The Hacienda Luisita Case Part I : How the Supreme Court Decided on July 15, 2011

In its Decision in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform Council (PARC), G.R. No. 171101, promulgated last July 5, 2011, the Supreme Court en banc DENIED the petition filed by HLI and AFFIRMED the resolutions of the PARC revoking HLI’s Stock Distribution Plan (SDP) and placing the subject lands under compulsory coverage of the Comprehensive Agrarian Reform Program (CARP) of the government.

[To read the FACTS of the case and a digest of the main opinion, please click here.]

The Court however MODIFIED the PARC’s resolutions and did not order outright land distribution. Noting that there are operative facts that occurred in the interim and which the Court cannot validly ignore, the Court declared that the revocation of the SDP must, by application of the operative fact principle, give way to the right of the original 6,296 qualified farmworkers-beneficiaries (FWBs) to choose whether they want to remain as HLI stockholders or [choose actual land distribution].  The Court said it cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the Stock Distribution Option Agreement (SDOA), which became the basis of the SDP approved by PARC. It thus ordered the Department of Agrarian Reform (DAR) to “immediately schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and legal or practical implications of their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed names.”

The Court refused to pass upon the question on the constitutionality of Sec. 31 of RA 6657, the legal basis for the stock distribution option exercised by Tadeco/HLI, because it was not raised at the earliest opportunity and because the resolution thereof is not the lis mota of the case. Moreover, the issue has been rendered moot and academic since SDO is no longer one of the modes of acquisition under RA 9700. The Court also held that those portions of Hacienda Luisita that have been validly converted to industrial use and have been acquired by intervenors Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) should be excluded from the coverage of the assailed PARC resolution since the said intervenors are innocent purchasers for value. Finally, the Court held that in determining the just compensation to be paid to HLI, the date of the “taking” was November 21, 1989, the time when PARC approved HLI’s SDP.

            Justice Presbitero Velasco wrote the majority opinion. Fully concurring with him were Justices Teresita Leonardo-De Castro, Lucas Bersamin, Mariano Del Castillo, Roberto Abad, and Jose Portugal Perez. Chief Justice Renato Corona wrote what he styled as “Dissenting Opinion.” Justice Arturo Brion, with whom Justice Martin Villarama fully concurred, wrote a “Separate Concurring and Dissenting Opinion.” Justice Jose Mendoza wrote a “Separate Opinion.” Finally, Justice Sereno wrote her own “Dissenting Opinion.”

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 contravenes Sec. 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 Corona’s 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 Brion’s 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 Brion’s dissent centered on the consequences of the revocation of HLI’s SDP/SDOA. He argued that that the 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 HLI’s 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.

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 Court’s 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 dissented from 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 14^th and 15^th 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 Court’s decision, Marquez initially used the term “referendum” in explaining the High Court’s ruling. This created confusion among the parties and the interested public since a “referendum” implies that the FWBs will have 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 people’s 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.

[To read a summary of the November 22, 2011 Court en banc resolution, please click here.]