SC ruling on Hacienda Luisita

Control over the land must be in hands of farmers
/ 10:24 PM November 26, 2011

A farmer calls for the distribution of Hacienda Luisita to farm workers. RAFFY LERMA

(Editor’s Note: By a vote of 14-0, the Supreme Court ordered on Nov. 22 the distribution of land to farm workers of Hacienda Luisita, an estate owned by the family of President Benigno Aquino III.

The ruling capped the decades-old struggle of farm workers in the sprawling sugar plantation to own a piece of land. At least 14 farm workers, union leaders and agrarian reform advocates lost their lives in the struggle. Most of them were shot dead.


“I am happy because I will have something to leave to my grandchildren and they can say that this land is the product of their grandmother’s struggle,” said Anita Flores, 65, after the court issued the ruling.


Below is part of the ruling under the heading “Control over Agricultural Lands” and the order to distribute land to the farm workers.)

After having discussed and considered the different contentions raised by the parties in their respective motions, we are now left to contend with one crucial issue in the case at bar, that is, control over the agricultural lands by the qualified farm-worker beneficiaries (FWBs).

Upon a review of the facts and circumstances, we realize that the FWBs will never have control over these agricultural lands for as long as they remain as stockholders of HLI (Hacienda Luisita Inc.). In our July 5 decision, this court made the following observations:

There is, thus, nothing unconstitutional in the formula prescribed by Republic Act No. 6657. (The Comprehensive Agrarian Reform Law of 1988). The policy on agrarian reform is that control over the agricultural land must always be in the hands of the farmers.  Then it falls on the shoulders of DAR (Department of Agrarian Reform) and PARC (Presidential Agrarian Reform Council) to see to it the farmers should always own majority of the common shares entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority in the board.

Before the SDP (stock distribution plan) is approved, strict scrutiny of the proposed SDP must always be undertaken by DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be more than 50 percent of the total assets of the corporation to ensure that the majority of the members of the board of directors are composed of the farmers.

The PARC, composed of the President of the Philippines and Cabinet secretaries, must see to it that control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of directors to non-farmers.

Any deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA 6657 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers. (Emphasis supplied.)


In line with our finding that control over agricultural lands must always be in the hands of the farmers, we reconsider our ruling that the qualified FWBs should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control given the present proportion of shareholdings in HLI.

Total assets

A revisit of HLI’s proposal for stock distribution under CARP (Comprehensive Agrarian Reform Program) and the stock distribution option agreement (SDOA) upon which the proposal was based reveals that the total assets of HLI is P590,554,220, while the value of the 4,915.74 hectares is P196,630,000.  Consequently, the share of the farmer-beneficiaries in the HLI capital stock is 33.29 percent (196,630,000 divided by 590,554.22); 118,391,976.85 HLI shares represent 33.296 percent.

Thus, even if all the holders of the 118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which is unlikely, control will never be placed in the hands of the farmer-beneficiaries.  Control, of course, means the majority of 50 percent plus at least one share of the common shares and other voting shares.

Applying the formula to the HLI stockholdings, the number of shares that will constitute the majority is 295,112,101 shares (590,554,220 divided by 2 plus one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by PARC substantially fall short of the 295,112,101 shares needed by the FWBs to acquire control over HLI.


Hence, control can NEVER be attained by the FWBs. There is even no assurance that 100 percent of the 118,391,976.85 shares issued to the FWBs will all be voted in favor of staying in HLI, taking into account the previous referendum among the farmers where said shares were not voted unanimously in favor of retaining the SDP.  In light of the foregoing consideration, the option to remain in HLI granted to the individual FWBs will have to be recalled and revoked.

Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI will no longer be operating under SDP and will 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.

Operative fact doctrine

In addition to the foregoing, in view of the operative fact doctrine, all the benefits and home lots 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 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.”

Only for original FWBs

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.

In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent with its administrative prerogative to identify and select the agrarian reform beneficiaries under RA 6657.


WHEREFORE, the motion for partial reconsideration dated July 20 filed by public respondents PARC and DAR, the motion for reconsideration dated July 19 filed by private respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita (Ambala), the motion for reconsideration dated July 21 filed by respondent-intervenor Farmworkers Agrarian Reform Movement Inc., and the motion for reconsideration dated July 22 filed by private respondents Rene Galang and Ambala are PARTIALLY GRANTED with respect to the option granted to the original farmworker-beneficiaries of Hacienda Luisita to remain with Hacienda Luisita Inc., which is hereby RECALLED and SET ASIDE.

The motion for clarification and partial reconsideration dated July 21 filed by petitioner HLI and the motion for reconsideration dated July 21 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita Inc. and Windsor Andaya are DENIED.

The fallo of the court’s July 5 decision is hereby amended and shall read:

PARC Resolution No. 2005-32-01 dated Dec. 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 following modifications:

All salaries, benefits, the 3 percent of the gross sales of the production of the agricultural lands, the 3 percent share in the proceeds of the sale of the 500-ha converted land and the 80.51-ha SCTEx (Subic-Clark-Tarlac Expressway)  lot and the homelots already received by the 10,502 FWBs composed of 6,296 original FWBs and the 4,206 nonqualified FWBs shall be respected with no obligation to refund or return them.

Forfeit rights to shares

The 6,296 original FWBs shall forfeit and relinquish their rights over the HLI shares of stock issued to them in favor of HLI.  The HLI corporate secretary shall cancel the shares issued to the said FWBs and transfer them to HLI in the stocks and transfer book, which transfers shall be exempt from taxes, fees and charges. The 4,206 nonqualified FWBs shall remain as stockholders of HLI.

DAR shall segregate from the HLI agricultural land with an area of 4,915.75 ha subject of PARC’s SDP-approving Resolution No. 89-12-2 the 500-ha lot subject of the Aug. 14, l996 conversion order and the 80.51-ha lot sold to, or acquired by, the government as part of the SCTEx complex.

After the segregation process, as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the original 6,296 FWBs or their successors-in-interest which will be identified by the DAR. The 4,206 nonqualified FWBs are not entitled to any share in the land to be distributed by DAR.

Payment to beneficiaries

From the total amount of P1,330,511,500 (P500,000,000 + P750,000,000 + P80,511,500 = P1,330,511,500) shall be deducted the 3 percent of the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the expenditures incurred by HLI and Centennary Holdings Inc. for legitimate corporate purposes.

For this purpose, DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the P1,330,511,500 proceeds of the sale of the three aforementioned lots were actually used or spent for legitimate corporate purposes.

Any unspent or unused balance and any disallowed expenditures as determined by the audit shall be distributed to the 6,296 original FWBs.

Just compensation

HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from Nov. 21, 1989, which is the date of issuance of  PARC Resolution No. 89-12-2. DAR and Land Bank of the Philippines are ordered to determine the compensation due to HLI.

DAR shall submit a compliance report after six months from finality of this judgment. It shall also submit, after submission of the compliance report, quarterly reports on the execution of this judgment within the first 15 days after the end of each quarter, until fully implemented.

The temporary restraining order is lifted.


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