Fundamental Powers of the State (Case Digest)

8/10/2019 Fundamental Powers of the State (Case Digest)

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FUNDAMENTAL POWERS OF THE STATE CASE DIGEST

1. Ichong vs Hernandez

FACTS: The Legislature passed R.A. 1180 (An Act to Regulate the Retail Business). Its purpose was to prevent

persons who are not citizens of the Phil. from having a stranglehold upon the peoples economic life.

a prohibition against aliens and against associations, partnerships, or corporations the capital of which are

not wholly owned by Filipinos, from engaging directly or indirectly in the retail trade

aliens actually engaged in the retail business on May 15, 1954 are allowed to continue their business,

unless their licenses are forfeited in accordance with law, until their death or voluntary retirement. In

case of juridical persons, ten years after the approval of the Act or until the expiration of term.

Citizens and juridical entities of the United States were exempted from this Act.

provision for the forfeiture of licenses to engage in the retail business for violation of the laws on

nationalization, economic control weights and measures and labor and other laws relating to trade,

commerce and industry. provision against the establishment or opening by aliens actually engaged in the retail business of

additional stores or branches of retail business

Lao Ichong, in his own behalf and behalf of other alien residents, corporations and partnerships affected by the

Act, filed an action to declare it unconstitutional for the ff: reasons:

1.

it denies to alien residents the equal protection of the laws and deprives them of their liberty and

property without due process

2. the subject of the Act is not expressed in the title

3. the Act violates international and treaty obligations

4.

the provisions of the Act against the transmission by aliens of their retail business thru hereditary

succession

ISSUE: WON the Act deprives the aliens of the equal protection of the laws.

HELD: The law is a valid exercise of police power and it does not deny the aliens the equal protection of the laws.

There are real and actual, positive and fundamental differences between an alien and a citizen, which fully justify

the legislative classification adopted.

RATIO: The equal protection clause does not demand absolute equality among residents. It merely requires that

all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and

liabilities enforced.

The classification is actual, real and reasonable, and all persons of one class are treated alike.

The difference in status between citizens and aliens constitutes a basis for reasonable classification in the exercise

of police power.

Official statistics point out to the ever-increasing dominance and control by alien of the retail trade. It is this

domination and control that is the legislatures target in the enactment of the Act.

The mere fact of alienage is the root cause of the distinction between the alien and the national as a trader. The

alien is naturally lacking in that spirit of loyalty and enthusiasm for the Phil. where he temporarily stays and makes

his living. The alien owes no allegiance or loyalty to the State, and the State cannot rely on him/her in times of

crisis or emergency.

While the citizen holds his life, his person and his property subject to the needs of the country, the alien may

become the potential enemy of the State.

The alien retailer has shown such utter disregard for his customers and the people on whom he makes his profit.

Through the illegitimate use of pernicious designs and practices, the alien now enjoys a monopolistic control on

the nations economy endangering the national security in times of crisis and emergency.


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2. TIO v.VIDEOGRAM REGULATORY BOARD

FACTS: On September 1, 1986, Tio filed a petition assailing the constitutionality of PD No. 1987 entitled An Act

Creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry.

On November 5, 1985, PD No. 1994 amended Sec. 134 of National Internal Revenue Code providing annual tax of

P5.00 on video-tape cassettes. On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie

Producers, Importers and Distributors Association of the Philippines and Philippine Motion Pictures ProducersAssociation were permitted by the court as INTERVENORS. Tio questions the decree on the following grounds: a)

Sec 10, PD No. 1987 is a rider; b)30% tax is harsh, confiscatory, oppressive and in restraint of trade; c) there is no

factual or legal basis for the promulgation of the decree by the President under Amendment No. 6, 1973

Constitution; d) there is undue delegation of power and authority; e) the decree is an ex-post facto law; and f)

there is overregulation of the video industry as if it were a nuisance, which it is not.

ISSUE: Whether or not PD No. 1987 is constitutional?

HELD: YES, PD No. 1987 is constitutional. Petitioners arguments were refuted.

a) Sec. 10, PD No. 1987 is not a rider. It is allied and germane to the general object of the decree The regulation

of the video industry through Videogram Regulatory Board .

b) The levy of the 30% tax is valid since it was imposed to answer the need for regulating the video industry

because of the film piracy, the flagrant violation of the intellectual property rights and the proliferation of

pornographic video tapes .

c) The 8thwhereas clause summarizes the justification in that grave emergencies necessitates bold emergency

measures to be adopted with dispatch.

d) Sec. 11, PD No. 1987 provides that the authority of the board to solicit such assistance is for a fixed and limited

period with the deputized agencies concerned being subject to the discretion and control ofthe board.

e) Sec. 15, PD No. 1987 is not violative of an ex-post facto law. There is no question that there is a rational

connection between the fact proved (non-registration) and the ultimate fact presumed(violation of the decree).

f) While the underlying objective of the decree is to protect the movie industry, there is no question that public

welfare is at the bottom of its enactment.

3. TAXICAB OPERATORS VS. BOARD OF TRANSPORTATION

SYNOPSIS

Petitioners who are taxicab operators assail the constitutionality of Memorandum Circular No. 77-42 issued by theBoard of Transportation (BOT) providing for the phasing out and replacement of old and dilapidated taxicabs; aswell as Implementing Circular No. 52 issued pursuant thereto by the Bureau of Land Transportation (BLT)instructing personnel of the BLT within the National Capital Region to implement the said BOT Circular, and

formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public conveyances.Petitioners allege that the questioned Circulars did not afford them procedural and substantive due process, equalprotection of the law, and protection against arbitrary and unreasonable classification and standard. Among others,they question the issuance of the Circulars without first calling them to a conference or requiring them to submitposition papers or other documents enforceability thereof only in Metro Manila; and their being applicable only totaxicabs and not to other transportation services.

The Supreme Court held that there was no denial of due process since calling the taxicab operators or persons whomay be affected by the questioned Circulars to a conference or requiring them to submit position papers or otherdocuments is only one of the options open to the BOT which is given wide discretionary authority under P.D. No.101; and fixing a six- year ceiling for a car to be operated as taxicab is a reasonable standard adopted to apply toall vehicles affected uniformly, fairly, and justly. The Court also ruled that neither has the equal protection clausebeen violated by initially enforcing the Circulars only in Metro Manila since it is of common knowledge that taxicabsin this city, compared to those of other places, are subjected to heavier traffic pressure and more constant use,thus making for a substantial distinction; nor by non-application of the Circulars to other transportation servicesbecause the said Circulars satisfy the criteria required under the equal protection clause, which is the uniformoperation by legal means so that all persons under identical or similar circumstances would be accorded the sametreatment both in privilege conferred and the liabilities imposed.

FACTS: Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation composed of

taxicab operators, who are grantees of Certificates of Public Convenience to operate taxicabs within the City of

Manila and to any other place in Luzon accessible to vehicular traffic.

On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum Circular No. 77-42 which

reads:

SUBJECT: Phasing out and Replacement of Old and Dilapidated Taxis


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On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No. 80-7553, seeking to nullify MC

No. 77-42 or to stop its implementation; to allow the registration and operation in 1981 and subsequent years of

taxicabs of model 1974, as well as those of earlier models which were phased-out, provided that, at the time of

registration, they are roadworthy and fit for operation.

ISSUES: A. Did BOT and BLT promulgate the questioned memorandum circulars in accord with the manner

required by Presidential Decree No. 101, thereby safeguarding the petitioners constitutional right to proceduraldue process?

B. Granting arguendo, that respondents did comply with the procedural requirements imposed by Presidential

Decree No. 101, would the implementation and enforcement of the assailed memorandum circulars violate the

petitioners constitutional rights to.

(1) Equal protection of the law;

(2) Substantive due process; and

(3) Protection against arbitrary and unreasonable classification and standard?

HELD: As enunciated in the preambular clauses of the challenged BOT Circular, the overriding consideration is

the safety and comfort of the riding public from the dangers posed by old and dilapidated taxis. The State, in the

exercise of its police power, can prescribe regulations to promote the health, morals, peace, good order, safety

and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society. It

may also regulate property rights. In the language of Chief Justice Enrique M. Fernando the necessities imposed

by public welfare may justify the exercise of governmental authority to regulate even if thereby certain groups

may plausibly assert that their interests are disregarded.

4. DECS vs. San Diego

Facts: Respondent San Diego has flunked the NMAT (National Medical Admission Test) three times. When he

applied to take again, petitioner rejected his application based on the three-flunk-rule. He then filed a petitionbefore the RTC on the ground of due process and equal protection and challenging the constitutionality of the

order. The petition was granted by the RTC therefore this petition.

Issue: Whether or not the NMAT three-flunk-rule order is valid and constitutional.

Ruling: Yes. It is the right and responsibility of the State to insure that the medical profession is not infiltrated by

incompetents to whom patients may unwarily entrust their lives and health. The method employed by the

challenged regulation is not irrelevant to the purpose of the law nor is it arbitrary or oppressive. The right to

quality education is not absolute. The Constitution provides that every citizen has the right to choose a

profession or course of study, subject to fair, reasonable and equitable admission and academic requirements. It

is not enough to simply invoke the right to quality education as a guarantee of the Constitution but one must show

that he is entitled to it because of his preparation and promise. Petition was granted and the RTC ruling was

reversed.

5. US VS. TORIBIO

Facts: Respondent Toribio is an owner of carabao, residing in the town of Carmen in the province of Bohol. The

trial court of Bohol found that the respondent slaughtered or caused to be slaughtered a carabao without a permit

from the municipal treasurer of the municipality wherein it was slaughtered, in violation of Sections 30 and 33 of

Act No. 1147, an Act regulating the registration, branding, and slaughter of Large Cattle. The act prohibits the

slaughter of large cattle fit for agricultural work or other draft purposes for human consumption.

The respondent counters by stating that what the Act is (1) prohibiting is the slaughter of large cattle in the

municipal slaughter house without a permit given by the municipal treasurer. Furthermore, he contends that the

municipality of Carmen has no slaughter house and that he slaughtered his carabao in his dwelling, (2) the actconstitutes a taking of property for public use in the exercise of the right of eminent domain without providing for

the compensation of owners, and it is an undue and unauthorized exercise of police power of the state for it

deprives them of the enjoyment of their private property.

Issue:Whether or not Act. No. 1147, regulating the registration, branding and slaughter of large cattle, is an undue

and unauthorized exercise of police power.


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Held: It is a valid exercise of police power of the state.

Police power is the inherent power of the state to legislate laws which may interfere with personal liberties. To

justify the state in the exercise of its sovereign police power it must appear (1) that the interest of the general

public requires it and (2) that the means are reasonably necessary for the accomplishment of the purpose, and not

unduly oppressive upon individuals.

The court is of the opinion that the act applies generally to the slaughter of large cattle for human consumption,

ANYWHERE, without a permit duly secured from the municipal treasurer, For to do otherwise is to defeat the

purpose of the law and the intent of the law makers. The act primarily seeks to protect large cattle against theft to

make it easy for the recovery and return to owners, which encouraged them to regulate the registration and

slaughter of large cattle.

Several years prior to the enactment of the said law, an epidemic struck the Philippine islands which threatened

the survival of carabaos in the country. In some provinces seventy, eighty and even one hundred percent of their

local carabaos perished due to the said epidemic. This drove the prices of carabaos up to four or five-fold, as a

consequence carabao theft became rampant due to the luxurious prices of these work animals. Moreover, this

greatly affected the food production of the country which prompted the government to import rice from its

neighboring countries.

As these work animals are vested with public interest for they are of fundamental use for the production of crops,

the government was prompted to pass a law that would protect these work animals. The purpose of the law is to

stabilize the number of carabaos in the country as well as to redistribute them throughout the entire archipelago.

It was also the same reason why large cattles fit for farm work was prohibited to be slaughtered for human

consumption. Most importantly, the respondents carabao was found to be fit for farm work.

These reasons satisfy the requisites for the valid exercise of police power.

Act No. 1147 is not an exercise of the inherent power of eminent domain. The said law does not constitute the

taking of carabaos for public purpose; it just serves as a mere regulation for the consumption of these private

properties for the protection of general welfare and public interest. Thus, the demand for compensation of the

owner must fail.

6. MMDA VS. BEL-AIR

Facts:MMDA is a government agency tasked with the delivery of basic services in Metro Manila. Bel-Air is a non-

stock, non-profit corporation whose members are homeowners of Bel-Air Villagee in Makati City. Bel-Air is the

registered owner of the Neptune Street, a road inside Bel-Air Village.

December 30, 1995 Bel-Air received a notice from MMDA requesting Bel-Air to open Neptune St. to public

vehicular traffic. On the same day, MMDA apprised that the perimeter wall separating the subdivision from the

adjacent Kalayaan Avenue would be demolished.

January 2, 1996, MMDA instituted a case for injunction against Bel-Air; and prayed for a TRO and preliminary

injunction enjoining Neptune St. and prohibiting the demolition of the perimeter wall. Court issued a TRO the next

day.

After due hearing, RTC denied the issuance of a preliminary injunction. MMDA question the denial and appealed to

the CA. CA conducted an ocular inspection of Neptune St. then issued a writ of preliminary injunction enjoining the

MMDA proposed action.

On January 27, 1997, appellate court rendered a decision finding MMDA no authority to order the opening of

Neptune St. It held that the authority is in the City Council of Makati by ordinance.

The motion for reconsideration is denied hence this recourse.

Issues: (1) MMDA has the authority to mandate the opening of Neptune St. to public traffic pursuant to itsregulatory and police powers? (2) Is passage of an ordinance a condition precedent before the MMDA may order

the opening of subdividion roads to public traffic? (3) Is Bel-Air estopped from denying the authority of MMDA?

(4)Was Bel-Air denied of due process despite the several meetings held between MMDA and Bel-Air? (5) Has Bel-

Air come to court with unclean hands?


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MMDA: it has the authority to open Neptune St. because it is an agent of the Government endowed with police

power in the delivery of basic services in Metro Manila. From the premise of police powers, it follow then that it

need not for an ordinance to be enacted first.

**Police power is an inherent attribute of sovereignty. Police power is lodged primarily in the National Legislature,

which the latter can delegate to the President and administrative boards, LGU or other lawmaking bodies.

**LGU is a political subdivision for local affairs. Which has a legislative body empowered to enact ordinances,

approved resolutions and appropriate funds for the general welfare of the province/city/municipality.

**Metro Manila is declared as a special development and administrative region in 1995. And the administration of

metro-wide basic services is under the MMDA.Which includes, transport and traffice management. It should be

noted that MMDA are limited to the acts: formulation, coordination, regulation, implementation, preparation,

management, monitoring, setting of policies and installation of a system and administration. MMDA was not

granted with legislative power.

Ruling:

(1) The basis for the proposed opening of Neptune Street is contained in the notice of December 22, 1995 sent by

petitioner to respondent BAVA, through its president. The notice does not cite any ordinance or law, either by the

Sangguniang Panlungsod of Makati City or by the MMDA, as the legal basis for the proposed opening of Neptune

St.

(2) The MMDA is not the same entity as the MMC in Sangalang. Although the MMC is the forerunner of the

present MMDA, an examination of Presidential Decree (P. D.) No. 824, the charter of the MMC, shows that the

latter possessed greater powers which were not bestowed on the present MMDA.

(3) Under the 1987 Constitution, the local government units became primarily responsible for the governance of

their respective political subdivisions. The MMA's jurisdiction was limited to addressing common problems

involving basic services that transcended local boundaries. It did not have legislative power.

Petition Denied.

7. MMDA VS. GARIN

Facts:The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was issued a traffic

violation receipt (TVR) by MMDA and his driver's license confiscated for parking illegally along Gandara Street,

Binondo, Manila, on August 1995.

Shortly before the expiration of the TVR's validity, the respondent addressed a letter to then MMDA Chairman

Prospero Oreta requesting the return of his driver's license, and expressing his preference for his case to be filed in

court.

Receiving no immediate reply, Garin filed the original complaint with application for preliminary injunction,

contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924 grants

the MMDA unbridled discretion to deprive erring motorists of their licenses, pre-empting a judicial determination

of the validity of the deprivation, thereby violating the due process clause of the Constitution.

The respondent further contended that the provision violates the constitutional prohibition against undue

delegation of legislative authority, allowing as it does the MMDA to fix and impose unspecified and therefore

unlimited fines and other penalties on erring motorists.

The trial court rendered the assailed decision in favor of herein respondent.

Issue:

1. WON MMDA, through Sec. 5(f) of Rep. Act No. 7924 could validly exercise police power.

HELD: Police Power, having been lodged primarily in the National Legislature, cannot be exercised by any group orbody of individuals not possessing legislative power. The National Legislature, however, may delegate this power

to the president and administrative boards as well as the lawmaking bodies of municipal corporations or local

government units (LGUs). Once delegated, the agents can exercise only such legislative powers as are conferr ed on

them by the national lawmaking body.

Our Congress delegated police power to the LGUs in the Local Government Code of 1991. 15 A local government is

a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs."


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16 Local government units are the provinces, cities, municipalities and barangays, which exercise police power

through their respective legislative bodies.

Metropolitan or Metro Manila is a body composed of several local government units. With the passage of Rep. Act

No. 7924 in 1995, Metropolitan Manila was declared as a "special development and administrative region" and the

administration of "metro-wide" basic services affecting the region placed under "a development authority"

referred to as the MMDA. Thus:

The MMDA is, as termed in the charter itself, a "development authority." It is an agency created for the purpose of

laying down policies and coordinating with the various national government agencies, people's organizations, non-

governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the

vast metropolitan area. All its functions are administrative in nature and these are actually summed up in the

charter itself

* Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila Development

Authority." The contested clause in Sec. 5(f) states that the petitioner shall "install and administer a single ticketing

system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations, whether

moving or non-moving in nature, and confiscate and suspend or revoke drivers' licenses in the enforcement of

such traffic laws and regulations, the provisions of Rep. Act No. 4136 and P.D. No. 1605 to the contrary

notwithstanding," and that "(f)or this purpose, the Authority shall enforce all traffic laws and regulations in Metro

Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local

government units, duly licensed security guards, or members of non-governmental organizations to whom may be

delegated certain authority, subject to such conditions and requirements as the Authority may impose."

8. LBP VS. OBIAS

FACTS: Pursuant to the Operation Land Transfer (OLT) Program of Presidential Decree (P.D.) No. 27, an aggregate

area of 34.6958 hectares composing three parcels of agricultural land located at Himaao, Pili, Camarines Sur

owned by THE respondents (landowners) were distributed to the farmers-beneficiaries (farmers).

As a result, the owners had to be paid just compensation for the property taken. The Department of Agrarian

Reform (DAR), using the formula under P.D. 27 and Executive Order (E.O.) 228, came up with a computation of thevalue of the acquired property at P1,397,578.72. However, the amount was contested by the landowners as an

inadequate compensation for the land. Thus did they filed a complaint for determination of just compensation

before the RTC of Naga City, the assigned Special Agrarian Court (SAC) which has jurisdiction over the complaint.

To ascertain the amount of just compensation, a committee was formed by the trial court. The Provincial Assessor

of Camarines Sur was appointed as the Chairman and the representatives from the Land Bank of the Philippines

(LBP), DAR, the landowners and farmers, were appointed as the Members. The Provincial Assessor recommended

the above average value ofP40,065.31 per hectare as just compensation; LBP Representative Edgardo

Malazarte recommended the amount of P38,533.577 per hectare; and the representative of the landowners, Atty.

Fe Rosario P. Bueva submitted a P180,000.00 per hectare valuation of the land. None of these recommendations

was adopted in the by the trial court.

Both the landowners and LBP appealed the trial courts decision before the CA. The appellate court vacated the

decision of the trial court. It relied heavily on Gabatin v. Land Bank of the Philippinesruling wherein this Court

fixed the rate of the government support price (GSP) for one cavan of palay at P35.00, the price of the palay at the

time of the taking of the land. Following the formula, Land Value= 2.5 multiplied by the Average Gross Production

(AGP) multiplied by the Government Support Price (GSP),provided by P.D. No. 27 and E.O. 228, the value of the

total area taken will be P371,015.20 plus interest thereon at the rate of 6% interest per annum, compounded

annually, starting 21 October 1972, until fully paid. Hence, this petition.

ISSUE: WON the payment of interest shall be made until full payment thereof.

HELD: To answer the contention of LBP that there should be no payment of interest when there is already a

prompt payment of just compensation, the High Court discussed that even though the LBP immediately paid theremaining balance on the just compensation due to the petitioners after this Court had fixed the value of the

expropriated properties, it overlooks one essential fact from the time that the State took the petitioners

properties until the time that the petitioners were fully paid, almost 12 long years passed. This is the rationale for

imposing the 12% interest in order to compensate the petitioners for the income they would have made had

they been properly compensated for their properties at the time of the taking.


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This Court is not oblivious of the purpose of our agrarian laws particularly P.D. No. 27, that is, to emancipate

the tiller of the soil from his bondage; to be lord and owner of the land he tills.

Section 4, Article XIII of the 1987 Constitution mandates that the State shall, by law, undertake an agrarian reform

program founded on the right of farmers and regular farm workers who are landless, to own directly or collectively

the lands they till or, in the case of other farm workers, to receive a just share of the fruits thereof. It also provides

that the State shall encourage and undertake the just distribution of all agricultural lands subject to the payment ofjust compensation.

Further, the deliberations of the 1986 Constitutional Commission on this subject reveal that just compensation

should not do violence to the Bill of Rights, but should also not make an insurmountable obstacle to a successful

agrarian reform program. Hence, the landowner's right to just compensation should be balanced with agrarian

reform.

9. HACIENDA LUISITA INC. VS. PARC

I. THE FACTS

In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas (Tabacalera) sold Hacienda Luisita andthe 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

landsof which the hacienda consisted are not covered by existing agrarian reform legislations(PD 27-rice andcorn). 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 governments case against Tadeco,et al. The CA dismissed the case, subject to the

PARCs approval of Tadecos proposed stock distribution plan (SDP) in favor of its farmworkers. [Under EO 229

(Sec10) and later RA 6657(Sec31), 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 signifiedin 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.

As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing equivalent

to three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash

dividends or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to

family-beneficiaries. The production-sharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes

money or not," implying that the benefits do not partake the nature of dividends, as the term is ordinarily

understood under corporation law. (5,117 out of 5315 = shares; 132 = land distribution)

Prior to approval, DAR Secretary Miriam Defensor-Santiago proposed that the SDP be revised, along the following

lines:

1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in

the shares of stocks of individual [FWBs];

2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of

the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time


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November 21, 1989 - the PARC, under then Sec. Defensor-Santiago, issued Resolution No. 89-12-2, approving the

SDP of Tadeco/HLI.

From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:

(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits

(b) 59 million shares of stock distributed for free to the FWBs;

(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural

land of Hacienda Luisita;

(e) 240-square meter homelots distributed for free;

(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos

(P80,000,000) for the SCTEX;

(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old

age/death benefits and no interest bearing salary/educational loans and rice sugar accounts.

Two separate groups subsequently contested this claim of HLI. (the petitions/protets)

CONVERSION PROPER

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. 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(180 has and 4 has), 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 LIPCOs PhP431,695,732.10 loan obligations to RCBC(dacion en pago). LIPCOs titles were

cancelled and new ones were issued to RCBC.

The other 200 has was transferred to Luisita Realty Corporation (LRC) in two separate transactions in 1997 and

1998, both uniformly involving 100 hectares for PhP 250 million each.

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 byAlyansa 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, AND RECOMMENDED. 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 ofHacienda 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.

II. THE ISSUES

(1) Does the PARC possess jurisdiction to recall or revoke HLIs 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 HLIs SDP valid? [Did PARC gravely abuse its discretion in revoking the subject SDP and

placing the hacienda under CARPs compulsory acquisition and distribution scheme?]

(4) Shouldthose 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


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included LIPCOs and RCBCs respective properties that once formed part of Hacienda Luisita under the CARP

compulsory acquisition scheme via the assailed Notice of Coverage?]

III. THE RULING

HLI: PARC has no authority to revoke the SDP; it has the power to disapprove, but not to recall its previous

approval of the SDP. It is the court which has jurisdiction and authority to order the revocation or rescission of thePARC-approved SDP

(1) YES, the PARC has jurisdiction to revoke HLIs 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 HLIs 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.

HLI: the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their

rights, obligations and remedies. The Code should be the applicable law on the disposition of the agricultural land

of HLI.

SC: NO! the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed

by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657,

which the OSG aptly described as the "mother law" of the SDOA and the SDP. It is, thus, paradoxical for HLI toshield itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise

of being a corporate entity.

(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 opportunityand because the resolution thereof is

not the lis motaof the case. Moreover, the issue has been rendered moot and academicsince SDO is no longer one

of the modes of acquisition under RA 9700.]

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 14years 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 motaof the case does

not likewise obtain. The lis motaaspect is not present, the constitutional issue tendered not being critical to the

resolution of the case. If some other grounds exist by which judgment can be made without touching the

constitutionality of a law, such recourse is favored.


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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--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 HLIs SDP valid. [NO, the PARC did NOT gravely abuse its discretion in revoking thesubject SDP and placing the hacienda under CARPs compulsory acquisition and distribution scheme.]

The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLIs 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 violatestwo (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 theSECOND 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 years 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) monthsfrom

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 transferbooks 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. 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.


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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 HLIs

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 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 Secretarys Certificate in favor of Teresita Lopa, the Secretarys

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 Secretarys 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. Afterall, 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 agrarianreform. 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 pagoto 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 andare, thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it

placed LIPCOs and RCBCs 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:


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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 lawor executive actionnull 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 PARCper 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 HLIstockholders, 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.]

The dissents in the July 5, 2011 decision

The dissents of the minority justices were on the other fine points of the decision.

Chief Justice Corona dissented insofar as the majority refused to declare Sec. 31 of RA 6657 unconstitutional. The

provision grants to corporate landowners the option to give qualified FWBs the right to own capital stock of the

corporation in lieu of actual land distribution. The Chief Justice was of the view that by allowing the distribution

of capital stock, and not land, as compliance with agrarian reform, Sec. 31 of RA 6657 contravenesSec. 4, Article XIII of the Constitution, which, he argued, requires that the law implementing the

agrarian reform program should employ [actual] land redistribution mechanism. Under Sec. 31 of RA

6657, he noted, the corporate landowner remains to be the owner of the agricultural land. Qualified beneficiaries

are given ownership only of shares of stock, not [of] the lands they till. He concluded that since an unconstitutional

provision cannot be the basis of a constitutional act, the SDP of petitioner HLI based on Section 31 of RA 6657 is

also unconstitutional.

Justice Mendoza fully concurred with Chief Justice Coronas position that Sec. 31 of RA 6657 is unconstitutional. He

however agreed with the majority that the FWBs be given the option to remain as shareholders of HLI. He also

joined Justice Brions proposal that that the reckoning date for purposes of just compensation should be May 11,

1989, when the SDOA was executed by Tadeco, HLI and the FWBs. Finally, he averred that considering that more

than 10 years have elapsed from May 11, 1989, the qualified FWBs, who can validly dispose of their due shares,

may do so, in favor of LBP or other qualified beneficiaries. The 10-year period need not be counted from the

issuance of the Emancipation Title (EP) or Certificate of Land Ownership Award CLOA)because, under the SDOA,

shares, not land, were to be awarded and distributed.

Justice Brions dissent centered on the consequences of the revocation of HLIs SDP/SDOA. He argued that thatthe

operative fact doctrine only applies in considering the effects of a declaration of unconstitutionality of

a statute or a rule issued by the Executive Department that is accorded the status of a statute. The

SDOA/SDP is neither a statute nor an executive issuance but a contract between the FWBs and the

landowners; hence, the operative fact doctrine is not applicable. A contract stands on a different plane

than a statute or an executive issuance. When a contract is contrary to law, it is deemed void ab initio. It produces

no legal effects whatsoever. Thus, Justice Brion questioned the option given by the majority to the FWBs to remain

as stockholders in an almost-bankrupt corporation like HLI. He argued that the nullity of HLIs SDP/SDOA goes into

its very existence, and the parties to it must generally revert to their respective situations prior to its execution.

Restitution, he said, is therefore in order. With the SDP being void, the FWBs should return everything they are

proven to have received pursuant to the terms of the SDOA/SDP. Justice Brion then proposed that all aspects of

the implementation of the mandatory CARP coverage be determined by the DAR by starting with a clean slate

from [May 11,] 1989, the point in time when the compulsory CARP coverage should start, and proceeding to adjust

the relations of the parties with due regard to the events that intervened [thereafter]. He also held that the time of

the taking (when the computation of just compensation shall be reckoned) shall be May 11, 1989, when the SDOA

was executed by Tadeco, HLI and the FWBs.


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Justice Sereno dissented with respect to how the majority modified the questioned PARC Resolutions (i.e., no

immediate land distribution, give first the original qualified FWBs the option to either remain as stockholders of

HLI or choose actual land distribution) and the applicability of the operative fact doctrine. She would instead order

the DAR to forthwith determine the area of Hacienda Luisita that must be covered by the compulsory coverage

and monitor the land distribution to the qualified FWBs.

Erroneous interpretation of the Courts decision

The High Tribunal actually voted unanimously (11-0) to DISMISS/DENY the petition of HLI and to

AFFIRM the PARC resolutions.This is contrary to media reports that the Court voted 6-4 to dismiss the HLI

petition. The five (not four) minority justices (Chief Justice Corona, and Justices Brion, Villarama, Mendoza, and

Sereno) only partially dissentedfrom the decision of the majority of six (Justice Velasco Jr., Leonardo-De Castro,

Bersamin, Del Castillo, Abad, and Perez). Justice Antonio Carpio took no part in the deliberations and in the voting,

while Justice Diosdado Peralta was on official leave. The 14th

and 15th

seats in the Court were earlier vacated by the

retirements of Justices Eduardo Antonio Nachura (June 13, 2011) and Conchita Carpio-Morales (June 19, 2011).

Another misinterpretation came from no less than the Supreme Court administrator and spokesperson, Atty.

Midas Marquez. In a press conference called after the promulgation of the Courts decision, Marquez initially used

the term referendum in explaining the High Courts ruling. This created confusion among the parties and the

interested public since a referendum implies that the FWBs will ha ve to vote on a common mode by which to

pursue their claims over Hacienda Luisita. The decision was thus met with cries of condemnation by the

misinformed farmers and the various peoples organizations and militant groups supportive of their cause.

Marquez would later correct himself in a subsequent press briefing. But since by then the parties had already filed

their respective motions for reconsideration, he called upon everyone to just wait for the final resolution of the

motion[s], which is forthcoming anyway. The resolution of the consolidated motions for reconsideration came

relatively early on November 22, 2011, or less than five months from the promulgation of the decision.

G.R. No. 171101

November 22, 2011

(1)

Motion for Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner Hacienda Luisita, Inc.(HLI);

it is not proper to distribute the proceeds of the conversion sale to the FWBs the proceeds of the sale

belong to the corporation for having sold its asset, and the distribution would be considered dissolution

of HLI

-the actual taking is NOT November 21, 1989, but should be reckoned from finality of the Decision of this

Court, or at the very least, the reckoning period may be tacked to January 2, 2006, the date when the Notice

of Coverage was issued by the DAR

(2)Motion for Partial Reconsideration dated July 20, 2011 filed by PARC and DAR

-Doctrine of Operative fact does not apply because no law was declared void.

(3)Motion for Reconsideration dated July 19, 2011 filed by AMBALA

-RA 6657 is unconstitutional

-"operative fact doctrine" does not apply. the option given to the farmers to remain as stockholders of HLI is

equivalent to an option for HLI to retain land in direct violation of the CARL, the SDP having been revoked. It

should not apply if it would result to inequity

-CA erred in holding that improving the economic status of FWBs is not among the legal obligations of HLI

under the SDP and an imperative imposition by RA 6657 and DAO 10

-CA erred in holding that LIPCO and RCBC were purchasers for value

(4)Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers Agrarian Reform

Movement, Inc. (FARM);

-same with AMBALA

-issue of constitutionality is the lis mota of the case which must be decided upon

(5)

Motion for Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari, Julio Suniga,

Supervisory Group of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively referred to as

"Mallari, et al."); and

(6)Motion for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and

ISSUES:

(1) applicability of the operative fact doctrine;

(2) constitutionality of Sec. 31 of RA 6657 or the Comprehensive Agrarian Reform Law of 1988;

(3) coverage of compulsory acquisition;


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(4) just compensation;

(5) sale to third parties;

(6) the violations of HLI; and

(7) control over agricultural lands (revocation of SDP)

OPERATIVE FACT DOCTRINE (not much related)Bearing in mind that PARC Resolution No. 89-12-2an executive actwas declared invalid in the instant case, the

operative fact doctrine is clearly applicable.

it should be recognized that SC, in its July 5, 2011 Decision, affirmed the revocation of Resolution No. 89-12-2 and

ruled for the compulsory coverage of the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP

and DAO 10. By applying the doctrine, this Court merely gave the qualified FWBs the option to remain as

stockholders of HLI and ruled that they will retain the homelots and other benefits which they received from HLI by

virtue of the SDP.

The application of the doctrine is favorable to the FWBs because not only were the FWBs 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.

CONSTITUTIONALITY

(Upheld previous ruling)

FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second

requirement that the constitutional question should be raised at the earliest possible opportunity is clearly

wanting.

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 motaaspect is not present, the constitutional issue tendered not being critical to the

resolution of the case.

COVERAGE OF COMPULSORY ACQUISITION

FARM argues that this Court ignored certain material facts when it limited the maximum area to be covered to

4,915.75 hectares, whereas the area that should, at the least, be covered is 6,443 hectares, which is the

agricultural land allegedly covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco).

We cannot subscribe to this view. Since what is put in issue before the Court is the propriety of the

revocation of the SDP, which only involves 4,915.75 has. of agricultural land and not 6,443 has., then We

are constrained to rule only as regards the 4,915.75 has. of agricultural land.

DAR, however, contends that the declaration of the areato be awarded to each FWB is too restrictive. It stresses

that in agricultural landholdings like Hacienda Luisita, there are roads, irrigation canals, and other portions of the

land that are considered commonly-owned by farmworkers, and this may necessarily result in the decrease of the

area size that may be awarded per FWB. DAR also argues that the July 5, 2011 Decision does not give it any leewayin adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs decreases.

The argument is meritorious. In order to ensure the proper distribution of the agricultural lands of Hacienda Luisita

per qualified FWB, and considering that matters involving strictly the administrative implementation and

enforcement of agrarian reform laws are within the jurisdiction of the DAR, it is the latter which shall determine

the area with which each qualified FWB will be awarded.

500 HECTARES

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.

PROCEEDS OF SALE

Considering that the 500-hectare converted land, as well as the 80.51-hectare SCTEX lot, should have been

included in the compulsory coverage were it not for their conversion and valid transfers, then it is only but proper


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that the price received for the sale of these lots should be given to the qualified FWBs. In effect, the proceeds from

the sale shall take the place of the lots.

JUST COMPENSATION - TAKING

In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation for the remaining agricultural

land that will be transferred to DAR for land distribution to the FWBs." We also ruled that the date of the "taking"

is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2.

Mallari, et al. argued that the valuation of the land cannot be based on November 21, 1989. Instead, they aver that

the date of "taking" for valuation purposes is a factual issue best left to the determination of the trial courts.

AMBALA alleged that HLI should no longer be paid just compensation for the agricultural land that will be

distributed to the FWBs, since the RTC already rendered a decision ordering "the Cojuangcos to transfer the

control of Hacienda Luisita to the Ministry of Agrarian Reform, which will distribute the land to small farmers after

compensating the landowners P3.988 million." In the event, however, that this Court will rule that HLI is indeed

entitled to compensation, AMBALA contended that it should be pegged at forty thousand pesos (PhP 40,000) per

hectare, since this was the same value that Tadeco declared in 1989 to make sure that the farmers will not own

the majority of its stocks.

SC:the date of "taking" is November 21, 1989, the date when PARC approved HLIs SDP in view of the fact that this

is the time that the FWBs were considered to own and possess the agricultural lands in Hacienda Luisita. To beprecise, these lands became subject of the agrarian reform coverage through the stock distribution scheme only

upon the approval of the SDP, that is, November 21, 1989. Thus, such approval is akin to a notice of coverage

ordinarily issued under compulsory acquisition. Further, any doubt should be resolved in favor of the FWBs.

SALE TO THIRD PARTIES

There is a view that since the agricultural lands in Hacienda Luisita were placed under CARP coverage through the

SDOA scheme on May 11, 1989, then the 10-year period prohibition on the transfer of awarded lands under RA

6657 lapsed on May 10, 1999, and, consequently, the qualified FWBs should already be allowed to sell these lands

with respect to their land interests to third parties, including HLI, regardless of whether they have fully paid for the

lands or not.

The proposition is erroneous. If the land has not yet been fully paid by the beneficiary, the right to the land may be

transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary

who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith,

the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner

specified in the immediately preceding paragraph.

In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the

amounts the latter has already paid, together with the value of improvements he has made on the land.

Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten (10)

years from the issuance and registration of the emancipation patent (EP) or certificate of land ownership award

(CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in the instant case, the

10-year prohibitive period has not even started. Significantly, the reckoning point is the issuance of the EP or CLOA,

and not the placing of the agricultural lands under CARP coverage.

if We maintain the position that the qualified FWBs should be immediately allowed the option to sell

or convey the agricultural lands in Hacienda Luisita, then all efforts at agrarian reform would be

rendered nugatory by this Court, since, at the end of the day, these lands will just be transferred to

persons not entitled to land distribution under CARP.

CONTROL OVER AGRICULTURAL LANDS

SC realized that the FWBs will never have control over these agricultural lands for as long as they remain as

stockholders of HLI.

bearing in mind that with the revocation of the approval of the SDP, HLI will no longer be operating under SDP andwill only be treated as an ordinary private corporation; the FWBs who remain as stockholders of HLI will be treated

as ordinary stockholders and will no longer be under the protective mantle of RA 6657.

In addition to the foregoing, in view of the operative fact doctrine, all the benefits and homelot s80

received by all

the FWBs shall be respected with no obligation to refund or return them, since, as We have mentioned in our July

5, 2011 Decision, "the benefits x x x were received by the FWBs as farmhands in the agricultural enterprise of HLI

and other fringe benefits were granted to them pursuant to the existing collective bargaining agreement with

Tadeco."
http://www.lawphil.net/judjuris/juri2011/nov2011/gr_171101_2011.html#fnt80http://www.lawphil.net/judjuris/juri2011/nov2011/gr_171101_2011.html#fnt80http://www.lawphil.net/judjuris/juri2011/nov2011/gr_171101_2011.html#fnt80http://www.lawphil.net/judjuris/juri2011/nov2011/gr_171101_2011.html#fnt80


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One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The remaining 4,206 FWBs are not

entitled to any portion of the HLI land, because the rights to said land were vested only in the 6,296 original FWBs

pursuant to Sec. 22 of RA 6657. With these, PARC/DARs, AMBALAs, and FARMs Motions GRANTED.

The order giving option to the FWBs to choose whether or not to stay as shareholders was thereby

recalled.

G.R. No. 171101

April 24, 2012

Before the Court are the Motion to Clarify and Reconsider Resolution of November 22, 2011 dated December 16,

2011 filed by petitioner Hacienda Luisita, Inc. (HLI) and the Motion for Reconsideration/Clarification dated

December 9, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita,

Inc. and Windsor Andaya (collectively referred to as "Mallari, et al.").

Basically, the issues raised by HLI and Mallari, et al. boil down to the following: (1) determination of the date of

"taking"; (2) propriety of the revocation of the option on the part of the original FWBs to remain as stockholders of

HLI; (3) propriety of distributing to the qualified FWBs the proceeds from the sale of the converted land and of the80.51-hectare Subic-Clark-Tarlac Expressway (SCTEX ) land; and (4) just compensation for the homelots given to

the FWBs.

PAYMENT OF JUST COMPENSATION

HLI contends that since the SDP is a modality which the agrarian reform law gives the landowner as alternative to

compulsory coverage, then the FWBs cannot be considered as owners and possessors of the agricultural lands of

Hacienda Luisita at the time the SDP was approved by PARC. It further claims that the approval of the SDP is not

akin to a Notice of Coverage in compulsory coverage situations because stock distribution option and compulsory

acquisition are two (2) different modalities with independent and separate rules and mechanisms. Concomitantly,

HLI maintains that the Notice of Coverage issued on January 2, 2006 may, at the very least, be considered as the

date of "taking" as this was the only time that the agricultural lands of Hacienda Luisita were placed undercompulsory acquisition in view of its failure to perform certain obligations under the SDP.

UPHELD PREVIOUS DECISION: taking was effected on November 21, 1989

What is notable, however, is that the divestment by Tadeco of the agricultural lands of Hacienda Luisita and the

giving of the shares of stock for free is nothing but an enticement or incentive for the FWBs to agree with the stock

distribution option scheme and not further push for land distribution. And the stubborn fact is that the "man days"

scheme of HLI impelled the FWBs to work in the hacienda in exchange for such shares of stock.

When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI in order to comply with CARP

through the stock distribution option scheme, sealed with the imprimatur of PARC under PARC Resolution No. 89-

12-2 dated November 21, 1989, Tadeco was consequently dispossessed of the afore-mentioned attributes of

ownership. Notably, Tadeco and HLI are two different entities with separate and distinct legal personalities.

Ownership by one cannot be considered as ownership by the other.

Corollarily, it is the official act by the government, that is, the PARCs approval of the SDP, which should be

considered as the reckoning point for the "taking" of the agricultural lands of Hacienda Luisita. Although the

transfer of ownership over the agricultural lands was made prior to the SDPs approval, it is this Courts consistent

view that these lands officially became subject of the agrarian reform coverage through the stock distribution

scheme only upon the approval of the SDP. And as We have mentioned in Our November 22, 2011 Resolution,

such approval is akin to a notice of coverage ordinarily issued under compulsory acquisition.

FWBS ENTITLED TO PROCEEDS OF SALE

HLI reiterates its claim over the proceeds of the sales of the 500 hectares and 80.51 hectares of the land as

corporate owner and argues that the return of said proceeds to the FWBs is unfair and violative of the Corporation

Code.

This claim is bereft of merit.

UPHELD PREVIOUS RULING - were it not for the approval of the SDP by PARC, these large parcels of land would

have been distributed and ownership transferred to the FWBs, subject to payment of just compensation, given

that, as of 1989, the subject 4,915 hectares of Hacienda Luisita were already covered by CARP.


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HOMELOTS

In the present recourse, HLI also harps on the fact that since the homelots given to the FWBs do not form part of

the 4,915.75 hectares covered by the SDP, then the value of these homelots should, with the revocation of the

SDP, be paid to Tadeco as the landowner.

We disagree. As We have explained in Our July 5, 2011 Decision, the distribution of homelots is required under RA6657 only for corporations or business associations owning or operating farms which opted for land distribution.

This is provided under Sec. 30 of RA 6657.

Since none of the provisions made reference to corporations which opted for stock distribution under Sec. 31 of RA

6657, then it is apparent that said corporations are not obliged to provide for homelots. Nonetheless, HLI

undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x

residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving

and owning a homelot in the barrio or barangay where it actually resides." In fact, HLI was able to distribute

homelots to some if not all of the FWBs.

Thus, in our November 22, 2011 Resolution, We declared that the homelots already received by the FWBs shall be

respected with no obligation to refund or to return them. However, since the SDP was already revoked with

finality, the Court directs the government through the DAR to pay HLI the just compensation for said

homelots in consonance with Sec. 4, Article XIII of the 1987 Constitution that the taking of land for use

in the agrarian reform program is "subject to the payment of just compensation."

To recapitulate, the Court voted on the following issues in this manner:

1) In determining the date of "taking," the Court voted 8-6 to maintain the ruling fixing November 21, 1989 as the

date of "taking," the value of the affected lands to be determined by the LBP and the DAR;

2) On the propriety of the revocation of the option of the FWBs to remain as HLI stockholders, the Court, by

unanimous vote, agreed to reiterate its ruling in its November 22, 2011 Resolution that the option granted to

the FWBs stays revoked;

3) On the propriety of returning to the FWBs the proceeds of the sale of the 500-hectare converted land and of

the 80.51-hectare SCTEX land, the Court unanimously voted to maintain its ruling to order the payment of the

proceeds of the sale of the said land to the FWBs less the 3% share, taxes and expenses specified in the fallo of

the November 22, 2011 Resolution;

4) On the payment of just compensation for the homelots to HLI, the Court, by unanimous vote, resolved to

amend its July 5, 2011 Decision and November 22, 2011 Resolution by ordering the government, through the

DAR, to pay to HLI the just compensation for the homelots thus distributed to the FWBS.

the government, through DAR, is ordered to pay Hacienda Luisita, Inc. the just compensation for the

240-square meter homelots distributed to the FWBs.

10. CITY OF MANILA VS. ALEGAR CORP

FACTS: This case is about the issues that a local government unit has to cope with when expropriating private

property for socialized housing. The City Council of Manila passed Ordinance 8012 that authorized the City Mayor

to acquire certain lots belonging to respondents Alegar Corporation, Terocel Realty Corporation, and Filomena

Vda. De Legarda, for use in the socialized housing project of petitioner City of Manila. The City offered to buy the

lots at P1,500.00 per square meter (sq m) but the owners rejected this as too low with the result that the City filed

a complaint for expropriation against them before the Regional Trial Court (RTC) of Manila.

The RTC dismissed the complaint on the ground that the City did not comply with Section 9 of Republic Act (R.A.)

7279 (Urban Development Housing Act) which set the order of priority in the acquisition of properties for

socialized housing. Private properties ranked last in the order of priorities for such acquisition and the City failed

to show that no other properties were available for the project. The City also failed to comply with Section 10

which authorized expropriation only when resort to other modes (such as community mortgage, land swapping,

and negotiated purchase) had been exhausted. On appeal, the Court of Appeals affirmed the RTC decision. Hence,

this petition.


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ISSUE: The petition raises the following issues:

1. Whether or not the CA erred in affirming the RTCs ruling that the City failed to comply with the

requirements of Sections 9 and 10 of R.A. 7279 in trying to acquire the subject lots by expropriation;

2. Whether or not the CA erred in failing to set aside the RTCs ruling that the City failed to establish the

existence of genuine necessity in expropriating the subject lots for public use or purpose; and

3. Whether or not the CA erred in failing to rule that the owners withdrawal of its P1.5 million deposit

constituted implied consent to the expropriation of their lots.

HELD:

1. The CA correctly ruled that the City failed to show that it complied with the requirements of Section 9 of R.A.

7279 which lays down the order of priority in the acquisition through expropriation of lands for socialized

housing. This section provides:

Section 9. Priorities in the acquisition of Land.Lands for socialized housing shall be

acquired in the following order:

(a) Those owned by the Government or any of its subdivisions, instrumentalities, or

agencies, including government-owned or controlled corporations and their

subsidiaries;

(b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle lands;

(d) Those within the declared Areas for Priority Development, Zonal Improvement

Program sites, and Slum Improvement and Resettlement Program sites which

have not yet been acquired;

(e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which have not

yet been acquired; and

(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the

beneficiaries, the priorities mentioned in this section shall not apply. The local government units

shall give budgetary priority to on-site development of government lands. (Emphasis supplied)

The City of course argues that it did not have to observe the order of priority provided above in acquiring lots

for socialized housing since it found on-site development to be more practicable and advantageous to the

beneficiaries who were these lots long-time occupants. But the problem remains. The City did not adduce

evidence that this was so.

Besides, Section 10 of R.A. 7279 also prefers the acquisition of private property by negotiated sale over the

filing of an expropriation suit. It provides that such suit may be resorted to only when the other modes of

acquisitions have been exhausted. Thus:

Section 10. Modes of Land Acquisition.The modes of acquiring land for purposes of

this Act shall include, among others, community mortgage, land swapping, land assembly or

consolidation, land banking, donation t

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