Case No.

18

Hacienda Luisita, Inc. (HLI)

vs.
Presidential Agrarian Reform Council (PARC) July 5, 2011
G.R. No. 171101.
FACTS:

In 1957, the Spanish owners of the Compañia General de Tabacos de Filipinas

(Tabacalera) sold to Tarlac Development Corporation (TADECO) Hacienda Luisita and their
controlling interest in the sugar mill within the hacienda. The Philippine Government, through the
Central Bank of the Philippines, aided the buyer to obtain a dollar loan from a US bank. Also,
the GSIS Board of Trustees extended loan in favour of TADECO with a condition that said lots
shall be divided at cost to the tenants, should there be any, under Land Tenure Act. In 1963,
the Agricultural Land Reform Code (RA 3844) was enacted, abolishing share tenancy and
converting it to leasehold tenancy. Subsequently, Congress passed the Code of Agrarian
Reform (RA 6389) declaring the entire country a land reform area. A month after the declaration
of Martial Law in 1972, President Marcos allowed tenant-farmers to purchase the land they tilled
or to change from shared-tenancy to fixed-rent leasehold tenancy. In 1980, the Martial Law
Administration filed a suit before the RTC of Manila against TADECO to surrender Hacienda
Luisita to the Ministry of Agrarian Reform (now the DAR) for its distribution to farmers. The RTC
ordered TADECO to surrender the hacienda to the MAR.

Then during the time of President Corazon C. Aquino, after Marcos was ousted, she
instituted Comprehensive Agrarian Reform Program (CARP) and created the Presidential
Agrarian Reform Council (PARC) as its policy-making body, thru RA 6657 (CARP Law of 1988)
ushering a new process of land classification, acquisition, and distribution. Consequently, the
CA dismissed the case the Marcos administration initially instituted and won against TADECO,
et al. However, the dismissal was conditioned that there be an approval of a stock distribution
plan (SDP) to be submitted, approved by PARC, and implemented as an alternative mode of
land distribution, and failure to comply will cause the revival of previous decision. Thereafter, the
Hacienda Luisita, Inc. (HLI) was formed as a spin-off corporation to facilitate the SDP.

In 1989, about 93% of the Farmworkers-beneficiaries (FWBs) accepted and signed the
proposed SDOP. Then, Stock Distribution Option Agreement (SDOA) was entered into by
TADECO/HLI and 5,848 qualified FWBs. A referendum conducted by DAR showed that 5,177
FWBs out of 5,315 participants opted to receive shares in the HLI.

A petition (Petisyon) was then filed for the revocation and nullification of the SDOA and
the distribution of the lands. The Petisyon was filed by the AMBALA (composing about 80% of
the 5,339 FWBs of Hacienda Luisita). DAR constituted a Special Task Force to attend to the
issues relating to the SDP of HLI and the latter found that HLI failed to comply with their
undertakings.

On December 22, 2005, PARC affirmed the recommendation of DAR to recall/revoke the
SDOP of TADECO/HLI and the land be placed under compulsory coverage or mandated land
acquisition.

ISSUES:

(1) Whether or not PARC has jurisdiction to recall or revoke HLI’s SDP;
(2) Whether or not Section 31 of RA 6657 is constitutional.
RULINGS:

1. YES. Although E0 229 expressly vested PARC with such authority to approve plan for
stock distribution, without explicitly vesting it to revoke/recall an approved SDP, under the
principle of necessary implication, a basic postulate that what is implied in a statute is as much
a part of it as that which is expressed. On a related issue, HLI claimed that subjecting the
landholding to compulsory distribution after the approval of its SDP results in the impairment of
obligation and 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.
The Supreme Court stressed that SDOA is a special contract imbued with public interest,
entered into pursuant to RA 6657 and subject to the approval and administrative adjudication of
its issuing authority—PARC.

Contrary to the view of HLI, the rights, obligations, and remedies of the parties to the
SDOA embodying the SDP are governed by RA 6657 and not by the Corporation Code. HLI, as
pointed by the Court was made to comply with RA 6657, and not to shield itself from the
coverage of CARP and supplant or circumvent the agrarian reform program. Also as between
the Corporation Code, a general law and RA 6657, a special law, the latter prevails –generalia
specialibus non derogant. What private respondents questioned before the Dar was the proper
implementation of SDP and HLI’s compliance with RA 6657. Evidently, RA 6657 was the
applicable law in this case.

Also, contrary to the view of HLI that the inclusion of the agricultural land of Hacienda
Luisita under CARP coverage and the eventual distribution of the land to FWBs amounts to the
dissolution of all corporate assets of HLI, and thus the Corporation Code apply, the Court was
not persuaded. The Court said that such inclusion and eventual distribution will not
automatically trigger the dissolution of HLI since the value of agricultural lands in relation to the
total assets transferred and conveyed by TADECO to HLI comprises only 33.296% (meaning it
does not hold the majority assets of the corporation to trigger such dissolution).

2. NO. The issue on constitutionality of Section 31 of RA 6657, springs to invalidate the

said provision of the law because it allows corporations to use stock distribution as its mode of
distribution or transfer instead of an outright agricultural land transfer, which they believe impairs
the fundamental right of farmers and farmworkers envisioned under Section 4, Article XIII of the
Constitution. Accordingly, the challenge on the constitutionality of Section 31 of RA 6657 and its
counterpart provision in EO 229 failed. The Supreme Court reasoned that the reason it failed
was because of failure of the intervenors to question its constitutionality in the earliest
opportunity. 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 was
sought to be revoked. Furthermore, AMBALA did NOT question the constitutionality of said
provision but focused on the flaws and gaps in the subsequent implementation of the SDP.

The Supreme Court also noted that Section 5 of RA 9700 superseded Section 31 of RA
6657 vis-à-vis the stock distribution component of said provision, where Section 5 of RA 9700
provides: “That after June 30, 2009, the mode of acquisition shall be limited to voluntary offer to
sell and compulsory acquisition.” Thus, stock distribution is no longer an available option under
existing law. The issue has become moot and academic. The Supreme Court ruled that there
appeared to have been no breach of the fundamental law in the light of Section 4, Article XIII of
the 1987 Constitution since farmers and regular farmworkers have a right to OWN DIRECTLY
OR COLLECTIVELY THE LANDS THEY TILL. The SC believed that Sec. 31 of RA 6657 is
NOT inconsistent with the State’s commitment to farmers and farmworkers to advance their
interests under the policy of social justice.