HACIENDA LUSITA, INCORPORATED, petitioner,
LUISITA INDURSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION,
petitioners-in-intervention, vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF
THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG
HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and JUILO SUNIGA and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, respondents
G.R. No. 1711001 | November
22, 2011
FACTS:
In 1957, the owners of Compania General de
Tabacos de Filipinas sold Hacienda Luisita as well as their contolling interest
in the Central Azucarera de Tarlac to Tarlac Development Corporation, then
owned and controlled by the Jose Cojuangco, Sr.
Group.
To facilitate the adverted
sale-and-purchase package, the Philippine government, through the then Central
Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US
bank. GSIS also extended a P5.911 million loan to Tadeco on the condition that the
lots comprising the Hacienda Luisita shall be subdivided by Tadeco and sold at
cost to the tenants, whenever conditions should exist warranting such action
under the provisions of the Land Tenure Act.
On May 7, 1980, the martial law
administration filed a suit against Tadeco, et al., for them to surrender
Hacienda Luisita to the then Ministry of Agrarian Reform so that the land can
be distributed to farmers at cost. Responding, Tadeco alleged that Hacienda
Luisita does not have tenants, besides the sugar lands––of which the hacienda
consisted––are not covered by existing agrarian reform legislations.
The RTC rendered judgment ordering Tadeco
to surrender Hacienda Luisita to the MAR. On March 17, 1988, the OSG moved to
withdraw the government’s case against Tadeco, et al. The CA dismissed the case,
subject to the PARC’s approval of Tadeco’s proposed stock distribution plan in
favor of its farmers.
On August 23,
1988, Tadeco organized a spin-off corporation, Hacienda Luisita
Incorporated, as vehicle to facilitate stock acquisition by the farmworkers.
For this purpose, Tadeco conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries
(FWBs) complement of Hacienda Luisita signified in a referendum their
acceptance of the proposed HLI’s Stock Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally
entered into by Tadeco, HLI, and the 5,848 qualified FWBs and attested to by
then DAR Secretary Philip Juico.
As gleaned from the SDOA, included as part
of the distribution plan are: (a) production-sharing equivalent to 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.
HLI submitted to DAR its Proposal for Stock
Distribution under C.A.R.P., which was substantially based on the SDOA. In a
follow-up referendum conducted by DAR, 5,117 FWBs opted to receive shares in
HLI while 132 chose actual land distribution.
After a review of the SDP, then DAR
Secretary Miriam Defensor-Santiago proposed that the SDP be revised to ensure
that there will be no dilution in the shares of stocks of the FWBs, that the
mechanics for distributing the stocks be explicitly stated in the MOA, that the
SDP will provide for clear and definite terms for determining the actual number
of seats to be allocated for FWBs in the HLI Board, that HLI will provide
guidelines and a timetable for the distribution of homelots to qualified FWBs,
and that the 3% cash dividends mentioned in the SDP be expressly provided for
in the MOA. HLI replied that the proposed revisions of the SDP are already
embodied in both the SDP and Moa. PARC then approved of Tadeco/HLI’s SDP.
At the time of the SDP approval, HLI had a
pool of farmworkers, numbering 6,296, more or less, composed of permanent,
seasonal and casual master list/payroll and non-master list members.
On August 15, 1995, HLI applied for the
conversion of 500 hectares of land of the hacienda from agricultural to
industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the
application on August 14, 1996, subject to payment of three percent (3%) of the
gross selling price to the FWBs and to HLI’s continued compliance with its
undertakings under the SDP, among other conditions.
On December 13, 1996, HLI ceded 300
hectares of the converted area in exchange for subscription of 12,000,000
shares of stocks of Centennary Holdings, Inc. Centennary then sold the entire
300 hectares for PhP750 million to Luisita Industrial Park Corporation (LIPCO),
which used it in developing an industrial complex. From this area was carved
out 2 parcels, for which 2 separate titles were issued in the name of LIPCO.
Later, LIPCO transferred these 2 parcels to the Rizal Commercial Banking
Corporation (RCBC) in payment of its PhP431,695,732.10 loan obligations to
RCBC. LIPCO’s titles were cancelled and
new ones were issued to RCBC. Apart from the 500 hectares, another 80.51
hectares were later detached from Hacienda Luisita and acquired by the
government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus,
4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI.
Such, was the state of things when two
separate petitions reached the DAR in the latter part of 2003. The first was
filed by the Supervisory Group of HLI (Supervisory Group), praying for a
renegotiation of the SDOA, or, in the alternative, its revocation. The second
petition, , was filed by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita
(AMBALA) praying for the revocation and nullification of the SDOA and the
distribution of the lands in the hacienda.
The DAR then constituted a Special Task
Force (STF) to attend to issues relating to the SDP of HLI. After investigation
and evaluation, the STF found that HLI has not complied with its obligations
under RA 6657 despite the implementation of the SDP. On December 22, 2005, the
PARC issued the assailed Resolution No. 2005-32-01, recalling/revoking the SDO
plan of Tadeco/HLI. It further resolved that the subject lands be forthwith
placed under the compulsory coverage or mandated land acquisition scheme of the
CARP.
ISSUE:
(1)
The constitutionality of Sec.
31 of RA 6657
(2)
Validity of the revocation of
HLI’s SDP
RULING:
The Court actually refused to pass upon the
constitutional question because it was not raised at the earliest opportunity
and because the resolution thereof is not the lis mota of the case. Moreover,
the issue has been rendered moot and academic since SDO is no longer one of the
modes of acquisition under RA 9700.
Sec. 5 of RA 9700, amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis-à-vis the stock
distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA
9700 provides: "That 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.
The Court said that appears to be no breach
of the fundamental law. The basic law allows two (2) modes of land
distribution—direct and indirect ownership. Direct transfer to individual
farmers is the most commonly used method by DAR and widely accepted. Indirect
transfer through collective ownership of the agricultural land is the
alternative to direct ownership of agricultural land by individual farmers. The
Constitution EXPRESSLY authorizes collective ownership by farmers. No language
can be found in the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. By using the word
"collectively," the Constitution allows for indirect ownership of
land and not just outright agricultural land transfer. This is in recognition
of the fact that land reform may become successful even if it is done through
the medium of juridical entities composed of farmers.
Collective ownership is permitted in two
(2) provisions of RA 6657. Its Sec. 29 allows workers’ cooperatives or
associations to collectively own the land, while the second paragraph of Sec.
31 allows corporations or associations to own agricultural land with the
farmers becoming stockholders or members.
While it is true that the farmer is issued
stock certificates and does not directly own the land, still, the Corporation
Code is clear that the FWB becomes a stockholder who acquires an equitable
interest in the assets of the corporation, which include the agricultural
lands. A share of stock typifies an aliquot part of the corporation’s property,
or the right to share in its proceeds to that extent when distributed according
to law and equity and that its holder is not the owner of any part of the
capital of the corporation. However, the FWBs will ultimately own the agricultural
lands owned by the corporation when the corporation is eventually dissolved and
liquidated.
The revocation of the approval of the SDP
is valid: (1) the mechanics and timelines of HLI’s stock distribution violate
DAO 10 because the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of “man days” and the
hiring of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs
stock transfer is contrary to what Sec. 11 of DAO 10 prescribes.
It is clear that the original 6,296 FWBs,
who were qualified beneficiaries at the time of the approval of the SDP,
suffered from watering down of shares.
As determined earlier, each original FWB is entitled to 18,804.32 HLI
shares. The original FWBs got less than
the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition
and distribution of the HLI shares were based on “man days” or “number of days
worked” by the FWB in a year’s time. As
explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal
year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares distributed varies
depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to
the original 6,296 FWBs, such that, as indicated in the Compliance dated August
2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI
as of said date stood at 10,502. All
these farmworkers, which include the original 6,296 FWBs, were given shares out
of the 118,931,976.85 HLI shares representing the 33.296% of the total
outstanding capital stock of HLI.
Clearly, the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of “man days” and the
hiring of additional farmworkers.
Going into another but related matter, par.
3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock
transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation
of the approved stock distribution plan within three (3) months from receipt by
the corporate landowner of the approval of the plan by PARC. In fact, based on
the said provision, the transfer of the shares of stock in the names of the
qualified FWBs should be recorded in the stock and transfer books and must be
submitted to the SEC within sixty (60) days from implementation.
To the Court, there is a purpose, which is
at once discernible as it is practical, for the three-month threshold. Remove
this timeline and the corporate landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits the implementation of the
stock distribution scheme.
Evidently, the land transfer beneficiaries
are given thirty (30) years within which to pay the cost of the land thus
awarded them to make it less cumbersome for them to pay the government. To be
sure, the reason underpinning the 30-year accommodation does not apply to
corporate landowners in distributing shares of stock to the qualified
beneficiaries, as the shares may be issued in a much shorter period of time.
Taking into account the above discussion,
the revocation of the SDP by PARC should be upheld because of its violations of
DAO 10.
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