Case Summary (G.R. No. 171101)
Statutory Framework
1987 Constitution, Art. XIII, Sec. 4 – mandates land redistribution to landless farmers (“to own directly or collectively the lands they till”) Comprehensive Agrarian Reform Law (CARL, R.A. 6657, 1988): two compliance modes for corporate landowners –
• Land-transfer option: actual transfer of land to qualified agrarian beneficiaries
• Stock-distribution option (Sec. 31): issuance of corporate shares pro rata to land value, subject to conditions and PARC approval DAR Administrative Order No. 10-1988: implementing rules for stock distribution plans (equal shares, 3-month implementation, audit, board representation, etc.)
Spin-Off and Stock Distribution Agreement
August 1988: HLI formed; 22 Mar 1989 TADECO transferred 4,915.75 ha + assets (net value ₱355.53 M) to HLI for ₱355.53 M in shares May 11 1989: HLI, TADECO and 5,898 farmworkers (93% of workforce) signed Stock Distribution Option Agreement (SDOA) – key features:
• 33.296% of HLI’s 355.53 M shares (≈118.39 M shares) for FWBs
• Distribution over 30 years based on “man-days” worked, at no cost
• 3% annual gross-sales share bonus, on top of wages
• Annual irrevocable voting proxy for FWB board representation
• Free 240 sqm homelots to FWBs’ families October 1989: DAR referendum ratified SDOA (5,117 vs. 132) Nov 21 1989: PARC approved HLI’s stock distribution plan (SDP) via Resolution No. 89-12-2
SDP Implementation and Land Conversion
1989–2005: HLI claims it delivered – 59 M shares free; ₱3 B in wages/fringes; ₱150 M production share; ₱37.5 M from sale of converted lands; homelots
1995–96: HLI applied for and DAR granted conversion of 500 ha to non-agricultural use, with FWB support
1996–98: Petitioner HLI transferred 200 ha to Luisita Realty (₱250 M + ₱250 M); 300 ha to Centennary (for 12 M Centennary shares), then sold to LIPCO (₱750 M); LIPCO mortgaged, then dacion en pago to RCBC (₱431.7 M) 2004–05: BCDA took 80.51 ha for SCTEX (₱80 M)
DAR Review and PARC Revocation
2003: Supervisory Group and AMBALA file petitions for renegotiation/revocation of SDOA
2005: DAR Task Force finds HLI violated CARL/AO 10 by –
• Using “man-days” instead of equal minimum shares
• Spreading share distribution over 30 years (vs. 3-month rule)
• Allowing conversion of agricultural land
• Failing to pay full 3% share and distribute homelots
Dec 22 2005: PARC Resolution No. 2005-32-01 revokes SDP approval; orders compulsory CARP coverage of HLI lands May 3 2006: PARC denies HLI reconsideration; DAR issues Notice of Coverage (incl. converted lands)
Supreme Court Proceedings
Jan 2006: HLI files certiorari petition and TRO (granted June 2006) 2007–10: FARM, LIPCO, RCBC intervene; parties submit pleadings; oral arguments (Aug 2010); failed mediation; memoranda filed
Main Issues for Decision
- Standing of farmworker groups and third-party buyers (LIPCO/RCBC)
- SDP’s validity under CARL & AO 10 (man-days method, 30-year term, land fragmentation)
- PARC’s authority to revoke SDP approval
- Legal and factual grounds to recall SDP
- Rights of LIPCO/RCBC as innocent purchasers for value
Ruling Overview
• SDP and SDOA judged void ab initio – immediate and equal share allocation denied by man-days rule; 30-year term violated AO 10’s 3-month implementation requirement; lands were fragmented (conversion of 500 ha) • PARC entitled to revoke its previous approval (necessary implication of “power to approve” includes “power to revoke”) • All HLI agricultural lands (4,915.75 ha) subject to compulsory CARP coverage and direct land redistribution to original 6,296 FWBs • Exclusions:
– Converted 300 ha sold to LIPCO/RCBC
– 80.51 ha expropriated for SCTEX
– 200 ha transferred to Luisita Realty (unless DAR upholds transfer) • LIPCO/RCBC’s titles are upheld – they were innocent purchasers for value of validly converted lands • HLI & TADECO are entitled to just compensation – fair market value at time of taking; offset by benefits FWBs received • No interest on compensation (lack of real loss of actual possess
Case Syllabus (G.R. No. 171101)
Facts of the Case
- Hacienda Luisita (6,443 ha) was sold in 1957 by Compania General de Tabacos de Filipinas to Tarlac Development Corporation (Tadeco)/Cojuangco Sr., with government loans conditioned on subdivision and sale to tenants within 10 years
- Martial law suit (1980) by Marcos government ordered Tadeco to surrender the land (1985 RTC judgment, 1988 CA dismissal conditioned on PARC-approved stock distribution plan)
- 1987–1988: CARP proclaimed in EO 229; R.A. 6657 enacted providing two compliance options for corporate landowners: land transfer or stock distribution
- 1988–1989: Tadeco formed spin-off Hacienda Luisita, Inc. (HLI) and transferred 4,915.75 ha plus other assets; 6,296 farmworker-beneficiaries (FWBs) signed SDOA on 11 May 1989 committing 33.296 % of HLI shares over 30 years
- 14 Oct 1989 DAR referendum: 5,117 of 5,315 FWBs favored stock distribution; PARC approved the Stock Distribution Plan (SDP) on 21 Nov 1989 (Resolution 89-12-2)
Land Conversion and Subsequent Sales
- 1995: HLI applied to DAR to convert 500 ha of agricultural land to industrial use; application supported by FWBs and HLI board; DAR issued conversion order 14 Aug 1996
- HLI split the 500 ha: sold 200 ha to Luisita Realty Corp. (P500 M) and 300 ha to Centennary Holdings in exchange for 12 million shares
- 1997–1998: Centennary sold its 300 ha to Luisita Industrial Park Corp. (LIPCO) for P750 M; PEZA registered it as a special economic zone (Proclamation 1207, 22 Apr 1998)
- 2004: LIPCO’s loan to RCBC (P432 M) settled by transferring 184 ha via dacion en pago; titles reissued to RCBC
- 2009: Government expropriated 80.51 ha for SCTEX for P80 M
Administrative Proceedings
- Oct 2003 & Dec 2003: Supervisory Group and AMBALA filed petitions with DAR challenging HLI’s compliance under the SDOA and praying for land distribution
- Nov 2004: DAR formed Special Task Force; Sep 2005: Task Force Report found multiple violations by HLI of R.A. 6657, EO 229 and DAO 10-1988 in implementing SDP
- 22 Dec 2005: PARC issued Resolution 2005-32-01 revoking SDP approval (Resolution 89-12-2) and ordering compulsory CARP coverage of Hacienda Luisita lands
- 02 Jan 2006 & 03 May 2006: DA
- ...continue reading