Title
Supreme Court
Hacienda Luisita, Inc. vs. Presidential Agrarian Reform Council
Case
G.R. No. 171101
Decision Date
Jul 5, 2011
Hacienda Luisita's SDP revoked; SC upheld compulsory land distribution to farmers, ensuring agrarian reform compliance and social justice.

Case Summary (G.R. No. 254596-97)

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

  1. Standing of farmworker groups and third-party buyers (LIPCO/RCBC)
  2. SDP’s validity under CARL & AO 10 (man-days method, 30-year term, land fragmentation)
  3. PARC’s authority to revoke SDP approval
  4. Legal and factual grounds to recall SDP
  5. 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

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