desires to sell, if fixed at the time of the actual taking by the government.[247]

For purposes of just compensation, the fair market value of an expropriated property is determined by its character and its price at the time of taking.[248] Therefore, the proper reckoning period to determine the value of the lands of petitioner HLI and/or TADECO is at the time of the taking, which approximates the fair market value of the properties as they stand now, and not as they were two decades ago. The fair market value takes into consideration the evolving nature of the land and its appreciated value, arising from the improvements introduced by petitioner HLI into the area, as well as the development in neighboring lands.

I differ from the position of Justice Brion that would reckon the taking from the time the SDOA was entered into, on 11 May 1989, and yet deprive petitioner HLI of interest payments in the interim. The proposal amounts to undue hardship on the part of petitioner HLI as the previous landowner. While it is the duty of the Court to protect the weak and the underprivileged, this duty should not be carried out to such an extent as to deny justice to the landowner.[249]

Pegging the value of the property to the time of the execution of the SDOA almost twenty years prior will undoubtedly affect the valuation of the property. The improvements there and the developments in neighboring areas contributed to the increase in the land’s value, regardless of whether they were introduced by petitioner HLI or not. The appreciation of the value will not be accounted for if the price is to be pegged at 1989. The increases in value cannot be ignored or taken away from petitioner HLI, if compensation to it as a landowner is to be considered just. “The word ‘just’ is used to intensify the meaning of the word ‘compensation’ and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample.”[250] Compensation cannot be real, substantial, full and ample if the price paid for the property expropriated under CARL is made to retroact the value of the land to more than two decades prior to the actual taking.

The payment of interest from the execution of the SDOA up to full satisfaction of just compensation may have presumably approximated the improvements and the appreciation in the land’s value throughout the years. Certainly, the computation of the amount of interest from 1989 would entail additional inconvenience, if not another future source of conflict, to the parties and the DAR. There are differences in the values of some of the portions of the land, and our jurisprudence on entitlement to interest involving government payments here have been less than clear and definitive. Yet, the proposal forwarded by Justice Brion would value the land at its decreased level in 1989 and at the same time deny interest from 1989, on the ground that petitioner HLI never lost possession of the lands because of the SDOA. Hence, petitioner HLI would be made to suffer twice the loss of its lands – first, by paying its properties at the 1989 levels; and second, by ignoring improvements made on the lands, which have appreciated its value.

The more equitable and just option under our jurisprudence that accounts for petitioner HLI’s twin losses of land and improvements is to allow payment of the fair market value of the property at the time of the taking. Regardless of whether the Hacienda Luisita lands remain viable as agricultural land or gain more substantial economic value for non-agricultural purposes, petitioner HLI will be justly compensated for the properties. Meanwhile, the FWBs will gain more from the direct transfer of valuable lands, and their freedom, as owners, to determine for themselves the best use for the lands according to their present nature and character. Although compensation may cause certain financial hardship to the government, there are various modes of payment of just compensation under the CARL,[251] which it can explore in order to give what is due to petitioner HLI for the lands subject of direct land transfer. As proposed here, the amount of just compensation owed to petitioner HLI, may be offset by its liabilities to the government and the qualified FWBs.

I cannot subscribe either to the imposition of liability upon petitioner HLI for the payment of rentals from 1989 as a form of damages in favor of the qualified FWBs. The rental payments would connote that petitioner HLI used the land, now belonging to qualified FWBs, to the exclusion of the owners. However, the land did not yet belong to the qualified FWBs at the time the property was being used by petitioner HLI; thus, they cannot demand payment for the use of the land that they did not yet own at that time. It would be iniquitous to extract from petitioner HLI reasonable compensation for the use of the Hacienda Luisita lands from the execution of the SDOA, when the properties were properly under its name and without any cloud of doubt as to its title thereto.

The Operative Facts Doctrine Inapplicable.

Our system of laws will be turned on its head by the application of the “doctrine of operative facts” in this case. It must be remembered that this doctrine is the exception; as an exception, it can only be applied sparingly under the right set of circumstances.

A very clear explanation of the doctrine is provided by former Chief Justice Fernando in his ponencia in De Agbayani v. Philippine National Bank[252] and his Concurring Opinion in Fernandez v. P. Cuerva & Co.[253] His analysis of the doctrine consists of a two-step process.

He first lays down the basic proposition:

… The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it: “When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive.[254]

The orthodox views finds support in the well-settled doctrine that the Constitution is supreme and provides the measure for the validity of legislative or executive acts. Clearly then, neither the legislative nor the executive branch, and for that matter, much less, this Court, has power under the Constitution to act contrary to its term. Any attempted exercise of power in violation of its provisions if to that extent unwarranted and null.[255]

Then he recognizes that some effects of the invalid act may be recognized as an exception to its consequent nullity but always in the context of the particulars of a case and not as a matter of general application:

This doctrine admits of qualifications, however. As the American Supreme Court stated: "The actual existence of a statute prior to such a determination [of constitutionality], is an operative fact and may have consequences which cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to particular regulations, individual and corporate, and particular conduct, private and official.[256]

Such exceptions have, for a very long time, recognized only instances when inequity would result from completely disregarding the good faith compliance with statutes before they were pronounced unconstitutional.

Manila Motor Co., Inc., v. Flores[257] and De Agbayani v. Philippine National Bank,[258] cited by the ponencia, and Republic v. Herida,[259] and Republic v. CFI,[260] cited by Justice Brion, all involve the application of the debt moratorium laws. In those cases, the Court held that during the period from the effectivity of the debt moratorium laws until they were struck down as unconstitutional in Rutter v. Esteban,[261] the parties could not be faulted for relying on the belief that the payment of debts was suspended by virtue of the debt moratorium laws. In Fernandez v. P. Cuerva & Co.,[262] another case relied on by the ponencia, another statute – the Reorganization Law – was the invalid act declared by the Court. In Rieta v. People,[263] also relied on by the ponencia, again another statute – General Order No. 60 issued by former President Ferdinand Marcos under his martial law legislative power – was invalidated.

While the ponencia claims that the application of the doctrine of operative facts to executive issuances is well-settled in our jurisprudence, the ponente relies on only two cases to support this claim – City Government of Makati v. Civil Service Commission,[264] and Chavez v. National Housing Authority, R-II Builders, Inc., et al.[265] In both instances, clear considerations of equity were present.

In City Government of Makati, a city employee was arrested without warrant and incarcerated for three years, until acquitted of the crime charged. Meantime, she was suspended on account of the arrest. Because she could not report for work, as she was in jail, she was dropped from the rolls for being absent without leave for more than a year. After her acquittal, she requested her reinstatement, but this request was repeatedly denied due to the lack of an approved leave. Her case was brought to the Civil Service Commission and the Court of Appeals, and both sustained her right to be reinstated. The Court deemed that the city government’s order of suspension was equivalent to an approved leave of absence, inasmuch as it was the city itself that “placed her under suspension and thus excused her from further formalities in applying for sick leave. Moreover, the arrangement bound the city government to allow private respondent to return to her work after the termination of her case.”[266]

The City of Makati raised as an alternative defense the theory that the order of suspension could not have created the above effect, as it was void considering there was no pending administrative charge against her; thus, the employee was still required to file a leave application. The Court held that it could not go to the extent of declaring the suspension order void, as competence was presumed to reside in the City’s personnel officer who issued the suspension order. Further, even if it were void, “(i)t would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application.”[267]

The application of the doctrine of operative facts in Chavez v. NHA and R-II Builders Inc., as in City of Makati was not made in a vacuum. It was applied considering the following:

The SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the “operative fact” principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated.

No similar demands of equity apply in this case. In fact, equity cannot apply in the clear presence of law. Section 31 of the CARL clearly mandates this Court to order land distribution. To recall:

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.

That the doctrine of operative facts must be applied strictly only to instances in which the law is silent, and the equity remedies of this Court are called for, is clear from two Decisions of this Court.

In Republic v. CA & Henrico Uvero, et al.,[268] the Court held:

A judicial declaration of invalidity, it is also true, may not necessarily obliterate all the effects and consequences of a void act occurring prior to such a declaration. Thus, in our decisions on the moratorium laws, we have been constrained to recognize the interim effects of said laws prior to their declaration of unconstitutionality, but there we have likewise been unable to simply ignore strong considerations of equity and fair play. So also, even as a practical matter, a situation that may aptly be described as fait accompli may no longer be open for further inquiry, let alone to be unsettled by a subsequent declaration of nullity of a governing statute.

The instant controversy, however, is too far distant away from any of the above exceptional cases. To this day, the controversy between the petitioner and the private respondents on the issue of just compensation is still unresolved, partly attributable to the instant petition that has prevented the finality of the decision appealed from. The fact of the matter is that the expropriation cases, involved in this instance, were still pending appeal when the EPZA ruling was rendered and forthwith invoked by said parties.

In Planters Products v. Fertiphil,[269] the Court summed up its view on the application of the doctrine thus:

At any rate, We find the doctrine inapplicable. The general rule is that an unconstitutional law is void. It produces no rights, imposes no duties and affords no protection. It has no legal effect. It is, in legal contemplation, inoperative as if it has not been passed. Being void, Fertiphil is not required to pay the levy. All levies paid should be refunded in accordance with the general civil code principle against unjust enrichment. The general rule is supported by Article 7 of the Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.

The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration.

The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it.

Here, We do not find anything iniquitous in ordering PPI to refund the amounts paid by Fertiphil under LOI No. 1465. It unduly benefited from the levy. It was proven during the trial that the levies paid were remitted and deposited to its bank account. Quite the reverse, it would be inequitable and unjust not to order a refund. To do so would unjustly enrich PPI at the expense of Fertiphil. Article 22 of the Civil Code explicitly provides that “every person who, through an act of performance by another comes into possession of something at the expense of the latter without just or legal ground shall return the same to him”. We cannot allow PPI to profit from an unconstitutional law. Justice and equity dictate that PPI must refund the amounts paid by Fertiphil.

Republic v. CA & Uvero denied the application of the doctrine of operative facts. The government had wanted the Court to apply the doctrine to fix the value of the just compensation for the expropriated land of private respondents at the rate fixed by Presidential Decree No. 76, which was valid at the time of the expropriation, but invalidated by the time Uvero was decided. The Court held that since the just compensation had never been completely settled, the situation was far from calling for the application of the doctrine.

In Planters Product, the Court denied the application of the doctrine of operative facts, because there was nothing inequitable or iniquitous in ordering Planters Products, Inc., from returning to Fertiphil Corporation all the amounts the latter paid pursuant to a letter of instruction (LOI) President Marcos had issued to that effect. This LOI was found unconstitutional by the trial court, and this finding was affirmed by both the Court of Appeals and by the Supreme Court. In fact, this Court found that what would be inequitable and unjust is for Planters Products, Inc., to retain the amounts held.

While substantial justice is the underlying aim of agrarian reform, it is equally true that equity may only be applied where positive law is silent. That the operative facts doctrine is one of equity has been discussed by the majority. In the same breath, the majority fails to delineate a clearly entrenched legal rule from an equitable rule, glossing over the fact that equity cannot take the place of positive law. Aptly described as “a justice outside legality,” this doctrine is applied only in the absence of, and never against, statutory law. Aequetas nunquam contravenit legis.[270]

For all its conceded merit, equity is thus only available in the absence of law, and not as its replacement. Equity has no application, as to do so would be tantamount to overruling or supplanting the express provisions of law.[271]

The pertinent positive rules being present here, they should preempt and prevail over all abstract arguments based only on equity.[272] To state otherwise would tolerate impunity in litigation.

In this case, Section 31 of the CARL is clear – the lands must be distributed if the stocks are not distributed. The validity of both the SDP and the SDOA is in question and unsettled. It would be unjust and inequitable to withhold from the qualified FWBs what is due them – their appropriate portions of the land. Petitioner HLI can have its shares back from the qualified FWBs and be paid just compensation. It would not suffer from any injustice by the application of the law.

On the other hand, if we call this a case in which equity is due petitioner HLI, then we encourage impunity. Impunity is when we reward the violation of the SDP by allowing its implementation to be marred by the illegalities that we have found here. In all the cases cited, the doctrine is never a reward for illicit acts as performed here. What this Court would signal is that it is rewarding a hollow promise of compliance with the law in order to obtain an administrative permit; then, after the permit has been obtained, break the law, since the lawbreakers can have this illicit act validated by the Court. This must absolutely not happen.

The doctrine of operative facts cannot apply either for two important reasons: (1) it will legitimize the injustice committed to the FWBs when their collective shares were arbitrarily reduced to only 33% of petitioner HLI through the undervaluation of the transferred assets; and (2) it will legitimize a second illegal reduction of the shares of the FWBs when more stockholders were added to their collective group. This Court cannot allow them to waive the rights that were granted to them under the social justice clause of the Constitution.

It strains reason how qualified FWBs can be allowed the “false choice”[273] of agreeing to a patently illegal SDO scheme, especially when their approval of the SDOA will not even improve their standing in the corporation, but only allowed to continue being minority stockholders. The vulnerability of qualified FWBs under the voting option is underscored by their current economic hardships and their desperate need for immediate financial assistance, as explained by counsel for FARM, Atty. Christian Monsod:

ATTY. MONSOD:

Both of them bad. Yes, Your Honor, because the farmers have other options than merely accepting one thousand three Hundred or one thousand four hundred square meters where they put in Seven Thousand Eight Hundred square meters into the enterprise. They can have the land, if they get the land there are many modalities, there are many ways by which they can be helped by government by which they can earn more from the land and if your read Your Honor all the answers of the farmers on why they got the money, there is not a single one I read, maybe you did, but I did not read a single answer of the farmers saying it was excellent, it was a good deal for us. They say – we have no money, we have no food better there is cash now, you know, I need it, how long will I have to wait for the case, it has been four (4) years I cannot wait much longer at least there is something here that I am getting and maybe 20 Million, maybe another 30 Million to do it. I have not read any reply of the farmer that does not reflect the fact that he is in a desperate, no choice situation that means there is something wrong with it. Now, for example, Your Honor, there is a portion there that says – you will get that measly one thousand three hundred or one thousand four hundred square meters because of the thirty three (33%) thing. And said – if you want to sell, Hacienda Luisita has a right of first refusal, it is three hundred sixty (360) days right of first refusal. If a farmer needs money very badly there is a good offer from his land and he needs it, he goes to Hacienda Luisita and Hacienda Luisita will make him wait to three hundred sixty (360) days, don’t you think he will accept a much lower price because precisely he is on the edge of survival. This is the kind of option that has been given to the farmer. DAR was not asked to participate in this process, when they are asked why the DAR was not participating they said DAR can say its opinion in the Supreme Court. But precisely DAR was needed in order to make sure that the consent of the famer was not vitiated that there was a reciprocity of values which there is none here.[274] (Emphasis supplied)

The compulsory coverage of the agricultural lands of petitioner HLI will not necessarily result in its automatic dissolution as a corporate entity. It must be remembered that the “sale” of the agricultural lands in this instance is not the ordinary business transfer of corporate assets as approved by petitioner HLI’s stockholders in accordance with the Corporation Code;[275] the transfer of the agricultural land to qualified FWBs is in the exercise of the state’s expropriation powers to take property for a legal objective (agrarian land reform) upon due payment of just compensation. Neither can the taking of the agricultural lands of petitioner HLI (which are only 33.296% of its total assets) be considered as substantially all of its assets under the Corporation Code,[276] since the corporation is not rendered incapable of engaging in the business of “planting, cultivation, production, purchase, sale, barter or exchange of all agricultural products.”[277]

In fact, after the transfer of the agricultural land is transferred to the qualified FWBs, nothing prevents petitioner HLI from buying or leasing the same lands from them as a collective entity, and continuing to conduct its primary business. In any event, the expropriation of the agricultural lands under the CARL will not result in the dissipation of the assets of petitioner HLI, since it will be compensated by the government for the agricultural lands expropriated, proceeds from which can be used to continue with the business, to fund the lease of agricultural lands, or to pay for any debts or liabilities incurred by petitioner HLI. Whether the stockholders of petitioner HLI will agree to continue with the business or initiate the process of dissolution is a matter that will have to be addressed in another forum, and not before the Court at this time.

With respect to the SCTEX lands, petitioner HLI has not denied receipt of the ₱80,000,000 from the government as just compensation. The just compensation paid for the expropriated lands properly belongs to the qualified FWBs, as they should now be considered as the rightful land owners under the direct land transfer option. Having been subjected to expropriation by the government, the SCTEX land is now invariably outside the scope of CARP coverage. However, since the qualified FWBs became the valid landowners before the said expropriation, the just compensation should accrue to them. What they seek – and indeed, what should be conveyed to them – is not only the landholdings per se, but also all payments that had rightfully accrued to them as landowners by virtue of the notice of coverage. This amount includes the total of ₱80,000,000 received by petitioner HLI as just compensation, and not just the 3% HLI claims it paid. Although it asserts having distributed 3% of the proceeds or ₱2,400,000, no evidence on the record supports its bare assertion. The amount given is important, as it may decrease petitioner HLI’s liability to the qualified FWBs. Be that as it may, this fact does not detract from the qualified FWBs’ entitlement to the just compensation paid by the government for lands properly belonging to them.

The division of Hacienda Luisita lands may indeed result in inefficient economies of scale, wherein 6,296 qualified FWBs will receive only a small portion of the land that was claimed by petitioner HLI to be inadequate to significantly improve their economic conditions.[278] Nevertheless, nothing prevents the farmworker beneficiaries from organizing themselves into a cooperative to manage the agricultural lands or to deal with petitioner HLI as suggested by the DAR,[279] considering that even CARL makes provisions for such alternatives for farms operated by corporations or associations.[280]

In addition, considering the lapse of the prohibitive period for the transfer of agricultural lands, nothing prevents the FWBs, as direct owner-beneficiaries of the Hacienda Luisita lands, from selling their ownership interest back to petitioner HLI, or to any other interested third-party, such as but not limited to the government, LBP, or other qualified beneficiaries, among others. Considering that the Hacienda Luisita lands were placed under CARP coverage through the SDOA scheme of petitioner HLI on 11 May 1989 and the lapse of the two-year period for the approval of its compliance, the period prohibiting the transfer of awarded lands under CARL[281] has undeniably lapsed. As landowner-beneficiaries, the qualified FWBs are now free to transact with third parties with respect to their land interests, regardless of whether they have fully paid for the lands or not.

To make the qualified FWBs of Hacienda Luisita wait another 10 years from the issuance of the Certificate of Land Ownership Award (CLOA) or Emancipation Patent (EP) before being allowed to transfer the land[282] is unduly prohibitive in the instant case. The prohibitive period under the CARL was meant to provide CARP beneficiaries sufficient time to profit from the awarded lands in order to sustain their daily living, pay off the yearly amortization, and earn modest savings for other needs. This period protected them from being influenced by dire necessity and short-sightedness and consequently, selling their awarded lands to a willing buyer (oftentimes the previous landowner) in exchange for quick money. This reasoning ordinarily may have been availing during the first few years of the CARL, but becomes an unreasonable obstruction for the qualified FWBs of Hacienda Luisita, who have been made to endure a null and void SDOA for more than 20 years.

Undeniably, some of the lands under compulsory coverage have become more viable for non-agricultural purposes, as seen from the converted lands of LIPCO and RCBC. In fact, the then Municipality of Tarlac had unanimously approved the Luisita Land Use Plan covering 3,290 hectares of agricultural lands in Hacienda Luisita, owned by, among others, petitioner HLI;[283] and reclassifying them for residential, commercial, industrial or institutional use.[284] The development of these kinds of land in Hacienda Luisita would better serve the local communities through the increase in economic activities in the area and the creation of more domestic employment.

Similarly, qualified FWBs should be afforded the same freedom to have the lands 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 reclassified lands in a free, competitive market may give the qualified FWBs greater options to improve their lives. The funds sourced from the sale may open up greater and more diverse entrepreneurial opportunities for them as opposed to simply tying them to the awarded lands. Severely restricting the options available to them with respect to the use or disposition of the awarded lands will only prolong their bondage to the land instead of freeing them from economic want. Hence, in the interest of equity, the ten-year prohibitive period for the transfer of the Hacienda Luisita lands covered under the CARL shall be deemed to have been lifted, and nothing shall prevent qualified FWBs from negotiating the sale of the lands transferred to them.

The determination of the best feasible way to manage the lands is best left to the qualified FWBs themselves,[285] to be assisted by public respondent DAR. Public respondent is now called upon to put into action its assurances to the Court that it is fully prepared to enforce compulsory coverage and to extend support to the FWBs to make an economic success of direct land distribution:

SECRETARY DELOS REYES:

… The government is prepared to extend support based on R.A. 9700. We are mandated to extend credit support to the farmer beneficiaries, not only in Hacienda Luisita, but also in the other areas that we are acquiring land. …

JUSTICE ABAD:

No, but we have to be realistic. I’m saying is that if we do this now, in this particular case, do you have enough support for the farmers? And can you guarantee that they will be able to farm their hectare land?

SECRETARY DELOS REYES:

Yes, Your Honor. …

JUSTICE ABAD:

So you believe that this can be done in Hacienda Luisita?

SECRETARY DELOS REYES:

Yes, Your Honor. …

JUSTICE ABAD:

You gave me comfort that if we annul this SDOA at least the government will answer for the result?

SECRETARY DELOS REYES:

Yes, Your Honor.[286]

JUSTICE SERENO:

… Because that is basically the option of land distribution is that the farmers must learn to be an entrepreneur. … Now to what extent are you prepared to create a program for this transformation of the farmer? As an entrepreneur of course you have outlined the steps, and then a farmer into a stockholder because if you are saying that there are about ten (10) or eleven (11) SDOs and many of them are being questioned, then we might find ourselves with a possibility that even this exception is not really viable under that concept. So is the DAR ready to try to give lessons in corporate citizenship in being a stockholder to his farmer beneficiaries?

SECRETARY DELOS REYES:

Yes, Your Honor, in the same way that we are prepared to transform the farmers into entrepreneurs. We are prepared to undertake the task.[287] (Emphasis supplied)

For indeed, agrarian reform is broader than just giving farmworkers land to till.[288] Rather, it is multi-dimensional in scope, and includes extending useful public services to increase agricultural productivity and to ensure independence and economic security for themselves and their families:[289]

Agrarian Reform is in effect, quite a distinct thing, more complex and more profound, from this simple aspect of the distribution of land conceived of at times by an already decrepit revolutionism. Also, it is more than the convenience of giving up ownership of the land to the campensino so as to tie him to the soil and increase production, because he invests more, as some think. Agrarian reform is much more than this: It is based on the right of man who tills the soil that this shall be useful for his welfare and independence; so that the concept must include, in addition to the land problem itself, that of credit to enable him to work the soil and that of security of markets to make it truly productive.[290]

V.

Petitioners-in-intervention RCBC and LIPCO are innocent purchasers for value and subsequent events preclude the legal and physical impossibility of the return of the converted lands.

The lands in Hacienda Luisita that were converted into industrial lands and sold to petitioners-in-intervention can no longer be the subject of compulsory coverage, especially since these were transferred to innocent purchasers for value. In any event, compulsory coverage and transfer of the land is no longer feasible, considering the supervening events attendant in the instant case.

To begin with, the rules do not prohibit the sale or transfer of lands, which have already been converted into commercial or industrial lands. Under DAR Administrative Order No. 10-88, the minimum criteria for keeping the lands intact and unfragmented are limited to viable agricultural lands and with potential for growth and increased profitability.[291] Hence, the obligation of the corporate landowner under a stock distribution agreement was to prevent the malicious sale or transfer of agricultural lands to deprive stockholder-farmer-beneficiaries of their livelihood.

However, nothing prevents a landowner from applying for the conversion of agricultural lands into commercial or industrial lands that would eventually be transferred or sold to third parties, as provided for under CARL.[292] It is not denied that, at times, converting agricultural lands to other uses may be more economical or profitable, rather than maintaining them in their present nature. It would be folly to insist on maintaining agricultural lands that are no longer profitable in their present state and deprive the landowners of the business opportunity to maximize available resources. Landowners shall be free to transfer or sell agricultural lands converted into other uses, for as long as the applications for conversion comply with the guidelines set by law and duly approved by the DAR.[293] In the instant case, nothing prevented petitioner HLI from applying for the conversion of the 500 hectares of the reclassified agricultural lands into commercial and industrial lands and eventually transferring these to petitioners-in-intervention.

It will be recalled that the 500-hectare land was first reclassified from agricultural to commercial, industrial and residential purposes by the Sangguniang Bayan of Tarlac[294] in the general zoning map of the then Municipality of Tarlac. Thereafter, the DAR approved the application for conversion into industrial use.[295] Thus, when petitioner HLI partitioned and transferred the property to Luisita Realty, Inc. (200 hectares) and Centennary Holdings, (300 hectares), there was no impediment thereto.

Since the conversion of the 500-hectare reclassified lands in Hacienda Luisita was in compliance with the guidelines set by the law and duly approved by the DAR, then petitioners-in-intervention RCBC and LIPCO, as subsequent purchasers for fair value of a portion of the property and holders of titles thereto, cannot now be defeated in their rights.

An innocent purchaser for value and in good faith is one who “buys the property of another without notice that some other person has a right to or interest in the property and who pays the full and fair price for it at the time of the purchase, or before they get notice of some other persons’ claim of interest in the property.”[296] A person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need for inquiring further, except when the party has actual knowledge of the facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title of the vender or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.[297]

In Vencilao v. Court of Appeals, the Court explained:

As a general rule, where the certificate of title is in the name of the vendor when the land is sold, the vendee for value has the right to rely on what appears on the face of the title. He is under no obligation to look beyond the certificate and investigate the title of the vendor appearing on the face of the certificate. By way of exception, the vendee is required to make the necessary inquiries if there is anything in the certificate of title which indicates any cloud or vice in the ownership of the property. Otherwise, his mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.[298]

At the time petitioners-in-intervention bought the converted properties, there was nothing in the titles thereto that would alert them to any claim or defect.

The 500-hectare converted land was partitioned and transferred to Luisita Realty, Inc., and Centennary Holdings. Luisita Realty paid petitioner HLI the amount of ₱500,000,000 for the 200-hectare land, and two titles covering 100 hectares each were issued in the former’s name. Meanwhile, Centennary Holdings received the 300-hectare land in exchange for the issuance of 12,000,000 shares of stock in favor of petitioner HLI, a title to which was likewise issued. The same 300-hectare land was eventually sold to petitioner-in-intervention LIPCO for ₱750,000,000, and title was transferred to it. When petitioner-in-intervention LIPCO failed to pay its loan from petitioner-in-intervention RCBC, it entered into a dacion en pago agreement with RCBC, wherein portions of the 300-hectare land were transferred in exchange for writing off the loan then amounting to ₱431,695,732.10. Both LIPCO and RCBC were issued separate titles over the same 300-hectare converted land.

Prior to acquiring the property Centennary Holdings, the only restrictions appearing in the title of the 300-hectare property were the Secretary’s Certificate in favor of Teresita Lopa and Shintaro Murai.[299] After LIPCO purchased the property and before a portion was transferred to petitioner-in-intervention RCBC through the dacion en pago, the only restrictions appearing on the face of LIPCO’s title[300] to the property were the following: (1) Deed of Restrictions; (2) Secretary’s Certificate in favor of Koji Komai and Kyosuke Nori; and (3) the Real Estate Mortgage in favor of RCBC for ₱300,000,000. Hence, there was nothing in the titles to the properties that would have alerted petitioners-in-intervention of any defect at the time these properties were sold to them. No adverse claim or pending litigation was annotated in the title that would defeat or supersede the claims of petitioners-in-intervention as purchasers of the property.

In fact, the Deed of Restrictions in LIPCO’s title specifically constrained the use and occupancy of the property “solely as an industrial estate for non-polluting, general, industrial and manufacturing activities,” and required prior written consent of petitioner HLI before the property could be used as a “vegetable/fruit plantation.”[301] Thus, LIPCO and RCBC had no inkling that the 300-hectare property would be used for anything but for industrial and manufacturing activities. The actions of both LIPCO and RCBC in dealing with the property were in conformity with the use and purpose of the land as an industrial estate. They had every reason to believe in good faith that the property was available for industrial purposes and free from any defect with respect to CARP coverage.

That the property was previously agricultural land that was subject to conversion is not sufficient notice to deny the rights of petitioners-in-intervention as innocent purchasers for value. At the time LIPCO purchased the property for purposes of establishing an industrial estate on 30 July 1998, the land had already been converted from an agricultural into industrial land, with the imprimatur of the DAR no less. If at all, the DAR’s conversion order was precisely what assured LIPCO that the property was approved for sale and not subject to CARP coverage. In fact, private respondents’ petitions were filed after the 300-hectare property had already been converted and transferred by petitioner HLI to Centennary Holdings and thereafter sold to LIPCO.

That the land was covered by a reclassification ordinance of the local government and by the DAR Conversion Order only bolstered their good faith belief in the validity of the sellers’ titles to the property. In addition, the Housing and Land Use Regulatory Board (HLURB) even registered the 300-hectare land of LIPCO and granted the owner thereof the license to sell the land.[302]

Neither can it be denied that a full and fair consideration was given in exchange for the said lands. LIPCO paid the total amount of ₱750,000,000 to Centennary Holdings in exchange for the 300-hectare land;[303] while RCBC wrote off a portion of LIPCO’s debt amounting to ₱431,695,732.10 when it received the two titles to the subdivided 300-hectare lands.[304]

With respect to petitioner-in-intervention RCBC, the Court has previously exacted more than just ordinary diligence from banks and other financial institutions in the conduct of their financial dealings with real properties. The standard required of banks and other financial institutions, however, does not deprive them of the protections afforded innocent purchasers for value, once they have shown that they have exercised the level of diligence required. Thus, the Court ruled:

While we agree with petitioners that GSIS, as a financial institution, is bound to exercise more than just ordinary diligence in the conduct of its financial dealings, we nevertheless find no law or jurisprudence supporting petitioners’ claim that financial institutions are not protected when they are innocent purchasers for value. When financial institutions exercise extraordinary diligence in determining the validity of the certificates of title to properties being sold or mortgaged to them and still fail to find any defect or encumbrance upon the subject properties after said inquiry, such financial institutions should be protected like any other innocent purchaser for value if they paid a full and fair price at the time of the purchase or before having notice of some other person's claim on or interest in the property.[305]

In the instant case, petitioner-in-intervention RCBC has displayed an observance of extraordinary degree of diligence in acquiring the property from LIPCO. Petitioner-in-intervention conducted ocular inspections and investigations of the properties to be the subjected to dacion en pago, in accordance with its credit policies. It likewise confirmed that LIPCO had possession over the lands, and that there was no other possessor or occupant thereof. It even confirmed the ownership and possession of LIPCO, with the residents in the vicinity endorsing the latter’s plans to create an industrial estate.[306]

To allow the converted land to be included in the compulsory coverage of the CARL would not only overturn the finality of the conversion order properly issued by the DAR, but also deprive petitioners-in-intervention of property without due process of law.

In Spouses Villorente v. Aplaya Laiya Corporation, the Court in no uncertain terms upheld the finality of a conversion order:

Indubitably, the Conversion Order of the DAR was a final order, because it resolved the issue of whether the subject property may be converted to non-agricultural use. The finality of such Conversion Order is not dependent upon the subsequent determination, either by agreement of the parties or by the DAR, of the compensation due to the tenants/occupants of the property caused by its conversion to non-agricultural use. Once final and executory, the Conversion Order can no longer be questioned.[307]

In this case, the DAR’s conversion order has already attained finality and can no longer be questioned, especially by a collateral attack on the SDOA that includes the converted lands. Not only has the conversion order been issued in accordance with law and the rules, it has also been executed with the subsequent transfers of titles to the lands to the present owners, Luisita Realty, Inc., LIPCO and RCBC. To reverse the final conversion order through the nullification of the SDOA would work injustice to LIPCO and RCBC, who were not even parties to the PARC proceedings below. Moreover, the indefeasibility of titles under the Torrens system[308] would be put in peril, if the questioned PARC Resolution would be allowed to nullify a claim of ownership through a collateral proceeding. Especially in this case, LIPCO and RCBC were not notified of the proceedings below nor did they participate therein. Yet, their registered titles would be impugned by an indirect attack.[309] The time is ripe for this Court to settle lingering doubts as to the finality of conversion orders of the DAR, in order to secure the rights and benefits to which farmworkers are entitled and to shore up investor’s confidence in the reliability of titles to the converted lands that they have obtained and developed.[310]

Nevertheless, the Court notes that Luisita Realty, which received the 200-hectare portion of converted land from petitioner HLI, failed to intervene in the instant case. Despite the notice of coverage issued under the questioned PARC resolution which included the converted lands it purchased, Luisita Realty did not seek to defend its claims of ownership in the instant case, unlike petitioners-in-intervention LIPCO and RCBC. Although the right to due process disallows decisions of the court to bind those who are not parties to the case,[311] it is deemed to have waived its right to be heard. Furthermore, Luisita Realty derives its right of ownership over the converted land from petitioner HLI, who is a party to the instant case. If petitioner HLI’s ownership of the 200-hectare converted land is assailed, Luisita Realty cannot claim a greater right than that of its predecessor. Since all of petitioner HLI’s agricultural lands in Hacienda Luisita are now subject to direct land transfer, those transferred by petitioner HLI to Luisita Realty are necessarily covered. Unlike petitioners-in-intervention LIPCO and RCBC, who timely raised and defended their claims as innocent purchasers for value before the Court, Luisita Realty kept its silence and did not bother to establish its rights over the converted lands in the proceedings before the Court. Absent any proof of Luisita Realty’s status as an innocent purchaser for value, the 200-hectare converted lands it received from petitioner HLI shall likewise be subject to direct land transfer, without prejudice to its right to claim just compensation under the law and the rules.

In any case, the supervening events have further established that the areas so converted are no longer economically feasible and sound for agricultural purposes. The subsequent development of and partial improvements[312] on the converted lands of petitioners-in-intervention RCBC and LIPCO only affirm their viability and feasibility for industrial and commercial purposes, and not for agricultural use.

That these converted lands were declared as a Special Economic Zone by then President Ramos (Luisita Industrial Park II) only emphasizes the desirability and economy of using them as industrial lands. Before they may be used for other purposes, reclassified agricultural lands must undergo the process of conversion;[313] the DAR’s approval of the conversion of agricultural land into an industrial estate is a condition precedent for its conversion into an ecozone.[314] A proposed ecozone cannot be considered for presidential proclamation, unless the landowner first submits to PEZA a land-use conversion clearance certificate from the DAR.[315]

Prior to the President’s approval of the Luisita Industrial Park II as a special economic zone on 22 April 1998,[316] the DAR had already approved the conversion of the land to an industrial zone on 14 August 1996.[317] It can be deduced that the presidential proclamation of the converted land as a special economic zone was a logical progression arising from the earlier intention to use the land for industrial purposes. This intention was the reason why the DAR allowed the conversion in the first place. Thus, agricultural land that has been approved for conversion by the DAR for commercial or industrial purposes, and subsequently proclaimed as a special economic zone by the President, can no longer be subject to coverage under the CARP.

To order that these lands now revert to agricultural use for the planting of sugar would be more costly and disadvantageous, since it involves undoing these improvements and rehabilitating the land to become viable for planting. If the DAR were to order the expropriation of the 300-hectare converted lands, then payment of just compensation must be made to petitioners-in-intervention as lawful and titled owners at the time of the taking. Such a scenario will not bode well for the cash-strapped agrarian reform program, since the present market value of the lands has vastly increased due to the partial improvements and developments introduced therein. Petitioner-in-intervention LIPCO even claims to have paid US$14,782,956.30 for the civil works and power supply system built on the converted land by its contractor, Hazama Philippines, Inc.[318] Worse, additional resources would be needed to remove these improvements and rehabilitate the industrial estate for agricultural farming. As found by the DAR, the converted lands were not irrigated and were in need of new irrigation facilities to make them viable for agriculture.[319]

Be that as it may, the Court should not, however, turn a blind eye to the fact that the proper recipients of the purchase price for the transferred and converted lands are the FWBs, under the compulsory coverage scenario. Had the qualified FWBs opted for direct land transfer of the entire Hacienda Luisita lands, then Centennary Holdings, LIPCO and RCBC would have all been dealing directly with them for the transfer and purchase of the 300-hectare lands. Instead, the stock distribution option placed the proceeds of the sale of these converted lands unto the hands of petitioner HLI as the corporate landowner. Considering that the land is to be redistributed to the qualified FWBs, and that the 300-hectare converted lands are no longer feasible as agricultural lands, it is to the best interest of justice and equity that petitioner HLI should return the amounts received from the sale and/or transfer of the converted lands, net of the taxes and other legitimate expenses actually incurred in the sale of the land. This is without prejudice to the reasonable offset of the amounts owed by the qualified FWBs to petitioner HLI from the benefits they received as stockholders under the SDOA.

Final Note

It is not denied that TADECO and petitioner HLI have attempted to give life to the pronouncement of agrarian reform through the distribution of

shares of stock to the FWBs.[320] Sadly, the mechanism they resorted to was fatally flawed and unjust in its implementation. Simply put, the SDOA has failed as an alternative to land redistribution scheme in empowering the landless farmworkers of Hacienda Luisita. An agrarian system that perpetuates excessive dependence on the few landed by the many landless carries within itself the seed of its own disintegration.[321]

I vote to affirm the PARC’s present resort to compulsory coverage of the agricultural lands, which is required under CARL in order to uphold the constitutional goal of land redistribution. Agrarian reform was aimed at placing the poor farmers on a parity with the landowner. As an alternative to direct land distribution, the stock distribution option under CARL was intended to hand control of the lands indirectly to the farmer by designating them as stockholders of the corporate landowner. However, instead of ensuring their freedom with the promise of corporate control, the petitioner HLI’s SDOA made them subservient and minority stockholders, who continue to be beholden to the good graces of the majority corporate landowner.

Under the SDOA, qualified FWBs were awarded “intangible paper” assets that became worthless, as the fortunes of petitioner HLI went south, instead of receiving “real and income-generating” assets, which offered a multitude of possibilities for their use. Despite the good intention of coming up with an alternative option under the agrarian land reform program, the failure of the SDOA to fulfill the promises of agrarian social justice in Hacienda Luisita leaves no other legal option than to order the unconditional and complete transfer of the agricultural lands to the qualified FWBs, not in the next generation, but now. In ordering the immediate redistribution of the Hacienda Luisita agricultural lands, what is sought is the reinvigoration of the constitutional mandate for agrarian reform and the empowerment of the farmworker-beneficiaries by giving them the means to determine their own destiny.[322]

DISPOSITIVE PORTION

IN VIEW OF THE FOREGOING, I vote to AFFIRM WITH MODIFICATIONS PARC Resolution No. 2005-32-01 dated 22 December 2005 and Resolution No. 2006-34-01 dated 03 May 2006. I dissent from the majority’s position with respect to how they modified the questioned PARC Resolutions. I would direct the modifications of the PARC Resolutions in the following manner.

The agricultural lands of TADECO and petitioner HLI are hereby ordered to be subject to compulsory coverage by the DAR. The previous approval of the SDOA is hereby REVOKED, and the parties thereto are hereby ordered restored to their previous states, subject to the following conditions:

1. Agricultural lands covered by CARL and previously held by TADECO, including those transferred to petitioner HLI, shall be subject to compulsory coverage and immediately distributed to the 6,296 original qualified FWBs who signed the SDOA or, if deceased, their heirs, subject to the disposition of the converted lands expressed in the paragraph after the next, but shall necessarily exclude only the following:

a. 300 out of the 500 hectares of converted lands, now in the name of LIPCO and RCBC;

b. 80-hectares of SCTEX lands; and

c. homelots already awarded to the qualified FWBs.

2. Petitioner HLI and Luisita Realty, Inc., shall be entitled to the payment of just compensation for the agricultural lands and the 200-hectare converted lands, respectively, at the time of the actual taking at fair market value, which shall be determined by the DAR; petitioner HLI shall not be held liable for the payment of rentals for the use of the property.

3. All shares of stock of petitioner HLI issued to the qualified FWBs, as beneficiaries of the direct land transfer, are nullified; and all such shares are restored to the name of TADECO, insofar as it transferred assets and liabilities to petitioner HLI, as the spin-off corporation; but the shares issued to non-qualified FWBs shall be considered as additional and variable employee benefits and shall remain in their names.

4. Petitioner HLI shall have no claim over all salaries, wages and benefits given to farmworkers; and neither shall the farmworkers, qualified or not, be required to return the same, having received them for services rendered in an employer-employee relationship.

5. Petitioner HLI shall be liable to the qualified FWBs for the value received for the sale or transfer of the 300 out of the 500 hectares of converted lands, specifically the equivalent value of 12,000,000 shares of Centennary Holdings; for the 300-hectare land assigned, but not less than ₱750,000,000; and the money received from the sale of the SCTEX land, less taxes and other legitimate expenses normally associated with the sale of land.

6. Petitioner HLI’s liability shall be offset by payments actually received by qualified FWBs under the SDOA, namely:

a. Three percent (3%) total gross sales from the production of the agricultural lands;[323]

b. homelots awarded to qualified FWBs;

c. any dividend given to qualified FWBs; and

d. proceeds of the sale of the 300-hectare converted land and SCTEX land, if any, distributed to the FWBs.[324]

The DAR is DIRECTED to determine the scope of TADECO’s and/or petitioner HLI’s agricultural lands that should have been included under the compulsory coverage of CARL at the time the SDOA was executed on 11 May 1989, but excluding the lands mentioned above. The lands of TADECO not covered by the SDOA should be covered by this ruling, after appropriate determination by DAR, considering that they were covered by CARL but operationally excluded therefrom when TADECO unilaterally assigned to the spin-off HLI only 4,916 hectares of the 6,443 hectares it owned. The DAR is also ORDERED to monitor the land distribution and extend support services that the qualified farmworker-beneficiaries may need in choosing the most appropriate and economically viable option for land distribution, and is further REQUIRED to render a compliance report on this matter one-hundred eighty (180) days after receipt of this Order. The compliance report shall include a determination of the exact land area of Hacienda Luisita that shall be subject to compulsory coverage in accordance with the Decision.

Petitioner HLI is REQUIRED to render a complete accounting and submit evidentiary proof of all the benefits given and extended to the qualified FWBs under the void SDOA – including but not limited to the dividends received, homelots awarded, and proceeds of the sales of the lands, which shall serve as bases for the offset of its liabilities to the qualified FWBs – and its accounting shall be subject to confirmation and verification by the DAR.

All titles issued over the 300-hectare converted land, including those under the names of petitioners-in-intervention Rizal Commercial Banking Corporation and Luisita Industrial Park Corporations and those awarded as homelots are hereby AFFIRMED and EXCLUDED from the notice of compulsory coverage. The 200-hectare converted lands transferred to Luisita Realty, Inc., by petitioner Hacienda Luisita, Inc., is deemed covered by the direct land transfer under the CARP in favor of the qualified FWBs, subject to the payment of just compensation.

The Temporary Restraining Order issued on 14 June 2006, enjoining the implementation of the questioned PARC Resolution and Notices of Coverage, is hereby LIFTED.

MARIA LOURDES P. A. SERENO

Associate Justice

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[1] Natalia Realty v. DAR, G.R. No. 103302, 12 August 1993, 225 SCRA 278.

[2] Land Bank of the Philippines, v. De Abello, et al., G.R. No. 168631, 07 April 2009, 584 SCRA 342.

[3] Heirs of Aurelio Reyes v. Garilao, G. R. No. 136466, 25 November 2009, 605 SCRA 294.

[4] Jeffrey M. Riedinger, Agrarian Reform in the Philippines (Stanford University Press 1995) at 117.

[5] CARL, Sec. 29 and 31.

[6] CARL, Sec. 4.

[7] Petitioner HLI’s Memorandum dated 23 September 2010, at 2, citing “The Factual Back[d]rop of the Hacienda Luisita Case” contained in the memorandum filed by Solicitor General Francisco Chavez in the Court of Appeals, Republic of the Philippines v. Tarlac Development Corporation, et al., CA-G.R. No. 08634 (rollo, Vol. 3, at 3644); See also Private Respondent FARM’s Memorandum dated 24 September 2010, at 55-56; rollo, Vol. 3, at 3859-3860.

[8] Terminal Report dated 22 September 2005; rollo, Vol. 1, at 386.

[9] Public Respondent PARC Comment at 3; rollo, Vol. 1, at 336.

[10] “WHEREAS, to facilitate stock acquisition by the farmworkers and at the same time give them greater benefits than if the agricultural land were to be divided among them instead, the FIRST PARTY caused the in-corporation and organization of the SECOND PARTY as the spin-off corporation to whom it has transferred and conveyed the agricultural portions of Hacienda Luisita and other farm-related properties in exchange for shares of stock of the latter, ...” (SDOA, Whereas Clause [rollo, Vol.1, at 148])

[11] Id.

[12] On 23 August 1988, petitioner HLI was registered with the Securities and Exchange Commission. (2008 General Information Sheet of HLI; rollo , Vol. 2, at 2200-2207)

[13] Amended Article of Incorporation of petitioner HLI; rollo, Vol. 3, at 3762-3776.

[14] “WHEREAS, in view of the fact that the part of Hacienda Luisita devoted to agriculture, consisting approximately 4,915.75 hectares, if divided and distributed among more or less 7,000 farmworkers as potential beneficiaries, would not be adequate to give the said farmworkers a decent means of livelihood, the FIRST PARTY and the THIRD PARTY agreed to resort to distribution of shares of stock to the beneficiaries the better and more equitable mode of compliance with the C.A.R.P. …” (SDOA, Whereas Clause [rollo, Vol.1, at 148])

[15] “WHEREAS, the FIRST PARTY has transferred and conveyed to the SECOND PARTY the said agricultural land of Hacienda Luisita and other properties necessary for its operation at an appraised valuation of P590,554,220.00, the value of the agricultural land being P196,630,000.00 and the other assets, P393,924,220.00, which valuations have been appraised and approved in principle by the Securities and Exchange Commission. …” (SDOA, Whereas Clause [rollo, Vol.1, at 148]; See Public Respondent PARC Comment at 3 [rollo, Vol. 1, at 336])

[16] SDOA dated 11 May 1989; rollo, Vol. 1, at 147-150.

[17] The value of petitioner HLI’s agricultural land was pegged at ₱196,630,000. If compared to the claimed total assets worth ₱590,554,220, then the agricultural land is 33.296% of petitioner HLI’s assets.

[18] (355,531,462 total shares of stock) x (33.29% proportional share of FWBs) = 118,391,976.85 shares.

[19] Man-days refer to the number of days that a farmworker beneficiary has worked in relation to their entitlement to shares of stock under the SDOA. Some of the parties in the case employed the term “mandays” (Petitioner HLI’s Consolidated Reply 29 May 2007, at 55-56) but we use its more readable form “man-days” in this Opinion.

[20] Inter-Agency Committee on Hacienda Luisita, Inc., Highlights of Consultative Meeting; rollo, Vol. 3, at 4015-4016.

[21] Minutes of Information Campaign Conducted; rollo, Vol. 3, at 4017-4024.

[22] Petition, par. 2, at 21 (rollo, Vol. 1, at 30); see also Terminal Report dated 22 September 2005, at 2 (rollo, Vol. 1, at 387).

[23] Petition, par. 3, at 22 (rollo, Vol. 1, at 31); Compliance dated 25 August 2009; (rollo, Vol. 2, at 2213-2492)

[24] Proposal for Stock Distribution under C.A.R.P. (May 1989); rollo, Vol. 3, at 3730-3748.

[25] PARC Letter dated 06 November 1989; rollo, Vol. 1, at 1308-1309.

[26] Letter dated 14 November 1989; rollo, Vol. 1, at 1310-1313.

[27] PARC Resolution No. 89-12-2 and PARC Letter dated 12 December 1989; rollo, Vol. 1, at 151-152.

[28] Petition, par. 5, at 22-23; rollo, Vol. 1, at 31-32.

[29] On 22 April 2005, petitioner HLI completed the distribution of 3,433,167 shares of stock corresponding to Crop Year 2003-2004 to all its existing stockholders of record as of June 2004. (Petitioner HLI Letter dated 09 June 2005 [rollo, Vol. 1, at 193])

[30] Out of these FWBs, 2,362 have allegedly received titles to their lots from the Register of Deeds. (Petition at par. 5(e), 23 [rollo, Vol. 1, at 32])

[31] Other benefits include: free hospital and medical services for FWBs and their spouses, children and parents; vacation and sick leaves; amelioration bonus; school bus allowance for dependents; emergency relief allowance; maternity benefits; financial benefits due to old age/death; unused sick leave conversion; and various loans.

[32] The lands applied for conversion were covered under Original Certificate of Title/Transfer Certificate of Title Nos. 258719, 240197 and 236741, with an area of 149.7733 hectares, 8.7763 hectares and 1,594.2008 hectares, respectively. (rollo, Vol. 1, at 647-650; see also Petition at par. 5(f), 23 [rollo, Vol. 1, at 32] and TCT Nos. 240197, 258719 and 236741 [rollo, Vol. 2, at 1423-1468])

[33] “The proposed conversion has the support or concurrence of the affected FWBs as verified by the PLUTC [PARC Land Use Technical Committee] Inspection Team.” (DAR Conversion Order No. 0306017074-764-95, Series of 1996, at 9-11 [rollo, Vol. 1, at 659-661]; see also RCBC Petition-in-Intervention dated 18 October 2007, par. 4.1 at 13 [rollo, Vol. 2, at 1372] and Manipesto ng Pagsuporta [rollo, Vol. 1, at 1327-1328]).

[34] “The eleven (11) directors, including the four directors (representing the farmer-beneficiaries, namely: Ernesto Sangil, Jose Cabilangan, Felimon Salas, Jr., and Jose Buneo Navarro) approved HLI’s plan to convert 500 hectares into an industrial estate (300 hectares) and medium to low-cost residential area (200 hectares).” (DAR Conversion Order No. 0306017074-764-95, Series of 1996, at 3 [rollo, Vol. 1, at 653]; see also RCBC Petition-in-Intervention dated 18 October 2007, par. 4.2 at 13 [rollo, Vol. 2, at 1372])

[35] Sangguniang Bayan Resolution No. 280 dated 01 September 1995 (rollo, Vol. 3, at 3594-3595); Supervisory Group and AMBALA Comment/Opposition dated 17 December 2006, par. 7.1, at 16 (rollo, Vol. 1, at 545); RCBC Petition-in-Intervention dated 18 October 2007, par. 5 at 13 (rollo, Vol. 2, at 1372).

[36] DARCO Conversion Order No. 030601074-764-(95), Series of 1996; rollo, Vol. 1, at 651-664.

[37] RCBC Petition-in-Intervention dated 18 October 2007, at 3; rollo, Vol. 2, at 1362.

[38] The first 100 hectares covered under TCT No. 287909 were sold on 24 June 1997 for P250,000,000 and the remaining 100 hectares under the same title were sold on 27 June 1997 also for P250,000,000. (Deeds of Absolute Sale; rollo, Vol. 3, at 3753-3756)

[39] TCT Nos. 236741, 258718, 258719 and 240197 were cancelled and TCT No. 287910 was issued. (Rollo, Vol. 2, at 1483-1484)

[40] This three hundred hectare portion of land was covered under Transfer Certificate of Title No. 287910.

[41] Deed of Conveyance and Exchange dated 13 December 1996; rollo, Vol. 2, at 1485-1487.

[42] TCT No. 292091; rollo, Vol. 2, at 1492-1493.

[43] These corporate entities include two domestic corporations (Rizal Commercial Banking Corporation and Aguila Holdings, Inc.), and a Japanese corporation (Itochu Corporation).

[44] Joint Venture Agreement dated 14 October 1996; rollo, Vol. 3, at 4313-4342.

[45] Memorandum of Agreement dated 12 November 1997; rollo, Vol. 2, at 1494-1498.

[46] Deed of Absolute Sale dated 30 July 1998 (rollo, Vol. 2, at 1499-1509) and Supplemental to Deed of Absolute Sale dated 01 February 2000 (rollo, Vol. 2, at 1510-1513).

[47] “SELLER’s Warranties – The SELLER warrants to the BUYER the following: xxx (b) There are no third parties with any right or claim whatsoever over the Property; …” (Deed of Absolute Sale dated 30 July 1998, at 3; rollo, Vol. 2, at 1501)

[48] “… (d) At the time of the execution of this Agreement, the SELLER has duly obtained a valid Department of Agrarian Reform Conversion Certificate that the Property is classified for us as an industrial estate; xxx” (Deed of Absolute Sale dated 30 July 1998, at 4; rollo, Vol. 2, at 1502)

[49] LIPCO Petition-in-intervention dated 22 November 2007, par. 10, at 14; rollo, Vol. 2, at 1558.

[50] TCT No. 310986; rollo, Vol. 2, at 1514-1518.

[51] TCT No. 365800 covering one hundred eighty (180) hectares (rollo, Vol. 2, at 1519-1520) and TCT No. 365801 covering four hectares (rollo, Vol. 1, at 1521-1522).

[52] LIPCO’s Petition for Intervention dated 22 November 2007, par. 12.2, at 15; rollo, Vol. 2, at 1559.

[53] Real Estate Mortgage (rollo, Vol. 3, at 3420-3423); RCBC’s Motion for Leave to Intervene dated 18 October 2007, par. 3.4, at 3 (rollo, Vol. 2, at 1352); RCBC’s Petition-in-Intervention dated 18 October 2007, par. 9.1, at 17 (rollo, Vol. 2, at 1376).

[54] “Upon the recommendation of the Philippine Economic Zone Authority, and pursuant to the powers vested in me by law, I, FIDEL V. RAMOS, President of the Republic of the Philippines, and by virtue of the Special Economic Zone Act of 1995, do hereby designate the following parcels of private lands in Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as Luisita Industrial Park II, consisting of THREE HUNDRED (300) HECTARES, more or less, as defined by the herein technical description: …” (Presidential Proclamation No. 1207 dated 22 April 1998 [rollo, Vol. 3, at 3400-3402]; see also Certificate of Registration No. EZ-98-05 [rollo, Vol. 3, at 3403])

[55] Sangguniang Bayan Resolution No. 392 dated 16 December 1996; rollo, Vol. 3, at 4355.

[56] Petitioner-in-Intervention LIPCO’s Memorandum dated 23 September 2010, par. 17, at 7; see also Annex “X-series” of the Memorandum.

[57] Petitioner-in-Intervention LIPCO’s Memorandum dated 23 September 2010, par. 73.1, at 41.

[58] Deed of Absolute Assignment; rollo, Vol. 2, at 1523-1527.

[59] TCT Nos. 365800 and 365801 in the name of LIPCO were cancelled and new titles (TCT Nos. 391051 and 391052) were issued in the name of RCBC. (Rollo, Vol. 2, at 1528-1533)

[60] RCBC’s Motion for Leave to Intervene date 18 October 2007, par. 3.9, at 4 (rollo, Vol. 2, at 1353); RCBC’s Petition-in-Intervention dated 18 October 2007, par. 16, at 21 (rollo, Vol. 2, at 1380).

[61] Petition dated 30 January 2006; rollo, Vol. 1, at 59. See also SCTEX project cost escalation, land valuation questioned, http://www.congress.gov.ph/committees/commnews/commnews_det.php?newsid=1231, as cited in footnote 161 of the Decision, at 78.

[62] Id.

[63] Attached as Annex “G” of petitioner’s Memorandum.

[64] Prepared by the finance manager, captioned as “Hacienda Luisita, Inc. Salaries, Benefits and Credit Privileges (in Thousand pesos) Since the Stock Option was Approved by PARC/CARP,” rollo, Vol. 3, at 3676.

[65] “1. To have a renegotiations of the Memorandum of Agreement the soonest possible time in order to cope up with the demands of time wherein our rights must be properly recognized by delivering to us what is due to us which must be strictly followed by HLI; …”

“6. We will be moving for the immediate implementation of the law to have the portions so far covered under the CARP be finally distributed to the HLI farmers in general if only to protect our long awaited dreams to come into reality.” (Rollo, Vol. 1, at 155-156)

[66] Rollo, Vol. 1, at 157-158.

[67] Rollo, Vol. 1, at 159-174.

[68] “… HLI would like to reiterate its position that its Stock Distribution Option (SDO) is impervious to any nullification, termination, abrogation, renegotiation or any appellation its detractors [may] want to christen their move. For how could they ask for the cancellation of an SDO (and its Certificate of Compliance) that has strictly complied with the provisions of both Rep. Act No. 6657 and its implementing rules under Administrative Order No. 10 on stock distribution?” (Id. at 172)

[69] “Petisyon (Para sa Pagpapawalang Bisa sa Stock Distribution Option [SDO], Pagpapatigil sa Pagpapalit Gamit ng Lupa at Pamamahagi ng Lupaing Napapaloob sa Hacienda Luisita, Inc.)”; rollo, Vol. 1, at 369-375.

[70] Rollo, Vol. 1, at 379.

[71] Opposition dated 21 January 2005; rollo, Vol. 1, at 184-192.

[72] DAR Special Order No. 789, Series of 2004; rollo, Vol. 1, at 679-680.

[73] Rollo, Vol. 1, at 386-405.

[74] Terminal Report at 14-19; rollo, Vol. 1, at 399-404.

[75] PARC Resolution No. 2005-SP-01.

[76] Respondent-intervenor FARM’s Memorandum dated 24 September 2010, at 11; rollo, Vol. 3, at 3816.

[77] Private respondents Supervisory Group and AMBALA Memorandum dated 25 November 2005; rollo, Vol. 1, at 711-729.

[78] PARC Resolution No. 2005-32-01; rollo, Vol. 1, at 100-101.

[79] “Pursuant to the decision of the Presidential Agrarian Reform (PARC), as contained in the PARC Resolution No. 05-32-01 S.2005, revoking/recalling the Stock Distribution Scheme granted to Hacienda Luisita Inc., you are hereby directed to immediately initiate appropriate action to acquire and distribute the entire Hacienda Luisita agricultural landholding under the Compulsory Acquisition Scheme of the Comprehensive Agrarian Reform Program, subject to the retention limits prescribed under R.A. 6657, as amended.” (Respondent Pangandaman’s DAR Memorandum dated 23 December 2005 [rollo, Vol. 1, at 213]; see also Memorandum dated 27 December 2005 of Undersecretary Narciso Nieto [rollo, Vol. 1, at 214])

[80] Rollo, Vol. 1, at 107-143.

[81] Opposition to Motion for Reconsideration and Motion for Immediate and Expeditious Execution of PARC Resolution dated 16 January 2006, filed by Atty. Jobert Pahilga of SENTRA and Atty. Romeo Capulong of the Public Interest Law Center. (Rollo, Vol. 1, at 771-781)

[82] Notice of Coverage dated 02 January 2006; rollo, Vol. 2, at 1407-1409.

[83] Notice of Coverage dated 02 January 2006; rollo, Vol. 2, at 1410-1414.

[84] Notice of Coverage dated 02 January 2006; rollo, Vol. 1, at 103-106 and rollo, Vol. 2, at 1415-1418.

[85] This Notice of Coverage identified TCT No. 236741 in the name of petitioner HLI, a portion of which (341.4507 hectares) was ordered converted by the DAR for industrial use. (TCT No. 236741 [rollo, Vol. 2, at 1427-1468]; DAR Conversion Order No. 0306017074-764-95, Series of 1996 [rollo, Vol. 1, at 651-664]) It likewise covered several lots under TCT No. 310986 in the name of LIPCO, which were also converted to industrial lands. (TCT No. 310986 [rollo, Vol. 2, at 1715-1717]; LIPCO Petition-in-Intervention dated 22 November 2007, par. 3-5, at 17-19 [rollo, Vol. 2, at 1561-1563])

[86] RCBC’s Petition-in-Intervention dated 18 October 2007, par. 21, at 24; rollo, Vol. 2, at 1383.

[87] “In the interest of substantial justice and orderly proceedings within the context of procedural due process, the directive to temporarily cease and desist from implementing the coverage is hereby reiterated and the same to remain effective until the matter is resolved.” (DAR Memorandum dated 07 February 2006; rollo, Vol. 1, at 227)

[88] ExCom Validation Committee Resolution dated 24 March 2006; rollo, Vol. 1, at 408-423.

[89] PARC Council Resolution No. 2006-34-01 dated 03 May 2006; rollo, Vol. 1, at 407-424.

[90] A Petition to Maintain Stock Distribution Option Agreement and three hundred ten separate petitions entitled “Petisyon sa Kagawaran ng Repormang Pansakahan” filed by 5,364 FWBs. (rollo, Vol. 1, at 987-1307)

[91] Petition; rollo, Vol. 1, at 3-193.

[92] Petitioner HLI Manifestation and Urgent Motion for Issuance of Temporary Restraining Order dated 18 May 2006; rollo, Vol. 1, at 233-254.

[93] Resolution; rollo, Vol. 1, at 257-259.

[94] Rollo, Vol. 1, at 334-428.

[95] Rollo, Vol. 1, at 436-519.

[96] Rollo, Vol. 1, at 460-517.

[97] “Section 31 of the Comprehensive Agrarian Reform Law is unconstitutional in so far as it fails to effect agrarian land reform that covers a redistribution of both wealth and power.” (Supplemental Comment, through collaborating counsel Mary Ann dela Peña of the PEACE Foundation, Inc.; rollo, Vol. 1, at 822-837).

[98] The Supervisory Group was then represented by Windsor Andaya and Jose Julio Zuniga.

[99] AMABALA was then represented by Rene Galang.

[100] Rollo, Vol. 1, at 530-770.

[101] Rollo, Vol. 1, at 856-979.

[102] (a) Private respondents Supervisory Group and AMBALA; and (b) private respondents Mallari and FARM.

[103] Public respondents PARC and DAR Secretary.

[104] Consolidated Reply at 7-17; rollo, Vol. 1, at 862-872.

[105] Rollo, Vol. 2, at 1350-1533.

[106] Rollo, Vol. 2, at 1535-1734.

[107] Rollo, Vol. 2, at 1767-1793.

[108] LIPCO Reply dated 06 October 2008 (rollo, Vol. 2, at 1800-1829); RCBC Reply dated 12 September 2008 (rollo, Vol. 2, at 1835-1871).

[109] Resolution dated 01 June 2009; rollo, Vol. 2, at 1880-1881.

[110] Petitioner HLI’s Compliance dated 07 July 2009; rollo, Vol. 2, at 1905-2208.

[111] The 11,955 recipients of the shares were later on “sanitized” by petitioner HLI and certified to be only 10,502 FWBs, which is 1,453 less than the original number. (Certification dated 05 August 2010; rollo, Vol. 3, at 2612)

[112] Under the SDOA, the qualified FWBs were entitled only to 118,391,976.85 shares, based on the proportional value of the agricultural land to the total value of all of petitioner HLI’s assets.

[113] Public Respondents Compliance dated 25 August 2009; rollo, Vol. 2, at 2213-2492.

[114] Private respondent AMBALA was herein represented by Noel Mallari, who was previously identified in the Petition filed by him in the name of FARM.

[115] Private respondent Supervisory Group was represented by Julio Zuniga and Windsor Andaya.

[116] ULWU was represented by Eldifonso Pingol.

[117] Joint Submission and Motion for Approval of Attached Compromise Agreement dated 10 August 2010; rollo, Vol. 3, at 2898-2913.

[118] Id.

[119] Petitioner HLI’s Manifestation and Motion dated 13 August 2010; rollo, Vol. 3, at 2917.

[120] Private Respondent AMBALA’s Comment/Opposition dated 16 August 2010; rollo, Vol. 3, at 2958-2987.

[121] Atty. Capulong of the Public Interest Law Center previously represented AMBALA, the Supervisory Group and ULWU in their consolidated opposition to the motion for reconsideration of petitioner HLI that was filed in the PARC.

[122] Entry of Appearance dated14 September 2010; rollo, Vol. 3, at 3158.

[123] Lalic Group’s Motion for Leave to Intervene with Comment-in-Intervention dated 16 August 2010; rollo, Vol. 3, at 2988-3009.

[124] Manifestation and Motion with Comment Attached; rollo, Vol. 1, at 436-519.

[125] There were 28 signatories to the FARM’s Comment-in-intervention. (rollo, Vol. 3, 3003-3006)

[126] FARM’s Motion for Leave to Intervene with Comment-in-Intervention dated 16 August 2010, par. 4, at 2; rollo, Vol. 3, at 2989.

[127] FARM’s Comment-in-Intervention dated 16 August 2010, par. 2-3, at 7-5; rollo, Vol. 3, at 2997-2998.

[128] Resolution dated 27 July 2010; rollo, Vol. 3, at 2558-2259.

[129] Resolution dated 18 August 2010; rollo, Vol. 3, at 3024-3027.

[130] Resolution dated 31 August 2010; rollo, Vol. 3, at 3060-3062.

[131] Resolution dated 24 August 2010; rollo, Vol. 3, at 3055-3057.

[132] Rollo, Vol. 3, at 3635-3805.

[133] Rollo, Vol. 3, at 3215-3230.

[134] Rollo, Vol. 3, at 3231-3279.

[135] Rollo, Vol. 3, at 4173-4217.

[136] Rollo, Vol. 3, at 3806-3931.

[137] Rollo, Vol. 3, at 3932-4024.

[138] Rollo, Vol. 3, at 3280-3634.

[139] Rollo, Vol. 3, at 4219-4473.

[140] “A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.” (Rules of Court, Rule 3, Sec. 2)

[141] National Housing Authority v. Magat, G.R. No. 164244, 30 July 2009, 594 SCRA 356, citing Shipside, Inc. v. Court of Appeals, 404 Phil. 981, 998 (2001) and Pioneer Insurance & Surety Corporation v. Court of Appeals, G.R. No. 84197, 28 July 1989, 175 SCRA 668.

[142] Sumalo Homeowners Association of Hermosa, Bataan v. Litton, et al., G.R. No. 146061, 31 August 2006, 500 SCRA 385, citing VSC Commercial Enterprises v. Court of Appeals, G.R. No. 121159, 16 December 2002, 394 SCRA 74, 79.

[143] Id.

[144] “1. That while we adhere to the law, we equally make manifestation that we do not now enjoy most of the rights and privileges that we are supposed to enjoy as provided in our Memorandum of Agreement (SDOA) with the Hacienda Luisita, Inc. as such but not limited to the 1 per cent share from the HLI which represents our shares as supervisors during the transition period; …” (Supervisory Group’s Petition/Protest, par.1, at 1; rollo, Vol. 1, at 153)

[145] Rollo, Vol. 1, at 157-158.

[146] As indicated in the signature sheet of the Petition/Protest, the list submitted confirmed that Zuñiga and Andaya both received 15,633 and 19,565 shares from the years 1989 to 2004. After the Petition/Protest was filed in the DAR, they again received an equivalent number of shares (“accelerated shares”), and thus doubling their individual shareholdings to 31,266 shares (Zuñiga) and 39,130 shares (Andaya). (Annex “A” of petitioner HLI’s Compliance dated 07 July 2009; rollo, Vol. 2, at 1913 and 1932).

[147] DAR Certification dated 24 August 2009; rollo, Vol. 2, at 2329.

[148] DAR Certification dated 24 August 2009; rollo, Vol. 2, at 2413.

[149] Annex “A” of petitioner HLI’s Compliance dated 07 July 2009; rollo, Vol. 2, at 1920, 2032, 2105.

[150] Petitioner HLI’s Consolidated Reply dated 29 May 2007, para 2.2.1 (a), at 14; rollo, Vol. 1, at 869.

[151] “The petitioners before the DAR/PARC are real parties-in-interest, namely private respondents RENE GALANG and NOEL MALLARI who signed the ‘petisyon’ of the Alyansa ng mga Manggawang Bukid ng Hacienda Luisita (AMBALA) filed with the Department of Agrarian Reform (DAR) and the sixty-two (62) farmworkers who signed the ‘petition/protest’ filed with the DAR on October 14, 2003, led by private respondents JOSE JULIO SUNIGA and WINDSOR ANDAYA;” (Petitioner HLI’s Memorandum dated 23 September 2010, par. 6.1, at 73; rollo, Vol. 3, at 3715)

[152] Joint Submission and Motion for Approval of Attached Compromise Agreement dated 10 August 2010; rollo, Vol. 3, at 2898-2913.

[153] “Petisyon (Para sa Pagpapawalang Bisa sa Stock Distribution Option [SDO], Pagpapatigil sa Pagpapalit Gamit ng Lupa at Pamamahagi ng Lupaing Napapaloob sa Hacienda Luisita, Inc.)”; rollo, Vol. 1, at 369-375.

[154] Rene Galang was represented in his individual capacity by Atty. Capulong of the Public Interest Law Center. But Atty. Capulong was also the collaborating counsel representing the AMBALA Galang Group. (Entry of Appearance dated14 September 2010; rollo, Vol. 3, at 3158)

[155] Rene Galang received 47,216 shares from petitioner HLI. (Rollo, Vol. 2, at 1920)

[156] Rollo, Vol. 1, at 436-519.

[157] FARM’s Memorandum dated 24 September 2010, at 111-112; rollo, Vol. 3, at 3915-3916.

[158] Opposition to Motion for Reconsideration and Motion for Immediate and Expeditious Execution of PARC Resolution dated 16 January 2006, filed by Atty. Jobert Pahilga of SENTRA and Atty. Romeo Capulong of the Public Interest Law Center. (Rollo, Vol. 1, at 771-781)

[159] The Court had earlier granted the petition-in-intervention of RCBC and noted the petition-in-intervention of LIPCO. (Resolution dated 10 December 2007)

[160] Respondent-intervenor FARM’s Memorandum dated 24 September 2010, at 14-45; rollo, Vol. 3, at 3819-3850.

[161] Petitioner HLI’s Memorandum dated 23 September 2010, at 76-80; rollo, Vol. 3, at 3718-3722.

[162] Biraogo v. Philippine Truth Commission, G.R. No. 192935 & 193036, 07 December 2010, citing Senate of the Philippines v. Ermita, G.R. No. 169777, 20 April 2006, 488 SCRA 1, 35, and Francisco v.
House of Representatives, 460 Phil. 830, 842 (2003).

[163] “As regards the third requisite of timeliness of raising the constitutionality issue, Respondents-Intervenors have already raised the constitutional issue in their position paper at the level of the Presidential Reform Council (PARC).” (Respondent-intervenor FARM’s Memorandum dated 24 September 2010, at 42; rollo, Vol. 3, at 3847)

[164] G.R. No. 167614, 24 March 2009, 582 SCRA 254.

[165] “Sec. 10. Money Claims. - … In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less.” (Republic Act No. 8042, Sec. 10)

[166] “Petitioner (Serrano) filed a Motion for Partial Reconsideration (with the NLRC), but this time he questioned the constitutionality of the subject clause. The NLRC denied the motion.”

“Petitioner filed a Petition for Certiorari with the CA, reiterating the constitutional challenge against the subject clause. After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.” (Serrano v. Gallant Maritime Services, supra. note 164)

[167] “Section 31 of the Comprehensive Agrarian Reform Law is unconstitutional in so far as it fails to effect agrarian land reform that covers a redistribution of both wealth and power.” (Supplemental Comment, through collaborating counsel Mary Ann dela Peña of the PEACE Foundation, Inc.; rollo, Vol. 1, at 822-837).

[168] Francisco v. House of Representatives, G. R. No. 160261, 160262, 160263, 160277, 160292, 160295, 160310, 160318, 160342, 160343, and 160360, 10 November 2003, 415 SCRA 44.

[169] Garcia v. Executive Secretary, G.R. No. 157584, 02 April 2009, 583 SCRA 119.

[170] Sotto v. Commission on Elections, 76 Phil 516 (1946).

[171] “Any law duly enacted by Congress carries with it the presumption of constitutionality. Before a law may be declared unconstitutional by this Court, there must be a clear showing that a specific provision of the fundamental law has been violated or transgressed. When there is neither a violation of a specific provision of the Constitution nor any proof showing that there is such a violation, the presumption of constitutionality will prevail and the law must be upheld. To doubt is to sustain.” (Aquino v. COMELEC, G. R. No. 189793, 07 April 2010, 617 SCRA 623)

[172] As of 26 January 2006, there were thirteen (13) corporate landowners with approved stock distribution option plans for monitoring by the DAR covering 7,703 hectares of private agricultural lands. (DAR Administrative Order No. 01-2006)

[173] Constitution, Art. XIII, Sec. 4.

[174] “However, when the corporate landowner and the farmworkers have entered into an [sic] Stock Distribution Agreement (SDOA) as in this case, which the PARC approved, the SDOA has ascended to the level of a civil contract where the parties are governed by the law on contracts under civil law.” (Petitioner HLI’s Memorandum, par. 4.7.1, at 43; rollo, Vol. 3, at 3685)

[175] Executive Order No. 229, Sec. 1.

[176] The policies, rules and regulations for formulation by the PARC included following: (a) Recommended small farm economy areas, which shall be specific by crop and based on thorough technical study and evaluation; (b) The schedule of acquisition and redistribution of specific agrarian reform areas, provided that such acquisition shall not be implemented until all the requirements are completed, including the first payment to the landowners concerned; and (c) Control mechanisms for evaluating the owner's declaration of current fair market value in order to establish the government's compensation offer, taking into account current land transactions in the locality, the landowner's annual income from his land, and other factors. (Executive Order No. 229, Sec. 1)

[177] “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.” (CARL, Sec. 31, last paragraph)

[178] “After the evaluation of the stock distribution plan submitted by the corporate land-owner applicant to the Secretary of Agrarian Reform, he shall forward the same with all the supporting documents to the Presidential Agrarian Reform Council (PARC), through its Executive Committee, with his recommendation for final action.” (Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Option under Sec. 31 of R.A. 6657, DAR Administrative Order No. 10-88, Sec. 10)

[179] CARL, Sec. 31, last paragraph.

[180] “There is no question that the PARC has jurisdiction to approve or disapprove the application of corporate landowners to avail of stock distribution under Sec. 31 as an alternative arrangement under Sec. 3 of RA 6657 to land redistribution.” (Petitioner HLI’s Memorandum, par. 4.7.1, at 43; rollo, Vol. 3, at 3685)

[181] Lakeview Golf and Country Club, Inc., v. Luzvimin Samahang Nayon, G. R. No. 171253, 16 April 2009, 585 SCRA 368.

[182] Lakeview Golf and Country Club, Inc., v. Luzvimin Samahang Nayon, id.

[183]“[Agrarian dispute] includes any controversy relating to compensation of lands acquired under this Act and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee.” (CARL, Sec. 3-d)

[184] Republic Act No. 9700, Sec. 19.

[185] Soriano v. Laguardia, G. R. No. 164785 and 165636, 29 April 2009, 587 SCRA 79.

[186] G.R. No. 164527, 15 August 2007, 530 SCRA 235, citing Angara v. Electoral Commission, 63 Phil. 139, 177 (1936).

[187] “Reservation Clause - Nothing herein shall be construed as precluding the PARC from making its own independent evaluation and assessment of the stock distribution plan of the corporate landowner-applicant and in prescribing other requirements.” (DAR Administrative Order No. 10-88, Sec. 12)

[188] CARL, Sec. 31, last par.

[189] Petitioner HLI’s Memorandum, at 31-46; rollo, Vol. 3, at 3673-3688.

[190] Id., at 75; rollo, Vol. 3, at 3717.

[191] Agrarian dispute includes any controversy relating to compensation of lands acquired and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee. (CARL, Sec. 3 [d])

[192] “The basic rule is that jurisdiction over the subject matter is determined by the allegations in the complaint. Jurisdiction is not affected by the pleas or the theories set up by the defendant in an answer or a motion to dismiss. Otherwise, jurisdiction would become dependent almost entirely upon the whims of the defendant.” (Arzaga v. Copias, G.R. No. 152404, 28 March 2003, 400 SCRA 148)

[193] As amended by Republic Act No. 9700, Sec. 19.

[194] CARL, Sec. 31.

[195] “The stock distribution plan submitted by the corporate landowner-applicant shall provide for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases shall be at least the minimum ratio for purposes of compliance with Section 31 of RA 6657. …” (DAR Administrative Order No. 10-88, Sec. 4, 1^st par.)

[196] “… On top of the minimum ratio provided under Section 3 of this Implementing Guideline, corporate landowner-applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of sound company policy.” (DAR Administrative Order No. 10-88, Sec. 4, 1^st par.)

[197] “2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY (Petitioner HLI).”

“3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY (TADEDCO) the acquisition and distribution to the THIRD PARTY (qualified FWBs) on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,3976.85 shares of stock 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 118,391,3976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.” (SDOA at p. 3 [rollo, Vol. 1, at 149]; emphasis supplied)

[198] “The lands covered by the CARP shall be distributed as much as possible to landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality in the following order of priority: (a) agricultural lessees and share tenants; (b) regular farmworkers; (c) seasonal farmworkers; (d) other farmworkers; (e) actual tillers or occupants of public lands; (f) collectives or cooperatives of the above beneficiaries; and (g) others directly working on the land. …” (CARL, Sec. 22)

[199] “Farmworker is a natural person who renders services for value as an employee or laborer in an agricultural enterprise or farm regardless of whether his compensation is paid on a daily, weekly, monthly or ‘pakyaw’ basis.” (CARL, Sec. 3 [g])

[200] Assuming arguendo that there were 118,391,976.85 shares to be distributed to the 6,296 farmworkers who signed the SDOA, then each of them should have been entitled to a minimum ratio of 18,804.32 shares in petitioner HLI.

[201] “Considering that the list of qualified worker-beneficiaries is a mobile one that changes from time to time and will depend on the number of days that they have worked during the year, there is no fixed number of shares due each qualified worker-beneficiary to speak of and the much-feared dilution of his shares cannot, therefore, possibly take place.” (Letter dated 14 November 1989, at 2; rollo, Vol. 1, at 1311; emphasis supplied)

[202] “JUSTICE VELASCO: … Your stock distribution option agreement is unique in the sense that these workers or farmer beneficiaries will get the stocks only when they work for the company. Meaning to say, it will be dependent on the work to be performed by these workers or farmer beneficiaries?

ATTY. ASUNCION: That is correct Your Honor they call it man days.” (TSN dated 18 August 2010, at 38-38)

[203] “4. As more new workers are hired, throughout the suspended period of 30 years, the lesser be the entitlement of the original farmer beneficiaries considering the policy of HLI under its SDP that the share is determined by the actual day’s work, proportionately computed.” (PARC Council Resolution No. 2006-34-01 dated 03 May 2006, at 16; rollo, Vol. 1, at 422)

[204] Assuming that as claimed by petitioner HLI that 118,391,976 shares of stock have all been completed distributed to the 10,502 stockholders of record (Petitioner HLI’s Letter dated 09 June 2005 [rollo, Vol. 2, at 2208]; Certification dated 05 August 2010 [rollo, Vol. 3, at 2612]) and assuming further that each of them received an equal number of shares, then each of them would have received 11,273.28 shares, which is 59.95% of 18,804.32 shares that were supposed to be received by the original 6,296 farmworkers.

[205] Petitioner HLI’s Memorandum, par. 5.2 (a), at 51; rollo, Vol. 3, at 3693.

[206] Terminal Report dated 22 September 2005, at 12; rollo, Vol. 1, at 397.

[207] Terminal Report dated 22 September 2005, at 18; rollo, Vol. 1, at 403.

[208] Id.

[209] “The original farmers, under the man-days scheme of stock distribution can still be denied entitlement to a share of stock by just not allowing him to work. In effect, the matter of distribution of shares of stock was made totally dependent on the discretion of HLI management, for, by the simple expediency of denying employment, one will never qualify to receive a share irrespective of whether or not he is an original, regular and/or permanent worker.” (PARC Council Resolution No. 2006-34-01 dated 03 May 2006, at 16-17; rollo, Vol. 1, at 422-423)

[210] Petitioner HLI’s proposal for the stock distribution even clarifies that the qualified FWBs will be entitled only to receive dividends whether cash or in stock, on the shares already distributed to them. This necessarily excludes their receipt of the announced dividends on the other shares to which they are entitled to but have yet to receive within the thirty year period. (Rollo, Vol. 3, at 3144)

[211] “The rights and responsibilities of the beneficiaries shall commence from their receipt of a duly registered emancipation patent or certificate of land ownership award and their actual physical possession of the awarded land. Such award shall be completed in not more than one hundred eighty (180) days from the date of registration of the title in the name of the Republic of the Philippines: Provided, That the emancipation patents, the certificates of land ownership award, and other titles issued under any agrarian reform program shall be indefeasible and imprescriptible after one (1) year from its registration with the Office of the Registry of Deeds, subject to the conditions, limitations and qualifications of this Act, the property registration decree, and other pertinent laws. The emancipation patents or the certificates of land ownership award being titles brought under the operation of the torrens system, are conferred with the same indefeasibility and security afforded to all titles under the said system, as provided for by Presidential Decree No. 1529, as amended by Republic Act No. 6732.”

“It is the ministerial duty of the Registry of Deeds to register the title of the land in the name of the Republic of the Philippines, after the Land Bank of the Philippines (LBP) has certified that the necessary deposit in the name of the landowner constituting full payment in cash or in bond with due notice to the landowner and the registration of the certificate of land ownership award issued to the beneficiaries, and to cancel previous titles pertaining thereto.” (CARL, Sec. 24)

[212] “The approved stock distribution plan shall be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC and the transfer of the shares of stocks in the names of qualified beneficiaries shall be recorded in the stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. …” (DAR Administrative Order No. 10-88, Sec. 11)

[213] “2. While the SDO/SDP is an alternative arrangement to the physical distribution of lands pursuant to Section 31 of R.A. 6657, logic and reason dictate that such agreement must materialize within a specific period during the lifetime of the CARP, stating clearly therein when such arrangement must end. The aforementioned provision (CARL, Sec. 5) may be considered as the provision of the law on ‘suspended coverage,’ parallel to the provisions on Section 11 on Commercial Farming where coverage of CARP is deferred for ten (10) years after the effectivity of Republic Act No. 6657. Stated simply, owners of commercial farms are given a chance to recoup their investment for ten (10) years before same is finally subjected to coverage under the CARP.” (Terminal Report dated 22 September 2005, at 14; rollo, Vol. 1, at 399)

[214] “On the matter of the need to protect the worker-beneficiaries’ participation in the capital stock of the Company from dilution, we hereby guarantee that, happen what may during the time span of 30 years, the Company will have distributed to the worker-beneficiaries 33.296% of its outstanding capital stock at the end of the said period and that while the interest of the worker-beneficiaries in the Company gradually builds up through the years until it reaches 33.296%, their representation in the Board of Directors of the Company every year or at any given time will always be at the level of 33.296% or one-third (1/3) of the total number of seats in the said Board.” (Letter dated 14 November 1989; rollo, Vol. 1, at 1311; emphasis supplied).

[215] On 22 April 2005, petitioner HLI completed the distribution of 3,433,167 shares of stock corresponding to Crop Year 2003-2004 to all its existing stockholders of record as of June 2004. (Petitioner HLI Letter dated 09 June 2005 [rollo, Vol. 1, at 193])

[216] Private respondents Supervisory Group and AMBALA filed their protests with the PARC on 14 October 2003 and 04 December 2003, respectively.

[217] “It is our position that since Hacienda Luisita, Inc., owner of the agricultural portions of the property known as Hacienda Luisita, has accelerated after 15 years the distribution to its farmworker-beneficiaries of the entire 118,396,000 shares of stock that were originally scheduled to allocated over a period of 30 years under its Stock Distribution Option (SD), such act has completed the implementation of the said Stock Distribution option (SDO) as a vehicle of land reform and has, as a consequence, taken out of the ambit of agrarian reform Hacienda Luisita, Inc., to which the agricultural land belongs.” (Comments dated 18 November 2005, at 7; rollo, Vol. 1, at 709)

[218] “Secondly, the allegation that all of the shares of stock have already been distributed to the farmers, by way of acceleration, was only triggered by the filing of protests/complaints by the disillusioned farmers against the SDP of TDC/HLI.” (PARC Council Resolution No. 2006-34-01 dated 03 May 2006, at 8; rollo, Vol. 1, at 414)

[219] “Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations at six percent (6%) interest per annum. The annual amortization shall start one (1) year from the date of the certificate of land ownership award registration. However, if the occupancy took place after the certificate of land ownership award registration, the amortization shall start one (1) year from actual occupancy. The payments for the first three (3) years after the award shall be at reduced amounts as established by the PARC: Provided, That the first five (5) annual payments may not be more than five percent (5%) of the value of the annual gross production as established by the DAR. Should the scheduled annual payments after the fifth (5th) year exceed ten percent (10%) of the annual gross production and the failure to produce accordingly is not due to the beneficiary's fault, the LBP shall reduce the interest rate and/or reduce the principal obligation to make the repayment affordable. …” (CARL, Sec. 26)

[220] “The rights and responsibilities of the beneficiaries shall commence from their receipt of a duly registered emancipation patent or certificate of land ownership award and their actual physical possession of the awarded land.” (CARL, Sec. 24)

[221] “JUSTICE BRION: I see your point. My question is about the thirty (30) years. Where did these thirty years (30) years come from? Then I would like to suggest to you, counsel that you look at the land distribution scheme where there is the thirty (30) year period, under the land distribution scheme the transfer of the land would be immediate but the payment should be over a period of thirty (30) years. And now, what we are seeing here is a transfer of shares of stock contemplated to be for a period of thirty (30) years, but the transfer is not immediate, but supposedly there is no payment. So, it seems to me that ….

SOL. GEN. CADIZ: It is the reverse, Your Honor. In fact, thirty (30) years to pay; now it is thirty (30) years to acquire.” (TSN dated 24 August 2010, at 46)

[222] CARL, Sec. 31.

[223] “The valuation of corporate assets submitted by the corporate landowner-applicant in this proposal shall be subject to the verification and audit examination by DAR. The determination of the value of the agricultural land shall be based on the land valuation guidelines promulgated by the DAR.” (DAR Administrative Order No. 10-88, Sec. 6)

[224] “The above valuations of both assets and liabilities have been given the imprimatur of the Securities and Exchange Commission by reason of its approval of the increase in the authorized capital stock of Hacienda Luisita, Inc., the subscription to such increase of Tarlac Development Corporation, and the payment by Tarlac Development Corporation of its subscription thru transfer of assets and liabilities.” (Proposal for Stock Distribution Option under the CARP at 9; rollo, Vol. 3, at 3739)

[225] Proposal for Stock Distribution Option under the CARP at 6-9; rollo, Vol. 3, at 3736-739

[226] ₱196,360,000 (value of agricultural land) ÷ ₱590,554,220 (total value of company’s assets) × 355,131,462 shares (capital stock) = 118,391,976.85 shares.

[227] Table of Excluded Lands (Private Respondent FARM’s Memorandum dated 24 September 2010, at 55-56; rollo, Vol. 3, at 3859-3860)

Description	Land Area (in Hectares)
Total Land Area		6,443
Less:
1. Sugar Mill Land	66
2. Lands “Unfit for agriculture”	263
3. Roads and Creeks	266
4. Agro-Forest Land	159
5. Residential Lots for Beneficiaries	121
6. Reserve for Additional Homelots	652
Total Exclusions		1,527
EQUALS: Land subject of SDOA		4,916

[228] “According to HLI, the farmer’s 4,916 hectares were valued at P196.6 million, which amounts to P4 per square meter, or P40,000 per hectare. The 121 hectares contributed for homelots by TADECO, was valued at P60.5 million, or P500,000 per hectare. According to Putzel, all the lands were valued at P55,000/hectare in the books of TADECO in 1988 and that the land for the homelots and land improvements were valued at P6.7 million and P5.6 million respectively. (The SEC says that the records of TADECO’s books are no longer available.)” (Respondent FARM’s Memorandum at 57; rollo, Vol. 3, at 3861)

[229] “Incidentally, the FWBs did not have participation in the valuation of the agricultural land for the purpose of determining its proportionate equity in relation to the total assets of the corporation. Apparently, the sugarland are undervalued.” (Terminal Report dated 22 September 2005, at 18; rollo, Vol. 1, 403)

[230] TSN dated 24 August 2010, at 230-231

[231] “There are a variety of means by which both to meet the constitutional requirement that regular farmworkers receive direct or collective ownership of the land they till and permit the continued operation of such corporate farms as are proven to be efficient in their present scale of operation. For example, separate corporate entities could be established, with one corporation having ownership of all land assets coupled with the distribution of all the stock of that corporation to the worker beneficiaries. Assuming existing operations were maintained; existing management retained, or comparable management hired; and wage and benefits levels remained constant, farm profitability would not differ significantly from previously levels. However, the land-related portion of this profits would now benefit the farmworkers.” (Riedinger, supra. note 4, at 160; emphasis supplied)

[232] “The provision created obvious incentives to dilute the value of the workers’ shares by either undervaluing the land assets or overvaluing the non-land assets.” (Riedinger, supra. note 4, at 159)

[233] Petitioner HLI was registered in the SEC only on 23 August 1988 and received the assigned agricultural lands and other assets from TADECO on 22 March 1989. However, the SDOA was signed by TADECO, petitioner HLI and the FWBs only on 11 May 1989.

[234] It was only after the SDOA was signed on 11 May 1989, that the DAR issued a massive information campaign on 14 October 1989 and conducted a referendum. (Petitioner HLI’s Memorandum dated 23 September 2010, at 11; rollo, Vol. 3, at 3645)

[235] “The problem was not really that the farmworkers on the hacienda were denied the freedom of expression or the right to choose, as one peasant organization charged. It was rather that farmworkers, tenants and the landless rural poor continued to be denied an environment that would allow them to identify what their choices were.” (James Putzel, A Captive Land: The Politics of Agrarian Reform in the Philippines [Ateneo de Manila University Press 1992] at 335)

[236] The stock distribution arrangement “contemplates of allowing the farmer-beneficiaries from the very start to occupy such number of seats in the board of directors of the corporate landowner as the whole number of shares of stock set aside for distribution may entitle them, so that they could have a say in forging their destiny.” (Proposal for Stock Distribution under C.A.R.P. (May 1989) at 17; rollo, Vol. 3, at 3747)

[237] Respondent FARM’s Memorandum at 60; rollo, Vol. 3, at 3864.

[238] Petitioner HLI’s Memorandum at 47-48; rollo, Vol. 3, at 3689-3690.

[239] DAR Order dated 06 December 2004; rollo, Vol. 3, at 3750.

[240] “The Technical Working Group had a meeting with Atty. Jun dela Merced, HLI Legal Counsel, where the extent of HLI’s compliance and some clarification on the MOA entered into by and between the corporation and the FWBs were discussed.” (Terminal Report dated 22 September 2005, at 7; rollo, Vol. 1, at 392)

[241] “No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.” (Constitution, Art. VIII, Sec. 14)

[242] 34 SCRA 751, 764 (1970).

[243] “JUSTICE MORALES: So, my question now is, again I sound like a broken record, are the assailed acts of PARC considered legislative for you to invoke the Constitutional non impairment clause?

ATTY. ASUNCION: My answer is no, your Honor please.” (TSN, 18 August 2010, at 66)

[244] “In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced.” (CARL, Sec. 31)

[245] Civil Code, Art. 1144.

[246] “Only a programme that makes land redistribution central to the logic of reform can help to break both the economic and political ties of dependence and subordination between the rural poor and their patrons.” (Putzel, supra. note 235, at 33-34)

[247] LBP v. Rivera, G. R. No. 182431, 17 November 2010, citing Republic v. Court of Appeals, 433 Phil. 106 (2002).

[248] LBP v. Livioco, G. R. No. 170685, 22 September 2010, citing Heirs of Francisco R. Tantoco, Sr. v. Court of Appeals, G.R. No. 149621, 05 May 2006, 489 SCRA 590, 613.

[249] Landbank of the Philippines v. Heirs of Domingo, G. R. No. 168533, 04 February 2008, 543 SCRA 627, citing Landbank of the Philippines v. Court of Appeals. 319 Phil. 246, 249 (1995).

[250] NAPOCOR v. Diato-Bernal, G. R. No. 180979, 15 December 2010, citing Republic v. Libunao, 594 SCRA 363, 376 (2009).

[251] CARL, Sec. 18.

[252] G. R. No. L-23127, 29 April 1971, 38 SCRA 429.

[253] G. R. No. L-21114, 28 November 1967.

[254] De Agbayani v. Philippine National Bank, supra.

[255] Concurring Opinion, Fernandez v. P. Cuerva & Co., supra.

[256] Id., citing Chicot Country Drainage Dist. vs. Baxter States Bank, 308 US 371 (1940).

[257] G. R. No. L-9396, 16 August 1956, 99 Phil. 738.

[258] G. R. No. L-23127, 29 April 1971, 38 SCRA 429.

[259] G. R. No. L-34486, 27 December 1982, 119 SCRA 411.

[260] G. R. No. L-29725, 27 January 1983, 120 SCRA 154.

[261] G.R. No. L-3708, 18 May 1953, 93 Phil. 68 (1953).

[262] G. R. No. L-21114, 28 November 1967.

[263] G. R. No. 147817, 12 August 2004, 436 SCRA 273.

[264] G, R. No. 131392, 06 February 2002, 376 SCRA 248.

[265] G. R. No. 164527, 15 August 2007, 530 SCRA 235.

[266] “This pledge sufficiently served as legitimate reason for her to altogether dispense with the formal application for leave; there was no reason to, as in fact it was not required, since she was for all practical purposes incapacitated or disabled to do so.” (City Government of Makati v. Civil Service Commission, supra.)

[267] City Government of Makati v. Civil Service Commission, id.

[268] G.R. No. 79732, 08 November 1993, 227 SCRA 509.

[269] G. R. No. 166006, 14 March 2008, 548 SCRA 485.

[270] Zabat v. Court of Appeals, No. L-36958, 10 July 1986, 142 SCRA 58.

[271] PTA v. St. Mattew Christian Academy, G.R. No. 176518, 2 March 2010, 614 SCRA 41.

[272] Causapin v. Court of Appeals, G.R. NO. 107432, 4 July 1997, 233 SCRA 615, 625.

[273] “ATTY. MONSOD: The compromise agreement presents the farmers with two (2) false choices.” (TSN dated 24 August 2010, at 218)

[274] TSN dated 24 August 2010, at 219-220.

[275] “Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of non-stock corporation, by the vote of at least to two-thirds (2/3) of the members, in a stockholder's or member's meeting duly called for the purpose. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code.” (Batas Pambansa Blg. 68, Sec. 40)

[276] “A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated.” (Batas Pambansa Blg. 68, Sec. 40)

[277] Amended Article of Incorporation of petitioner HLI; rollo, Vol. 3, at 3762-3776.

[278] However, Jeffrey Riedinger presented contrary claims that “that small sugar cane farms were more efficient in terms of total factor productivity” and that “Philippine sugarcane yields were, on average, little more than one-half of those of the small (1 to 2 hectare) owner operated farms of Taiwan, and only one-quarter yields obtained on small owner-operated farms in Maharashtra state in western India.” (Riedinger, supra. note 4, at 80-85) Riedinger even asserted that “[a]nalysis suggests that the workers would be no worse off, indeed might be substantially better off, if they were to purchase the land assets of Hacienda Luisita under the terms of the reform law rather than accept the proposed ‘no cost’ stock distribution.” (Id., at 150)

[279] “DAR has established guidelines on the matter of such allocations and no problem has been encountered in its implementation of the CARP. By and large for a whole scale cultivation and production, formation of cooperatives has proven to be an effective mechanism to address the problem. …” (Terminal Report dated 22 September 2005 at 13; rollo, Vol. 1, at 398).

[280] “In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a workers' cooperative or association which will deal with the corporation or business association. ...” (CARL, Sec. 29, 2^nd par.)

[281] “Transferability of Awarded Lands. — Lands acquired by beneficiaries under this Act or other agrarian reform laws shall not be sold, transferred or conveyed except through hereditary succession, or to the government, or to the LBP, or to other qualified beneficiaries through the DAR for a period of ten (10) years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase the land from the government or LBP within a period of two (2) years. Due notice of the availability of the land shall be given by the LBP to the BARC of the barangay where the land is situated. The PARCCOM, as herein provided, shall, in turn, be given due notice thereof by the BARC. …

“If the land has not yet been fully paid by the beneficiary, the rights to the land may 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, shall cultivate the land himself/herself. Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph.

“In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the amounts the latter has already paid, together with the value of improvements he/she has made on the land.” (CARL, Sec. 27, as amended; emphasis supplied)

[282] “Lands awarded to ARBs under this Act may not be sold, transferred or conveyed except through hereditary succession or to the Government, or to the LBP, or to other qualified beneficiaries within a period of ten (10) years; Provided, however, that the children or the spouse of the transferor shall have a right to repurchase the land from the government or the LBP within a period of two (2) years from the date of transfer.” (DAR Administrative Order No. 02-2009, Part F, 10.2)

[283] “The Sangguniang Bayan of Tarlac, Tarlac, hereby, approves the Luisita Land Use Plan submitted by the Luisita Realty Corporation covering the lands owned by Hacienda Luisita Inc., Central Azucarera de Tarlac, Tarlac Development Corporation, Luisita Golf and Country Club, Inc., Luisita Realty Corporation, [illegible] in the Luisita Industrial Park and others, covering over Three Thousand Two Hundred Ninety (3,290) hectares, as enumerated in the list of transfer certificates of titles, which list, including photocopies of the titles referred to in the list. Is hereto attached as Annex ‘B’, (hereinafter referred to as the ‘Luisita lands’), which is hereby approved for integration/inclusion in the general zoning map of the Municipality.” (Sangguniang Bayan Resolution No. 280 dated 01 September 1995, Sec. 1; rollo, Vol. 3, at 3594-3595)

[284] “The Luisita Lands included in the Luisita Land Use Plan, whose present classification is agricultural, are hereby reclassified to residential, commercial, industrial or institutional use, as the case may be, in accordance with the Luisita Land Use Plan, as said Luisita Lands have been found to have substantially greater economic value for residential, commercial, or industrial purposes. Furthermore, the Luisita Lands included in the Luisita Land Use Plan, whose present classification, as per its tax declaration or other official government document, is non-agricultural, is hereby confirmed as non-agricultural and shall remain as non-agricultural in accordance with the Luisita Land Use Plan.” (Id., Sec. 2; emphasis supplied)

[285] “JUSTICE BERSAMIN: All right, the last question that I would like you to answer is this – is this land if it were to be distributed among your members included, among the farmers your members included, would you go back to sugar production or sugar cane production or planting?

ATTY. PAJILDA: It is a matter not yet discussed by the group but our contention Your Honor is that if the whole of the agricultural land of Luisita should be awarded to the farmworkers it should not be parcelized and given to them individually but it should be owned or under the control or management of the farmers cooperative where this cooperative will be the one to run the business of the organization, Your Honor.

JUSTICE BERSAMIN: So you would fall back on Section 29?

ATTY. PAJILDA: Yes, Your Honor.” (TSN dated 24 August 2010, at 186-187)

[286] TSN dated 24 August 2010, at 104-108.

[287] TSN dated 24 August 2010, at 120-121.

[288] “For many years, land reform has been considered an end in itself, a device to promote social justice. Today it is regarded not only as a tool of social justice but as a definite part of agricultural development. Land ownership gives Juan Cruz the pride of possession, but this is meaningless unless Cruz gets every kind of assistance to draw the most out of his plot. Mere landownership is like gold turned to sand. If land reform is indeed part of agricultural development, then increased and efficient production is its goal” (Mariano N. Querol, Land Reform in Asia [Solidaridad Publishing House 1974] at 25)

[289] “Agrarian reform involves both redistribution of landownership (land reform) and the development of complementary credit, extension, infrastructure, pricing, and research programs.” (Riedinger, supra. note 4, at 2)

[290] Lynn Smith Thomas, Agrarian Reform in Latin America (1965), as cited in Milagros A. German, The Agrarian Law in the New Society (U. P. Law Center 1980) at 75-76.

[291] DAR Administrative Order No. 10-88. Sec. 5 (a).

[292] “After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner with respect only to his/her retained area which is tenanted, with due notice to the affected parties, and subject to existing laws, may authorize the reclassification or conversion of the land and its disposition: Provided, That if the applicant is a beneficiary under agrarian laws and the land sought to be converted is the land awarded to him/her or any portion thereof, the applicant, after the conversion is granted, shall invest at least ten percent (10%) of the proceeds coming from the conversion in government securities: Provided, further, That the applicant upon conversion shall fully pay the price of the land: Provided, furthermore, That irrigated and irrigable lands, shall not be subject to conversion: Provided, finally, That the National Irrigation Administration shall submit a consolidated data on the location nationwide of all irrigable lands within one (1) year from the effectivity of this Act.” (CARL, Sec. 65)

[293] Reclassified agricultural lands must undergo the process of conversion in the DAR before they may be used for other purposes. (Ros v. DAR, G. R. No. 132477, 31 August 2005, 468 SCRA 471; DAR v. Polo Coconut Plantation, Co., Inc., G. R. No. 168787 and 169271, 03 September 2008, 564 SCRA 78)

[294] Sangguniang Bayan Resolution No. 280 dated 01 September 1995 (rollo, Vol. 3, at 3594-3595); Supervisory Group and AMBALA Comment/Opposition dated 17 December 2006, par. 7.1, at 16 (rollo, Vol. 1, at 545); RCBC Petition-in-Intervention dated 18 October 2007, par. 5 at 13 (rollo, Vol. 2, at 1372).

[295] DARCO Conversion Order No. 030601074-764-(95), Series of 1996; rollo, Vol. 1, at 651-664.

[296] Coastal Pacific Trading, Inc., v. Southern Rolling Mills, Co., Inc., G.R. No. 118692, 28 July 2006, 497 SCRA 11.

[297] Rufloe v. Burgos, G. R. No. 143573, 30 January 2009, 577 SCRA 264.

[298] G.R. No. 123713, 01 April 1998, 288 SCRA 574.

[299] TCT No. 292091, rollo, Vol. 2, at 1492-1493.

[300] TCT No. 310985, rollo, Vol. 2, at 1514-1518.

[301] TCT No. 310985, id., at 1515.

[302] HLURB Certificate of Registration No. 00794 and HLURB License to Sell No. 00776 both dated 26 December 1997; rollo, Vol. 3, at 4399-4400.

[303] Rollo, Vol. 2, at 1499-1513.

[304] Rollo, Vol. 2, at 1523-1527.

[305] Ty v. Queen’s Row Subdivision, G. R. No. 173158, 04 December 2009, 607 SCRA 324.

[306] Rollo, Vol. 3, at 4357-4362.

[307] G. R. No. 145013, 31 March 2005, 454 SCRA 493.

[308] “[A] Torrens title is evidence of indefeasible title to property in favor of the person in whose name the title appears. It is conclusive evidence with respect to the ownership of the land described therein.” (Vda. De Aguilar, v. Spouses Alfaro, G. R. No. 164402, 05 July 2010, citing Baloloy v. Hular, 481 Phil. 398, 410 [2004], and Carvajal v. Court of Appeals, 345 Phil. 582, 594 [1997])

[309] “Indeed, a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, reliance on registered titles would be lost.” (Ugale v. Gorospe, G. R. No. 149516, 11 September 2006, 501 SCRA 376)

[310] “What the Philippine government must do is to clarify existing rules and regulations concerning land use and land conversions in order to avoid disputes that have the potential of encouraging domestic unrest and discoursing foreign investment particularly in industrial and real estate development. Foreign investors need to know that the land they acquire for development will not be subject to later disputes, while farmer-beneficiaries need to be sure that they still obtain the land they are entitled to under the CARP.” (Janeth San Pedro, Agrarian Reform’s Constraint on Land Acquisition and Development for Non-Agricultural Use in the Philippines, 12 Transnat’l Law. 319 [1999] at 351)

[311] Laguinilla, v. Velasco, G. R. No. 169276, 16 June 2009, 589 SCRA 224, citing Aron v. Realon, G.R. No. 159156, January 31, 2005, 450 SCRA 372, 389.

[312] Petitioner-in-intervention RCBC has claimed that the property has been partially developed into an industrial estate with a main road fully paved with proper drainage and equipped with a power control house, deep well and water tanks, drainage reservoir and STP, concrete perimeter security fence, and security gate house. (Petitioner-in-intervention RCBC’s Memorandum dated 23 September 2010, at 85) On the other hand, petitioner-in-intervention LIPCO claims 62% completion of its 115.779 hectare property, where concrete roads, a power control house, an elevated water tank, two main gates, a drainage reservoir with a release gate, a drying tower, and an aceration tank is already put in place. (Petitioner-in-intervention LIPCO’s Memorandum dated 23 September 2010, at 41)

[313] Ros v. DAR, G.R. No. 132477, 31 August 2005, 468 SCRA 471.

[314] DAR v. Polo Coconut Plantation, Co., Inc., G. R. No. 168787 and 169271, 03 September 2008, 564 SCRA 78, citing Republic Act No. 7916, Sec. 5 and DAR Administrative Order No. 1, s. 1999, Sec. 6(e).

[315] DAR v. Polo Coconut Plantation, Co., Inc., id., citing Rules and Regulation to Implement R.A. 7916. Part III, Rule IV, Sec. 3

[316] Presidential Proclamation No. 1207 dated 22 April 1998; rollo, Vol. 3, at 3400-3402.

[317] DARCO Conversion Order No. 030601074-764-(95), Series of 1996; rollo, Vol. 1, at 651-664.

[318] Petitioner-in-Intervention LIPCO’s Memorandum dated 23 September 2010, par. 73.1, at 41.

[319] “4. Accordingly, thought the subject area is included in the NIA service are, the HLI has been using the NIA irrigation facilities because of the complaint of the farmworkers downstream (outside the HLI) that they are not getting enough water, if HLI tapped it. To make matters worse, the eruption of Mt. Pinatubo has caused the lahar siltation to close the O’Donnel River which is the main source of the irrigation water of Tarlac. Without other source to its irrigation water requirement, the HLI heavily depends on ground water pumping at 50 feet deep.” (DAR Conversion Order No. 0306017074-764-(95), s. of 1996, at 6-7; rollo, Vol. 2, at 1474-75)

[320] “This Agreement is entered into by the parties herein in the spirit of the Comprehensive Agrarian Reform Program (C.A.R.P.) of the government and with the supervision of the Department of Agrarian Reform, with the end in view of improving the lot of the qualified beneficiaries of the stock distribution plan and obtaining for them greater benefits.” (SDOA dated 11 May 1989, at 4; rollo, Vol. 1, at 150; emphasis supplied)

[321] Jesus M. Montemayor, The Economic, Social and Political Rationale of Agrarian Reform, Agrarian Reform Land Law (UP Law Center, 1975), at 210.

[322] “Mr. President, no one will argue with the productive potential inherent in people who own the land they till. To own land is to hold one’s destiny in his own hands. This is why rural development must be anchored on land reform.” (Sen. Heherson Alvarez, Sponsorship Speech of the CARL in Rufus B. Rodriguez, Comprehensive Agrarian Reform Law Annotated [2004] at 175)

[323] Based on its own records, petitioner HLI distributed the 3% production share to qualified FWBs amounting to ₱151,386,000 from 1989-2005. (Report on Salaries, Benefits and Credit Privileges; rollo, Vol. 3, at 3759-3761)

[324] Private respondents Supervisory Group and AMBALA admit that ₱37,500.000 was distributed to the FWBs as part of the sales of the proceeds of the converted 500 hectare lands. (Memorandum dated 25 November 2005 filed in the PARC, par. 46, at 19 [rollo, Vol. 1, at 728]; see also petitioner HLI’s Motion for Reconsideration dated 02 January 2006, at 20 [rollo, Vol. 1, at 752])