Abella v.

NLRC
FACTS: PETITIONER Abella leased a farmland from Ramona for a period of 10 years
and renewable for another 10 years at the option of the former. Abella hired the
private respondents Quitco and Dionele. Abella renewed the lease for another ten
years. At the expiration of the lease, she dismissed both private respondents and
turned over the hacienda to the owners. Private respondents filed a complaint against
petitioner. for overtime pay, reinstatement, and illegal dismissal. The Labor Arbiter
ruled that the dismissal was warranted by the cessation of business, but the
respondents are entitled to separation pay, invoking Art. 284 of the Labor Code, as
amended.
ISSUEWhether or not private respondents are entitled to separation pay.
RULINGThe Court upheld the ruling of the Labor Arbiter that Article 284 is the
applicable law in this case. Art 284, as amended refers to employment benefits to
farm hands who were not parties to petitioner's lease contract with the owner of
Hacienda Danao-Ramona. That contract cannot have the effect of annulling
subsequent legislation designed to protect the interest of the working class.It is wellsettled that in the implementation and interpretation of the provisions of the Labor
Code and its implementing regulations, the workingman's welfare should be the
primordial and paramount consideration. It is the kind of interpretation which gives
meaning and substance to the liberal and compassionate spirit of the law as provided
for in Article 4 of the New Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of this Code including its
implementing rules and regulations shall be resolved in favor of labor." The policy is to
extend the applicability of the decree to a greater number of employees who can avail
of the benefits under the law, which is in consonance with the avowed policy of the
State to give maximum aid and protection to labor.
Art. 284. Closure of establishment and reduction of personnel.
The employer may also terminate the employment of any employee due to
the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establisment
or undertaking unless the closing is for the purpose of circumventing the
provisions of this title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious

business losses or financial reverses, the separation pay shall be

equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
Petitioner then contends that the aforequoted provision violates the constitutional guarantee
against impairment of obligations and contracts, because when she leased Hacienda DanaoRamona on June 27, 1960, neither she nor the lessor contemplated the creation of the obligation to
pay separation pay to workers at the end of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369
[1977]) where the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair
the obligation of contracts is not absolute and unqualified. The
prohibition is general, affording a broad outline and requiring construction to fill
in the details. The prohibition is not to read with literal exactness like a
mathematical formula for it prohibits unreasonable impairment only. In spite of
the constitutional prohibition the State continues to possess authority to
safeguard the vital interests of its people. Legislation appropriate to safeguard
said interest may modify or abrogate contracts already in effect. For not only are
existing laws read into contracts in order to fix the obligations as between the
parties but the reservation of essential attributes of sovereign power is also read
into contracts as a postulate of the legal order. All contracts made with reference
to any matter that is subject to regulation under the police power must be
understood as made in reference to the possible exercise of that power.
Otherwise, important and valuable reforms may be precluded by the simple
device of entering into contracts for the purpose of doing that which otherwise
maybe prohibited. ...
In order to determine whether legislation unconstitutionally
impairs contract of obligations, no unchanging yardstick, applicable at
all times and under all circumstances, by which the validity of each
statute may be measured or determined, has been fashioned, but every
case must be determined upon its own circumstances. Legislation
impairing the obligation of contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the means adopted must
be legitimate, i.e. within the scope of the reserved power of the state construed
in harmony with the constitutional limitation of that power. (Citing Basa vs.
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas
[FOITAF] [L-27113], November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose employment
is terminated because of the closure of establishment and reduction of personnel. Without said law,
employees like private respondents in the case at bar will lose the benefits to which they are
entitled for the thirty three years of service in the case of Dionele and fourteen years in the case
of Quitco. Although they were absorbed by the new management of the hacienda, in the absence of
any showing that the latter has assumed the responsibilities of the former employer, they will be
considered as new employees and the years of service behind them would amount to nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of
the parties with reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment
benefits to farm hands who were not parties to petitioner's lease contract with the owner of
Hacienda Danao-Ramona. That contract cannot have the effect of annulling subsequent
legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingman's welfare should be the primordial
and paramount consideration. (Volshel Labor Union v. Bureau of Labor Relations, 137 SCRA 43
[1985]). It is the kind of interpretation which gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that
"all doubts in the implementation and interpretation of the provisions of this Code including its
implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the
applicability of the decree to a greater number of employees who can avail of the benefits under the
law, which is in consonance with the avowed policy of the State to give maximum aid and protection

to labor. (Sarmiento v. Employees Compensation Commission, 144 SCRA 422 [1986] citing Cristobal
v. Employees Compensation Commission, 103 SCRA 329; Acosta v. Employees Compensation
Commission, 109 SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED

Presley v. BAVA
ENEDINA PRESLEY, petitioner,
vs.
BEL-AIR VILLAGE ASSOCIATION, INC., and THE HON. COURT OF APPEALS,
respondents.
Alejandro dela Rosa for petitioner.
J. Vicente G. Sison for private respondent.
GUTIERREZ, JR., J.:
FACTS:
A complaint for specific performance and damages with preliminary injunction was filed by
plaintiff-appellee, Bel-Air Village Association, Inc. (BAVA for short) against
TeofiloAlmendras and Rollo Almendras (now both deceased and substituted by defendantappellant Enedina Presley) for violation of the Deed Restrictions of Bel-Air Subdivision that
the subject house and lot shall be used only for residential and not for commercial
purposes and for non-payment of association dues to plaintiff BAVA amounting to
P3,803.55.
Presley, as lessee of the property, is the owner and operator of 'Hot Pan de Sal Store'
located in the same address. At the time the Almendrases bought their property in
question from Makati Development Corporation, the Deed Restrictions (Exh. "C") was
already annotated in their title (Exh. "B") providing (among others) 'that the lot must be
used only for residential purpose' (Exh. "B-1" and "B-2").
When BAVA came to know of the existence of the 'Pan de sal' store, it sent a letter to the
defendants asking them to desist from operating the store (Exh. "D").
Under the existing Deed Restrictions aforesaid, the entire Bel-Air Subdivision is classified
as a purely residential area, particularly Jupiter Road which is owned by and registered in
the name of BAVA.
During the pendency of the case with this Court, petitioner Enedina Fox Presley
died on January 4, 1991. She was substituted by her two daughters as heirs, namely Olivia
V. Pizzaro and Consuelo V. Lacson. The issues raised in the instant petition have already
been dealt with in the consolidated cases decided by this Court promulgated on
December 22, 1988 entitled Sangalang Doctrine.
ISSUES:

 Does the Sangalang Doctrine can be consider in the case at bar?

Does the Deed of Restrictions entirely wrong?

HELD:

We have carefully examined the pleadings but have found no reason to

reconsider the Sangalang doctrine (

"non-impairment" guaranty of the

Constitution, which, as we have declared, is secondary to the

morecompelling interests of general welfare.)
. In assailing the Court's decision, the private respondent has come out with mere
assertions and allegations. It failed to present any proofs or convincing arguments to
substantiate its claim that Jupiter Street is still classified as a residential zone. (See
Filinvest v. Court of Appeals, 182 SCRA 664 [1990]) No new zoning re-classification,
ordinance, certification to the effect or jurisprudence for that matter was brought to the
attention of this Court which would necessarily compel us to take a second look at the
Sangalang Case. The Court cannot reverse a precedent and rule favorably for the private
respondent on the strength of mere inferences.
The respondent court in the case at bar was not at all entirely wrong in upholding the
Deed of Restrictions annotated in the title of the petitioners. It held that the provisions of
the Deed of Restrictions are in the nature of contractual obligations freely entered into by
the parties. Undoubtedly, they are valid and can be enforced against the petitioner.
However, these contractual stipulations on the use of the land even if said conditions are
annotated on the Torrens title can be impaired if necessary to reconcile with the legitimate
exercise of police power. (Ortigas& Co. Limited Partnership v. Feati Bank and Trust Co., 94
SCRA 533 [1979]).
The respondent court in the case at bar was not at all entirely
wrong in upholding the Deed of Restrictions annotated in the title
of the petitioners. It held that the provisions of the Deed of
Restrictions are in the nature of contractual obligations freely
entered into by the parties. Undoubtedly, they are valid and can
be enforced against the petitioner.

But they are, like all contracts, subject to the overriding demands,
needs, and interests of the greater number as the State may
determine in the legitimate exercise of police power. Our
jurisdiction guarantees sanctity of contract and is said to be the
'law between the contracting parties,' (Civil Code, supra, art.
1159) but while it is so, it cannot contravene 'law, morals, good
customs, public order, or public policy.' (supra, art. 1306). Above
all, it cannot be raised as a deterrent to police power, designed
precisely to promote health, safety, peace, and enhance the
common good, at the expense of contractual rights, whenever
necessary.

Miners assoc v. factoran

MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner,
vs.
HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and Natural Resources, and JOEL D. MUYCO,
Director of Mines and Geosciences Bureau, respondents
G.R. No. 98332 January 16, 1995
ROMERO, J.:

Facts:
Former President Cory Aquino, exercising legislative power, issued EO211 prescribing the interim procedures in the
processing and approval of exploration, development and utilization of minerals. To implement the act, Secretary of DENR
promulgated AO No. 57 and 82. On 25 July 1987 the then President Aquino issued EO279 authorizing the DENR
SECRETARY to negotiate and conclude joint venture, co-production, production sharing, development and those agreements
involving technical or financial assistance by foreign owned corporations for large scale EDU.
Pursuant to Sec 6 of EO 279, the DENR issued AO No.57 which provides that all existing mining leases or agreements which
were granted AFTER the affectivity of the 1987 Constitution, except small scale mining leases and those pertaining to sand
and gravel and quarry resources covering an area of 20 hectares or less, shall be converted into production sharing agreement
within one year from the effectivity of the guidelines.
On 20 November 1990, Sec of DENR issued EO No. 82 laying down the Procedural Guidelines on the award of mineral
Production sharing agreement. This order provides the person or entities required to submit a LETTER OF INTENT and
MINERAL PRODUCTION SHARING AGREEMENT within 2 years from the effectivity of AO No.57 or until 17 July 1991.
Failure to do so within the prescribed period shall cause the abandonment of mining, quarry, gravel and sand.
The Miners Association Inc assailed the validity of the above-mentioned issuances and alleged the following:
. The orders violate the non-impairment of contracts provision under the bill of rights on the ground the AO57 unduly preterminates existing mining leases and other mining agreements and automatically converts them into production-sharing
agreements within one year from its effectivity date.

On 13 November 1991, Continental Marble Corp sought to intervene in the cases alleging that the TRO issued by the Court,
the DENR Regional Office in San Fernando Pampanga refused to renew its Mines Temporary Permit and claimed further that
its rights and interest are prejudicially affected by AO No.57 and 82.
Issue:
1. WON The orders violate the non-impairment of contracts provision under the bill of rights on the ground the AO57 unduly
pre-terminates existing mining leases and other mining agreements and automatically converts them into production-sharing
agreements within one year from its effectivity date.
Held: No.
PD No. 463, as amended, pertains to the old system of EDU of natural resources through license, concession or lease which has been disallowed by Article XII, Sec 2 of the 1987 Philippine
Constitution. By virtue of this constitutional mandate and its implementing laws, the provisions dealing with license, concession or leases ceased to operate as the governing laws. In other
words, in all areas of administration and management of mineral lands, the provision of PD463, as amended and other existing laws still govern.
Upon the effectivity of the 1987 Consti on 2 February 1987, the State assumed a more dynamic role in EDU. Article XII, Section 2 explicitly ordains that EDU shall under the
full control and supervision of the State. Given these considerations, there is no clear showing that the DENR Sec has transcended the bounds demarcated in the EO279 for the exercise of
his rule-making power.
Article XII, Sec 2 of the 1987 Consti does not apply retroactively to license, concession or lease granted by the government under the 1973 Consti or before the effectivity of
the present Constitution. The intent to apply prospectively was stressed during the deliberations in the Constitutional Commission.
AO No. 57 applies only to all existing mining leases or agreements which were granted after the effectivity of the 1987 Consti pursuant to EO No. 211. It bears to mention
that under the text of EO211, there is a reservation clause which provides that the privileges as well as the terms and conditions of all existing mining leases or agreements granted after the
effectiviyt of the present constitution shall be subject to any and all modification or alterations which the Congress may adopt. Hence, the strictures of the non-impairment of contract clause
do not apply to the aforesaid mining leased or agreements after the effectivity of the 1987 Consti.

The State in the exercise of police power may not be precluded by the constitutional restriction on nonimpairment of contracts. Police power being co-extensive with the necessities of the case and the demands of public
interest.
In this petition for certiorari, petitioner Miners Association of the Philippines, Inc. mainly contends that respondent
Secretary of DENR issued both Administrative Order Nos. 57 and 82 in excess of his rule-making power under
Section 6 of Executive Order No. 279. On the assumption that the questioned administrative orders do not
conform with Executive Order Nos. 211 and 279, petitioner contends that both orders violate the
non-impairment of contract provision under Article III, Section 10 of the 1987 Constitution on the ground that
Administrative Order No. 57 unduly pre-terminates existing mining agreements and automatically converts them
into production-sharing agreements within one (1) year from its effectivity date.

non-impairment of contract clause under Article III, Section 10 of the 1987 Constitution 20 do not apply to the
aforesaid leases or agreements granted after the effectivity of the 1987 Constitution, pursuant to Executive Order
No. 211. They can be amended, modified or altered by a statute passed by Congress to achieve the purposes of
Article XII, Section 2 of the 1987 Constitution.
Clearly, Executive Order No. 279 issued on July 25, 1987 by President Corazon C. Aquino in the exercise of her
legislative power has the force and effect of a statute or law passed by Congress. As such, it validly modified or
altered the privileges granted, as well as the terms and conditions of mining leases and agreements under
Executive Order No. 211 after the effectivity of the 1987 Constitution by authorizing the DENR Secretary to
negotiate and conclude joint venture, co-production, or production-sharing agreements for the exploration,
development and utilization of mineral resources and prescribing the guidelines for such agreements and those
agreements involving technical or financial assistance by foreign-owned corporations for large-scale exploration,
development, and utilization of minerals.
Well -settled is the rule, however, that regardless of the reservation clause, mining leases or agreements granted
by the State, such as those granted pursuant to Executive Order No. 211 referred to this petition, are subject to
alterations through a reasonable exercise of the police power of the State. In the 1950 case of Ongsiako v.
Gamboa,21 where the constitutionality of Republic Act No. 34 changing the 50-50 sharecropping system in existing
agricultural tenancy contracts to 55-45 in favor of tenants was challenged, the Court, upholding the
constitutionality of the law, emphasized the superiority of the police power of the State over the sanctity of this
contract:
The prohibition contained in constitutional provisions against: impairing the obligation of contracts is not an
absolute one and it is not to be read with literal exactness like a mathematical formula. Such provisions are
restricted to contracts which respect property, or some object or value, and confer rights which may be asserted in
a court of justice, and have no application to statute relating to public subjects within the domain of the general
legislative powers of the State, and involving the public rights and public welfare of the entire community affected
by it. They do not prevent a proper exercise by the State of its police powers. By enacting regulations reasonably
necessary to secure the health, safety, morals, comfort, or general welfare of the community, even the contracts

may thereby be affected; for such matter can not be placed by contract beyond the power of the State shall
regulates and control them. 22
In Ramas v. CAR and Ramos 23 where the constitutionality of Section 14 of Republic Act No. 1199 authorizing the
tenants to charge from share to leasehold tenancy was challenged on the ground that it impairs the obligation of
contracts, the Court ruled that obligations of contracts must yield to a proper exercise of the police power when
such power is exercised to preserve the security of the State and the means adopted are reasonably adapted to
the accomplishment of that end and are, therefore, not arbitrary or oppressive.
The economic policy on the exploration, development and utilization of the country's natural resources under
Article XII, Section 2 of the 1987 Constitution could not be any clearer. As enunciated in Article XII, Section 1 of
the 1987 Constitution, the exploration, development and utilization of natural resources under the new system
mandated in Section 2, is geared towards a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and
an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.
The exploration, development and utilization of the country's natural resources are matters vital to the public
interest and the general welfare of the people. The recognition of the importance of the country's natural resources
was expressed as early as the 1984 Constitutional Convention. In connection therewith, the 1986 U.P. Constitution
Project observed: "The 1984 Constitutional Convention recognized the importance of our natural resources not
only for its security and national defense. Our natural resources which constitute the exclusive heritage of the
Filipino nation, should be preserved for those under the sovereign authority of that nation and for their prosperity.
This will ensure the country's survival as a viable and sovereign republic."
Accordingly, the State, in the exercise of its police power in this regard, may not be precluded by the constitutional
restriction on non-impairment of contract from altering, modifying and amending the mining leases or agreements
granted under Presidential Decree No. 463, as amended, pursuant to Executive Order No. 211. Police Power,
being co-extensive with the necessities of the case and the demands of public interest; extends to all the vital
public needs. The passage of Executive Order No. 279 which superseded Executive Order No. 211 provided legal
basis for the DENR Secretary to carry into effect the mandate of Article XII, Section 2 of the 1987 Constitution.

Hacienda luisita v. parc

.

Facts

In 1958, Tarlac Development Corporation (Tadeco), assisted by the Central Bank of the Philippines, purchased Hacienda Luisita
and the Central Azucarera de Tarlac, the sugar mill of the hacienda, from the Spanish owners of Compaia General de Tabacos de Filipinas
(Tabacalera). Tadeco was then owned and controlled by the Jose Cojuangco Sr. Group. Also, the GSIS extended a PhP5.911 million loan in
favor of Tadeco to pay the peso price component of the sale, with the condition that the lots comprising the Hacienda Luisita be subdivided
by the applicant-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. Tadeco however did not comply with this condition.
On May 7, 1980, the martial law administration filed a suit before the Manila RTC against Tadeco, et al., for them to surrender
Hacienda Luisita to the then Ministry of Agrarian Reform (MAR) so that the land can be distributed to farmers at cost. Tadeco alleged that
Hacienda Luisita is not covered by existing agrarian reform legislations for it does not have tenants. The argument did not convince the
Manila RTC, thus rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Tadeco appealed the case to the CA.
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the governments case against Tadeco, et
al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al. The
dismissal action was, however, made subject to the obtention by Tadeco of the PARCs approval of a stock distribution plan (SDP) that must
initially be implemented after such approval shall have been secured. On August 23, 1988, Tadeco organized a spin-off corporation, herein
petitioner HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco conveyed to HLI the agricultural land
portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a
referendum their acceptance of the proposed HLIs Stock Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally
entered into by Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip Juico. The SDOA embodied the

basis and mechanics of HLIs SDP, which was eventually approved by the PARC after a follow-up referendum conducted by the DAR on
October 14, 1989, in which 5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial use,
pursuant to Sec. 65 of RA 6657. The DAR approved the application on August 14, 1996, subject to payment of three percent (3%) of the
gross selling price to the FWBs and to HLIs continued compliance with its undertakings under the SDP, among other conditions. On
December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary), ceded
300 hectares of the converted area to the latter. Consequently, HLIs Transfer Certificate of Title (TCT) No. 287910 was canceled and TCT
No. 292091 was issued in the name of Centennary. HLI transferred the remaining 200 hectares covered by TCT No. 287909 to Luisita
Realty Corporation (LRC) in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each.
Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial Park Corporation (LIPCO), which used it in
developing an industrial complex. Later, LIPCO transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in
payment of LIPCOs PhP431,695,732.10 loan obligations to RCBC. LIPCOs titles were cancelled and new ones were issued to RCBC.
Apart from the 500 hectares, another 80.51 hectares were later detached from Hacienda Luisita and acquired by the government as part of
the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to
HLI.
Such, was the state of things when two separate petitions reached the DAR in the latter part of 2003. The first was filed by the
Supervisory Group of HLI (Supervisory Group), praying for a renegotiation of the SDOA, or, in the alternative, its revocation. The second
petition, praying for the revocation and nullification of the SDOA and the distribution of the lands in the hacienda, was filed by Alyansa ng
mga Manggagawang Bukid ng Hacienda Luisita (AMBALA). The DAR then constituted a Special Task Force (STF) to attend to issues
relating to the SDP of HLI. After investigation and evaluation, the STF found that HLI has not complied with its obligations under RA 6657
despite the implementation of the SDP. On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01,
recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that the subject lands be forthwith placed under the compulsory coverage
or mandated land acquisition scheme of the CARP.
From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI also filed a petition before the
Supreme Court in light of what it considers as the DARs hasty placing of Hacienda Luisita under CARP even before PARC could rule or
even read the motion for reconsideration. PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01
dated May 3, 2006.

On another but related issue, the HLI foists on the Court the argument that subjecting its
landholdings to compulsory distribution after its approved SDP has been implemented would impair
the contractual obligations created under the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts and must, therefore,
be rejected.
A law authorizing interference, when appropriate, in the contractual relations between or among
parties is deemed read into the contract and its implementation cannot successfully be resisted by
force of the non-impairment guarantee. There is, in that instance, no impingement of the
impairment clause, the non-impairment protection being applicable only to laws that derogate prior
acts or contracts by enlarging, abridging or in any manner changing the intention of the parties.
Impairment, in fine, obtains if a subsequent law changes the terms of a contract between the
parties, imposes new conditions, dispenses with those agreed upon or withdraws existing remedies
for the enforcement of the rights of the parties.100 Necessarily, the constitutional proscription would
not apply to laws already in effect at the time of contract execution, as in the case of RA 6657, in
relation to DAO 10, vis--vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with the general
principle that laws newly enacted have only a prospective operation, and cannot affect acts or
contracts already perfected; however, as to laws already in existence, their provisions are read into
contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II
[of the Constitution] is limited in application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging or in any manner changing the
intention of the parties thereto.101 (Emphasis supplied.)

Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the
ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the obligation of
contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its
terms and conditions is not a PARC administrative matter, but one that gives rise to a cause of
action cognizable by regular courts.102 This contention has little to commend itself. The SDOA is a
special contract imbued with public interest, entered into and crafted pursuant to the provisions of
RA 6657. It embodies the SDP, which requires for its validity, or at least its enforceability, PARCs
approval. And the fact that the certificate of compliance103to be issued by agrarian authorities
upon completion of the distribution of stocksis revocable by the same issuing authority supports
the idea that everything about the implementation of the SDP is, at the first instance, subject to
administrative adjudication.

DECISION petitioner HLIs insistence on the non-impairment clause is misplaced, as it deals with a

fundamental right against the exercise of legislative power, and not of judicial or quasi-judicial power.
In Lim v. Secretary of Agriculture, the Court explained the scope of the non-impairment clause thus:
For it is well-settled that a law within the meaning of this constitutional provision has reference primarily
to statutes and ordinances of municipal corporations. Executive orders issued by the President
whether derived from his constitutional power or valid statutes may likewise be considered as such. It
does not cover, therefore, the exercise of the quasi-judicial power of a department head even if
affirmed by the President. The administrative process in such a case partakes more of an adjudicatory
character. It is bereft of any legislative significance. It falls outside the scope of the non-impairment
clause.242 (Emphasis supplied)
In the instant case, the recall/revocation of the SDOA is necessarily an exercise of the PARCs quasijudicial power. Public respondent PARC was made to decide conflicting claims based on petitioner
HLIs purported violations of the provisions of the SDOA. There was an adjudication of the respective
rights of the parties to the SDOA, as well as the validity of the SDOA. The questioned PARC resolution
was not a legislative act or an administrative order that prescribed regulations applicable to all kinds of
stock distribution options; it was a decision on the competing allegations of non-performance under the
SDOA, which was sought to be enforced. No less than petitioner HLIs counsel concedes that the
assailed acts of public respondent PARC were not legislative in nature for purposes of invoking the
non-impairment clause under the Constitution.243

The Hacienda Luisita Case Part II : The November 22, 2011 Supreme Court Resolution
Less than five months from the promulgation of its July 5, 2011Decision, the Court en banc promulgated on
November 22, 2011 itsResolution on the various motions for reconsideration filed in Hacienda Luisita Inc. (HLI) vs.
Presidential Agrarian Reform Council (PARC), G.R. No. 171101.
[To read the FACTS of the case and the digest of the decision, please click here. To read a summary of the
opinions in the July 5, 2011 decision, please click here.]
In its Resolution, the Court PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et al. with
respect to the option granted to the original farmworkers-beneficiaries (FWBs) of Hacienda Luisita to remain with petitioner
HLI, which option the Court thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified FWBs
should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control [over the
subject lands] given the present proportion of shareholdings in HLI. The Court noted that the share of the FWBs in the HLI
capital stock is [just] 33.296%. Thus, even if all the holders of this 33.296% unanimously vote to remain as HLI stockholders,
which is unlikely, control will never be in the hands of the FWBs. Control means the majority of [sic] 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 total HLI capital shares 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.
Thus, the Court unanimously this time directed immediate land distribution to the qualified FWBs. On the fine
points, however, again the Court failed to have one voice.
The majority maintained its argument that the operative fact doctrine applies in this case since, contrary to the
suggestion of the minority, the doctrine is not limited only to invalid or unconstitutional laws but also applies to decisions made by
the President or the administrative agencies that have the force and effect of laws. Prior to the nullification or recall of said
decisions, they may have produced acts and consequences that 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. The majority stressed that the application of the operative fact doctrine by the Court in its July 5, 2011 decision
was in fact favorable to the FWBs because not only were they 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.
The majority also maintained that the Court is NOT compelled to rule on the constitutionality of Sec. 31 of RA 6657,
reiterating that it was not raised at the earliest opportunity and that the resolution thereof is not the lis mota of the case.
Moreover, the issue has been rendered moot and academic since SDO is no longer one of the modes of acquisition under RA
9700. The majority clarified that in its July 5, 2011 decision, it made no ruling in favor of the constitutionality of Sec. 31 of RA
6657, but found nonetheless that there was no apparent grave violation of the Constitution that may justify the resolution of the
issue of constitutionality. On the other hand, the majority likewise reiterated its holding that those portions of Hacienda Luisita
that have been validly converted to industrial use and have been acquired by intervenors Rizal Commercial Banking Corporation
(RCBC) and Luisita Industrial Park Corporation (LIPCO) should be excluded from the coverage of the assailed PARC resolution
since the said intervenors are innocent purchasers for value.
Finally, the majority maintained that for the purpose of determining just compensation, the date of taking is November
21, 1989 (the date when PARC approved HLIs SDP) since 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, on November 21, 1989. Such approval is akin to a
notice of coverage ordinarily issued under compulsory acquisition. On the contention of the minority (Justice Sereno) that the
date of the notice of coverage [after PARCs revocation of the SDP], that is, January 2, 2006, is determinative of the just
compensation that HLI is entitled to receive, the majority noted that none of the cases cited to justify this position involved the
stock distribution scheme. Thus, said cases do not squarely apply to the instant case. 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.
The separate opinions in the resolution
While the Court is unanimous on the matter of the distribution of Hacienda Luisita to the FWBs, the minority still
disagreed with several aspects of the resolution of the majority.
Thus, Chief Justice Corona reiterated in his Dissenting Opinionthat Section 31 of RA 6657 is invalid and
unconstitutional. Agrarian reforms underlying principle is the recognition of the rights of farmers who are landless to own, directly
or collectively, the lands they till. Under the Constitution, actual land distribution to qualified agrarian reform beneficiaries is
mandatory. Anything that promises something other than land, such the stock distribution option in Sec. 31, must be struck down
for being unconstitutional.
Justice Bersamin, who fully concurred in the July 15, 2011 decision, wrote a Concurring and Dissenting Opinion. He
opined that (1) the reckoning date for purposes of determining just compensation should be left to the DAR and Land Bank, and,
ultimately, to the Special Agrarian Court (SAC) to determine; and (2) the landowner should be compensated for the value of the
homelots granted to the farmworkers-beneficiaries (FWBs) pursuant to the discredited stock distribution plan (SDP). According to
Justice Bersamin, the determination of when the taking occurred is an integral part of the determinationof just compensation.
The nature and character of land at the time of its taking are the principal criteria to determine just compensation to the
landowner; thus, the factual issue of when the taking had taken place should not be separated from the determination of just
compensation by DAR, Land Bank and SAC. On the other hand, it appeared that the homelots granted to the FWBs under the
SDP do not form part of the total area of the agricultural lands to be turned over to DAR for distribution to the qualified FWBs for
which the landowner will be justly compensated. Should the landowner not be justly compensated for the value of the homelots,
the taking will be confiscatory and unconstitutional.
Justice Sereno this time wrote a Concurring and Dissenting Opinion. She disagreed with the majoritys choice of
November 21, 1989 as the reckoning date of the taking of the lands ordered to be distributed for the purpose of eventually
determining just compensation. Her thesis: The taking of private lands under the agrarian reform program partakes of the nature
of an expropriation proceeding. For purposes of taking under the agrarian reform program, the owners of the land should not
receive less than the market value for their expropriated properties. There is taking of private property by the State in
expropriation proceedings when the owner is ousted from his property and deprived of his beneficial enjoyment thereof. The
time of taking is the moment when landowners are deprived of the use and benefit of the property. No taking of agricultural
lands can thus be considered either at the time the SDOA was signed (May 11, 1989, as proposed by Justice Brion) or at the
time PARC approved it (November 21, 1989, as held by the majority) since petitioner HLI retained full ownership and use of the

lands thereafter. Despite the change in stockholders, petitioner was never ousted from or deprived of the beneficial enjoyment of
the agricultural lands in Hacienda Luisita. Citing the rulings of the Court in agrarian reform cases, Justice Sereno noted that the
notice of coverage commences the process of acquiring private agricultural lands covered by the CARP. The date of the notice of
coverage January 2, 2006 is therefore determinative of the just compensation that petitioner HLI is entitled to.

GOLDENWAY MERCHANDISING CORPORATION VS EQUITABLE PCI BANK

Nature: Redemption of Mortgage
Ponente: Villarama
Date: March 13, 2013
DOCTRINE: Section 47 did not divest juridical persons of the right to redeem
their foreclosed properties but only modified the time for the exercise of such
right by reducing the one-year period originally provided in Act No. 3135. The
new redemption period commences from the date of foreclosure sale, and
expires upon registration of the certificate of sale or three months after
foreclosure, whichever is earlier. There is likewise no retroactive application of
the new redemption period because Section 47 exempts from its operation
those properties foreclosed prior to its effectivity and whose owners shall
retain their redemption rights under Act No. 3135.
FACTS:

On November 29, 1985, petitioner Goldenway Merchandising Corporation executed a Real

Estate Mortgage in favor of Equitable PCI Bank over three parcels of land as security for a
Php2,000,000 loan granted to the petitioner. Petitioner eventually failed to settles its loan
obligation, leading respondent to extrajudicially foreclose the mortgage on December 13,
2000. Subsequently, a Certificate of Sale was issued to respondent on January 26, 2001.
In a letter dated March 7, 2001, petitioner offered to redeem the foreclosed properties by
tendering a check. Petitioner and respondent met on March 12, 2001. However, petitioner
was told that redemption was no longer possible since the certificate of sale had already
been registered; the title to the foreclosed properties were consolidated in favor of the
respondent on March 9, 2001.
Petitioner filed a complaint for specific performance and damages contending that the 1year period of redemption under Act 3135 should apply, and not the shorter redemption
period under RA 8791 as applying RA 8791 would result in the impairment of obligations
of contracts and would violate the equal protection clause under the constitution.
The RTC dismissed the action of the petitioner ruling that redemption was made belatedly
and that there was no redemption made at all.
The Court of Appeals affirmed the RTC.
ISSUE:
Whether or not the redemption period should be the 1-year period provided under Act
3135, and not the shorter period under RA 8791 as the parties expressly agreed that
foreclosure would be in accordance with Act 3135
RULING: The shorter period under RA 8791 should apply.
The one-year period of redemption is counted from the date of the registration of the
certificate of sale. In this case, the parties provided in their real estate mortgage contract
that upon petitioners default and the latters entire loan obligation becoming due,
respondent may immediately foreclose the mortgage judicially in accordance with the
Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended.
But under Sec 47 of RA 8791, an exception is thus made in the case of juridical persons
which are allowed to exercise the right of redemption only "until, but not after, the
registration of the certificate of foreclosure sale" and in no case more than three (3)
months after foreclosure, whichever comes first.
Section 47 did not divest juridical persons of the right to redeem their foreclosed
properties but only modified the time for the exercise of such right by reducing the oneyear period originally provided in Act No. 3135. The new redemption period commences
from the date of foreclosure sale, and expires upon registration of the certificate of sale or
three months after foreclosure, whichever is earlier. There is likewise no retroactive
application of the new redemption period because Section 47 exempts from its operation
those properties foreclosed prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135.
We agree with the CA that the legislature clearly intended to shorten the period of
redemption for juridical persons whose properties were foreclosed and sold in accordance
with the provisions of Act No. 3135.
The difference in the treatment of juridical persons and natural persons was based on the
nature of the properties foreclosed whether these are used as residence, for which the
more liberal one-year redemption period is retained, or used for industrial or commercial
purposes, in which case a shorter term is deemed necessary to reduce the period of
uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner
of these acquired assets. It must be underscored that the General Banking Law of 2000,
crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the
General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and

sound banking system. In this context, the amendment introduced by Section 47

embodied one of such safe and sound practices aimed at ensuring the solvency and
liquidity of our banks. It cannot therefore be disputed that the said provision amending
the redemption period in Act 3135 was based on a reasonable classification and germane
to the purpose of the law.
The right of redemption being statutory, it must be exercised in the manner prescribed by
the statute, and within the prescribed time limit, to make it effective. Furthermore, as with
other individual rights to contract and to property, it has to give way to police power
exercised for public welfare. The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to enact legislation that may
interfere with personal liberty or property in order to promote the general welfare." Its
scope, ever-expanding to meet the exigencies of the times, even to anticipate the future
where it could be done, provides enough room for an efficient and flexible response to
conditions and circumstances thus assuming the greatest benefits.
The freedom to contract is not absolute; all contracts and all rights are subject to the
police power of the State and not only may regulations which affect them be established
by the State, but all such regulations must be subject to change from time to time, as the
general well-being of the community may require, or as the circumstances may change,
or as experience may demonstrate the necessity. Settled is the rule that the nonimpairment clause of the Constitution must yield to the loftier purposes targeted by the
Government. The right granted by this provision must submit to the demands and
necessities of the States power of regulation. Such authority to regulate businesses
extends to the banking industry which, as this Court has time and again emphasized, is
undeniably imbued with public interest.
Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no
reversible error committed by the CA in holding that petitioner can no longer exercise the
right of redemption over its foreclosed properties after the certificate of sale in favor of
respondent had been registered.