Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R. No. 171101, November 22, 2011

I.      THE FACTS

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to DISMISS/DENY the petition filed by HLI and AFFIRM with MODIFICATIONS the resolutions of the PARC revoking HLI’s Stock Distribution Plan (SDP) and placing the subject lands in Hacienda Luisita under compulsory coverage of the Comprehensive Agrarian Reform Program (CARP) of the government.

The Court however did not order outright land distribution. Voting 6-5, the Court noted that there are operative facts that occurred in the interim and which the Court cannot validly ignore. Thus, 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]. 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 parties thereafter filed their respective motions for reconsideration of the Court decision.

II.    THE ISSUES

(1)  Is the operative fact doctrine available in this case?(2)  Is Sec. 31 of RA 6657 unconstitutional?(3)  Can’t the Court order that DAR’s compulsory acquisition of Hacienda Lusita cover the full 6,443 hectares allegedly

covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco), and not just the 4,915.75 hectares covered by HLI’s SDP?

(4)  Is the date of the “taking” (for purposes of determining the just compensation payable to HLI) November 21, 1989, when PARC approved HLI’s SDP?

(5)  Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May 11, 1989), and thus the qualified FWBs should now be allowed to sell their land interests in Hacienda Luisita to third parties, whether they have fully paid for the lands or not?

(6)  THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to remain as stockholders of HLI be reconsidered?

III.   THE RULING

            [The Court PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et al. with respect to the option granted to the original farmworkers-beneficiaries (FWBs) of Hacienda Luisita to remain with petitioner HLI, which option the Court thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified FWBs should be given an option to remain as stockholders of HLI, and UNANIMOUSLY directed immediate land distribution to the qualified FWBs.]

1.    YES, the operative fact doctrine is applicable in this case.

[The Court maintained its stance that the operative fact doctrine is applicable in this case since, contrary to the suggestion of the minority, the doctrine is not limited only to invalid or unconstitutional laws but also applies to decisions made by the President or the administrative agencies that have the force and effect of laws. Prior to the nullification or recall of said decisions, they may have produced acts and consequences that must be respected. It is on this score that the operative fact doctrine should be applied to acts and consequences that resulted from the implementation of the PARC Resolution approving the SDP of HLI. The majority stressed that the application of the operative fact doctrine by the Court in its July 5, 2011 decision was in fact favorable to the FWBs because not only were they 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.]

2.    NO, Sec. 31 of RA 6657 NOT unconstitutional.

[The Court maintained that the Court is NOT compelled to rule on the constitutionality of Sec. 31 of RA 6657, reiterating that it was not raised at the earliest opportunity and that 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 majority clarified that in its July 5, 2011 decision, it made no ruling in favor of the constitutionality of Sec. 31 of RA 6657, but found nonetheless that there was no apparent grave violation of the Constitution that may justify the resolution of the issue of constitutionality.]

3.    NO, the Court CANNOT order that DAR’s compulsory acquisition of Hacienda Lusita cover the full 6,443 hectares and not just the 4,915.75 hectares covered by HLI’s SDP.

[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 the Court is constrained to rule only as regards the 4,915.75 has. of agricultural land.Nonetheless, this should not prevent the DAR, under its mandate under the agrarian reform law,

from subsequently subjecting to agrarian reform other agricultural lands originally held by Tadeco that were allegedly not transferred to HLI but were supposedly covered by RA 6657.

However since the area to be awarded to each FWB in the July 5, 2011 Decision appears too restrictive – considering that there are roads, irrigation canals, and other portions of the land that are considered commonly-owned by farmworkers, and these may necessarily result in the decrease of the area size that may be awarded per FWB – the Court reconsiders its Decision and resolves to give the DAR leeway in adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs decreases. 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.

On the other hand, the majority likewise reiterated its holding that the 500-hectare portion 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), as well as the separate 80.51-hectare SCTEX lot acquired by the government, should be excluded from the coverage of the assailed PARC resolution. The Court however ordered that the unused balance of the proceeds of the sale of the 500-hectare converted land and of the 80.51-hectare land used for the SCTEX be distributed to the FWBs.]

4.    YES, the date of “taking” is November 21, 1989, when PARC approved HLI’s SDP.

[For the purpose of determining just compensation, the date of “taking” is November 21, 1989 (the date when PARC approved HLI’s SDP) since this is the time that the FWBs were considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands became subject of the agrarian reform coverage through the stock distribution scheme only upon the approval of the SDP, that is, on November 21, 1989. Such approval is akin to a notice of coverage ordinarily issued under compulsory acquisition. On the contention of the minority (Justice Sereno) that the date of the notice of coverage [after PARC’s revocation of the SDP], that is, January 2, 2006, is determinative of the just compensation that HLI is entitled to receive, the Court majority noted that none of the cases cited to justify this position involved the stock distribution scheme. Thus, said cases do not squarely apply to the instant case.  The foregoing notwithstanding, it bears stressing that the DAR's land valuation is only preliminary and is not, by any means, final and conclusive upon the landowner. The landowner can file an original action with the RTC acting as a special agrarian court to determine just compensation. The court has the right to review with finality the determination in the exercise of what is admittedly a judicial function.]

5.    NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has NOT lapsed on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell their land interests in Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after 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. Moreover, should the FWBs be immediately allowed the option to sell or convey their interest in the subject lands, then all efforts at agrarian reform would be rendered nugatory, since, at the end of the day, these lands will just be transferred to persons not entitled to land distribution under CARP.]

6.    YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to remain as stockholders of HLI should be reconsidered.

[The Court reconsidered its earlier decision that the qualified FWBs should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control [over the subject lands] given the present proportion of shareholdings in HLI. The Court noted that the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the holders of this 33.296% unanimously vote to remain as HLI stockholders, which is unlikely, control will never be in the hands of the FWBs.  Control means the majority of [sic] 50% 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 total HLI capital shares 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.]

PEOPLE V FAJARDO G.R. NO. L-12172 AUGUST 29, 1958Facts: Fajardo was mayor in Baao, Camrines Sur when the municipal council passed the ordinance that prohibits the construction of a building that blocks the view of the town plaza. Moreover, it redirects the grant of permission to the mayor.After his incumbency, Fajardo applied for a permit to build a building beside the gasoline stationnear the town plaza. His request was repeatedly denied.  He continued with the construction under the rationale that he needed a house to stay in because the old one was destroyed by a typhoon.He was convicted and ordered to pay a fine and demolish the building due to its obstructing view.He appealed to the CA, which in turn forwarded the petition due to the question of the ordinance’sconstitutionality.

Issue: Is the ordinance constitutional?

Held: No, petition granted.

Ratio:The ordinance doesn’t state any standard that limits the grant of power to the mayor. It is an arbitrary and unlimited conferment.Ordinances which thus invest a city council with a discretion which is purely arbitrary, and which may be exercised in the interest of a favored few, are unreasonable and invalid. The ordinance should have established a rule by which its impartial enforcement could be secured. All of the authorities cited above sustain this conclusion.The ordinance is unreasonable and oppressive, in that it operates to permanently deprive appellants of the right to use their own property; hence, it oversteps the bounds of police power, and amounts to a taking of appellants property without just compensation.While property may be regulated to the interest of the general welfare, and the state may eliminate structures offensive to the sight, the state may not permanently divest owners of the beneficial use of their property and practically confiscate them solely to preserve or assure theaesthetic appearance of the community.Fajardo would be constrained to let the land be fallow and not be used for urban purposes. To do this legally, there must be just compensation and they must be given an opportunity to be heard.An ordinance which permanently so restricts the use of property that it can not be used for any reasonable purpose goes, it is plain, beyond regulation and must be recognized as a taking of the property.The validity was also refuted by the Admin Code which states:SEC. 2243. Certain legislative powers of discretionary character. — The municipal council shall have authority to exercise the following discretionary powers:x x x           x x x           x x x(c) To establish fire limits in populous centers, prescribe the kinds of buildings that may be constructed or repaired within them, and issue permits for the creation or repair thereof, charging a fee which shall be determined by the municipal council and which shall not be less than two pesos for each building permit and one peso for each repair permit issued. The fees collected under the provisions of this subsection shall accrue to the municipal school fund.Since, there was absolutely no showing in this case that the municipal council had either established fire limits within the municipality or set standards for the kind or kinds of buildings to be constructed or repaired within them before it passed the ordinance in question, it is clear that said ordinance was not conceived and promulgated under the express authority of sec. 2243 (c)

P E O P L E V . F A J A R D O ( 1 9 5 8 )

Facts Aug. 15, 1950 - Juan Fajardo was the mayor of Baoo, Camarines Sur. During his term the municipal council passed

Ordinance No. 7 which prohibited the construction or repair of any building without a written permit from the mayor prior to construction or repairing.

1954 - Fajardo and Babillonia (Fajardo’s son-in-law) applied for a permit to construct a building adjacent to their gas station, still on Fajardo’s private land, separated from public plaza by a creek.

 Jan. 16, 1954 – request denied because it would destroy the view of the public plaza.o    Applicants appealed but were turned down again on Jan. 18, 1954.

 Fajardo and Babillonia proceeded to construct even without a permit because they claimed that they needed a residence badly due to a typhoon destroying their previous place of residence

Feb. 26, 1954 – Fajardo et at., were charged and convicted by peace court of Baoo for violating Ordinance no. 7o    CFI – Affirmedo    CA forwarded the case to the SC because “the appeal attacks the constitutionality of the ordinance in question.”

Issue/Held: W/N Ordinance No. 7 is a valid exercise police power in its regulation of property.NO. Ordinance No. 7 went beyond the authority that the municipality could enact and is therefore null and void. Fajardo et al., acquitted.

Ratio:•      The ordinance is not merely lacking in providing standards to guide and/or control the discretion vested by the ordinance.

STANDARDS ARE ENTIRELY LACKING IN THIS CASE.o    Ordinance grants mayor arbitrary and unrestricted power to grant/deny construction/repair permits•         Legislation may validly regulate property in the interest of general welfare

à Prohibition of offensive structures. HOWEVER, ‘the state may not under the guise of police power permanently divest owners of the beneficial use of their property and practically confiscate them solely to preserve or assure the aesthetic appearance of the community.’

o    IN THIS CASE: Structures regardless of their own beauty and regardless of the fact that they are built on private land are condemned by the ordinance à appellants constrained would be constrained to leave their land to idle without receiving just compensation for the virtual confiscation of their private land

•      Municipal government justified the ordinance under Revised Administrative Code – Sec. 2243 – C – that municipal council shall have authority to exercise discretionary powers regarding establishing fire limits in populous centers à empowers municipal government to require construction/repair permits, to charge fees for such permits

o    IN THIS CASE: there were no fire limits or safety regulations that the municipal council promulgated in order to set a standard in the type of building that can be safely constructed in the public plaza.

REPUBLIC VS. PLDT

FACTS:

            Sometime in 1933, the defendant PLDT entered into an agreement with RCA Communications Inc., an American corporation, whereby telephone messages coming from the US and received by RCA’s domestic station, could automatically be transferred to the lines of PLDT, and vice versa.

            The plaintiff through the Bureau of Telecommunications, after having set up its own Government Telephone System, by utilizing its own appropriation and equipment and by renting trunk lines of the PLDT, entered into an agreement with RCA for a joint overseas telephone service.

            Alleging that plaintiff is in competition with them, PLDT notified the former and receiving no reply, disconnected the trunk lines being rented by the same; thus, prompting the plaintiff to file a case before the CFI praying for judgment commanding PLDT to execute a contract with the Bureau for the use of the facilities of PLDT’s telephone system, and for a writ of preliminary injunction against the defendant to restrain the severance of the existing trunk lines and restore those severed.

ISSUE: Whether or not interconnection between PLDT and the Government Telephone System can be a valid object for expropriation.

HELD: Yes, in the exercise of the sovereign power of eminent domain, the Republic may require the telephone company to permit interconnection as the needs of the government service may require, subject to the payment of just compensation. The use of lines and services to allow inter-service connection between the both telephone systems, through expropriation can be a subject to an easement of right of way.

QC VS ERICTA

Police Power – Not Validly ExercisedQuezon City enacted an ordinance  entitled “ORDINANCE REGULATING THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE MEMORIAL TYPE CEMETERY OR BURIAL GROUND WITHIN THE JURISDICTION OF QUEZON CITY AND PROVIDING PENALTIES FOR THE VIOLATION THEREOF”. The law basically provides that  at least six (6) percent of the total area of the memorial park cemetery shall be set aside for charity burial of deceased persons who are paupers and have been residents of Quezon City for at least 5 years prior to their death, to be determined by competent City Authorities. QC justified the law by invoking police power.ISSUE: Whether or not the ordinance is valid.HELD: The SC held the law as an invalid exercise of police power. There is no reasonable relation between the setting aside of at least six (6) percent of the total area of all private cemeteries for charity burial grounds of deceased paupers and the promotion of health, morals, good order, safety, or the general welfare of the people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit paupers who are charges of the municipal corporation. Instead of building or maintaining a public cemetery for this purpose, the city passes the burden to private cemeteries.

CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF QUEZON CITY,  petitioners,vs.HON. JUDGE VICENTE G. ERICTA as Judge of the Court of First Instance of Rizal, Quezon City, Branch XVIII; HIMLAYANG PILIPINO, INC., respondents.

Facts:

Section 9 of Ordinance No. 6118, S-64 provides that at least 6% of the total area of the memorial park cemetery shall be set aside for the charity burial of deceased persons who are paupers and have been residents of Quezon City for at least 5 years prior to their death. As such, the Quezon City engineer required the respondent, Himlayang Pilipino Inc, to stop any further selling and/or transaction of memorial park lots in Quezon City where the owners thereof have failed to donate the required 6% space intended for paupers burial.

The then Court of First Instance and its judge, Hon. Ericta, declared Section 9 of Ordinance No. 6118, S-64 null and void.

Petitioners argued that the taking of the respondent’s property is a valid and reasonable exercise of police power and that the land is taken for a public use as it is intended for the burial ground of paupers. They further argued that the Quezon City Council is authorized under its charter, in the exercise of local police power, ” to make such further ordinances and resolutions not repugnant to law as may be necessary to carry into effect and discharge the powers and duties conferred by this Act and such as it shall deem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order, comfort and convenience of the city and the inhabitants thereof, and for the protection of property therein.”

On the otherhand, respondent Himlayang Pilipino, Inc. contended that the taking or confiscation of property was obvious because the questioned ordinance permanently restricts the use of the property such that it cannot be used for any reasonable purpose and deprives the owner of all beneficial use of his property.

Issue:Is Section 9 of the ordinance in question a valid exercise of the police power?

Held:

No. The Sec. 9 of the ordinance is not a valid exercise of the police power.

Occupying the forefront in the bill of rights is the provision which states that ‘no person shall be deprived of life, liberty or property without due process of law’ (Art. Ill, Section 1 subparagraph 1, Constitution). On the other hand, there are three inherent powers of government by which the state interferes with the property rights, namely-. (1) police power, (2) eminent domain, (3) taxation. These are said to exist independently of the Constitution as necessary attributes of sovereignty.

An examination of the Charter of Quezon City (Rep. Act No. 537), does not reveal any provision that would justify the ordinance in question except the provision granting police power to the City. Section 9 cannot be justified under the power granted to Quezon City to tax, fix the license fee, and regulate such other business, trades, and occupation as may be established or practised in the City. The power to regulate does not include the power to prohibit or confiscate. The ordinance in question not only confiscates but also prohibits the operation of a memorial park cemetery.

Police power is defined by Freund as ‘the power of promoting the public welfare by restraining and regulating the use of liberty and property’. It is usually exerted in order to merely regulate the use and enjoyment of property of the owner. If he is deprived of his property outright, it is not taken for public use but rather to destroy in order to promote the general welfare. In police power, the owner does not recover from the government for injury sustained in consequence thereof.

Under the provisions of municipal charters which are known as the general welfare clauses, a city, by virtue of its police power, may adopt ordinances to the peace, safety, health, morals and the best and highest interests of the municipality. It is a well-settled principle, growing out of the nature of well-ordered and society, that every holder of property, however absolute and may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community. A property in the state is held subject to its general regulations, which are necessary to the common good and general welfare. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations, established by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient. The state, under the police power, is possessed with plenary power to deal with all matters relating to the general health, morals, and safety of the people, so long as it does not contravene any positive inhibition of the organic law and providing that such power is not exercised in such a manner as to justify the interference of the courts to prevent positive wrong and oppression.

However, in the case at hand, there is no reasonable relation between the setting aside of at least six (6) percent of the total area of an private cemeteries for charity burial grounds of deceased paupers and the promotion of health, morals, good order, safety, or the general welfare of the people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit paupers who are charges of the municipal corporation. Instead of building or maintaining a public cemetery for this purpose, the city passes the burden to private cemeteries.

The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within the center of population of the city and to provide for their burial in a proper place subject to the provisions of general law regulating burial grounds and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177 (q) that a Sangguniang panlungsod may “provide for the burial of the dead in such place and in such manner as prescribed by law or ordinance” it simply authorizes the city to provide its own city owned land or to buy or expropriate private properties to construct public cemeteries. This has been the law and practise in the past. It continues to the present. Expropriation, however, requires payment of just compensation. The questioned ordinance is different from laws and regulations requiring owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and other public facilities from the land they sell to buyers of subdivision lots. The necessities of public safety, health, and convenience are very clear from said requirements which are intended to insure the development of communities with salubrious and wholesome environments. The beneficiaries of the regulation, in turn, are made to pay by the subdivision developer when individual lots are sold to home-owners.