Hacienda Luisita v.

Luisita Industrial Park (Eminent Domain)

[G.R. No. 171101 : November 22, 2011]

HACIENDA LUISITA, INCORPORATED, PETITIONER, LUISITA INDUSTRIAL PARK

CORPORATION AND RIZAL COMMERCIAL BANKING CORPORATION, PETITIONERS-IN-
INTERVENTION, VS. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA
MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, AND
JULIO SUNIGA[1] AND HIS SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. AND
WINDSOR ANDAYA, RESPONDENTS.

RESOLUTION

VELASCO JR., J.:

For resolution are the (1) Motion for Clarification and Partial Reconsideration dated July
21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents Presidential Agrarian
Reform Council (PARC) and Department of Agrarian Reform (DAR); (3) Motion for
Reconsideration dated July 19, 2011 filed by private respondent Alyansa ng mga
Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4) Motion for
Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July 21,
2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of
Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively referred to
as "Mallari, et al."); and (6) Motion for Reconsideration dated July 22, 2011 filed by
private respondents Rene Galang and AMBALA.[2]

On July 5, 2011, this Court promulgated a Decision[3] in the above-captioned case,

denying the petition filed by HLI and affirming Presidential Agrarian Reform Council
(PARC) Resolution No. 2005-32-01 dated December 22, 2005 and PARC Resolution No.
2006-34-01 dated May 3, 2006 with the modification that the original 6,296 qualified
farmworker-beneficiaries of Hacienda Luisita (FWBs) shall have the option to remain as
stockholders of HLI.

In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI raises
the following issues for Our consideration:

IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE ORIGINAL

FWBs OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF THE SALE
OF THE 500 HECTARES AND 80.51 HECTARES OF THE HLI LAND, BECAUSE:

(1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION, HLI, AS CORPORATE
CAPITAL AND ASSETS IN SUBSTITUTION FOR THE PORTIONS OF ITS LAND ASSET
WHICH WERE SOLD TO THIRD PARTY;

(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS OF THE LAND
ASSET TO THE FWBs, WHO ARE STOCKHOLDERS OF HLI, IS TO DISSOLVE THE
CORPORATION AND DISTRIBUTE THE PROCEEDS AS LIQUIDATING DIVIDENDS
WITHOUT EVEN PAYING THE CREDITORS OF THE CORPORATION;

(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT PROVISIONS OF THE
CORPORATION CODE AND CORPORATE PRACTICE.

IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE PAYMENT OF JUST

COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE
CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR-SANTIAGO, APPROVED THE
STOCK DISTRIBUTION PLAN (SDP) PROPOSED BY TADECO/HLI, BECAUSE:

(1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989 WAS NOT THE
"ACTUAL TAKING" OF THE TADECO's/HLI's AGRICULTURAL LAND;

(2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01 OF THAT SDP
BY THE NEW PARC UNDER THE CHAIRMANSHIP OF DAR SECRETARY NASSER
PANGANDAMAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN THE SDP WAS
APPROVED DID NOT RESULT IN "ACTUAL TAKING"• ON NOVEMBER 21, 1989;

(3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR 22 YEARS BACK
WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE, CONSIDERING THE
IMPROVEMENTS, EXPENSES IN THE MAINTENANCE AND PRESERVATION OF THE LAND,
AND RISE IN LAND PRICES OR VALUE OF THE PROPERTY.

On the other hand, PARC and DAR, through the Office of the Solicitor General (OSG),
raise the following issues in their Motion for Partial Reconsideration dated July 20,
2011:

THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR THE
FOLLOWING REASONS:

THERE IS NO LAW OR RULE WHICH HAS BEEN INVALIDATED ON THE GROUND OF

UNCONSTITUTIONALITY; AND

II

THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE ABSENCE
OF A LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH MANDATES THE
DISTRIBUTION OF THE LAND AS A RESULT OF THE REVOCATION OF THE STOCK
DISTRIBUTION PLAN (SDP).

For its part, AMBALA poses the following issues in its Motion for Reconsideration dated
July 19, 2011:

THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS
CONSTITUTIONAL.

II

THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT ONLY THE [PARC’S] APPROVAL OF HLI's PROPOSAL FOR
STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE REVOKED AND NOT THE
STOCK DISTRIBUTION OPTION AGREEMENT (SDOA).

III

THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN APPLYING THE DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE
[FWBs] CHOOSE TO OPT FOR ACTUAL LAND DISTRIBUTION OR TO REMAIN AS
STOCKHOLDERS OF [HLI].

IV

THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT
AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE SDP AND AN IMPERATIVE
IMPOSITION BY [RA 6657] AND DEPARTMENT OF AGRARIAN REFORM ADMINISTRATIVE
ORDER NO. 10 (DAO 10).

THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT THE
CONVERSION OF THE AGRICULTURAL LANDS DID NOT VIOLATE THE CONDITIONS OF
RA 6657 AND DAO 10.

VI

THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT PETITIONER
IS ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD THE HONORABLE COURT
AFFIRM THE ENTITLEMENT OF THE PETITIONER TO JUST COMPENSATION, THE SAME
SHOULD BE PEGGED TO FORTY THOUSAND PESOS (PhP 40,000.00) PER HECTARE.

VII

THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT LUISITA
INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL COMMERCIAL BANKING CORPORATION
(RCBC) ARE INNOCENT PURCHASERS FOR VALUE.

In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the
following issues:

THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN SECTION 31 OF [RA
6657] FOR BEING UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE THAT WAS
RAISED BY THE RESPONDENTS-INTERVENORS IS THE LIS MOTA OF THE CASE.

II

THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE DOCTRINE OF
"OPERATIVE FACT" TO THE CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN AS
STOCKHOLDERS OF HACIENDA LUISITA IS EQUIVALENT TO AN OPTION FOR
HACIENDA LUISITA TO RETAIN LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE
AGRARIAN REFORM LAW. THE DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE
SUPREME COURT HAS AFFIRMED ITS REVOCATION.

III

THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED [LIPCO] AND
[RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE INSTANT CASE.

Mallari, et al., on the other hand, advance the following grounds in support of their
Motion for Reconsideration dated July 21, 2011:

(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN DISTRIBUTED

PURSUANT TO THE MEMORANDUM OF AGREEMENT. WHAT REMAINS MERELY IS THE
RELEASE OF TITLE FROM THE REGISTER OF DEEDS.

(2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE RECORDS WOULD SHOW
THAT IF EVER NOT ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE ACTUAL
ORIGINAL FARMWORKER BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE IS THE
NEXT OF KIN OR CHILDREN OF SAID ORIGINAL [FWBs]. HENCE, WE RESPECTFULLY
SUBMIT THAT SINCE THE SHARES WERE GIVEN TO THE SAME "FAMILY
BENEFICIARY"•, THIS SHOULD BE DEEMED AS SUBSTANTIAL COMPLIANCE WITH THE
PROVISIONS OF SECTION 4 OF DAO 10.

(3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO IMPLEMENT THE
[SDP] AS PROVIDED FOR BY SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE
READ IN LIGHT OF SECTION 10 OF EXECUTIVE ORDER NO. 229, THE PERTINENT
PORTION OF WHICH READS, "THE APPROVAL BY THE PARC OF A PLAN FOR SUCH
STOCK DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION, SHALL BE DEEMED
COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE CARP."

(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF NOVEMBER 21, 1989, THE
DATE OF APPROVAL OF THE STOCK DISTRIBUTION OPTION. INSTEAD, WE
RESPECTFULLY SUBMIT THAT THE "TIME OF TAKING"• FOR VALUATION PURPOSES IS
A FACTUAL ISSUE BEST LEFT FOR THE TRIAL COURTS TO DECIDE.

(5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT WAS GIVEN TO
THEM UNDER THE SDP. IT WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE
LAND AND AT THE SAME TIME HOLD ON TO THE BENEFITS THEY RECEIVED PURSUANT
TO THE SDP IN THE SAME WAY AS THOSE WHO WILL CHOOSE TO STAY WITH THE
SDO.
Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC),
submit the following grounds in support of their Motion for Reconsideration dated July
22, 2011:

THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN ORDERING THE
HOLDING OF A VOTING OPTION INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT
LANDS TO [FWBs] in [HLI].

A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE REVOCATION OF

THE [SDP] CARRIES WITH IT THE REVOCATION OF THE [SDOA].

B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS OF HLI WITHOUT

MAKING THE NECESSARY CHANGES IN THE CORPORATE STRUCTURE WOULD ONLY
SUBJECT THEM TO FURTHER MANIPULATION AND HARDSHIP.

C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND PERTINENT LAWS
JUSTIFY TOTAL LAND REDISTRIBUTION OF HACIENDA LUISITA.

II

THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN HOLDING THAT
THE [RCBC] AND [LIPCO] ARE INNOCENT PURCHASERS FOR VALUE OF THE 300-
HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS SOLD TO THEM PRIOR TO THE
INCEPTION OF THE PRESENT CONTROVERSY.

Ultimately, the issues for Our consideration are the following: (1) applicability of the
operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the
Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory acquisition;
(4) just compensation; (5) sale to third parties; (6) the violations of HLI; and (7)
control over agricultural lands.

We shall discuss these issues accordingly.

I. Applicability of the Operative Fact Doctrine

In their motion for partial reconsideration, DAR and PARC argue that the doctrine of
operative fact does not apply to the instant case since: (1) there is no law or rule which
has been invalidated on the ground of unconstitutionality;[4] (2) the doctrine of
operative fact is a rule of equity which may be applied only in the absence of a law, and
in this case, they maintain that there is a positive law which mandates the distribution
of the land as a result of the revocation of the stock distribution plan (SDP).[5]

Echoing the stance of DAR and PARC, AMBALA submits that the operative fact doctrine
should only be made to apply in the extreme case in which equity demands it, which
allegedly is not in the instant case.[6] It further argues that there would be no undue
harshness or injury to HLI in case lands are actually distributed to the farmworkers, and
that the decision which orders the farmworkers to choose whether to remain as
stockholders of HLI or to opt for land distribution would result in inequity and prejudice
to the farmworkers.[7] The foregoing views are also similarly shared by Rene Galang
and AMBALA, through the PILC.[8] In addition, FARM posits that the option given to the
FWBs is equivalent to an option for HLI to retain land in direct violation of RA 6657.[9]

(a) Operative Fact Doctrine Not Limited to

Invalid or Unconstitutional Laws

Contrary to the stance of respondents, the operative fact doctrine does not only apply
to laws subsequently declared unconstitutional or unlawful, as it also applies to
executive acts subsequently declared as invalid. As We have discussed in Our July 5,
2011 Decision:

That the operative fact doctrine squarely applies to executive acts– “in this case, the
approval by PARC of the HLI proposal for stock distribution– “is well-settled in our
jurisprudence. In Chavez v. National Housing Authority, We held:

Petitioner postulates that the "operative fact"• doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no longer be
disturbed or simply ignored, citing Rieta v. People of the Philippines.

The argument of the Solicitor General is meritorious.

The “operative fact• doctrine is embodied in De Agbayani v. Court of Appeals,

wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:

xxx xxx xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:

Moreover, we certainly cannot nullify the City Government's order of suspension, as we

have no reason to do so, much less retroactively apply such nullification to deprive
private respondent of a compelling and valid reason for not filing the leave application.
For as we have held, a void act though in law a mere scrap of paper nonetheless
confers legitimacy upon past acts or omissions done in reliance thereof. Consequently,
the existence of a statute or executive order prior to its being adjudged void is an
operative fact to which legal consequences are attached. It would indeed be ghastly
unfair to prevent private respondent from relying upon the order of suspension in lieu
of a formal leave application.

The applicability of the operative fact doctrine to executive acts was further explicated
by this Court in Rieta v. People, thus:

Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO)
No. 4754 was invalid, as the law upon which it was predicated — General Order No.
60, issued by then President Ferdinand E. Marcos ” was subsequently declared by the
Court, in Tañada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.

We do not agree. In Tañada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein how
such a declaration might affect acts done on a presumption of their validity, the Court
said:

“. . .. In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit:

"The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. . . . It
is quite clear, however, that such broad statements as to the effect of a determination
of unconstitutionality must be taken with qualifications. The actual existence of a
statute, prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past 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 conduct, private and
official. Questions of rights claimed to have become vested, of status, of prior
determinations deemed to have finality and acted upon accordingly, of public policy in
the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have
engaged the attention of courts, state and federal, and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified."

xxx xxx xxx

"Similarly, the implementation/ enforcement of presidential decrees prior to their

publication in the Official Gazette is ˜an operative fact which may have consequences
which cannot be justly ignored. The past cannot always be erased by a new judicial
declaration . . . that an all-inclusive statement of a principle of absolute retroactive
invalidity cannot be justified."

The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence as
an operative fact negating the acceptance of "a principle of absolute retroactive
invalidity."• Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The ASSO
that was issued in 1979 under General Order No. 60 "” long before our Decision in
Tañada and the arrest of petitioner ” is an operative fact that can no longer be
disturbed or simply ignored. (Citations omitted; emphasis in the original.)

Bearing in mind that PARC Resolution No. 89-12-2[10]“an executive act" “was declared
invalid in the instant case, the operative fact doctrine is clearly applicable.
Nonetheless, the minority is of the persistent view that the applicability of the operative
fact doctrine should be limited to statutes and rules and regulations issued by the
executive department that are accorded the same status as that of a statute or those
which are quasi-legislative in nature. Thus, the minority concludes that the phrase
“executive act― used in the case of De Agbayani v. Philippine National
Bank[11] refers only to acts, orders, and rules and regulations that have the force and
effect of law. The minority also made mention of the Concurring Opinion of Justice
Enrique Fernando in Municipality of Malabang v. Benito,[12] where it was supposedly
made explicit that the operative fact doctrine applies to executive acts, which are
ultimately quasi-legislative in nature.

We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang
case elaborates what “executive act― mean. Moreover, while orders, rules and
regulations issued by the President or the executive branch have fixed definitions and
meaning in the Administrative Code and jurisprudence, the phrase “executive
act― does not have such specific definition under existing laws. It should be noted
that in the cases cited by the minority, nowhere can it be found that the term
“executive act― is confined to the foregoing. Contrarily, the term “executive
act― is broad enough to encompass decisions of administrative bodies and agencies
under the executive department which are subsequently revoked by the agency in
question or nullified by the Court.

A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as

Chairman of the Presidential Commission on Good Government (PCGG) and as Chief
Presidential Legal Counsel (CPLC) which was declared unconstitutional by this Court in
Public Interest Center, Inc. v. Elma.[13] In said case, this Court ruled that the
concurrent appointment of Elma to these offices is in violation of Section 7, par. 2,
Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably, the
appointment of Elma as Chairman of the PCGG and as CPLC is, without a question, an
executive act. Prior to the declaration of unconstitutionality of the said executive act,
certain acts or transactions were made in good faith and in reliance of the appointment
of Elma which cannot just be set aside or invalidated by its subsequent invalidation.

In Tan v. Barrios,[14] this Court, in applying the operative fact doctrine, held that
despite the invalidity of the jurisdiction of the military courts over civilians, certain
operative facts must be acknowledged to have existed so as not to trample upon the
rights of the accused therein. Relevant thereto, in Olaguer v. Military Commission No.
34,[15] it was ruled that "military tribunals pertain to the Executive Department of the
Government and are simply instrumentalities of the executive power, provided by the
legislature for the President as Commander-in-Chief to aid him in properly commanding
the army and navy and enforcing discipline therein, and utilized under his orders or
those of his authorized military representatives."[16]

Evidently, the operative fact doctrine is not confined to statutes and rules and
regulations issued by the executive department that are accorded the same status as
that of a statute or those which are quasi-legislative in nature.

Even assuming that De Agbayani initially applied the operative fact doctrine only to
executive issuances like orders and rules and regulations, said principle can nonetheless
be applied, by analogy, to decisions made by the President or the agencies under the
executive department. This doctrine, in the interest of justice and equity, can be
applied liberally and in a broad sense to encompass said decisions of the executive
branch. In keeping with the demands of equity, the Court can apply the operative fact
doctrine to acts and consequences that resulted from the reliance not only on a law or
executive act which is quasi-legislative in nature but also on decisions or orders of the
executive branch which were later nullified. This Court is not unmindful that such acts
and consequences must be recognized in the higher interest of justice, equity and
fairness.

Significantly, a decision made by the President or the administrative agencies has to be

complied with because it has the force and effect of law, springing from the powers of
the President under the Constitution and existing laws. Prior to the nullification or
recall of said decision, it may have produced acts and consequences in conformity to
and in reliance of said decision, which must be respected. It is on this score that the
operative fact doctrine should be applied to acts and consequences that resulted from
the implementation of the PARC Resolution approving the SDP of HLI.

More importantly, respondents, and even the minority, failed to clearly explain how the
option to remain in HLI granted to individual farmers would result in inequity and
prejudice. We can only surmise that respondents misinterpreted the option as a
referendum where all the FWBs will be bound by a majority vote favoring the retention
of all the 6,296 FWBs as HLI stockholders. Respondents are definitely mistaken. The
fallo of Our July 5, 2011 Decision is unequivocal that only those FWBs who signified
their desire to remain as HLI stockholders are entitled to 18,804.32 shares each, while
those who opted not to remain as HLI stockholders will be given land by DAR. Thus,
referendum was not required but only individual options were granted to each FWB
whether or not they will remain in HLI.

The application of the operative fact doctrine to the FWBs is not iniquitous and
prejudicial to their interests but is actually beneficial and fair to them. First, they are
granted the right to remain in HLI as stockholders and they acquired said shares
without paying their value to the corporation. On the other hand, the qualified FWBs
are required to pay the value of the land to the Land Bank of the Philippines (LBP) if
land is awarded to them by DAR pursuant to RA 6657. If the qualified FWBs really want
agricultural land, then they can simply say no to the option. And second, if the
operative fact doctrine is not applied to them, then the FWBs will be required to return
to HLI the 3% production share, the 3% share in the proceeds of the sale of the 500-
hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac Expressway (SCTEX)
lot, the homelots and other benefits received by the FWBs from HLI. With the
application of the operative fact doctrine, said benefits, homelots and the 3%
production share and 3% share from the sale of the 500-hectare and SCTEX lots shall
be respected with no obligation to refund or return them. The receipt of these things is
an operative fact “that can no longer be disturbed or simply ignored.―

(b) The Operative Fact Doctrine as Recourse in Equity

As mentioned above, respondents contend that the operative fact doctrine is a rule of
equity which may be applied only in the absence of a law, and that in the instant case,
there is a positive law which mandates the distribution of the land as a result of the
revocation of the SDP.
Undeniably, the operative fact doctrine is a rule of equity.[17] As a complement of legal
jurisdiction, equity “seeks to reach and complete justice where courts of law,
through the inflexibility of their rules and want of power to adapt their judgments to the
special circumstances of cases, are incompetent to do so. Equity regards the spirit and
not the letter, the intent and not the form, the substance rather than the circumstance,
as it is variously expressed by different courts.―[18] Remarkably, it is applied only in
the absence of statutory law and never in contravention of said law.[19]

In the instant case, respondents argue that the operative fact doctrine should not be
applied since there is a positive law, particularly, Sec. 31 of RA 6657, which directs the
distribution of the land as a result of the revocation of the SDP. Pertinently, the last
paragraph of Sec. 31 of RA 6657 states:

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.)

Markedly, the use of the word "or"• under the last paragraph of Sec. 31 of RA 6657
connotes that the law gives the corporate landowner an "option" to avail of the stock
distribution option or to have the SDP approved within two (2) years from the approval
of RA 6657. This interpretation is consistent with the well-established principle in
statutory construction that “[t]he word or is a disjunctive term signifying
disassociation and independence of one thing from the other things enumerated; it
should, as a rule, be construed in the sense in which it ordinarily implies, as a
disjunctive word.―[20] In PCI Leasing and Finance, Inc. v. Giraffe-X Creative
Imaging, Inc.,[21] this Court held:

Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND
the return of the equipment; only either one of the two was required. The demand
letter was prepared and signed by Atty. Florecita R. Gonzales, presumablypetitioner's
counsel. As such, the use of "or"• instead of "and" in the letter could hardly be treated
as a simple typographical error, bearing in mind the nature of the demand, the amount
involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would
have known that a world of difference exists between "and" and "or"• in the manner
that the word was employed in the letter.

A rule in statutory construction is that the word "or"• is a disjunctive term signifying
dissociation and independence of one thing from other things enumerated unless the
context requires a different interpretation.[22]

In its elementary sense, "or"•, as used in a statute, is a disjunctive article indicating

an alternative. It often connects a series of words or propositions indicating a choice of
either. When "or"• is used, the various members of the enumeration are to be taken
separately.[23]

The word "or"• is a disjunctive term signifying disassociation and independence of one
thing from each of the other things enumerated.[24] (Emphasis in the original.)
Given that HLI secured approval of its SDP in November 1989, well within the two-year
period reckoned from June 1988 when RA 6657 took effect, then HLI did not violate the
last paragraph of Sec. 31 of RA 6657. Pertinently, said provision does not bar Us from
applying the operative fact doctrine.

Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed
the revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of the
agricultural lands of Hacienda Luisita in view of HLI's violation of the SDP and DAO 10.
By applying the operative fact doctrine, this Court merely gave the qualified FWBs the
option to remain as stockholders of HLI and ruled that they will retain the homelots and
other benefits which they received from HLI by virtue of the SDP.

It bears stressing that the application of the operative fact doctrine by the Court in its
July 5, 2011 Decision is favorable to the FWBs because not only were the FWBs allowed
to retain the benefits and homelots they received under the stock distribution scheme,
they were also given the option to choose for themselves whether they want to remain
as stockholders of HLI or not. This is in recognition of the fact that despite the claims of
certain farmer groups that they represent the qualified FWBs in Hacienda Luisita, none
of them can show that they are duly authorized to speak on their behalf. As We have
mentioned, “To date, such authorization document, which would logically include a
list of the names of the authorizing FWBs, has yet to be submitted to be part of the
records.―

II. Constitutionality of Sec. 31, RA 6657

FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota of
the case, raised at the earliest opportunity, and not to be considered as moot and
academic.[25]

This contention is unmeritorious. As We have succinctly discussed in Our July 5, 2011

Decision:

While there is indeed an actual case or controversy, intervenor FARM, composed of a

small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC
approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter
and why its members received benefits from the SDP without so much of a protest. It
was only on December 4, 2003 or 14 years after approval of the SDP via PARC
Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving
resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT
question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some
eighteen (18) years from November 21, 1989 before it challenged the constitutionality
of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on
their rights and even accepted benefits from the SDP with nary a complaint on the
alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court
cannot now be goaded into resolving a constitutional issue that FARM failed to assail
after the lapse of a long period of time and the occurrence of numerous events and
activities which resulted from the application of an alleged unconstitutional legal
provision.

It has been emphasized in a number of cases that the question of constitutionality will
not be passed upon by the Court unless it is properly raised and presented in an
appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly
questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that
the constitutional question should be raised at the earliest possible opportunity is
clearly wanting.

The last but the most important requisite that the constitutional issue must be the very
lis mota of the case does not likewise obtain. The lis mota aspect is not present, the
constitutional issue tendered not being critical to the resolution of the case. The
unyielding rule has been to avoid, whenever plausible, an issue assailing the
constitutionality of a statute or governmental act. If some other grounds exist by which
judgment can be made without touching the constitutionality of a law, such recourse is
favored. Garcia v. Executive Secretary explains why:

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.

The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the Supervisory Group,
is the alleged non-compliance by HLI with the conditions of the SDP to support a plea
for its revocation. And before the Court, the lis mota is whether or not PARC acted in
grave abuse of discretion when it ordered the recall of the SDP for such non-compliance
and the fact that the SDP, as couched and implemented, offends certain constitutional
and statutory provisions. To be sure, any of these key issues may be resolved without
plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into
the underlying petitions of AMBALA, et al., it is not the said section per se that is
invalid, but rather it is the alleged application of the said provision in the SDP that is
flawed.

It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis-Ã -vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides:
“[T]hat after June 30, 2009, the modes of acquisition shall be limited to
voluntary offer to sell and compulsory acquisition.― Thus, for all intents and
purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an
available option under existing law. The question of whether or not it is unconstitutional
should be a moot issue. (Citations omitted; emphasis in the original.)

Based on the foregoing disquisitions, We maintain that this Court is NOT compelled to
rule on the constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that this
Court, in its July 5, 2011 Decision, made no ruling in favor of the constitutionality of
Sec. 31 of RA 6657. There was, however, a determination of the existence of an
apparent grave violation of the Constitution that may justify the resolution of the issue
of constitutionality, to which this Court ruled in the negative. Having clarified this
matter, all other points raised by both FARM and AMBALA concerning the
constitutionality of RA 6657 deserve scant consideration.

III. Coverage of Compulsory Acquisition

FARM argues that this Court ignored certain material facts when it limited the maximum
area to be covered to 4,915.75 hectares, whereas the area that should, at the least, be
covered is 6,443 hectares,[26] which is the agricultural land allegedly covered by RA
6657 and previously held by Tarlac Development Corporation (Tadeco).[27]

We cannot subscribe to this view. Since what is put in issue before the Court is the
propriety of the revocation of the SDP, which only involves 4,915.75 has. of agricultural
land and not 6,443 has., then We are constrained to rule only as regards the 4,915.75
has. of agricultural land.

Moreover, as admitted by FARM itself, this issue was raised for the first time by FARM in
its Memorandum dated September 24, 2010 filed before this Court.[28] In this regard, it
should be noted that “[a]s a legal recourse, the special civil action of certiorari is a
limited form of review.―[29] The certiorari jurisdiction of this Court is narrow in scope
as it is restricted to resolving errors of jurisdiction and grave abuse of discretion, and
not errors of judgment.[30] To allow additional issues at this stage of the proceedings is
violative of fair play, justice and due process.[31]

Nonetheless, it should be taken into account that this should not prevent the DAR,
under its mandate under the agrarian reform law, from subsequently subjecting to
agrarian reform other agricultural lands originally held by Tadeco that were allegedly
not transferred to HLI but were supposedly covered by RA 6657.

DAR, however, contends that the declaration of the area[32] to be awarded to each FWB
is too restrictive. It stresses that in agricultural landholdings like Hacienda Luisita, there
are roads, irrigation canals, and other portions of the land that are considered
commonly-owned by farmworkers, and this may necessarily result in the decrease of
the area size that may be awarded per FWB.[33] DAR also argues that the July 5, 2011
Decision of this Court does not give it any leeway in adjusting the area that may be
awarded per FWB in case the number of actual qualified FWBs decreases.[34]

The argument is meritorious. In order to ensure the proper distribution of the

agricultural lands of Hacienda Luisita per qualified FWB, and considering that matters
involving strictly the administrative implementation and enforcement of agrarian reform
laws are within the jurisdiction of the DAR,[35] it is the latter which shall determine the
area with which each qualified FWB will be awarded.
(a) Conversion of Agricultural Lands

AMBALA insists that the conversion of the agricultural lands violated the conditions of
RA 6657 and DAO 10, stating that "keeping the land intact and unfragmented is one of
the essential conditions of [the] SD[P], RA 6657 and DAO 10."•[36] It asserts that "this
provision or conditionality is not mere decoration and is intended to ensure that the
farmers can continue with the tillage of the soil especially since it is the only occupation
that majority of them knows."[37]

We disagree. As We amply discussed in Our July 5, 2011 Decision:

Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657, and
DAO 10.

The Terminal Report states that the proposed distribution plan submitted in 1989 to the
PARC effectively assured the intended stock beneficiaries that the physical integrity of
the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-assailed
resolution would take HLI to task for securing approval of the conversion to non-
agricultural uses of 500 hectares of the hacienda. In not too many words, the Report
and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which
reads: “a. that the continued operation of the corporation with its agricultural land
intact and unfragmented is viable with potential for growth and increased profitability."

The PARC is wrong.

In the first place, Sec. 5(a)““just like the succeeding Sec. 5(b) of DAO 10 on increased
income and greater benefits to qualified beneficiaries““is but one of the stated criteria
to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not
exact from the corporate landowner-applicant the undertaking to keep the farm intact
and unfragmented ad infinitum. And there is logic to HLI's stated observation that the
key phrase in the provision of Sec. 5(a) is "viability of corporate operations•: "[w]hat
is thus required is not the agricultural land remaining intact x x x but the viability of the
corporate operations with its agricultural land being intact and unfragmented. Corporate
operation may be viable even if the corporate agricultural land does not remain intact
or [un]fragmented."•[38]

It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisita's
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA
6657 which reads:

Sec. 65. Conversion of Lands.¾After the lapse of five 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 landowner with due notice to the affected parties, and subject to existing
laws, may authorize the x x x conversion of the land and its dispositions. x x x
Moreover, it is worth noting that the application for conversion had the backing of 5,000
or so FWBs, including respondents Rene Galang, and Jose Julio Suniga, then leaders of
the AMBALA and the Supervisory Group, respectively, as evidenced by the Manifesto of
Support they signed and which was submitted to the DAR.[39] If at all, this means that
AMBALA should be estopped from questioning the conversion of a portion of Hacienda
Luisita, which its leader has fully supported.

(b) LIPCO and RCBC as Innocent Purchasers for Value

The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial Banking
Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not innocent
purchasers for value. The AMBALA, in particular, argues that LIPCO, being a wholly-
owned subsidiary of HLI, is conclusively presumed to have knowledge of the agrarian
dispute on the subject land and could not feign ignorance of this fact, especially since
they have the same directors and stockholders.[40] This is seconded by Rene Galang and
AMBALA, through the PILC, which intimate that a look at the General Information
Sheets of the companies involved in the transfers of the 300-hectare portion of
Hacienda Luisita, specifically, Centennary Holdings, Inc. (Centennary), LIPCO and
RCBC, would readily reveal that their directors are interlocked and connected to Tadeco
and HLI.[41] Rene Galang and AMBALA, through the PILC, also allege that “with the
clear-cut involvement of the leadership of all the corporations concerned, LIPCO and
RCBC cannot feign ignorance that the parcels of land they bought are under the
coverage of the comprehensive agrarian reform program [CARP] and that the
conditions of the respective sales are imbued with public interest where normal
property relations in the Civil Law sense do not apply.―[42]

Avowing that the land subject of conversion still remains undeveloped, Rene Galang
and AMBALA, through the PILC, further insist that the condition that “[t]he
development of the land should be completed within the period of five [5] years from the
issuance of this Order― was not complied with. AMBALA also argues that since RCBC
and LIPCO merely stepped into the shoes of HLI, then they must comply with the
conditions imposed in the conversion order.[43]

In addition, FARM avers that among the conditions attached to the conversion order,
which RCBC and LIPCO necessarily have knowledge of, are (a) that its approval shall in
no way amend, diminish, or alter the undertaking and obligations of HLI as contained in
the [SDP] approved on November 21, 1989; and (b) that the benefits, wages and the
like, received by the FWBs shall not in any way be reduced or adversely affected,
among others.[44]

The contentions of respondents are wanting. In the first place, there is no denying that
RCBC and LIPCO knew that the converted lands they bought were under the coverage
of CARP. Nevertheless, as We have mentioned in Our July 5, 2011 Decision, this does
not necessarily mean that both LIPCO and RCBC already acted in bad faith in
purchasing the converted lands. As this Court explained:

It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that
were previously covered by the SDP. Good faith “consists in the possessor's belief
that the person from whom he received it was the owner of the same and could convey
his title. Good faith requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There is good
faith where there is an honest intention to abstain from taking any unconscientious
advantage from another." It is the opposite of fraud.

To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were
validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2
and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA
6657 explicitly allows conversion and disposition of agricultural lands previously
covered by CARP land acquisition "after the lapse of five (5) years from its award when
the land ceases to be economically feasible and sound for agricultural purposes or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes."• Moreover, DAR notified all the
affected parties, more particularly the FWBs, and gave them the opportunity to
comment or oppose the proposed conversion. DAR, after going through the necessary
processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its
primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian
reform matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the CA. In this factual
setting, RCBC and LIPCO purchased the lots in question on their honest and well-
founded belief that the previous registered owners could legally sell and convey the lots
though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted
in good faith in acquiring the subject lots. (Emphasis supplied.)

In the second place, the allegation that the converted lands remain undeveloped is
contradicted by the evidence on record, particularly, Annex "X" of LIPCO's
Memorandum dated September 23, 2010,[45] which has photographs showing that the
land has been partly developed.[46] Certainly, it is a general rule that the factual
findings of administrative agencies are conclusive and binding on the Court when
supported by substantial evidence.[47] However, this rule admits of certain exceptions,
one of which is when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record.[48]

In the third place, by arguing that the companies involved in the transfers of the 300-
hectare portion of Hacienda Luisita have interlocking directors and, thus, knowledge of
one may already be imputed upon all the other companies, AMBALA and Rene Galang,
in effect, want this Court to pierce the veil of corporate fiction. However, piercing the
veil of corporate fiction is warranted "only in cases when the separate legal entity is
used to defeat public convenience, justify wrong, protect fraud, or defend crime, such
that in the case of two corporations, the law will regard the corporations as merged into
one."•[49] As succinctly discussed by the Court in Velarde v. Lopez, Inc.:[50]

Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by

piercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted,
however, only in cases when the separate legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, such that in the case of two
corporations, the law will regard the corporations as merged into one. The rationale
behind piercing a corporation's identity is to remove the barrier between the
corporation from the persons comprising it to thwart the fraudulent and illegal schemes
of those who use the corporate personality as a shield for undertaking certain
proscribed activities.

In applying the doctrine of piercing the veil of corporate fiction, the following requisites
must be established: (1) control, not merely majority or complete stock control; (2)
such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in
contravention of plaintiff's legal rights; and (3) the aforesaid control and breach of duty
must proximately cause the injury or unjust loss complained of. (Citations omitted.)

Nowhere, however, in the pleadings and other records of the case can it be gathered
that respondent has complete control over Sky Vision, not only of finances but of policy
and business practice in respect to the transaction attacked, so that Sky Vision had at
the time of the transaction no separate mind, will or existence of its own. The existence
of interlocking directors, corporate officers and shareholders is not enough justification
to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations.

Absent any allegation or proof of fraud or other public policy considerations, the
existence of interlocking directors, officers and stockholders is not enough justification
to pierce the veil of corporate fiction as in the instant case.

And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered
the payment of the proceeds of the sale of the converted land, and even of the 80.51-
hectare land sold to the government, through the Bases Conversion Development
Authority, to the qualified FWBs, effectively fulfils the conditions in the conversion
order, to wit: (1) that its approval shall in no way amend, diminish, or alter the
undertaking and obligations of HLI as contained in the SDP approved on November 21,
1989; and (2) that the benefits, wages and the like, received by the FWBs shall not in
any way be reduced or adversely affected, among others.

A view has also been advanced that the 200-hectare lot transferred to Luisita Realty
Corporation (LRC) should be included in the compulsory coverage because the
corporation did not intervene.

We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by
PARC Resolution 2005-32-01, this Court is constrained to make a ruling on the rights of
LRC over the said lot. Moreover, the 500-hectare portion of Hacienda Luisita, of which
the 200-hectare portion sold to LRC and the 300-hectare portion subsequently acquired
by LIPCO and RCBC were part of, was already the subject of the August 14, 1996 DAR
Conversion Order. By virtue of the said conversion order, the land was already
reclassified as industrial/commercial land not subject to compulsory coverage. Thus, if
We place the 200-hectare lot sold to LRC under compulsory coverage, this Court would,
in effect, be disregarding the DAR Conversion Order, which has long attained its finality.
And as this Court held in Berboso v. CA,[51] “Once final and executory, the
Conversion Order can no longer be questioned."• Besides, to disregard the Conversion
Order through the revocation of the approval of the SDP would create undue prejudice
to LRC, which is not even a party to the proceedings below, and would be tantamount
to deprivation of property without due process of law.

Nonethess, the minority is of the adamant view that since LRC failed to intervene in the
instant case and was, therefore, unable to present evidence supporting its good faith
purchase of the 200-hectare converted land, then LRC should be given full opportunity
to present its case before the DAR. This minority view is a contradiction in itself. Given
that LRC did not intervene and is, therefore, not a party to the instant case, then it
would be incongruous to order them to present evidence before the DAR. Such an
order, if issued by this Court, would not be binding upon the LRC.

Moreover, LRC may be considered to have waived its right to participate in the instant
petition since it did not intervene in the DAR proceedings for the nullification of the
PARC Resolution No. 89-12-2 which approved the SDP.

(c) Proceeds of the sale of the 500-hectare converted land

and of the 80.51-hectare land used for the SCTEX

As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot acquired by the government from compulsory coverage, then
HLI and its subsidiary, Centennary, should be liable to the FWBs for the price received
for said lots. Thus:

There is a claim that, since the sale and transfer of the 500 hectares of land subject of
the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after
compulsory coverage has taken place, the FWBs should have their corresponding share
of the land's value. There is merit in the claim. Since the SDP approved by PARC
Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will
automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the
Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order
and the 80.51-hectare SCTEX lot acquired by the government from the area covered by
SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price
received for said lots. HLI shall be liable for the value received for the sale of the 200-
hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value of the
12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO
for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP
80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.

We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account
the payment of taxes and expenses relating to the transfer of the land and HLI's
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. In order to determine once and for all whether or not all the proceeds were
properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of
a reputable accounting firm to be approved by the parties to audit the books of HLI to
determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare
SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order. The cost of the audit will be
shouldered by HLI. If after such audit, it is determined that there remains a balance
from the proceeds of the sale, then the balance shall be distributed to the qualified
FWBs.

HLI, however, takes exception to the above-mentioned ruling and contends that it is
not proper to distribute the unspent or unused balance of the proceeds of the sale of
the 500-hectare converted land and 80.51-hectare SCTEX lot to the qualified FWBs for
the following reasons: (1) the proceeds of the sale belong to the corporation, HLI, as
corporate capital and assets in substitution for the portions of its land asset which were
sold to third parties; (2) to distribute the cash sales proceeds of the portions of the land
asset to the FWBs, who are stockholders of HLI, is to dissolve the corporation and
distribute the proceeds as liquidating dividends without even paying the creditors of the
corporation; and (3) the doing of said acts would violate the stringent provisions of the
Corporation Code and corporate practice.[52]

Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability to
the FWBs for the price received for the 500-hectare converted lot and the 80.51-
hectare SCTEX lot. However, as We have established in Our July 5, 2011 Decision, the
rights, obligations and remedies of the parties in the instant case are primarily
governed by RA 6657 and HLI cannot shield itself from the CARP coverage merely
under the convenience of being a corporate entity. In this regard, it should be
underscored that the agricultural lands held by HLI by virtue of the SDP are no ordinary
assets. These are special assets, because, originally, these should have been
distributed to the FWBs were it not for the approval of the SDP by PARC. Thus, the
government cannot renege on its responsibility over these assets. Likewise, HLI is no
ordinary corporation as it was formed and organized precisely to make use of these
agricultural lands actually intended for distribution to the FWBs. Thus, it cannot shield
itself from the coverage of CARP by invoking the Corporation Code. As explained by the
Court:

HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.

Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply with RA
6657, which the OSG aptly described as the “mother law― of the SDOA and the
SDP.[53] It is, thus, paradoxical for HLI to shield itself from the coverage of
CARP by invoking exclusive applicability of the Corporation Code under the
guise of being a corporate entity.

Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of
the parties arising from the SDP should not be made to supplant or circumvent
the agrarian reform program.

Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is the
special law on agrarian reform. As between a general and special law, the latter shall
prevail”generalia specialibus non derogant.[54] Besides, the present impasse between
HLI and the private respondents is not an intra-corporate dispute which necessitates
the application of the Corporation Code. What private respondents questioned before
the DAR is the proper implementation of the SDP and HLI's compliance with RA 6657.
Evidently, RA 6657 should be the applicable law to the instant case. (Emphasis
supplied.)

Considering that the 500-hectare converted land, as well as the 80.51-hectare SCTEX
lot, should have been included in the compulsory coverage were it not for their
conversion and valid transfers, then it is only but proper that the price received for the
sale of these lots should be given to the qualified FWBs. In effect, the proceeds from
the sale shall take the place of the lots.

The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the
payment of taxes and expenses relating to the transfer of the land, as well as HLI's
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. Accordingly, We ordered the deduction of the taxes and expenses relating to
the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary for legitimate corporate purposes, among others.

On this note, DAR claims that the “[l]egitimate corporate expenses should not be
deducted as there is no basis for it, especially since only the auditing to be conducted
on the financial records of HLI will reveal the amounts to be offset between HLI and the
FWBs."[55]

The contention is unmeritorious. The possibility of an offsetting should not prevent Us

from deducting the legitimate corporate expenses incurred by HLI and Centennary.
After all, the Court has ordered for a proper auditing "œ[i]n order to determine once
and for all whether or not all the proceeds were properly utilized by HLI and its
subsidiary, Centennary."• In this regard, DAR is tasked to "ngage the services of a
reputable accounting firm to be approved by the parties to audit the books of HLI to
determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare
SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order." Also, it should be noted that it
is HLI which shall shoulder the cost of audit to reduce the burden on the part of the
FWBs. Concomitantly, the legitimate corporate expenses incurred by HLI and
Centennary, as will be determined by a reputable accounting firm to be engaged by
DAR, shall be among the allowable deductions from the proceeds of the sale of the 500-
hectare land and the 80.51-hectare SCTEX lot.

We, however, find that the 3% production share should not be deducted from the
proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX
lot. The 3% production share, like the homelots, was among the benefits received by
the FWBs as farmhands in the agricultural enterprise of HLI and, thus, should not be
taken away from the FWBs.

Contrarily, the minority is of the view that as a consequence of the revocation of the
SDP, the parties should be restored to their respective conditions prior to its execution
and approval, subject to the application of the principle of set-off or compensation.
Such view is patently misplaced.

The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To
reiterate, what was actually revoked by this Court, in its July 5, 2011 Decision, is PARC
Resolution No. 89-12-2 approving the SDP. To elucidate, it was the SDP, not the SDOA,
which was presented for approval by Tadeco to DAR.[56] The SDP explained the
mechanics of the stock distribution but did not make any reference nor correlation to
the SDOA. The pertinent portions of the proposal read:

MECHANICS OF STOCK DISTRIBUTION PLAN

Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land may
distribute among the qualified beneficiaries such proportion or percentage of its capital
stock that the value of the agricultural land actually devoted to agricultural activities,
bears in relation to the corporation's total assets. Conformably with this legal provision,
Tarlac Development Corporation hereby submits for approval a stock distribution plan
that envisions the following:[57] (Terms and conditions omitted; emphasis supplied)

xxxx

The above stock distribution plan is hereby submitted on the basis of all these benefits
that the farmworker-beneficiaries of Hacienda Luisita will receive under its provisions in
addition to their regular compensation as farmhands in the agricultural enterprise and
the fringe benefits granted to them by their collective bargaining agreement with
management.[58]

Also, PARC Resolution No. 89-12-2 reads as follows:

RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF TARLAC DEVELOPMENT

COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)

NOW THEREFORE, on motion duly seconded, RESOLVED, as it is hereby resolved, to

approve the stock distribution plan of TDC/HLI.

UNANIMOUSLY APPROVED.[59] (Emphasis supplied)

Clearly, what was approved by PARC is the SDP and not the SDOA. There is, therefore,
no basis for this Court to apply the law on contracts to the revocation of the said PARC
Resolution.

IV. Just Compensation

In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation for
the remaining agricultural land that will be transferred to DAR for land distribution to
the FWBs.― We also ruled that the date of the "taking" is November 21, 1989, when
PARC approved HLI's SDP per PARC Resolution No. 89-12-2.

In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the
foregoing ruling and contends that the "taking" should be reckoned from finality of the
Decision of this Court, or at the very least, the reckoning period may be tacked to
January 2, 2006, the date when the Notice of Coverage was issued by the DAR
pursuant to PARC Resolution No. 2006-34-01 recalling/revoking the approval of the
SDP.[60]

For their part, Mallari, et al. argue that the valuation of the land cannot be based on
November 21, 1989, the date of approval of the SDP. Instead, they aver that the date
of "taking" for valuation purposes is a factual issue best left to the determination of the
trial courts.[61]

At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid
just compensation for the agricultural land that will be distributed to the FWBs, since
the Manila Regional Trial Court (RTC) already rendered a decision ordering “the
Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian
Reform, which will distribute the land to small farmers after compensating the
landowners P3.988 million.―[62] In the event, however, that this Court will rule that
HLI is indeed entitled to compensation, AMBALA contends that it should be pegged at
forty thousand pesos (PhP 40,000) per hectare, since this was the same value that
Tadeco declared in 1989 to make sure that the farmers will not own the majority of its
stocks.[63]

Despite the above propositions, We maintain that the date of "taking" is November 21,
1989, the date when PARC approved HLI's SDP per PARC Resolution No. 89-12-2, in
view of the fact that this is the time that the FWBs were considered to own and possess
the agricultural lands in Hacienda Luisita. To be precise, these lands became subject of
the agrarian reform coverage through the stock distribution scheme only upon the
approval of the SDP, that is, November 21, 1989. Thus, such approval is akin to a
notice of coverage ordinarily issued under compulsory acquisition. Further, any doubt
should be resolved in favor of the FWBs. As this Court held in Perez-Rosario v. CA:[64]

It is an established social and economic fact that the escalation of poverty is the driving
force behind the political disturbances that have in the past compromised the peace and
security of the people as well as the continuity of the national order. To subdue these
acute disturbances, the legislature over the course of the history of the nation passed a
series of laws calculated to accelerate agrarian reform, ultimately to raise the material
standards of living and eliminate discontent. Agrarian reform is a perceived solution to
social instability. The edicts of social justice found in the Constitution and the
public policies that underwrite them, the extraordinary national experience,
and the prevailing national consciousness, all command the great departments
of government to tilt the balance in favor of the poor and underprivileged
whenever reasonable doubt arises in the interpretation of the law. But annexed
to the great and sacred charge of protecting the weak is the diametric function to put
every effort to arrive at an equitable solution for all parties concerned: the jural
postulates of social justice cannot shield illegal acts, nor do they sanction false
sympathy towards a certain class, nor yet should they deny justice to the landowner
whenever truth and justice happen to be on her side. In the occupation of the legal
questions in all agrarian disputes whose outcomes can significantly affect societal
harmony, the considerations of social advantage must be weighed, an inquiry into the
prevailing social interests is necessary in the adjustment of conflicting demands and
expectations of the people, and the social interdependence of these interests,
recognized. (Emphasis supplied.)
The minority contends that it is the date of the notice of coverage, that is, January 2,
2006, which is determinative of the just compensation HLI is entitled to for its
expropriated lands. To support its contention, it cited numerous cases where the time
of the taking was reckoned on the date of the issuance of the notice of coverage.

However, a perusal of the cases cited by the minority would reveal that none of them
involved the stock distribution scheme. Thus, said cases do not squarely apply to the
instant case. Moreover, it should be noted that it is precisely because the stock
distribution option is a distinctive mechanism under RA 6657 that it cannot be treated
similarly with that of compulsory land acquisition as these are two (2) different
modalities under the agrarian reform program. As We have stated in Our July 5, 2011
Decision, RA 6657 "provides two (2) alternative modalities, i.e., land or stock transfer,
pursuant to either of which the corporate landowner can comply with CARP."•

In this regard, it should be noted that when HLI submitted the SDP to DAR for
approval, it cannot be gainsaid that the stock distribution scheme is clearly HLI's
preferred modality in order to comply with CARP. And when the SDP was approved,
stocks were given to the FWBs in lieu of land distribution. As aptly observed by the
minority itself, "[i]nstead of expropriating lands, what the government took and
distributed to the FWBs were shares of stock of petitioner HLI in proportion to the value
of the agricultural lands that should have been expropriated and turned over to the
FWBs."• It cannot, therefore, be denied that upon the approval of the SDP submitted
by HLI, the agricultural lands of Hacienda Luisita became subject of CARP coverage.
Evidently, the approval of the SDP took the place of a notice of coverage issued under
compulsory acquisition.

Also, it is surprising that while the minority opines that under the stock distribution
option, “title to the property remains with the corporate landowner, which should
presumably be dominated by farmers with majority stockholdings in the
corporation,"• it still insists that the just compensation that should be given to HLI is
to be reckoned on January 2, 2006, the date of the issuance of the notice of coverage,
even after it found that the FWBs did not have the majority stockholdings in HLI
contrary to the supposed avowed policy of the law. In effect, what the minority wants is
to prejudice the FWBs twice. Given that the FWBs should have had majority
stockholdings in HLI but did not, the minority still wants the government to pay higher
just compensation to HLI. Even if it is the government which will pay the just
compensation to HLI, this will also affect the FWBs as they will be paying higher
amortizations to the government if the "taking" will be considered to have taken place
only on January 2, 2006.

The foregoing notwithstanding, it bears stressing that the DAR's land valuation is only
preliminary and is not, by any means, final and conclusive upon the landowner. The
landowner can file an original action with the RTC acting as a special agrarian court to
determine just compensation. The court has the right to review with finality the
determination in the exercise of what is admittedly a judicial function.[65]

A view has also been advanced that HLI should pay the qualified FWBs rental for the
use and possession of the land up to the time it surrenders possession and control over
these lands. What this view fails to consider is the fact that the FWBs are also
stockholders of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also, the
income earned by the corporation from its possession and use of the land ultimately
redounded to the benefit of the FWBs based on its business operations in the form of
salaries, benefits voluntarily granted by HLI and other fringe benefits under their
Collective Bargaining Agreement. That being so, there would be unjust enrichment on
the part of the FWBs if HLI will still be required to pay rent for the use of the land in
question.

V. Sale to Third Parties

There is a view that since the agricultural lands in Hacienda Luisita were placed under
CARP coverage through the SDOA scheme on May 11, 1989, then the 10-year period
prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10, 1999,
and, consequently, the qualified FWBs should already be allowed to sell these lands
with respect to their land interests to third parties, including HLI, regardless of whether
they have fully paid for the lands or not.

The proposition is erroneous. Sec. 27 of RA 6657 states:

SEC. 27. Transferability of Awarded Lands. - Lands acquired by beneficiaries 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 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 Barangay Agrarian Reform Committee (BARC) of
the barangay where the land is situated. The Provincial Agrarian Coordinating
Committee (PARCCOM), as herein provided, shall, in turn, be given due notice thereof
by the BARC.

If the land has not yet been fully paid by the beneficiary, the right 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. 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 has made on the land. (Emphasis supplied.)

To implement the above-quoted provision, inter alia, DAR issued Administrative Order
No. 1, Series of 1989 (DAO 1) entitled Rules and Procedures Governing Land
Transactions. Said Rules set forth the rules on validity of land transactions, to wit:

II. RULES ON VALIDITY OF LAND TRANSACTIONS

A. The following transactions are valid:

 1. Those executed by the original landowner in favor of the qualified
beneficiary from among those certified by DAR.

2. Those in favor of the government, DAR or the Land Bank of the

Philippines.

3. Those covering lands retained by the landowner under Section 6 of R.A.

6657 duly certified by the designated DAR Provincial Agrarian Reform
Officer (PARO) as a retention area, executed in favor of transferees whose
total landholdings inclusive of the land to be acquired do not exceed five
(5) hectares; subject, however, to the right of pre-emption and/or
redemption of tenant/lessee under Section 11 and 12 of R.A. 3844, as
amended.

xxxx

4. Those executed by beneficiaries covering lands acquired under any

agrarian reform law in favor of the government, DAR, LBP or other
qualified beneficiaries certified by DAR.

5. Those executed after ten (10) years from the issuance and registration of
the Emancipation Patent or Certificate of Land Ownership Award.

B. The following transactions are not valid:

1. Sale, disposition, lease management contract or transfer of possession of

private lands executed by the original landowner prior to June 15, 1988,
which are registered on or before September 13, 1988, or those executed
after June 15, 1988, covering an area in excess of the five-hectare
retention limit in violation of R.A. 6657.

2. Those covering lands acquired by the beneficiary under R.A. 6657 and
executed within ten (10) years from the issuance and registration of an
Emancipation Patent or Certificate of Land Ownership Award.

3. Those executed in favor of a person or persons not qualified to acquire

land under R.A. 6657.

4. Sale, transfer, conveyance or change of nature of the land outside of

urban centers and city limits either in whole or in part as of June 15,
1988, when R.A. 6657 took effect, except as provided for under DAR
Administrative Order No. 15, series of 1988.

5. Sale, transfer or conveyance by beneficiary of the right to use or any

other usufructuary right over the land he acquired by virtue of being a
beneficiary, in order to circumvent the law.

x x x x (Emphasis supplied.)

Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be
transferred or conveyed after ten (10) years from the issuance and registration of
the emancipation patent (EP) or certificate of land ownership award (CLOA).
Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in
the instant case, the 10-year prohibitive period has not even started. Significantly, the
reckoning point is the issuance of the EP or CLOA, and not the placing of the
agricultural lands under CARP coverage.

Moreover, if We maintain the position that the qualified FWBs should be immediately
allowed the option to sell or convey the agricultural lands in Hacienda Luisita, then all
efforts at agrarian reform would be rendered nugatory by this Court, since, at the end
of the day, these lands will just be transferred to persons not entitled to land
distribution under CARP. As aptly noted by the late Senator Neptali Gonzales during the
Joint Congressional Conference Committee on the Comprehensive Agrarian Reform
Program Bills:

SEN. GONZALES. My point is, as much as possible let the said lands be
distributed under CARP remain with the beneficiaries and their heirs because
that is the lesson that we have to learn from PD No. 27. If you will talk with the
Congressmen representing Nueva Ecija, Pampanga and Central Luzon provinces, law or
no law, you will find out that more than one-third of the original, of the lands
distributed under PD 27 are no longer owned, possessed or being worked by
the grantees or the awardees of the same, something which we ought to avoid
under the CARP bill that we are going to enact.[66] (Emphasis supplied.)

Worse, by raising that the qualified beneficiaries may sell their interest back to HLI, this
smacks of outright indifference to the provision on retention limits[67] under RA 6657,
as this Court, in effect, would be allowing HLI, the previous landowner, to own more
than five (5) hectares of agricultural land, which We cannot countenance. There is a big
difference between the ownership of agricultural lands by HLI under the stock
distribution scheme and its eventual acquisition of the agricultural lands from the
qualified FWBs under the proposed buy-back scheme. The rule on retention limits does
not apply to the former but only to the latter in view of the fact that the stock
distribution scheme is sanctioned by Sec. 31 of RA 6657, which specifically allows
corporations to divest a proportion of their capital stock that “the agricultural land,
actually devoted to agricultural activities, bears in relation to the company’s total
assets.― On the other hand, no special rules exist under RA 6657 concerning the
proposed buy-back scheme; hence, the general rules on retention limits should apply.

Further, the position that the qualified FWBs are now free to transact with third parties
concerning their land interests, regardless of whether they have fully paid for the lands
or not, also transgresses the second paragraph of Sec. 27 of RA 6657, which plainly
states that "[i]f the land has not yet been fully paid by the beneficiary, the right 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. Failing compliance herewith, the land shall
be transferred to the LBP x x x."• When the words and phrases in the statute are clear
and unequivocal, the law is applied according to its express terms.[68] Verba legis non
est recedendum, or from the words of a statute there should be no departure.[69]

The minority, however, posits that “[t]o insist that the FWBs' rights sleep for a
period of ten years is unrealistic, and may seriously deprive them of real opportunities
to capitalize and maximize the victory of direct land distribution.― By insisting that
We disregard the ten-year restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation, which is violative of the
principle of separation of powers.[70] The discourse by Ruben E. Agpalo, in his book on
statutory construction, is enlightening:

Where the law is clear and unambiguous, it must be taken to mean exactly what it says
and the court has no choice but to see to it that its mandate is obeyed. Where the law
is clear and free from doubt or ambiguity, there is no room for construction or
interpretation. Thus, where what is not clearly provided in the law is read into
the law by construction because it is more logical and wise, it would be to
encroach upon legislative prerogative to define the wisdom of the law, which
is judicial legislation. For whether a statute is wise or expedient is not for the
courts to determine. Courts must administer the law, not as they think it ought
to be but as they find it and without regard to consequences.[71] (Emphasis
supplied.)

And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang
Ladlad LGBT Party v. COMELEC:[72]

Regardless of the personal beliefs and biases of its individual members, this Court can
only apply and interpret the Constitution and the laws. Its power is not to create policy
but to recognize, review or reverse the policy crafted by the political departments if and
when a proper case is brought before it. Otherwise, it will tread on the dangerous
grounds of judicial legislation.

Considerably, this Court is left with no other recourse but to respect and apply the law.

VI. Grounds for Revocation of the SDP

AMBALA and FARM reiterate that improving the economic status of the FWBs is among
the legal obligations of HLI under the SDP and is an imperative imposition by RA 6657
and DAO 10.[73] FARM further asserts that “[i]f that minimum threshold is not met,
why allow [stock distribution option] at all, unless the purpose is not social justice but a
political accommodation to the powerful.―[74]

Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657 and
DAO 10 can it be inferred that improving the economic status of the FWBs is among the
legal obligations of HLI under the SDP or is an imperative imposition by RA 6657 and
DAO 10, a violation of which would justify discarding the stock distribution option. As
We have painstakingly explained in Our July 5, 2011 Decision:

In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian
reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity
and improve the quality of lives of the FWBs through greater productivity of agricultural
lands. We disagree.

Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless
farmers and farm workers will receive the highest consideration to promote social
justice and to move the nation towards sound rural development and industrialization,
and the establishment of owner cultivatorship of economic-sized farms as the basis of
Philippine agriculture.

To this end, 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,
shall be undertaken to provide farmers and farm workers with the opportunity to
enhance their dignity and improve the quality of their lives through greater
productivity of agricultural lands.

The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof. To this end, the
State shall encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into account ecological,
developmental, and equity considerations, and subject to the payment of just
compensation. The State shall respect the right of small landowners and shall provide
incentives for voluntary land-sharing.

Paragraph 2 of the above-quoted provision specifically mentions that “a more

equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of agricultural lands.― Of note
is the term “opportunity― which is defined as a favorable chance or opening
offered by circumstances. Considering this, by no stretch of imagination can said
provision be construed as a guarantee in improving the lives of the FWBs. At best, it
merely provides for a possibility or favorable chance of uplifting the economic status of
the FWBs, which may or may not be attained.

Pertinently, improving the economic status of the FWBs is neither among the legal
obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10,
a violation of which would justify discarding the stock distribution option. Nothing in
that option agreement, law or department order indicates otherwise.

Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and
higher benefits exclusive of free hospital and medical benefits to their immediate
family. And attached as Annex “G― to HLI's Memorandum is the certified true
report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac
Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit
Privileges (in Thousand Pesos) Since the Stock Option was Approved by
PARC/CARP, detailing what HLI gave their workers from 1989 to 2005. The sum total,
as added up by the Court, yields the following numbers: Total Direct Cash Out
(Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out
(Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the
report, include the cost of homelots; the PhP 150 million or so representing 3% of the
gross produce of the hacienda; and the PhP 37.5 million representing 3% from the
proceeds of the sale of the 500-hectare converted lands. While not included in the
report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80
hectares of land traversed by the SCTEX. On top of these, it is worth remembering that
the shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs have
benefited from the SDP.

To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not
anyway earned profits through the years, it cannot be over-emphasized that, as a
matter of common business sense, no corporation could guarantee a profitable run all
the time. As has been suggested, one of the key features of an SDP of a corporate
landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing
money.

The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider
the advisability of approving a stock distribution plan is the likelihood that the plan
“would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them
individually.― But as aptly noted during the oral arguments, DAO 10 ought to have
not, as it cannot, actually exact assurance of success on something that is subject to
the will of man, the forces of nature or the inherent risky nature of business.[75] Just
like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact
that there were many instances wherein after a farmworker beneficiary has been
awarded with an agricultural land, he just subsequently sells it and is eventually left
with nothing in the end.

In all then, the onerous condition of the FWBs' economic status, their life of hardship, if
that really be the case, can hardly be attributed to HLI and its SDP and provide a valid
ground for the plan’s revocation. (Citations omitted; emphasis in the original.)

This Court, despite the above holding, still affirmed the revocation by PARC of its
approval of the SDP based on the following grounds: (1) failure of HLI to fully comply
with its undertaking to distribute homelots to the FWBs under the SDP; (2) distribution
of shares of stock to the FWBs based on the number of "man days"• or "number of
days worked" by the FWB in a year's time; and (3) 30-year timeframe for the
implementation or distribution of the shares of stock to the FWBs.

Just the same, Mallari, et al. posit that the homelots required to be distributed have all
been distributed pursuant to the SDOA, and that what merely remains to be done is the
release of title from the Register of Deeds.[76] They further assert that there has been
no dilution of shares as the corporate records would show that if ever not all of the
18,804.32 shares were given to the actual original FWB, the recipient of the difference
is the next of kin or children of said original FWB.[77] Thus, they submit that since the
shares were given to the same “family beneficiary,― this should be deemed as
substantial compliance with the provisions of Sec. 4 of DAO 10.[78] Also, they argue
that there has been no violation of the three-month period to implement the SDP as
mandated by Sec. 11 of DAO, since this provision must be read in light of Sec. 10 of
Executive Order No. 229, the pertinent portion of which reads, “The approval by the
PARC of a plan for such stock distribution, and its initial implementation, shall be
deemed compliance with the land distribution requirement of the CARP.―[79]
Again, the matters raised by Mallari, et al. have been extensively discussed by the
Court in its July 5, 2011 Decision. As stated:

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations or

business associations owning or operating farms which opted for land distribution. Sec.
30 of RA 6657 states:

SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual

members of the cooperatives or corporations mentioned in the preceding section shall
be provided with homelots and small farmlots for their family use, to be taken from the
land owned by the cooperative or corporation.

The "preceding section"• referred to in the above-quoted provision is as follows:

SEC. 29. Farms Owned or Operated by Corporations or Other Business

Associations.¾In 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.

Noticeably, the foregoing provisions do not make reference to corporations which opted
for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are
not obliged to provide for it except by stipulation, as in this case.

Under the SDP, HLI undertook to "subdivide and allocate for free and without charge
among the qualified family-beneficiaries x x x 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 barrio or barangay where it actually resides," "œwithin a reasonable
time."•

More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240-
square meter homelots and, of those who were already given, some still do not have
the corresponding titles.

During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:

Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can you
also [prove] that the qualified family beneficiaries were already provided the 240
square meter homelots.

Atty. Asuncion: We will, your Honor please.

Other than the financial report, however, no other substantial proof showing that all the
qualified beneficiaries have received homelots was submitted by HLI. Hence, this Court
is constrained to rule that HLI has not yet fully complied with its undertaking to
distribute homelots to the FWBs under the SDP.

On “Man Days"and the Mechanics of Stock Distribution

In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the
SDOA states:

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
[HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the
THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of
one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND
PARTY that are presently owned and held by the FIRST PARTY, until such time as the
entire block of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.

Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of "man
days," that is, the number of days that the FWBs have worked during the year. This
formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes of
compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:

Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate landowner-

applicant shall provide for the distribution of an equal number of shares 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 R.A. No. 6657.

On top of the minimum ratio provided under Section 3 of this Implementing Guideline,
the 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.

The above proviso gives two (2) sets or categories of shares of stock which a qualified
beneficiary can acquire from the corporation under the SDP. The first pertains, as
earlier explained, to the mandatory minimum ratio of shares of stock to be distributed
to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates
of that "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."• It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is
supposed to be allocated “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."•

On the other hand, the second set or category of shares partakes of a gratuitous extra
grant, meaning that this set or category constitutes an augmentation share/s that the
corporate landowner may give under an additional stock distribution scheme, taking
into account such variables as rank, seniority, salary, position and like factors which the
management, in the exercise of its sound discretion, may deem desirable.

Before anything else, it should be stressed that, at the time PARC approved HLI's SDP,
HLI recognized 6,296 individuals as qualified FWBs. And under the 30-year stock
distribution program envisaged under the plan, FWBs who came in after 1989, new
FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.

Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of “man days,― HLI violated the afore-quoted rule on
stock distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given
up their rights to the land that could have been distributed to them, suffered a dilution
of their due share entitlement. As has been observed during the oral arguments, HLI
has chosen to use the shares earmarked for farmworkers as reward system chips to
water down the shares of the original 6,296 FWBs. Particularly:

Justice Abad: If the SDOA did not take place, the other thing that would have happened
is that there would be CARP?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: That’s the only point I want to know x x x. Now, but they chose to
enter SDOA instead of placing the land under CARP. And for that reason those who
would have gotten their shares of the land actually gave up their rights to this land in
place of the shares of the stock, is that correct?

Atty. Dela Merced: It would be that way, Your Honor.

Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to the
farmers and pay for the land, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the
farmers at that time that numbered x x x those who signed five thousand four hundred
ninety eight (5,498) beneficiaries, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional shares
who were not in the original list of owners?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Did those new workers give up any right that would have belong to them
in 1989 when the land was supposed to have been placed under CARP?

Atty. Dela Merced: If you are talking or referring… (interrupted)

Justice Abad: None! You tell me. None. They gave up no rights to land?

Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.

Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if
they become workers later on.

Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original…
(interrupted)

Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for new
workers who come in? It is not that the new workers, in effect, become just workers of
the corporation whose stockholders were already fixed. The TADECO who has shares
there about sixty six percent (66%) and the five thousand four hundred ninety eight
(5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x what
right or where did you get that right to use this shares, to water down the shares of
those who should have been benefited, and to use it as a reward system decided by the
company?

From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from watering
down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI
shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per
beneficiary, because the acquisition and distribution of the HLI shares were based on
“man days― or “number of days worked― by the FWB in a year's time. As
explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before
he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work in
one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such
that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as of said date stood at 10,502. All
these farmworkers, which include the original 6,296 FWBs, were given shares out of the
118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital
stock of HLI. Clearly, the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of “man days― and the hiring
of additional farmworkers.

Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-
year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec.
11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved
stock distribution plan within three (3) months from receipt by the corporate landowner
of the approval of the plan by PARC. In fact, based on the said provision, the transfer of
the shares of stock in the names of the qualified FWBs should be recorded in the stock
and transfer books and must be submitted to the SEC within sixty (60) days from
implementation. As stated:

Section 11. Implementation/Monitoring of Plan.¾The 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 the qualified beneficiaries shall be recorded in 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.

It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3) months
from receipt by HLI of the approval of the stock distribution plan by PARC. While neither
of the clashing parties has made a compelling case of the thrust of this provision, the
Court is of the view and so holds that the intent is to compel the corporate landowner
to complete, not merely initiate, the transfer process of shares within that three-month
timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the
SEC) requirement reckoned from the implementation of the SDP.

To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can veritably
evade compliance with agrarian reform by simply deferring to absurd limits the
implementation of the stock distribution scheme.

The argument is urged that the thirty (30)-year distribution program is justified by the
fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under
CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a
justifying dimension to its 30-year stock distribution program.

HLI's reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as

the said provision clearly deals with land distribution.

SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be paid
for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.

Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what is
involved is stock distribution, it is the corporate landowner who has the obligation to
distribute the shares of stock among the FWBs.

Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay
the cost of the land thus awarded them to make it less cumbersome for them to pay
the government. To be sure, the reason underpinning the 30-year accommodation does
not apply to corporate landowners in distributing shares of stock to the qualified
beneficiaries, as the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be
upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC
and the DAR have the power to issue rules and regulations, substantive or procedural.
Being a product of such rule-making power, DAO 10 has the force and effect of law and
must be duly complied with. The PARC is, therefore, correct in revoking the SDP.
Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving
the HLI's SDP is nullified and voided. (Citations omitted; emphasis in the original.)

Based on the foregoing ruling, the contentions of Mallari, et al. are either not supported
by the evidence on record or are utterly misplaced. There is, therefore, no basis for the
Court to reverse its ruling affirming PARC Resolution No. 2005-32-01 and PARC
Resolution No. 2006-34-01, revoking the previous approval of the SDP by PARC.

VII. Control over Agricultural Lands

After having discussed and considered the different contentions raised by the parties in
their respective motions, We are now left to contend with one crucial issue in the case
at bar, that is, control over the agricultural lands by the qualified FWBs.

Upon a review of the facts and circumstances, We realize that the FWBs will never have
control over these agricultural lands for as long as they remain as stockholders of HLI.
In Our July 5, 2011 Decision, this Court made the following observations:

There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR and
PARC to see to it the farmers should always own majority of the common shares
entitled to elect the members of the board of directors to ensure that the farmers will
have a clear majority in the board. Before the SDP is approved, strict scrutiny of the
proposed SDP must always be undertaken by the DAR and PARC, such that the value of
the agricultural land contributed to the corporation must always be more than 50% of
the total assets of the corporation to ensure that the majority of the members of the
board of directors are composed of the farmers. The PARC composed of the President
of the Philippines and cabinet secretaries must see to it that control over the board of
directors rests with the farmers by rejecting the inclusion of non-agricultural assets
which will yield the majority in the board of directors to non-farmers. Any deviation,
however, by PARC or DAR from the correct application of the formula prescribed by the
second paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally
infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec.
31 of RA 6657 does not trench on the constitutional policy of ensuring control by the
farmers. (Emphasis supplied.)

In line with Our finding that control over agricultural lands must always be in the hands
of the farmers, We reconsider our ruling that the qualified FWBs should be given an
option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never
gain control given the present proportion of shareholdings in HLI.

A revisit of HLI's Proposal for Stock Distribution under CARP and the Stock Distribution
Option Agreement (SDOA) upon which the proposal was based reveals that the total
assets of HLI is PhP 590,554,220, while the value of the 4,915.7466 hectares is PhP
196,630,000. Consequently, the share of the farmer-beneficiaries in the HLI capital
stock is 33.296% (196,630,000 divided by 590,554.220); 118,391,976.85 HLI shares
represent 33.296%. Thus, even if all the holders of the 118,391,976.85 HLI shares
unanimously vote to remain as HLI stockholders, which is unlikely, control will never be
placed in the hands of the farmer-beneficiaries. Control, of course, means the majority
of 50% plus at least one share of the common shares and other voting
shares. Applying the formula to the HLI stockholdings, the number of shares that will
constitute the majority is 295,112,101 shares (590,554,220 divided by 2 plus
one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by PARC
substantially fall short of the 295,112,101 shares needed by the FWBs to acquire
control over HLI. Hence, control can NEVER be attained by the FWBs. There is even no
assurance that 100% of the 118,391,976.85 shares issued to the FWBs will all be voted
in favor of staying in HLI, taking into account the previous referendum among the
farmers where said shares were not voted unanimously in favor of retaining the
SDP. In light of the foregoing consideration, the option to remain in HLI granted to the
individual FWBs will have to be recalled and revoked.

Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI will
no longer be operating under SDP and will only be treated as an ordinary private
corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary
stockholders and will no longer be under the protective mantle of RA 6657.

In addition to the foregoing, in view of the operative fact doctrine, all the benefits and
homelots[80] received by all the FWBs shall be respected with no obligation to refund or
return them, since, as We have mentioned in our July 5, 2011 Decision, "œthe benefits
x x x were received by the FWBs as farmhands in the agricultural enterprise of HLI and
other fringe benefits were granted to them pursuant to the existing collective
bargaining agreement with Tadeco."•

One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The
remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the
rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22 of
RA 6657.

In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent with
its administrative prerogative to identify and select the agrarian reform beneficiaries
under RA 6657.[81]

WHEREFORE, the Motion for Partial Reconsideration dated July 20, 2011 filed by public
respondents Presidential Agrarian Reform Council and Department of Agrarian Reform,
the Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa
ng mga Manggagawang Bukid sa Hacienda Luisita, the Motion for Reconsideration dated
July 21, 2011 filed by respondent-intervenor Farmworkers Agrarian Reform Movement,
Inc., and the Motion for Reconsideration dated July 22, 2011 filed by private
respondents Rene Galang and AMBALA are PARTIALLY GRANTED with respect to
the option granted to the original farmworker-beneficiaries of Hacienda Luisita
to remain with Hacienda Luisita, Inc., which is hereby RECALLED and SET
ASIDE. The Motion for Clarification and Partial Reconsideration dated July 21, 2011
filed by petitioner HLI and the Motion for Reconsideration dated July 21, 2011 filed by
private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita,
Inc. and Windsor Andaya are DENIED.

The fallo of the Court’s July 5, 2011 Decision is hereby amended and shall read:

PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-
34-01 dated May 3, 2006, placing the lands subject of HLI's SDP under compulsory
coverage on mandated land acquisition scheme of the CARP, are
hereby AFFIRMED with the following modifications:

All salaries, benefits, the 3% of the gross sales of the production of the agricultural
lands, the 3% share in the proceeds of the sale of the 500-hectare converted land and
the 80.51-hectare SCTEX lot and the homelots already received by the 10,502 FWBs
composed of 6,296 original FWBs and the 4,206 non-qualified FWBs shall be respected
with no obligation to refund or return them. The 6,296 original FWBs shall forfeit and
relinquish their rights over the HLI shares of stock issued to them in favor of HLI. The
HLI Corporate Secretary shall cancel the shares issued to the said FWBs and transfer
them to HLI in the stocks and transfer book, which transfers shall be exempt from
taxes, fees and charges. The 4,206 non-qualified FWBs shall remain as stockholders of
HLI.

DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARC's SDP-approving Resolution No. 89-12-2 the 500-hectare lot subject of
the August 14, l996 Conversion Order and the 80.51-hectare lot sold to, or acquired by,
the government as part of the SCTEX complex. After the segregation process, as
indicated, is done, the remaining area shall be turned over to DAR for immediate land
distribution to the original 6,296 FWBs or their successors-in-interest which will be
identified by the DAR. The 4,206 non-qualified FWBs are not entitled to any share in
the land to be distributed by DAR.

HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of
the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration
of PhP 750,000,000 received by its owned subsidiary, Centennary Holdings, Inc., for
the sale of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita
Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government
through the Bases Conversion Development Authority for the sale of the 80.51-hectare
lot used for the construction of the SCTEX road network. From the total amount of PhP
1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP
1,330,511,500) shall be deducted the 3% of the proceeds of said transfers that were
paid to the FWBs, the taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for
legitimate corporate purposes. For this purpose, DAR is ordered to engage the services
of a reputable accounting firm approved by the parties to audit the books of HLI and
Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale
of the three (3) aforementioned lots were actually used or spent for legitimate
corporate purposes. Any unspent or unused balance and any disallowed expenditures
as determined by the audit shall be distributed to the 6,296 original FWBs.

HLI is entitled to just compensation for the agricultural land that will be transferred to
DAR to be reckoned from November 21, 1989 which is the date of issuance of PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due
to HLI.

DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report, quarterly
reports on the execution of this judgment within the first 15 days after the end of each
quarter, until fully implemented.

The temporary restraining order is lifted.

SO ORDERED.