D E C I S
I O N
VELASCO, JR., J.:
I.
THE FACTS
In 1958, the Spanish owners of
Compañia General de Tabacos de Filipinas (Tabacalera) sold Hacienda Luisita and
the Central Azucarera de Tarlac, the sugar mill of the hacienda, to the Tarlac
Development Corporation (Tadeco), then owned and controlled by the Jose
Cojuangco Sr. Group. The Central Bank of the Philippines assisted Tadeco in
obtaining a dollar loan from a US bank. 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. Responding, Tadeco
alleged that Hacienda Luisita does not have tenants, besides which sugar lands
– of which the hacienda consisted – are not covered by existing agrarian reform
legislations. The Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the CA.
On March 17, 1988, during the
administration of President Corazon Cojuangco Aquino, the Office of the
Solicitor General moved to withdraw the government’s case against
Tadeco, et al. The CA dismissed the case, subject to the PARC’s
approval of Tadeco’s proposed stock distribution plan (SDP) in favor of its
farmworkers. [Under EO 229 and later RA
6657, Tadeco had the option of availing stock distribution as an alternative
modality to actual land transfer to the farmworkers.] 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 HLI’s 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
HLI’s 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 HLI’s 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. Subsequently, Centennary sold the entire 300 hectares for PhP750
million to Luisita Industrial Park Corporation (LIPCO), which used it in
developing an industrial complex. From this area was carved out 2 parcels, for
which 2 separate titles were issued in the name of LIPCO. Later, LIPCO
transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in
payment of LIPCO’s PhP431,695,732.10 loan obligations to RCBC. LIPCO’s
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 DAR’s
hasty placing of Hacienda Luisita under CARP even before PARC could rule or
even read the motion for reconsideration. PARC would eventually deny HLI’s
motion for reconsideration via Resolution No. 2006-34-01 dated May 3,
2006.
II.
THE ISSUES
(1) Does the PARC possess jurisdiction
to recall or revoke HLI’s SDP?
(2) [Issue raised by intervenor FARM (group of
farmworkers)] Is Sec. 31 of RA 6657, which allows stock transfer in lieu of outright
land transfer, unconstitutional?
(3) Is the revocation of the HLI’s
SDP valid? [Did PARC gravely abuse its
discretion in revoking the subject SDP and placing the hacienda under CARP’s
compulsory acquisition and distribution scheme?]
(4) Should those portions of the converted land within Hacienda Luisita that
RCBC and LIPCO acquired by purchase be excluded from the coverage of the
assailed PARC resolution? [Did the PARC gravely abuse its discretion when it
included LIPCO’s and RCBC’s respective properties that once formed part of
Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed
Notice of Coverage?]
III.
THE RULING
[The Court DENIED the petition of HLI
and AFFIRMED the PARC resolution placing the lands subject of
HLI’s SDP under compulsory coverage on mandated land acquisition scheme of the
CARP, with the MODIFICATION that the original 6,296 qualified
FWBs were given the option to remain as stockholders of HLI. It also excluded
from the mandatory CARP coverage that part of Hacienda Luisita that had been
acquired by RCBC and LIPCO.]
(1) YES, the PARC has jurisdiction to
revoke HLI’s SDP under the doctrine of necessary implication.
Under Sec. 31 of RA 6657, as implemented by DAO 10,
the authority to approve the plan for stock distribution of the corporate
landowner belongs to PARC. Contrary to petitioner HLI’s posture, PARC also
has the power to revoke the SDP which it previously approved. It may be,
as urged, that RA 6657 or other executive issuances on agrarian reform do not
explicitly vest the PARC with the power to revoke/recall an approved SDP.
Such power or authority, however, is deemed possessed by PARC 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.
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.
(2) NO, Sec. 31 of RA 6657 is not
unconstitutional. [The Court actually refused to
pass upon the constitutional question because it was not raised at the earliest opportunity and because 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.]
When the Court is called upon to
exercise its power of judicial review over, and pass upon the constitutionality
of, acts of the executive or legislative departments, it does so only when the
following essential requirements are first met, to wit: (1) there is an actual
case or controversy; (2) that the constitutional question is raised at the
earliest possible opportunity by a proper party or one with locus
standi; and (3) the issue of constitutionality must be the very lis
mota of the case.
Not all the foregoing
requirements are satisfied in the case at bar.
While there is indeed an actual
case or controversy, intervenor FARM, composed of a small minority of 27
farmers, has yet to explain its failure to challenge the constitutionality of
Sec. 31 of RA 6657 as early as November 21, 1989 when PARC approved the SDP of
Hacienda Luisita or at least within a reasonable time thereafter, and why its
members received benefits from the SDP without so much of a protest. It was
only on December 4, 2003 or 14 years after approval of the SDP that said plan
and approving resolution were sought to be revoked, but not, to stress, by FARM
or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA
petition did NOT question the constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the subsequent implementation
of the SDP. Even the public respondents, as represented by the Solicitor General,
did not question the constitutionality of the provision. On the
other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the
constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental
Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it
challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late
in the day. The FARM members slept on their rights and even
accepted benefits from the SDP with nary a complaint on the alleged
unconstitutionality of Sec. 31 upon which the benefits were
derived. The Court cannot now be goaded into resolving a
constitutional issue that FARM failed to assail after the lapse of a long
period of time and the occurrence of numerous events and activities which
resulted from the application of an alleged unconstitutional legal provision.
The last but the most important
requisite that the constitutional issue must be the very lis mota of
the case does not likewise obtain. The lis mota aspect is not
present, the constitutional issue tendered not being critical to the resolution
of the case. The unyielding rule has been to avoid, whenever plausible, an
issue assailing the constitutionality of a statute or governmental act. If some
other grounds exist by which judgment can be made without touching the
constitutionality of a law, such recourse is favored.
The lis mota in
this case, proceeding from the basic positions originally taken by AMBALA (to
which the FARM members previously belonged) and the Supervisory Group, is the
alleged non-compliance by HLI with the conditions of the SDP to support a plea
for its revocation. And before the Court, the lis mota is whether or not PARC
acted in grave abuse of discretion when it ordered the recall of the SDP for
such non-compliance and the fact that the SDP, as couched and implemented,
offends certain constitutional and statutory provisions. To be sure, any of these key issues may be
resolved without plunging into the constitutionality of Sec. 31 of RA 6657.
Moreover, looking deeply into the underlying petitions of AMBALA, et
al., it is not the said section per se that is invalid, but rather it is
the alleged application of the said provision in the SDP that is flawed.
It may be well to note at this juncture
that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has all but
superseded Sec. 31 of RA 6657 vis-à-vis the stock distribution component of
said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: “[T]hat
after June 30, 2009, the modes of acquisition shall be limited to
voluntary offer to sell and compulsory acquisition.” Thus, for all intents and purposes,
the stock distribution scheme under Sec. 31 of RA 6657 is no longer an
available option under existing law. The question of whether or not it is
unconstitutional should be a moot issue.
(3) YES, the revocation of the HLI’s
SDP valid. [NO, the PARC did NOT gravely abuse its discretion in revoking the
subject SDP and placing the hacienda under CARP’s compulsory acquisition and
distribution scheme.]
The revocation of the approval of
the SDP is valid: (1) the mechanics and timelines of HLI’s stock distribution
violate DAO 10 because the minimum individual allocation of each original FWB
of 18,804.32 shares was diluted as a result of the use of “man days” and the
hiring of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs
stock transfer is contrary to what Sec. 11 of DAO 10 prescribes.
In our review and analysis of
par. 3 of the SDOA on the mechanics and timelines of stock distribution, We
find that it violates two (2) provisions of DAO 10. Par.
3 of the SDOA states:
3. At the end of each fiscal year, for a period of
30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the
acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number
of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY that are presently owned and
held by the FIRST PARTY, until such time as the entire block of 118,391,976.85
shares shall have been completely acquired and distributed to the THIRD PARTY.
[I]t is clear as day that the original 6,296 FWBs, who
were qualified beneficiaries at the time of the approval of the SDP, suffered
from watering down of shares. As determined earlier, each
original FWB is entitled to 18,804.32 HLI shares. The original FWBs
got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the
acquisition and distribution of the HLI shares were based on “man days” or
“number of days worked” by the FWB in a year’s time. As explained by
HLI, a beneficiary needs to work for at least 37 days in a fiscal year before
he or she becomes entitled to HLI shares. If it falls below 37 days,
the FWB, unfortunately, does not get any share at year end. The
number of HLI shares distributed varies depending on the number of days the
FWBs were allowed to work in one year. Worse, HLI hired farmworkers
in addition to the original 6,296 FWBs, such that, as indicated in the
Compliance dated August 2, 2010 submitted by HLI to the Court, the total number
of farmworkers of HLI as of said date stood at 10,502. All these
farmworkers, which include the original 6,296 FWBs, were given shares out of
the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding
capital stock of HLI. Clearly, the minimum individual allocation of
each original FWB of 18,804.32 shares was diluted as a result of the use of
“man days” and the hiring of additional farmworkers.
Going into another but related
matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for
HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10
prescribes. Said Sec. 11 provides for the implementation of the
approved stock distribution plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by PARC. In fact, based on the
said provision, the transfer of the shares of stock in the names of the
qualified FWBs should be recorded in the stock and transfer books and must be
submitted to the SEC within sixty (60) days from implementation.
To the Court, there is a purpose,
which is at once discernible as it is practical, for the three-month threshold.
Remove this timeline and the corporate landowner can veritably evade compliance
with agrarian reform by simply deferring to absurd limits the implementation of
the stock distribution scheme.
Evidently, the land transfer
beneficiaries are given thirty (30) years within which to pay the cost of the
land thus awarded them to make it less cumbersome for them to pay the
government. To be sure, the reason underpinning the 30-year accommodation does
not apply to corporate landowners in distributing shares of stock to the
qualified beneficiaries, as the shares may be issued in a much shorter period
of time.
Taking into account the above
discussion, the revocation
of the SDP by PARC should be upheld [because of violations of] DAO 10.
It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the
power to issue rules and regulations, substantive or procedural. Being a product of such
rule-making power, DAO 10 has the force and effect of law and must be duly
complied with. The PARC is, therefore, correct in revoking the SDP.
Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving
the HLI’s SDP is nullified and voided.
(4) YES, those portions of the
converted land within Hacienda Luisita that RCBC and LIPCO acquired by purchase
should be excluded from the coverage of the assailed PARC resolution.
[T]here are two (2) requirements
before one may be considered a purchaser in good faith, namely: (1) that the
purchaser buys the property of another without notice that some other person
has a right to or interest in such property; and (2) that the purchaser pays a
full and fair price for the property at the time of such purchase or
before he or she has notice of the claim of another.
It can rightfully be said that
both LIPCO and RCBC are––based on the above requirements and with respect to
the adverted transactions of the converted land in question––purchasers in good
faith for value entitled to the benefits arising from such status.
First, at the time LIPCO purchased
the entire three hundred (300) hectares of industrial land, there was no
notice of any supposed defect in the title of its transferor, Centennary, or
that any other person has a right to or interest in such property. In fact, at
the time LIPCO acquired said parcels of land, only the following annotations
appeared on the TCT in the name of Centennary: the Secretary’s Certificate in
favor of Teresita Lopa, the Secretary’s Certificate in favor of Shintaro Murai,
and the conversion of the property from agricultural to industrial and
residential use.
The same is true with respect to
RCBC. At the time it acquired portions of Hacienda Luisita, only the following
general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions,
limiting its use solely as an industrial estate; the Secretary’s Certificate in
favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of
RCBC to guarantee the payment of PhP 300 million.
To be sure, intervenor RCBC and
LIPCO knew that the lots they bought were subjected to CARP coverage by means
of a stock distribution plan, as the DAR conversion order was annotated at the
back of the titles of the lots they acquired. However, they are of the honest belief
that the subject lots were validly converted to commercial or industrial
purposes and for which said lots were taken out of the CARP coverage subject of
PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by
them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands previously covered by CARP
land acquisition “after the lapse of five (5) years from its award when the
land ceases to be economically feasible and sound for agricultural purposes or
the locality has become urbanized and the land will have a greater economic
value for residential, commercial or industrial purposes.” Moreover,
DAR notified all the affected parties, more particularly the FWBs, and gave
them the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary processes, granted
the conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian
reform matters and its original exclusive jurisdiction over all matters
involving the implementation of agrarian reform. The DAR conversion
order became final and executory after none of the FWBs interposed an appeal to
the CA. In this
factual setting, RCBC and LIPCO purchased the lots in question on their honest
and well-founded belief that the previous registered owners could legally sell
and convey the lots though these were previously subject of CARP coverage. Ergo,
RCBC and LIPCO acted in good faith in acquiring the subject lots.
And second, both
LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably,
LIPCO acquired 300 hectares of land from Centennary for the amount of PhP750
million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a
Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of
Hacienda Luisita in favor of RCBC by way of dacion en pago to
pay for a loan of PhP431,695,732.10.
In relying upon the
above-mentioned approvals, proclamation and conversion order, both RCBC and
LIPCO cannot be considered at fault for believing that certain portions of
Hacienda Luisita are industrial/commercial lands and are, thus, outside the
ambit of CARP. The PARC, and
consequently DAR, gravely abused its discretion when it placed LIPCO’s and
RCBC’s property which once formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed Notice of Coverage.
[The Court went on to apply the operative fact
doctrine to determine what should be done in the aftermath of its disposition
of the above-enumerated issues:
While We affirm the revocation of the SDP on
Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01, the
Court cannot close its eyes to certain “operative facts” that had occurred in
the interim. Pertinently, the “operative fact” doctrine
realizes that, in declaring a law or executive action null
and void, or, by extension, no longer without force and effect, undue harshness
and resulting unfairness must be avoided. This is as it should realistically
be, since rights might have accrued in favor of natural or juridical persons
and obligations justly incurred in the meantime. The actual existence of a statute or executive act is,
prior to such a determination, an operative fact and may have consequences
which cannot justly be ignored; the past cannot always be erased by a new
judicial declaration.
While the assailed PARC resolutions effectively
nullifying the Hacienda Luisita SDP are upheld, the revocation
must, by application of the operative fact principle, give way to the right of
the original 6,296 qualified FWBs to choose whether they want to remain as HLI
stockholders or not. The Court cannot turn a blind eye to the fact that in 1989,
93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the
SDP approved by PARC per its Resolution No. 89-12-2 dated November 21,
1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries
and cash benefits, hospital and medical benefits, 240-square meter homelots, 3%
of the gross produce from agricultural lands, and 3% of the proceeds of the
sale of the 500-hectare converted land and the 80.51-hectare lot sold to SCTEX.
HLI shares totaling 118,391,976.85 were distributed as of April 22,
2005. On August 6, 20l0, HLI and private respondents submitted a
Compromise Agreement, in which HLI gave the FWBs the option of acquiring a
piece of agricultural land or remain as HLI stockholders, and as a matter of
fact, most FWBs indicated their choice of remaining as stockholders. These
facts and circumstances tend to indicate that some, if not all, of the FWBs may
actually desire to continue as HLI shareholders. A matter best left
to their own discretion.]
[WHEREFORE, the instant petition is DENIED. PARC
Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01
dated May 3, 2006, placing the lands subject of HLI’s SDP under compulsory
coverage on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with
the MODIFICATION that the original 6,296 qualified FWBs shall
have the option to remain as stockholders of HLI. DAR shall
immediately schedule meetings with the said 6,296 FWBs and explain to them the
effects, consequences and legal or practical implications of their choice,
after which the FWBs will be asked to manifest, in secret voting, their choices
in the ballot, signing their signatures or placing their thumbmarks, as the
case may be, over their printed names.]
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