Comprehensive Case Digest: Hacienda Luisita v. PARC (G.R. No. 171101)

Hacienda Luisita Incorporated v. Presidential Agrarian Reform Council | G.R. No. 171101 | July 5, 2011 | J. Velasco, Jr. | Article XIII- 4 | 

Petitioners: Hacienda Luisita, Incorporated and petitioners-in-intervention: Luisita Industrial Park Corporation, and Rizal Commercial Banking Corporation
Respondents: 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 and his Supervisory Group of the Hacienda Luisita, Inc. and Windsor Andaya

Recit Ready Summary
Basically, the Marcos government filed a suit against the Cojuangcos to get Hacienda Luisita for the purpose of distributing it to farmers. But during the pendency of the appeal to CA by the Cojuangcos, OSG moved to withdraw the case so CA in a Resolution said that the case was dismissed but dismissal was subject to the condition that the Tadeco (Corp of the Cojuangcos) shall obtain approval from PARC of a scheme called stock distribution plan. This is governed by Section 31 of RA 6657 that allows stock transfer as mode of agrarian reform and the same shall effect compliance to CARP. So Tadeco made a spin-off organization named HLI and conveyed to the same 4,915.74 hectares of its agricultural land to facilitate stock acquisition by the farmers. So the farmer-beneficiaries (FWBs) and the Tadeco/HLI entered into the Stock Distribution Option Agreement (SDOA). This was made the basis of the Stock Development Plan (SDP) which was approved by the PARC under DAR Sec. Miriam Defensor. 2 petitions then reached the DAR saying that HIL violated SDOA’s terms, then asking for the revocation of the SDOA.

Issues are:
1. W/N Section 31 of RA 6657 is constitutional. YES. Section 31 of RA 6657 is constitutional as it simply implements Section 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers.
2. W/N PARC has jurisdiction to recall or revoke HLI’s SDP. YES. Under Section 31 of RA 6657, as implemented by the DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to PARC. The authority to revoke/call the same is deemed possessed by the PARC under the principle of necessary implication, as basic postulate that what is implied in a statute is as much a part of it as that which is expressed.
3. W/N SDP should be revoked. Revocation of the SDP by PARC should be upheld for violating DAO 10. RA 6657 gives power to PARC and DAR to issue substantive and procedural rules and regulations, so DAO 10 has the force of law and must be complied with. Specifically, it failed to comply with the giving of 240-sqm homelots to qualified FWBs within reasonable time. Because 16 years have passed and still not all received their 240-sqm homelots. Also, by following a “man days” rule in giving FWBs their rightful shares of stock and by accommodating new FWBs, HLI violated the DAR Admin. Order 10 because it effectively deprived the FWBs of equal shares of stock, for in net effect, the original 6,296 FWBs who has given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement.

Additional notes: The word “collectively” entails another mode of compliance with agrarian reform. It allows stock transfers like what the petitioners did in this case.

Art. XIII, Section 4: The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. 

SC said wording is clear that allows two modes of land distribution: direct and indirect. Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by individual farmers. 

Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through which collective ownership can be exercised. By using the word collectively, the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that land reform may become successful even if it is done through the medium of juridical entities composed of farmers. Court also said this provision is not self-executory and RA 6657 is the implementing legislation that gives life to this constitutional directive. RA 6657 has both direct and indirect transfer features which the Court believes is the instrument made to effect the said provision. 

At the end, SC revoked the PARC Reso which approved the HLI’s SDP because of its non-compliance with DAO 10, but held that only the approval and not the SDOA was nullified.


FACTS 

• Hacienda Luisita de Tarlac owned by Compañia General de Tabacos de Filipinas (Spaniards) is originally a 6443-hectare mixed agricultural-industrial-residential land in Tarlac. In 1958, it was bought by The Tarlac Development Corporation (Tadeco) then owned by the Jose Cojuangco, Sr. Group from its Spanish owners. To facilititate the sale, Tadeco obtained a dollar loan from the Central Bank of the Philippines. Another loan from the GSIS was also sought to effect payment subject to certain conditions, like GSIS Resolution No. 3203 as later amended by Resolution No. 356 provided that Hacienda Luisita shall be subdivided by the corporation and sold at cost to the tenants, should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act. 
• During the Marcos regime, a suit was filed against Tadeco, et al. for them to surrender the Hacienda to the then Ministry of Agrarian Reform (now DAR) so it can be distributed to farmers at cost. RTC ordered Tadeco to surrender the Hacienda, they appealed to CA but OSG moved to withdraw the case subject to the condition that Tadeco should get PARC’s approval of a stock distribution plant that must immediately be implemented (embodied in CA Reso of May 18, 1988). Consequently, Section 31 of RA 6657 provides alternatives to the actual land transfer scheme of Comprehensive Agrarian Reform Program (CARP): land or stock transfer subject to conditions and timeline requirements, either of which will effect compliance to the CARP. Relevant in the provision is: “Corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets.” In relation to this, DAR issued DAR Administrative Order No. 10 (DAO 10) entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of RA 6657. 
• SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x. Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: (a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; (c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. If within two (2) years from the approval of this Act, the [voluntary] 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.
  
• Tadeco opted for the stock distribution scheme. To comply, it organized a spin-off organization names HLI3 to facilitate stock acquisition by the farmworkers. Tadeco then conveyed 4,915.75 hectares of agricultural land and other farm-related properties of the Hacienda Luisita in exchange for HLI shares of stock. In its proposed Stock Development Plan (SDP), the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share. 
• Spin-off organization - An independent company through the sale or distribution of new shares of an existing business or division of a parent company. 
• Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI..
• On May 1989, 93% of the then farmworker-beneficiaries (FWBs) of Hacienda Luisita accepted the proposed Stock Distribution Option Plan, so the Stock Distribution Option Agreement (SDOA) was entered into by the Tadeco and the FWBs. It contained the basis and mechanics of the SDP. It included as part of the distribution plan are: (a) production-sharing equivalent to three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to family-beneficiaries. The productionsharing, as the SDP indicated, is payable irrespective of whether [HLI] makes money or not, implying that the benefits do not partake the nature of dividends, as the term is ordinarily understood under corporation law. 
• HLI then submitted to DAR the SDP which was based on the SDOA. After its review, PARC, under then DAR Sec. Miriam Defensor, issued PARC Resolution No. 89-12-2 which approved of the SDP of Tadeco/HLI. During this time, HLI had 6,296 farmers, of permanent, seasonal, and casual master list/payroll and non-master list members 1986-2005, HLI said that it gave FWBs the following benefits: 3 billion worth of salaries, wages and fringe benefits; 59 million shares of stock distributed for free to the FWBs; 150 million pesos representing 3% of the gross produce; 37.5 million pesos representing 3% from the sale of 500 hectares of converted agricultural land of Hacienda Luisita; 240-square meter homelots distributed for free; 2.4 million representing 3% from the sale of 80 hectares at 80 million for the SCTEX; and social service benefits. Aug. 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial use, allowed by Sec. 65 of RA 6657 which DAR then approved thru then Sec. Ernesto Garilao in its DAR Conversion Order subject to payment of three percent (3%) of the gross selling price to the FWBs and to HLI’s continued compliance with its undertakings under the SDP. Out of the 500 hectares of the newy-converted land, 300 was ceded to Centenarry Holdings, Inc in exchange for subscription of shares of stock and then all 300 hectares were sold to LIPCO. LIPCO then, transferred it to RCBC by way of dacion en pago as payment of its obligation. The left 200 was transferred to Luisita Realty Corporation. (Part where the intervenors enter the picture) Aside from the 500 hectares, another 80.51 hectares were detached from the area of Hacienda Luisita which was acquired by the government for the SCTEX. So, 4,335.75/4,915 hectares were left to HLI. 2 petitions then reached the DAR saying that HIL violated SDOA’s terms, then asking for the revocation of the SDOA. DAR formed a Special Task Force to attend to the issues of the SDP, to review the SDOA, and evaluate HLI’s compliance to such. Its findings are embodied in its Terminal Report finding that HLI did not comply with its obligations under RA 6657. This report was the basis of PARC Resolution No. 2005-32-01 which revoked the SDP. Petitioner appealed but pending appeal, DAR placed it under CARP already

ISSUES:
1. Whether or not Section 31 of RA 6657 is constitutional? YES
2. Whether or not PARC has jurisdiction to recall or revoke HLI’s SDP? YES
3. Whether or not SDP should be revoked? YES

HELD:
1. YES. Section 31 of RA 6657 is constitutional as it simply implements Section 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers. 

• The wording of the provision unequivocally gives farmers and regular farmworkers the right to own directly or collectively the lands they till. 
• The provision allows two (2) modes of land distribution: direct and indirect ownership. 
• Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. 
• Indirect transfer through collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by individual farmers. 
• By using the word collectively, the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that land reform may become successful even if it is done through the medium of juridical entities composed of farmers. 
• At present, collective ownership is allowed through 2 provisions in RA 6657: Sec. 29 (allows workers’ cooperatives or associations to collectively own the land) and second para. of Section 31 (allows corporations or associations to own agricultural land with the farmers becoming stockholders or members). 
• Main requisite for collective ownership of land is collective or group work by farmers of the agricultural land. Irrespective of whether the landowner is a cooperative, association or corporation composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls within the ambit of collective ownership scheme. 
• Art. XIII, Section 4 is also not self-executory and RA 6657 precisely is the one enacted as a tool to carry out the constitutional directive. RA 6657 defines ‘agrarian reform’ as redistribution of lands and all other arrangements alternative to the physical redistribution of lands and the distribution of shares of stock. 

2. YES. Under Section 31 of RA 6657, as implemented by the DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to PARC. The authority to revoke/call the same is deemed possessed by the PARC under the principle of necessary implication, as basic postulate that what is implied in a statute is as much a part of it as that which is expressed. 

• Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan. 
• To deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to impose sanctions for non-compliance with it. 
• Only PARC can effect such revocation. The DAR Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or approval of the SDP sought to be taken back or undone is the act of PARC whose official composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least eleven (11) other department heads. 

3. Revocation of the SDP by PARC should be upheld for violating DAO 10. RA 6657 gives power to PARC and DAR to issue substantive and procedural rules and regulations, so DAO 10 has the force of law and must be complied with. 

• Argument re: Lives of FWBs hardly improved even after 16 years from the implementation of the SDP. 
• SC: WRONG. RA 6657 says “more equitable distribution and ownership of land, with due regard to the rights of landowner…. shall be undertaken to provide farmers…with the opportunity to enhance their dignity and improve the quality of their lives…” By no stretch of imagination can this be construed as a guarantee in improving the lives of the FWBs. 
• Argument re: Distribution of the mandatory minimum ratio of land-to-shares of stock should have been made in full within 2 years from approval of RA 6657. 
• SC: WRONG. 2-year period refer to the period within which the corporate landowner, to avoid land transfer as a mode of CARP, is to avail of the stock distribution option or to have the SDP approved. Since HLI secured SDP approval in Nov 1989, it is still within the 2-yr period from June 1988 
• Argument re: Not keeping Hacienda Luisita unfragmented. 
• SC: WRONG. This is not among the imperative impositions by the SDP, RA 6657, and DAO 10. 
• HLI is right in saying that what is important is the viability of corporate operations. 
• DAR also approved of the conversion of the 500 hectares of land to industrial
• Argument re: HLI failed to comply with the sharing of 3% of the gross production sales of the hacienda and pay dividends from profit. 
• SC: WRONG. Financial books of HLI indicate compliance to this. However, some of the FWBs are said not to have received their share of the gross production sales and in the sale of the lot to SCTEX. But Court considered this as substantial compliance that would not justify recall of the SDP. 
• On Titles to Homelots 
• SC. RIGHT. 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, within a reasonable time. 
• Other than financial report, no other substantial proof showing the giving of homelots to FWBs were presented. Court rules HLI has not yet fully complied with this undertaking. 
• On “Man Days” and the Mechanics of Stock Distribution. 
• SC: HLI violated 2 provisions of DAO 10. 
• As per the SDOA, distribution of the shares of stock is contingent on the number of “man days” = number of working days FWBs completed in a year. This is violative of Sec. 1, DAO 10 which mandates the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock. This minimum ratio contemplates of that proportion of the capital stock of the corporation that the agricultural land, actually devoted to to agricultural activities, bears in relation to the company’s total assets. 
• The stock distribution was also violated by the accommodation of more FWBs (at present, 10k FWBs) visà-vis the man days rule because it effectively deprived the FWBs of equal shares of stock, for in net effect, the original 6,296 FWBs who has given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement. HLI has chosen to use the shares earmarked for farmworkers as reward system chips to water down the shares of the OG FWBs. 
• (Basically yung mga OGs kasi computed na entitled sila to 18,804.32 shares but because of the man days rule if you don’t complete 37 days in a fiscal year, you wont get any share at the end of the year. Also because there are new FWBs, their share was prejudiced once again) 
• Sec 11 of DAO 10 also provides that implementation, or the distribution of shares of stock must be made within 3 months from approval of SDP which it failed to do as well.  

Court applies the doctrine of operative fact and reiterates that what is nullified is the PARC Reso 89-12-2 = approval of the HLI’s SDP which is voided not the SDOA.  

Court also grants petitions of the intervenors as they are good faith purchasers of the lands. Their portion will be respected.

DISPOSITION: Petition DENIED. Original 6,269 qualified FWBs shall have the option to remain as stockholders of HLI and shall be entitled to 18,804.32 HLI shares which HLI is ordered to distribute within 30 days from this decision. New FWBs who did not belong to the original 6,269 are not entitled to land distribution but may remain as an HLI shareholder. DAR to segregate the 4,915.57 hectares of HLI land, minus those of the intervenors and SCTEX. After, remaining lands will be distributed to the original qualified FWBs who opted not to remain as stockholders. HLI is entitled to just compensation as DAR will take the agricultural land and reckoning date for the compensation is Nov. 21, 1989.