EN BANC
[G.R. No. 171101. August 24, 2010.]
HACIENDA LUISITA, INC., petitioner, vs. PRESIDENTIAL AGRARIAN REFORM COUNCIL, ET AL., respondents.
TRANSCRIPT
of stenographic notes taken during the
hearing of the above-entitled cases before the
En Banc held at the New Session Hall, New
Supreme Court Building, Padre Faura,
Manila on August 24, 2010, Tuesday, at 2:00
o'clock in the afternoon.
PRESENT:
HON. RENATO C. CORONA Acting Justice
HON. CONCHITA CARPIO-MORALES Associate Justice
HON. PRESBITERO J. VELASCO, JR. Associate Justice
HON. TERESITA J. LEONARDO DE CASTRO Associate Justice
HON. ARTURO D. BRION Associate Justice
HON. DIOSDADO M. PERALTA Associate Justice
HON. LUCAS P. BERSAMIN Associate Justice
HON. MARIANO C. DEL CASTILLO Associate Justice
HON. ROBERTO A. ABAD Associate Justice
HON. MARTIN S. VILLARAMA, JR. Associate Justice
HON. JOSE P. PEREZ Associate Justice
HON. JOSE C. MENDOZA Associate Justice
HON. MARIA LOURDES P.A. SERENO Associate Justice
NO PART:
HON. ANTONIO T. CARPIO Associate Justice
HON. ANTONIO EDUARDO B. NACHURA Associate Justice
ASSISTED BY:
Atty. Ma. Luisa D. Villarama Clerk of Court
Atty. Felipa B. Anama Assistant Clerk of Court
STENOGRAPHERS:
Milagros del Rosario-Cruz
Caridad A. Pinote
Famela Z. Camacho
Analou Baguiran
Benjamin L. Ancheta
APPEARANCES:
Counsels for the Petitioner HLI:
Atty. Gener E. Asuncion
Atty. Magdangal B. Elma
Atty. Antonio A. Merelos
Atty. Regino A. Moreno
Counsels for Petitioner-Intervenor RCBC
Atty. Ma. Celia Fernandez-Estavillo
Atty. Anacleto M. Diaz
Atty. Luis Karlo R. Tagarda
Atty. Roderick Rabino
Atty. Daniel Dolegon
Counsels for Petitioner-Intervenor LIPC
Atty. Mario Luza Bautista
Atty. Brigitte M. Da Costa
Counsels for Public Respondents
Solicitor General Jose Anselmo I. Cadiz
Assistant Sol. Gen. Amparo M. Cabotaje-Tang
Solicitor Ma. Zorayda V. Tejones-Zuñiga
Associate Solicitor Noel A. Salo
Associate Solicitor Jason T. Lorenzo
Associate Sol. Perfecto Adolfo C. Chua Cheng
Counsel for Respondents Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita/Noel Mallari/United Luisita WorkersUnion, et al.
Atty. Carmelito M. Santoyo
Counsel for Respondent AMBALA Sentral Foundation, Inc.
Atty. Jobert Ilarde Pahilga
Counsel for Respondent Rene Galang
Atty. David D. Erro
Counsels for FARM FOUNDATION, INC.
Atty. Edgar dL. Berna
Atty. Christian Monsod
xxx xxx xxx
CHIEF JUSTICE CORONA:
We will now resume the oral arguments on the Hacienda Luisita case. It is now the turn of the respondents to argue. Solicitor General Jose Anselmo Cadiz will have twenty-five (25) minutes, after which the Court will question him. And then after him, Atty. Carmelito M. Santoyo will have five (5) minutes, then the questioning; then Atty. Jobert Ilarde Pahilga will have five (5) minutes, then the questioning; and then Atty. David Erro will have five (5) minutes, then the questioning; and last but not least, Farm Peace Foundation represented by Atty. Christian Monsod will have five (5) minutes, then the questioning. Solicitor General may now take the floor.
SOL. GEN. CADIZ:
Good afternoon, Your Honors.
I will take less than the time allotted to me, Your Honors.
This case is being watched by multitudes of Filipinos, if not even by the whole country. The history of unrest in rebellions in our country is all about land. The Spanish friars owned vast tracks of land as far as the eyes can see and our forefathers took up arms in rebellion. The Hukbalahap Movement was also all about inciting the poor peasant to rise in arms in pursuit of land, so it is with the New Peoples Army. Let us examine the history of revolutions in the world.
The French Revolution, which saw the birth of modern democracy, was about land. The Bolsheviks Leninist Revolution, which overthrew Tsarist Russia, was also about land. As we knew it, it was the Boston Tea Party which precipitated the American Revolution, that maybe true for the people of Boston and the Cambridge, but months before in 1774, the British revoked the lands granted to the veterans of the French and Indian wars and restricted the grant of such lands to British regulars. This despite the fact that the American subjects bore the brand of fighting, the Indians and the French, so the revolution is still all about land. In fact, George Washington, who arguably is the best general and the greatest President, the United States ever produced, was a grantee to the tune of Twenty Thousand (P20,000.00) acres of the land and the British were poised to confiscate them. Why do we think he agreed to lead the revolution? Yes, George Washington was a patriot, he was a true patriot, and I admire him, but Your Honors, it's still all about land.
Your Honors, presently, there are only two (2) ascendant Maxist Leninist Maoist Insurgencies in the whole world that of the Philippines and Columbia, whose revolutionary arm is acronym, as we guest it "PARC", but not the PARC that we are about to discuss today. Contrast this with China and Russia, the former bedrocks of communist revolutions, they have fully embraced capitalism. Deng Shao Ping in overturning Mao Tse Tung's dictum said, "I don't care whether the cat is black or white as long as it catches the mouse." In other words, he doesn't care whether it is capitalism or communism as long as it brings development to One Billion of his Chinese people, even if we ask the Filipino rebel, "Why?" It's not that communism provides the answers, but democracy in the Philippines has failed him. So, here we are now, Your Honors. History is made by leaders and their followers. We may not make history today, but if we liberate our farmers, specially the farmworkers in this instant case, we may deserve a bit of footnote in history.
Your Honors, this Honorable Court has asked us to discuss the issues as follows:
(1) Whether or not PARC has jurisdiction, power and/or authority to revoke the Stock Distribution Option Agreement, as embodied in the Memorandum of Agreement (MOA) dated May 11, 1989, and if so, whether or not PARC, sixteen (16) years after the execution of the Stock Distribution Option Agreement (SDOA), can still validly revoke the same without violating due process and the non-impairment guaranty.
Your Honors, the answers to those questions are in the imperative. PARC has the duty if not the obligation to see to it that all provisions of the SDOP must be followed to the letter, and since this SDOP has chosen to vest shares for the period of thirty (30) years then it is our submission, Your Honor, that PARC has the duty and the obligation to see to it that the provisions of the SDOP has to be followed and not violated. Sixteen (16) years, yes, but originally, the SDOP is for thirty (30) years, Your Honors, please. And it is the duty of the PARC to see to it that the SDOP is followed by both parties.
In the earlier hearing last week, the Honorable Justice Peralta has cited the Angara Case for the continuing jurisdiction of PARC over this SDOP and it is inherent in the police power of the State, Your Honor, to be able to bring about social justice, and that is, what this case is all about.
The second issue, Your Honors, is whether of not there is legal basis for the revocation of the SDOP. Whether or not the implementation of the SDOP conforms to Section 31 of CARL and the Implementing Rules, DAR Administrative Order No. 10, Series of 1988.
We submit, Your Honor, that there is a legal basis for six (6) reasons:
(1) The ten (10%) percent dividend has not been distributed to the farmworkers. We concede, Your Honors that the company, the corporations has been losing money but management was not in the hands of the farmworkers for the past so many years, and in fact, from 1989. I don't think we have to tie-down the farmer to this uneven relationship when the management of the corporation has vested in those people who hold the sixty-seven (67%) percent share in the corporation.
(2) The three (3%) percent of the gross income of production has likewise not been fully distributed. There has been a claim, Your Honor, that there was some distribution but there has never been a claim and the records have not been shown that the three (3%) percent gross income of production has fully been given to the farmworkers.
(3) The titles to the home lots were also not given. A portion, perhaps, a number of them, perhaps, but today twenty-one (21) years after 1989, not all titles to the home lots were distributed.
(4) It is so stated, Your Honors, in Administrative Order No. 10, Series of 1988, that the economic condition of the farmers must improve. It's been twenty (20) years hence, the farmworker is still poor, the farmworker is still deprived, the farmworker is still ignorant.
(5) In contravention of the SDOP as a result of the land conversion, the land has been fragmented.
(6) And I think this is the biggest violation of them all, Your Honors, please. The man days formula is inherently infirmed because under CARL, those who will be given the land are farmworkers, at the time of the enactment of CARL in 1988, while under the instant SDOP the beneficiaries are workers, not in 1988, but in the future. In fact, originally, it was thirty (30) years now it's fifteen (15) but let us remember, Your Honors, that the original petition to revoke, the SDOP was filed in 2003, or fourteen (14) years after the SDOP in this case was agreed upon. So, I would presume that the fifteen (15) year vesting period was enacted in 2004 or shortly after the petition for the revocation of the SDOP was filed. Your Honors, the SDOP in the instant case is unique and deviates from the law as it allows the distribution of the shares of stocks of the farmworkers-beneficiaries based on man days work over a period of thirty (30) years. It can be described as a looking forward arrangement since the farmworker-beneficiaries shares of stock will only be given after thirty (30) years. This forward looking identification on the farmworker-beneficiaries places them at a disadvantage because the recognition of additional shareholders through the years effectively results in the delusion of the respective and aggregate shareholdings. I think that was pointedly said by Justice Abad in the last hearing, the watering down of the shares of the original beneficiaries.
Moreover, by requiring the farmworker-beneficiaries to earn their shares on the basis of man day's actually worked by them, the issuance of such shares partake the nature of mere employee benefits instead of the equivalent of the land that they, otherwise, would have owned under compulsory acquisition. In other words, the SDOP contemplates that the farmer will be a beneficiary, the farmer will be an employee, and the farmer will be a shareholder. But in this instant case, Your Honor, since no dividend has been given ever, then they are merely reduced to the status of an employee.
On the other hand, Your Honor, the SDOA contemplated by law is based on the principle of social justice. It is best described as looking backward arrangement. For what it actually intends is, to give the shares of stock to the farmworker-beneficiaries at around the effectivity of the Comprehensive Agrarian Reform Law or in 1988. Stated differently, Your Honors, the SDOA recognizes those who are farmworkers-beneficiaries at the time the SDOA was entered into and not at some distant future, precisely, to effect immediate and current redress for the injustice inflected upon the farmworker in the feudal economic system for many generations. In other words, the law contemplates a social justice measure, nothing more, nothing less.
May I now go to the fourth issue? I think the third issue was conceded by the petitioner so we don't have to discuss that.
The fourth issue is whether or not the rights, obligations and remedies of the parties to the Stock Distribution Agreement are now governed by the Corporation Code and not by the Comprehensive Agrarian Reform Law. And as corollary to that issue, Your Honors, it is asked whether or not the revocation of the Stock Distribution Option Agreement and the resulting distribution of the agricultural land to the farmworker-beneficiaries of Hacienda Luisita will cause the dissolution of petitioner Hacienda Luisita Incorporated.
Your Honors, it is the submission that the Comprehensive Agrarian Reform Law is the controlling law because the Stock Distribution Agreement is only an offshoot or one of the provisions in the totality of the Comprehensive Agrarian Reform Law. In other words, the Comprehensive Agrarian Reform Law is the mother law of all this agreement. And Your Honors, since only a portion of the assets of the corporation will be taken away, if the Court opts to distribute the land there still the corporation which will exist because the remaining assets of the corporation. So, I think it does not result into the dissolution of the corporation in question.
And let me go to the last issue, Your Honor. Whether or not Luisita Industrial Park Corporation (LIPCO) and Rizal Commercial Banking Corporation (RCBC), as transferees of a portion of Hacienda Luisita, may invoke the doctrine of IPV in the instant case.
Your Honors, we submit that both LIPCO and RCBC cannot claim that they are innocent purchaser for value. In the last hearing, Your Honors, the Honorable Justice Morales has stated exceptions to the IPV doctrine, and that is actual and constructive notices of a lien on the land or a condition on the land. Both LIPCO and RCBC, Your Honors, do not deny that they knew that this land was a converted land. LIPCO, in fact, admitted that it knew about the SDOP and the MOA. Then LIPCO should have been aware, Your Honors, about the thirty (30) years vesting period. Let us remember, Your Honors, that this was in 1998 or 1999. Only ten (10) years after the SDOP was enacted and the vesting of the shares would take thirty (30) years so there is still a full two-thirds (2/3) time remaining in 1998 or 1999 before the full vesting of shares, and I don't think it is prudent for them to assume, Your Honor, that everything will go well for the next twenty (20) years as regards the vesting of the shares. As regards as RCBC, Your Honors, it said that it was not aware of the SDOP and MOA or the Memorandum of Agreement. Let us give them the benefit of the doubt, Your Honor. But RCBC, likewise submitted that it knew that the land in question was a converted land, since it was a bank, Your Honor, would not it had been more prudent for the bank to look at the conditions of the conversion order. At the very least, and there they will thou find out the conditions of the SDOP in the conversion of the land. The Conversion Order would say that the SDOP must be followed, and the conversion of the land must not mitigate the benefit due to the farmworker. So, I think, Your Honors, the presentation by both LIPCO and RCBC must fail.
Your Honors, I'm about to end my presentation, I think I have discussed every issue that was presented to us. Let me just quote a letter, Your Honor, from St. Francis Xavier given to St. Ignatius de Loyola. St. Ignatius de Loyola was on the way to Pamplona, Spain and he passed by the home of St. Francis Xavier in the town of Obanos. The letter was to be presented to Juan de Azpilcueta, the favorite brother of St. Francis Xavier. And I quote part of the letter, "I give you my word, that never in all my life will I be able to repay the debt I owed to St. Ignatius or to Ignacio. Over and over again, both we dispersed and through his friends he has provided for my needs, and thanks to him also I had withdrawn from bad company. I beg you to receive him as you would me. You can learn or by needs or hardship from him better from anyone else for he knows them better than anyone." Your Honors, we are called upon to know the needs and hardships of the poor farmer and to provide for their needs.
Thank you very much, Your Honor, for this opportunity to the Republic, I'm now prepared to answer your questions.
CHIEF JUSTICE CORONA:
Justice Brion.
JUSTICE BRION:
Thank you very much counsel for quoting the Jesuits.
SOL. GEN. CADIZ:
I also studied in the Ateneo High School, Your Honor.
JUSTICE BRION:
And thank you for your discourse on resolution, but what I would like to know is, how do revolutions relate to land?
SOL. GEN. CADIZ:
Your Honor, land is always finite as the population grow there is a fight for land. It has happened in the fifteenth hundreds (1500), in the sixteenth hundreds (1600). In fact, Your Honor, I said, I admired George Washington; he was the leader, a Virginian, in fighting the French and the Indians West of Virginia. And he led the troops in fighting the Indians and the French. And for this, he was rewarded with twenty thousand (20,000) acres of land, prime land, Your Honor. He possessed those lands along the rivers and so he felt that with this edict of the British revoking the land-grant awarded to the American subjects who fought the Indians and the French, he taught that it was unfair. He taught, for him, West of Virginia it was already free land because the British limited in soldiers and man power would not be able to enforce that edict. But Your Honor, nevertheless, there was that edict and the one he was called upon to lead the American Revolution, he did so. He was a patriot, Your Honor, he love America, he love the colonies but at the same time he had the self-interest. And I don't think that his self-interest conflicted with his love for the America, and so it was borne that he led the American Revolution fighting a superior British force beating them in the decisive battle of your town where the British flee, and thereafter, he became the President of the United States, for two (2) terms and refusing to lead the United States for a third term.
JUSTICE BRION:
So, counsel, it's not the land itself, it's not the land per se, but the use or abuse of lands, right?
SOL. GEN. CADIZ:
Agree, Your Honor.
JUSTICE BRION:
Especially, if there is the government, it is abused by the government that can instigate revolutions.
SOL. GEN. CADIZ:
I agree, Your Honor, but there is also a concept of owning the land. The Americas at that time was frontier but George Washington owned twenty thousand (20,000) acres, most of them by the rivers and he felt very much secure owning that land. So, there is also the concept, not only of the use of the land but ownership. Ownership of the land, Your Honor, is also very, very important and that was what George Washington fought for.
JUSTICE BRION:
So, on this notes, counsel, may I proceed to the topics at hand and let me first clarify some terms? Note, counsel, may I proceed to the topic at hand and let me first clarify some terms? You used the term "SDOP" and then later on I heard "SDOA", what are these?
SOL. GEN. CADIZ:
Your Honor, the MOA, the Memorandum of Agreement is the SDOA that is the Agreement to form the SDOP. The SDOP is the plan itself, Your Honor.
JUSTICE BRION:
SDOP is the plan itself.
SOL. GEN. CADIZ:
Yes, it spells out the rights and obligations of the parties, Your Honor.
JUSTICE BRION:
And, in fact, the law itself speaks of the SDOP.
SOL. GEN. CADIZ:
I submit, Your Honors.
JUSTICE BRION:
And in the first PARC resolution it was an approval of the SDP or SDOP, right?
SOL. GEN. CADIZ:
SDOP, Your Honor.
JUSTICE BRION:
SDOP, and then later on, there was the SDOA, the Memorandum of Agreement, right?
SOL. GEN. CADIZ:
Your Honor, I think there was a Memorandum of Agreement outlining the basic elements but the SDOP, if I'm not mistaken, Your Honor, is the detailed plan; it is a longer document, Your Honor. So, I would think that the SDOP was a take-off of the MOA. It's just like, Your Honor, having an agreement at the NCMB to finish a CBA and yet the CBA still has to be crafted, Your Honor.
JUSTICE BRION:
I refer you to PARC Resolution No. 89-12-2, which says, "unanimously approved the Stock Distribution Proposal of the Tarlac Development Corporation/Hacienda Luisita." You know, I've been looking for a Stock Development Proposal in the records, I cannot find it. In fact, I asked the ponente Justice Velasco, if there is such an SDP or Stock Development Proposal or Plan and he said there appears to be none.
SOL. GEN. CADIZ:
Your Honors, there is a Stock Distribution Plan or Stock Distribution Option Plan approved by PARC and it was accompanied by the Memorandum of Agreement or the SDOA, or the Stock Distribution Option Agreement. So, in other words, I go back to my submission and my impression, Your Honor, that the SDOA or MOA are the broad strokes and the SDOP put the flesh in the bones, so to speak, Your Honor.
JUSTICE BRION:
Where is the SDOP? Because what we have in the records will be the SDOA of 1989, the Memorandum of Agreement among Tarlac Development Corporation/Hacienda Luisita and the farmworkers. I cannot see the SDP or SDOA.
SOL. GEN. CADIZ:
Your Honor, there is a proposal by the Tarlac Development Company for Stock Distribution. This is the plan itself, Your Honor, consisting of a . . . it's quite thick, so many, many pages which was approved later on by the PARC, Your Honor.
JUSTICE BRION:
Is this part of the records?
SOL. GEN. CADIZ:
I would presume, Your Honor, because this case has been on going since 2003 and this is a basic document, Your Honor. It is Annex "B" of the petition, Your Honor.
JUSTICE BRION:
The SDOP was approved, what about the MOA, the SDOA? Was it also approved by the PARC?
SOL. GEN. CADIZ:
It is likewise attached as Annex "C" to the petition.
JUSTICE BRION:
No. My question is: Was it approved by the PARC?
SOL. GEN. CADIZ:
Your Honor, it is an agreement among the farmworkers, the TADECO and the Hacienda Luisita, Inc., Your Honor. And I think it is just about the same as the SDP which was approved by the PARC.
JUSTICE BRION:
Whether we call it SDP or SDOA they carry the badge of consistently with the law coming from the PARC.
SOL. GEN. CADIZ:
Yes, Your Honor. I submit that at the time, Your Honor, without the benefit of hindsight and the experience and the situation on the ground it was approved by the PARC.
JUSTICE BRION:
Counsel, my next question is about the qualified beneficiaries you've mentioned this earlier. The qualified beneficiaries are defined under Section 22 of the CARL and these are also the same beneficiaries that would benefit under the Stock Distribution Option. This should be the beneficiaries, as of, what date?
SOL. GEN. CADIZ:
You referred to Section 22 of CARL, Your Honor?
JUSTICE BRION:
Yes.
SOL. GEN. CADIZ:
Your Honor, the qualified beneficiaries are those who were under CARL at the time it was enacted, Your Honor, in 1988. The SDOP was approved in 1989, so if this relates to this instant case, I think the submission, Your Honor, is that the qualified beneficiaries are the six thousand (6,000) plus farmworkers who were present at the time working in that corporation.
JUSTICE BRION:
And they are the focus really of all these exercise, right?
SOL. GEN. CADIZ:
Your Honor, in fact, preventing the watering down of the shares under CARL, they are the true beneficiaries.
JUSTICE BRION:
Would you know if PARC ever require the parties to submit a list of the six thousand (6,000) or so beneficiaries?
SOL. GEN. CADIZ:
I think, Your Honor, it was left to the corporation itself and even in the subsequent increasing in the number of shareholders, I think the corporation had the . . . They were the ones who did it, Your Honor.
JUSTICE BRION:
Don't you think this is a grievous omission on the part of PARC or the DAR that this qualified beneficiaries were never identified at the time of the approval of either the SDOP or the SDOA?
SOL. GEN. CADIZ:
It was sadly a default, Your Honor.
JUSTICE BRION:
My next question is: If they are to be the beneficiaries at that time, do you mean to imply that there will be known new beneficiaries thereafter?
SOL. GEN. CADIZ:
Your Honor, under the true spirit of the Comprehensive Agrarian Reform Law, whoever was tilling the land at the time that the law was enacted should be the ones to be benefited. But under the scheme, Your Honor, the looking forward scheme, where the computation is based on man days or work hours they were reduced to mere workers, Your Honor, and not farmworker-beneficiaries. It would seem, for example, if I was working on the land in 1989, under the CARL I would have a piece of that land. But looking forward, if I did not work anymore or if I only work for a year, I would not have that land, Your Honor, or if I work for a year I will have a very, very small share in the corporation. So, this was not the kind of the benefit to the farmworker as envisioned by the Comprehensive Agrarian Reform Law, Your Honor.
JUSTICE BRION:
We suggest another omission on the part of PARC. Now, let us go to . . . I understand there are supervisory workers and they are one of the petitioners in this case now. Where do they stand?
SOL. GEN. CADIZ:
Your Honor, they are supervisors, they are likewise workers or employees and I think in the SDOP they were given one (1%) percent of the gross sales of the corporation and that partakes the nature of an employee benefit, Your Honor.
JUSTICE BRION:
I refer you, counsel to Section 3 (g) which defines a farmworker and it refers to either an employee or a worker.
SOL. GEN. CADIZ:
Section 3 (d), Your Honor?
JUSTICE BRION:
Yah, 3 (g).
SOL. GEN. CADIZ:
3. . . .
JUSTICE BRION:
(g), so I would support your position that they are also beneficiaries and under the CARL, is it not that the beneficiaries are to be treated equally? Under the SDO they are to be treated equally and given the same kind of rights that the other shareholders in the company would enjoy, is that not right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
So again, there is a violation, right?
SOL. GEN. CADIZ:
Unfortunately, Your Honor.
JUSTICE BRION:
And did the PARC know this between 1989 and 2003?
SOL. GEN. CADIZ:
Your Honor, I would give them the benefit of the doubt, I cannot condemn them, but they did not have the benefit of hindsight at the experience on the ground, but as things now stand, they were violations indeed, Your Honor, of the terms and conditions of the SDO.
JUSTICE BRION:
Not only the violation, counsel, of the terms and conditions. The SDOP itself was violative of the law, what the PARC approved was a plan that violated the law. Would you agree with me?
SOL. GEN. CADIZ:
Considering, Your Honor, as regards the vesting right of thirty (30) years, I think that it was. I agree, Your Honor.
JUSTICE BRION:
No, I do not refer specifically to the thirty (30) years. I refer to what you mentioned about being given only one (1%) percent of the gross sales or gross production.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
This is different from what was given to the farmworker. Again, this is a violation on the part of PARC at the very first instance. Now, let's go to valuation. How does the law envision of the determination of the shares that would pertain to the farmworkers to the benefit?
SOL. GEN. CADIZ:
Your Honor, I think it is basic that the valuation of both the contribution of the farmworkers and the contribution of the landowner should be valuated independently, Your Honor. In other words, I would submit that an independent appraiser should have valuated the contributions of both parties.
JUSTICE BRION:
Contributions, that determination of how much shares would be distributed to the farmworkers. Is there a formula to that under the law?
SOL. GEN. CADIZ:
Your Honor, the formula, in my appreciation, is the amount of contribution of each party and since the contribution of the farmworker is contemplated to be the whole land and compassing that which could have been subjected to land distribution, then this is the contribution of the farmer. It is under Section 31, Your Honor.
JUSTICE BRION:
How does the law express that in mathematical formula? I would refer you to Section 31.
SOL. GEN. CADIZ:
Section 21 . . .
JUSTICE BRION:
31, 31, second paragraph.
SOL. GEN. CADIZ:
Yes, I cited that. It is also stated here, Your Honor. "Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company's total assets under such terms and conditions as maybe agreed upon by them."
JUSTICE BRION:
In mathematical terms that would be the value of the agricultural land divided by total assets of the corporations, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
So, we're speaking of valuation here. How is the value of the agricultural land to be valuated?
SOL. GEN. CADIZ:
Well, there is . . . I think a formula for valuation of land, and in fact, the DAR has a rule in this. It says, "The DAR must certify it, the parties agree." But because of the quite uneven relationship between the landlord and the landowner, and the employee, I think the proper way for DAR should have been to ask an independent appraiser to value the contribution of each party.
JUSTICE BRION:
I refer you to Section 34 of CARL, it says there, "A valuation scheme for the land shall be formulated by the PARC taking into account the factors enumerated in Section 17." And when you go to Section 17, it refers to the cost of acquisition, current value, nature, actual use, income, a lot of a host of other factors. My question is: Did the PARC come out with a formulation?
SOL. GEN. CADIZ:
It does not show in the records, Your Honor, unfortunately.
JUSTICE BRION:
If it is not shown in the records, can we say they did not?
SOL. GEN. CADIZ:
That's a fair assumption, Your Honor.
JUSTICE BRION:
What is the valuation of the agricultural land here?
SOL. GEN. CADIZ:
It's one third (1/3), Your Honor.
JUSTICE BRION:
One third (1/3) of agricultural land?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And how was that valuation arrived at?
SOL. GEN. CADIZ:
Well, it also does not show, Your Honor, unfortunately.
JUSTICE BRION:
I will point you to the SDOA. At the bottom of the fourth whereas clause, it says there, "which valuation have been appraised and approved in principle by the Securities and Exchange Commission, not by the PARC, nor by the DAR.
SOL. GEN. CADIZ:
Not by them, Your Honor.
JUSTICE BRION:
So again, this is an omission on part of PARC.
SOL. GEN. CADIZ:
It's a default, Your Honor.
JUSTICE BRION:
Now, when we use a formula, we said, "valuation of the land over valuation of the total assets." Before you arrived at the valuation of the total assets you have to first find out, what are these total assets?
SOL. GEN. CADIZ:
I submit, Your Honor, I think that is a fair assumption.
JUSTICE BRION:
Did the PARC find out what the total assets of the company were at that time?
SOL. GEN. CADIZ:
Sadly, Your Honor, it does not.
JUSTICE BRION:
Again, this is another omission. Now, under the SDOA there were figures cited and I quote to you, "One Hundred Ninety-Six (P196,000,000) Million or so for the land and a total valuation of Five Hundred Ninety (P590,000,000) Million or so for the total assets." My question is: Did the PARC ever verify the accuracy of this valuation?
SOL. GEN. CADIZ:
It does not show, Your Honor, please.
JUSTICE BRION:
These were valuations by the company.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And when we speak here of a "company" I am a little confused because we have the Tarlac Development Company and then the Hacienda Luisita, Incorporated. Can you explain to us the relationship between that Tarlac Development Company and the Hacienda Luisita, Incorporated?
SOL. GEN. CADIZ:
In my appreciation, Your Honor, the Tarlac Development Company is the contributor of the sixty-seven (67) percent of the shares of the Hacienda Luisita, Incorporated where the farmworkers owned the thirty-three (33%) percent, Your Honor. So, both Tarlac Development Company and the farmworkers are shareholders of HLI.
JUSTICE BRION:
Where did the thirty-three (33%) percent come from?
SOL. GEN. CADIZ:
From the contribution of the farmworkers which is the land, Your Honor.
JUSTICE BRION:
At the time of the SDO, in whose name was this portion of land appearing? Was it in the name of the farmers? Because if they were in the name of farmers, a land distribution would not have been necessary, so I would assume that they were in the name of somebody else, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And if you will verify the records, those agricultural were all in the name of the Tarlac Development Company, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And under the SDOA, the Tarlac Development Company transferred these lands into a spin-off corporation. "Spin-off" is a term used in the SDOA and that constituted the initial property of the HLI together with other agricultural assets, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And it was not a transfer for free, it was a transfer for value, and what was the consideration?
SOL. GEN. CADIZ:
Your Honor, the shares, the thirty-three (33%) percent shares of the farmworkers would have been distributed for thirty (30) years.
JUSTICE BRION:
No, no, no. We're not speaking of the thirty-three (33%) percent yet. Forget the farmworkers for now.
SOL. GEN. CADIZ:
I apologize, Your Honor.
JUSTICE BRION:
You just focus on the HLI and the Tarlac Development Company. So, here is the mother company, I would call the Tarlac Development Company, the mother company, and there was a spin-off, and in the course of the spin-off properties were transferred to HLI, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
And in the transfer they did not get it for free, right?
SOL. GEN. CADIZ:
Who did not get it for free, the farmworkers?
JUSTICE BRION:
The HLI, forget the farmworkers for now. We're just into the corporate arrangement. HLI got the property and HLI shares of stocks were transferred to Tarlac Development Company.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
So, this was the compensation, the consideration of that company.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
When a transfer was made to Hacienda Luisita, Incorporated, what was transferred, the properties only the agricultural plus other agricultural assets or, did this include also liabilities?
SOL. GEN. CADIZ:
It included the liabilities, Your Honor.
JUSTICE BRION:
It included the liabilities?
SOL. GEN. CADIZ:
In my appreciation, there were notes payables and accounts payable, Your Honor. I am not an accountant but when you see a notes payable and accounts payable in a balance sheet it is a debt. That is my appreciation, Your Honor.
JUSTICE BRION:
Because if you have evidence that the transfer included the liabilities then a fraud must have been committed against the farmers in the course of valuation, because you have assets and liabilities. If you will consider a proportion of the agricultural land to total assets then you must deduct from the total assets the liabilities, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
Which means that the value of the land would have been divided by a lower divisor, right? Because you subtracted the liabilities.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
Which means that the shares of the farmers should not be thirty-three (33) percent.
SOL. GEN. CADIZ:
Based on that postulate, Your Honor, I submit, Your Honor.
JUSTICE BRION:
Did the PARC recognize this?
SOL. GEN. CADIZ:
Unfortunately not, Your Honor.
JUSTICE BRION:
So, the PARC is an entity that has so many mistakes and omissions in this transaction shown the fact of transfer, I think we are very clear on that. Under the law, when is the transfer of shares supposed to be made?
SOL. GEN. CADIZ:
When it is paid for, Your Honor.
JUSTICE BRION:
Paid for?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
But what does the law say? What are the limits for transfer in payment? Are there limits stated in the law?
SOL. GEN. CADIZ:
In this particular instance, Your Honor, in this particular instance.
JUSTICE BRION:
Yes.
SOL. GEN. CADIZ:
Your Honor, if the HLI claims that it is giving away the shares for free, although it is being vested for a period of thirty (30) years, Your Honor.
JUSTICE BRION:
But my question to you is: What does the law say because the law is the standard?
SOL. GEN. CADIZ:
Your Honor, the shares must be transferred for a period of two (2) years and there should be just compensation for the shares, just like CARL when the land is distributed, the landowner is entitled to just compensation.
JUSTICE BRION:
What accounts for the thirty (30) year time frame that we keep hearing about? Is this an SDO that a land distribution scheme?
SOL. GEN. CADIZ:
Your honor, frankly, I would not have known the reasons why. However, Your Honor, as the records shows the original beneficiaries were about a little over Six Thousand (6,000) and now it's I think about Eleven Thousand (11,000). If I were the dominant stockholder of the corporation it would be easier for me to manage the corporation if there are so many, many other shares who hold the minority thirty-three (33%) percent. In other words, from the original Six Thousand (6,000) when you increase it to Eleven Thousand (11,000) it is so hard for the Eleven Thousand to bind together and speak as one and even it is also difficult . . .
JUSTICE BRION:
I see your point. My question is about the thirty (30) years. Where did these thirty (30) years come from? Then I would like to suggest to you, counsel that you look at the land distribution scheme where there is the thirty (30) year period, under the land distribution scheme the transfer of land should be immediate but the payment should be over a period of thirty (30) years. And now, what we are seeing here is a transfer of shares of stock contemplated to be for a period of thirty (30) years, but the transfer is not immediate, but supposedly, there is no payment. So, it seems to me that . . .
SOL. GEN. CADIZ:
It is the reverse, Your Honor. In fact, thirty (30) years to pay; now it is thirty (30) years to acquire.
JUSTICE BRION:
Yes. Can you consider this as a system that is sui generis specific and particular to HLI but which complies with the spirit of CARL?
SOL. GEN. CADIZ:
Your Honor, there are other SDOP's in question, Your Honor. I think every SDOP, around ten (10) or eleven (11) of them, is under question and I would not know, Your Honor, if the vesting period is as long as this particular instant case, Your Honor. But I would presume that since this corporation was the first SDOP, then others would have followed this kind of scheme and the vesting right should be there likewise, I'm not just sure if it is also for a period of thirty (30) years.
JUSTICE BRION:
So you're telling me that they became the bad example, right which others followed'?
SOL. GEN. CADIZ:
Your Honors, we now have the benefit of hindsight and the experience on the ground I would not condemn this at the time that it was enacted in 1989.
JUSTICE BRION:
Right. But all these were approved by PARC, right?
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
Who was PARC at that time? Who constituted PARC?
SOL. GEN. CADIZ:
Well, it is a committee under the Office of the President, Your Honor.
JUSTICE BRION:
Who were the members of the committee?
SOL. GEN. CADIZ:
Well, the Secretary of Agrarian Reform is the Vice Chairman; there are some other cabinet members, Your Honors.
JUSTICE BRION:
Cabinet members.
SOL. GEN. CADIZ:
Yes, Your Honor.
JUSTICE BRION:
Was the President a member of PARC?
SOL. GEN. CADIZ:
I think he is the Chairman, Your Honor.
JUSTICE BRION:
He is the Chairman. Did the President participate in this PARC decision?
SOL. GEN. CADIZ:
The records don't show, Your Honor, and I would think that in the dignity, the former President Aquino carried this in her office, I would not think that she participated in the deliberation of this particular issue, Your Honor. I would give that to the former late President, Your Honor.
JUSTICE BRION:
She did not participate?
SOL. GEN. CADIZ:
I would think so, Your Honor.
JUSTICE BRION:
But cabinet members participated, right?
SOL. GEN. CADIZ:
Yes, Your Honor, that is a fair presumption.
JUSTICE BRION:
And under our constitutional, political and administrative laws they are alter egos of the President, right?
SOL. GEN. CADIZ:
Agree, Your Honor.
JUSTICE BRION:
Did the President divest herself of all interest in either Tarlac Development Company or Hacienda Luisita?
SOL. GEN. CADIZ:
I don't think she was actively involved in the management but as regard divesting, I don't have information on that, Your Honor. But, Your Honor, if I may put it in the proper context, I am an appointee of the incumbent President but I am speaking in behalf of the Republic, Your Honor, and the Republic says, "Land must be distributed." Your Honors, the President has not swayed me either way, Your Honor, to speak in behalf of his family. And I would think the late Cory Aquino was also that way, Your Honor, I think it is fair to assume that the late President Aquino did not give instructions to her cabinet members nor did she sway her cabinet members to rule otherwise. I would think, Your Honor, because this was a novel idea without the benefit of experience and hindsight that people taught at that time that this was something that can work but now its twenty (20) years since, Your Honor, we see that it did not uplift the life of the poor farm.
JUSTICE BRION:
Less I be misunderstood, counsel, I do not wish to cast any as person against the person of the integrity or the dignity of our late President.
SOL. GEN. CADIZ:
Thank Your Honor.
JUSTICE BRION:
But here is where I am coming from. Don't you think that this circumstance should be an input into the consideration of the validity of the action of PARC in 1989, which actions you continued, which PARC continued in 2003, 2004, and 2005, and which was the subject of another PARC decision at that time, so have to take all these in totality. Perhaps, it might be shortsighted to look only at the 2003, 2004 problems, the ones brought by the unions, perhaps, it would be better to take a holistic look and then look at the validity of the SDOA and the SDOP itself because the PARC might have committed grave abuse of discretion in its decisions. So these are questions I pose to you, perhaps you can address this in your memorandum.
Thank you.
SOL. GEN. CADIZ:
Thank you, Your Honor.
CHIEF JUSTICE CORONA:
Justice Velasco.
JUSTICE VELASCO:
Mr. Solicitor General, I want clarification on the difference between the MOA, the Memorandum Agreement entered into between the Tarlac Development Corporation, Hacienda Luisita and farm workers and also the stock distribution mentioned by Justice Brion. Actually, attached to the petition is Annex "AA" which is the proposal for the stock distribution under CARP submitted by Tarlac Development Corporation, okay. Annex "AA-9" or rather "AA-8" mentions of the stock distribution plan and in Annexes "AA-9" and "AA-10", it lays down the mechanics of the stock distribution plan and a perusal of this conditions would show that these are practically the same or substantially the same terms and conditions, in the MOA so in effect, the Memorandum of Agreement and the stock distribution plan which is embodied in the proposal for stock distribution under CARL, submitted by TADECO and HLI are same, correct:
SOL. GEN. CADIZ:
Basically, Your Honor, the main provision are the same.
JUSTICE VELASCO:
I would like to ask your view on the meaning of the phrase "Company's Total Assets" and this was initially discussed in this afternoon session by Justice Brion. Section 31, provides that Corporations owning agricultural lands may give the qualified beneficiaries the right to purchase such proportions of the capital stock of the corporation that the agricultural lands actually devoted to agricultural activities, bares in relation to the Company's Total Assets. Now, in the MOA, they made use of that provision, that word, Company's Total Assets and Justice Brion is correct in saying that what was considered as the total assets of HLI would be all the asset plus the liabilities. No, No, rather the total assets in the MOA is composed of the land valued at One Hundred Ninety-Six (196) Million plus and other assets at 393 Million but in the computation of the shares of the farm workers in the corporation, the liabilities was not considered, it was not deducted from the total assets. Is this the right way of putting, of determining the value of the total assets or should we deduct the liabilities of the corporation first?
SOLICITOR GENERAL CADIZ:
Your Honor, if I were the farm worker beneficiary, I would want to get into a corporation which has no liability to start with because, your Honor, the history of the corporation show that up to now it has not made money. Probably because it was original burdened with an original sin and that is the liabilities, the notes payable, the accounts payable. So, it is no wonder that up to now, twenty (20) years hence is not making money at all, whereas the farmers should have been entitled to 10% of the dividends because it is losing money then that provision is a dead provision for all intents and purposes.
JUSTICE VELASCO:
The question counsel is, was PARC correct in approving that stipulation in the stock distribution plan meaning that it approve the valuation given or opposed by the parties that the total assets should be valued at Five Hundred Ninety Million (590) Million without deducting first the liabilities in the amount of 235 Million, is that the right way of applying Section 31?
SOLICITOR GENERAL CADIZ:
I think, your Honor, since even the land distribution arrangement, the only thing that the farm worker beneficiary will have to do is to pay for the land in the future, the land will have no liability, Your Honor. So, I would think that the proper way should have been, to have a clean corporation without any liability. The fact, Your Honor, that it was the land owner who was managing the company already puts the farm worker, the small farm worker, to a disadvantage and burden him up with notes payable and accounts payable. Then we have a situation where there is now with a benefit of hindsight these program would have bound to fail.
JUSTICE VELASCO:
Counsel, if the liabilities are not deducted from the assets of the corporation before determining the share holdings of the farmers in the corporation itself, will there be prejudice to the farmers. Because in MOA, the total assets of the HLI or the asset transferred by TADECO to HLI is in the total amount of 590,554,000. This is composed of land valued at One hundred 196,630,000 and other assets, meaning to say, equipments and other properties of the company valued at 393,924,000.00. Okay, so if you use the formula of Section 31, then the farmers will be entitled only to 33% and you arrive at that percentage by dividing 196 Million which is the value of the land by the total assets of the corporation which is 590 Million. However, if you deduct 235 Million net assets first from the 590 Million assets, you arrived at 355 Million net assets. So, if you divide 196,630,000.00 which is the value of the land by 355,131,000.00 the farmers will be entitled to 55% of the total stock holdings of the company. So, clearly there is damage to the company, to the farmworkers, is that right.
SOLICITOR GENERAL CADIZ:
Your Honor, yes.
JUSTICE VELASCO:
And in this respect PARC may have committed error or was termed grave abuse of discretion in approving the stipulation in the MOA which later on was approved by the PARC, correct?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Now, the farm-workers beneficiaries, the proposal submitted by TADECO and HLI says that a farm worker should have worked for at least thirty seven (37) days in a crop year before they are entitled to a share. Now, definitely, conversely, if he work for less than thirty seven (37) days in a crop year then he is not entitled to any share at all, right?
SOLICITOR GENERAL CADIZ:
Agree, Your Honor.
JUSTICE VELASCO:
And so the 6,296 farmers, farmer beneficiaries who were the workers of TADECO at the time of the signing of the MOA will be prejudiced by this agreement because the distribution of the shares to them will still have to depend on the man days, or days to be worked by them in the crop year, correct?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor. In fact, if the land was distributed at the time of the law in 1988, then the farm worker would have immediately have a share of the land.
JUSTICE VELASCO:
If the land is distributed to compulsory acquisition, the qualified beneficiaries will have to be determined by the DAR, is that correct?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
That is the process?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
And so with respect to the stock distribution scheme then the law says the stocks should be distributed within two years from approval.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
The approval of the CARL which is June 15, 1988 or within three (3) months from the approval of the stock option plan, correct?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor. That used the basic principle that if I work in the land at the time of the enaction of the law then I am entitled to the land.
JUSTICE VELASCO:
Right.
SOLICITOR GENERAL CADIZ:
Now, the two (2) years period is not long, it is in fact short, so basically if the stocks on the shares were distributed in the period of two (2) years I as a beneficiary in 1988 would have been entitled to the shares corresponding to my being a tenant or farm worker in the land.
JUSTICE VELASCO:
So what you are saying is that in the ordinary land acquisition or through the compulsory acquisition program of DAR or under CARL, a land should be distributed right away. With respect to the stock distribution plan then the shares has to be distributed right away within the time frame provided by the law, correct?
SOLICITOR GENERAL CADIZ:
Two (2) years, Your Honor.
JUSTICE VELASCO:
And because of this, it is your position that the stipulation in the MOA or the stock distribution plan is flawed.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
And it's a departure from . . .
SOLICITOR GENERAL CADIZ:
From the law, your Honor.
JUSTICE VELASCO:
Now, the 6,296 farm workers who participated in the approval of the MOA, were all these farm workers given their shares or you do not have information.
SOLICITOR GENERAL CADIZ:
I don't have any information, Your Honor, but if I was an old man in 1989 I would not have work the man hours required to acquire so many shares and that in fact makes me at the disadvantage, Your Honor.
JUSTICE VELASCO:
Now, ordinarily it's the DAR that determines the qualified beneficiaries under Section 2 of the DAR, Department of Agrarian Reform. The DAR considers the willingness, attitude, and the ability of the farmer beneficiary to cultivate the land. But in this case, it is HLI itself which will determine who are the qualified farmer beneficiaries.
SOLICITOR GENERAL CADIZ:
Because under the plan, Your Honor, it would know who were doing the man days. So therefore they were in complete control of who will get the shares eventually depending on the man days, Your Honor.
JUSTICE VELASCO:
Again, you are saying this is a violation of the law.
SOLICITOR GENERAL CADIZ:
It is a deviation of the principles of CARL, your Honor.
JUSTICE VELASCO:
Right. The conversion order, it is stipulated there that three percent (3%) of the selling price of the land to be converted will be distributed or awarded to the farmer beneficiaries.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
But that is not part or the MOA, is that correct?
SOLICITOR GENERAL CADIZ:
No, Your honor, it is I think in the conversion order but the SDOP likewise says that the three percent (3%) of production or gross income should inure to the benefit of the farm workers. I think that what was basically the principles where basically try to be aligned to each other, Your Honor.
JUSTICE VELASCO:
And that is provided in the law, the three percent (3%) of the gross sales of the company will have to be given to the qualified beneficiaries, is that the provision of the law.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Mr. Solicitor General, 300 hectares of land were transferred to Centenary Holdings Incorporated, right?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Or is it 500 hectares. I change my question. I think it is five hundred (500) hectares that was transferred to Centenary Holdings, Incorporated.
SOLICITOR GENERAL CADIZ:
Certain amount of the land was transferred, Your Honor.
JUSTICE VELASCO:
Yes, and that three hundred (300) hectares were transferred to LIPCO, correct, Luisita Industrial Park Corporation.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Two hundred (200) hectares were transferred to Luisita Realty, Incorporated.
SOLICITOR GENERAL CADIZ:
That is LIPCO, Your Honor.
JUSTICE VELASCO:
No, it's different, Luisita Realty, Incorporated, 200 hectares. Do you know what is the consideration of the transfer of 200 hectares to Luisita Realty, Incorporated.
SOLICITOR GENERAL CADIZ:
I am not aware of it, Your Honor.
JUSTICE VELASCO:
But you agree that 750 Million was the consideration for the transfer of 300 hectares to LIPCO, Luisita Industrial Park Corporation.
SOLICITOR GENERAL CADIZ:
From centenary.
JUSTICE VELASCO:
From Centenary?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Do you know how the 750 Million was used by the corporation?
SOLICITOR GENERAL CADIZ:
Since originally, your Honor, I would not really know, Your Honor, but as far as HLI is concern, even assuming that the three percent (3%) of the gross selling price was distributed to the farm workers, then I would assume that the remaining amount could have been flowed back to the operation of the company. However, since the company was losing, I don't know what came about of that amount of money which was pumped to HLI, your Honor.
JUSTICE VELASCO:
You made mention, that the . . . I think it is supervisory group who is claiming 10% of the dividend. Since you mentioned that the company is losing, so, how can there be any basis for the claim that they are entitled to 10% of the dividend?
SOLICITOR GENERAL CADIZ:
What I mentioned, your Honor, were the farm worker beneficiaries not the supervisors but the basis of the claim, your Honor is in the SDOP itself. Now, of course, the company was losing money, however, let us remember, your Honor, that the management of the company as a result of the 2/3, 1/3 relationship was vested in those who owned TADECO. And I think, it is unfair, your Honor, in this marriage to burden the farmer with a company which is losing money right from the start and it goes back, your Honor please, to the fact that this original company was a burdened with liability right from the very start. So, it was not a race which started from a starting line but it started way, way back from starting line, Your Honor.
JUSTICE VELASCO:
Now, in the last Tuesday's session, we were trying to find out where the 233 hectares were, because you deduct 500 hectares from 4,915 and then you deduct the 66 hectares that went to the Subic road or something and then there remains to be 233 hectares, would you be able to tell the Court based on your investigation or findings, what happened to the 233 hectares?
SOLICITOR GENERAL CADIZ:
We didn't have the opportunity to do that, your Honor and I think we have to start from a disclosure by the corporations concerned where those lands are and then we can start from there.
JUSTICE VELASCO:
Yes, in addition the conversion order mentions of an existing Luisita Industrial Park, are you familiar with this?
SOLICITOR GENERAL CADIZ:
Is it the LIPCO, your Honor that . . .
JUSTICE VELASCO:
I think it is a different park. Because the LIPCO acquired Three Hundred (300) of the Five Hundred (500) hectares but this Luisita Industrial Park is adjacent to the Five Hundred (500) hectares. You don't have information on this?
SOLICITOR GENERAL CADIZ:
No, your Honor please.
JUSTICE VELASCO:
Okay, now it appears that there are many provisions in the MOA which are contrary to Section 31 or to Administrative Order No. 10, Series of 1988. But the problem here is that this proposal was evaluated and reviewed and discussed and thoroughly look into by the PARC Executive Committee and it was given the imprimatur by PARC and the Tarlac Development Corporation and the Hacienda Luisita merely relied on the approval of the PARC. It may even be claimed that they acted in good faith because I think the PARC Executive Committee even pointed out certain issues that they should thresh out and Hacienda Luisita and TADECO and went back to them and explain their position and ultimately this was approved. So, what is the position of the government? Are you saying, this MOA is contrary to the Constitution or contrary to existing laws. What is the effect of the approval of the PARC on this MOA or stock distribution plan?
SOLICITOR GENERAL CADIZ:
Your Honor, I agree that the parties relied on the approval of PARC and the SDOP and that I think that what happened and was still existing up to the present. But your Honor please, since it has to be shown today and in the past hearings that there were violation of the SDOP and in fact the best thing right principle goes against the essence of the CARL. I think at the end of the day, all of these findings should not disadvantage the farmer, the farm worker. At the end of the day, under CARL, your Honor please, they are the beneficiaries so if there was something wrong which people did not anticipate then I think the farmer should not be the one bearing the brunt of the mistake of people at that time.
JUSTICE VELASCO:
Now sixteen (16) years, around sixteen (16) years have elapsed already since the PARC approved the MOA or the stock distribution plan, if you want it to call it that way. And many events had transpired and many transactions have been entered into and now I think it is your position, position of the government, that the MOA or stock distribution plan should be invalidated but there are such a thing as the operative fact doctrine that even if the law or whether the transactions or certain acts are considered contrary to the Constitution or the law that there are legal effects should be given to this acts or transactions. What can you say about this?
SOLICITOR GENERAL CADIZ:
Your Honor, there is such a principle but I would submit, Your Honor, that it need not apply in this case. The land is still there and more than Four thousand (4,000 hectares) of land is still there. RCBC and LIPCO are not innocent purchaser for value, that too should go to the PARC, your Honor, there was statement to the effect that the farmer should rejoice in the conversion of the land because in fact, the conversion of the land would give rise to rising prices of those lands in question. Your Honor, in the recent facts there was someone who advocated conversion of the land to industrial estates and to subdivisions and that someone lost badly in the last election. So, in other words, Your Honor, they must not sacrifice the agricultural sector. And in many, many countries of the world, the United States, Japan, even China, they have sought to develop the agricultural sector. Food, Your Honor, is equivalent to national security. Food security is national security, your Honor. We cannot just put this in economic terms that we are putting in danger the torrens system. At the end of the day, your Honor, there is the social justice principle which should cramp a torrens, a title, which I don't concede to be arising from an innocent purchaser for value principle because they should have known that in the conversion order, it is subject to the principles of the SDOP. So, it behooves upon them to go behind the conversion order, the condition of the conversion order and say and they could easily find out that on the principle alone of the vesting right in 1998, with more than twenty (20) years still to complete the vesting right anything could have happen, violations could have been committed and therefore they should have been on guard. It was a bank it should have exercised the utmost diligent in extending alone, your Honor.
JUSTICE VELASCO:
Counsel, is it possible that RCBC or LIPCO have already transferred portions of the land to other purchasers for value and in good faith? What can you say about this? Are we going to annul all these titles issued to the subsequent transferee or buyers?
SOLICITOR GENERAL CADIZ:
They have not alleged that, your Honor. In fact RCBC has said earlier, last Wednesday, that it is holdings to the land and it could not transfer it because of this pending case.
JUSTICE VELASCO:
Okay, we will clarify that. It is your contention that the MOA or the SDP should be invalidated because the land was fragmented?
SOLICITOR GENERAL CADIZ:
That is a condition, Your Honor, in the SDOP, that the land should not be converted.
JUSTICE VELASCO:
No.
SOLICITOR GENERAL CADIZ:
That it should not be fragmented.
JUSTICE VELASCO:
It is not stipulated in the MOA or SDP. That condition is not stipulated in the MOA. That is a provision in the AO 10, Series of 1988.
SOLICITOR GENERAL CADIZ:
I submit, your Honor. I apologize.
JUSTICE VELASCO:
Are you saying that even that provision is not in the MOA or SDP that can be used as a ground to invalidate the MOA?
SOLICITOR GENERAL CADIZ:
Yes, your Honor, because the AO is the guideline for the implementation of the Section 31 of CARL, that is my understanding, Your Honor. In fact, it also says there that the economic condition of the farm worker must improve. It seems to be motherhood principle, Your Honor, but it shows how the law tried to protect the farmer.
JUSTICE VELASCO:
Yes. Are you saying that the . . . like any provision of law, the provisions of administrative order like AO 10, series of 1988 are deemed incorporated to the MOA into this particular agreement.
SOLICITOR GENERAL CADIZ:
In this particular case, Your Honor please, we submit.
JUSTICE VELASCO:
So, it is deemed incorporated in the . . .
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
And it can be used as a basis to invalidate the agreement?
SOLICITOR GENERAL CADIZ:
I submit, Your Honor.
JUSTICE VELASCO:
Likewise, you are referring to the condition or the . . . well, if you can call it a condition that the stock distribution plan should result in increase income and greater benefits to the farm worker beneficiaries. Can the corporation guarantee that the stock distribution plan will result in increase income and greater benefits to the farm worker beneficiaries?
SOLICITOR GENERAL CADIZ:
By this administrative order, Your Honor, and have this corporation started with a clean slate, with no liabilities then the farm worker could have a fighting chance, your Honor.
JUSTICE VELASCO:
No, but that corporation is engage in business, in a business venture where success is not guaranteed so, one can say that there is no assurance, that the company will be successful in business operations.
SOLICITOR GENERAL CADIZ:
Agree, your Honor, and the option of the farm worker is to get out of that arrangement because it could not comply with the clear intent of the AO, Your Honor.
JUSTICE VELASCO:
Are you saying he should be a, what do you call that a stock holder, a dissenting stock holder to acts on the company?
SOLICITOR GENERAL CADIZ:
Your honor, in realizing this the farm worker has filed this petition to revoke SDP in 2003. It gave the plan sufficient time to succeed, Your Honor. Fourteen (14) years is not a short time to have this corporation earn income and guarantee a better life for the farm worker.
JUSTICE VELASCO:
So even though Section 5 of AO 10, Series of 1988, merely provides for the criteria, for the evaluation of the proposal, it is your position, the position of government, that these are considered incorporated in the Memorandum of Agreement or the stock distribution plan and that it can be used as a ground for invalidation.
SOLICITOR GENERAL CADIZ:
Section 5, Your Honor, the criteria, yes, Your Honor.
JUSTICE VELASCO:
It is only a criteria for the evaluation of the proposal.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor, it is, there are obligations in this administrative order and letter B, spells it out that the plan for stock distribution to qualified beneficiaries would result in increased income and greater benefits to them, than if the land were divided and distributed to them individually. But, Your Honor, as I have earlier presented the violation are not merely limited to the failure of the plan to provide for a better life for the poor farm worker. Then there are other violations, Your Honor, which this representation has earlier pointed out and Chief, among them, is the vesting right principle which she really contravene the basic principle of CARL, Your Honor.
JUSTICE VELASCO:
Presented before the Court is a proposed compromise agreement, what is the position of the government on this, considering that you are representing PARC and the Department of Agrarian Reform?
SOLICITOR GENERAL CADIZ:
Your Honor, I have not, this representation has not examined the compromise agreement. We have put all our energy and time for the preparation for this oral argument. But we have put in place an alternative dispute resolution scheme or an ADR. In fact, the Supreme Court has encouraged the settlement of disputes. Your Honor, if the provisions in the MOA will not be violative of the law and public policy and if we could hammer out with the help of the Court to hammer out a compromise agreement, acceptable to all parties and acceptable to the law then I think the party should be given the chance to be able to come up with something which is agreeable, I said to both parties in this case.
JUSTICE VELASCO:
So the Solicitor General is amenable to a creation of a panel of a mediators to be organized by the Court which will talk to the parties regarding the possibility of settlement of this case?
SOLICITOR GENERAL CADIZ:
It could partake of that, Your Honor. I am an officer of the law, the ADR is ingrained in our system of settlement of disputes and I personally have participated in conciliations and mediations, I think that is something that can be explored, Your Honor.
JUSTICE VELASCO:
But of course, you would agree that before we go to mediation we really have to settle the issue whether the MOA is really, whether the revocation made by PARC of the MOA or SDP is valid or not because if that is not lifted how can the mediators proceed to, as you say, hammer out a settlement among the parties.
SOLICITOR GENERAL CADIZ:
Your Honor, the case is now with the Supreme Court, we did not void or invalidate the rulings of the lower administrative bodies. We will not be prevented from talking to each other, Your Honor, to find out an acceptable solution if there is such acceptable solution and if the parties will agree, I think that is something that we can look forward to.
JUSTICE VELASCO:
Okay, thank you Mr. Solgen.
CHIEF JUSTICE CORONA:
We will call Justice Morales first because her questions is related to the questions of Justice Velasco and then after that Justice Abad.
JUSTICE CARPIO-MORALES:
Alright, Mr. Solicitor General, this is just a follow up to the question of Velasco respecting the possibility of forging a compromise agreement. You said that you have not enough time to go over the compromise agreement submitted by the parties.
SOLICITOR GENERAL CADIZ:
No, Your Honor.
JUSTICE CARPIO-MORALES:
You have no intimation at all of what the compromise agreement contains?
SOLICITOR GENERAL CADIZ:
Frankly, Your Honor, I have seen the documents but I have not really examined it, Your Honor, I will be very candid on that and there is no directive yet for us to comment on the compromise agreement.
JUSTICE CARPIO-MORALES:
I recall that I think more than 70% of those farm workers are agreeable to the forging of that compromise agreement and one of the terms of the compromise agreement is that, the parties respect whatever decision the farm workers make, whether they will stick to the 1989 MOA or opt for land distribution. Alright, now, if that is the condition, in light of your earlier theory that the MOA deviated, here is the word deviate, deviated from the provisions of CARL law, what is the effect of that compromise agreement on your theory that the provisions of the law were not followed to a T by the MOA.
SOLICITOR GENERAL CADIZ:
Yes, Your Honor, in fact I said in approving the compromise agreement, . . . the premise, your Honor, is that the SDP is contrary to CARL then the parties will have to find a way to be able to come up with a compromise agreement which huge to the law and to public policy.
JUSTICE CARPIO-MORALES:
What do you say to the theory of some of the parties that before the Court ever entertains a compromise agreement, it should first be addressed to the PARC?
SOLICITOR GENERAL CADIZ:
The PARC has made a ruling, Your Honor.
JUSTICE CARPIO-MORALES:
I beg your pardon.
SOLICITOR GENERAL CADIZ:
The PARC has already made a ruling so . . .
JUSTICE CARPIO-MORALES:
Precisely.
SOLICITOR GENERAL CADIZ:
The PARC has already made a ruling, revoking.
JUSTICE CARPIO-MORALES:
That's precisely it has made a ruling and do you agree that the PARC should be at least, should the PARC pass upon the validity or lack of it of the compromise agreement?
SOLICITOR GENERAL CADIZ:
I think, Your Honor, the PARC has to be consulted and its input should be taken into account.
JUSTICE CARPIO-MORALES:
In other words, you would agree that it should be the Supreme Court which should approve the compromise agreement.
SOLICITOR GENERAL CADIZ:
Since the case is already with the Court, Your Honor, I think, properly if I may say or if I may submit, the Supreme Court should approve the compromise agreement.
JUSTICE CARPIO-MORALES:
Alright so, but back to the same question. Since 70%, assuming that indeed the parties will respect the decision of the farm workers whether they will opt to stay with their agreement, in other words they would opt for the stock development option or they will opt for land distribution given that more than 70% allegedly is in favor of the compromise agreement, what is the effect of that on your theory that the law has been violated or at least the law has not been followed?
SOLICITOR GENERAL CADIZ:
Your Honor, the farmers cannot agree to an illegal or unlawful provision, your Honor.
JUSTICE CARPIO-MORALES:
In other words, you would certainly object to such . . .
SOLICITOR GENERAL CADIZ:
Yes, Your Honor. My submission, Your Honor is that the parties must come up with an agreement which is not contrary to law, not contrary to public policy, not contrary to morals.
JUSTICE CARPIO-MORALES:
Customs.
SOLICITOR GENERAL CADIZ:
Should be freely agreed upon by both parties and I think that is something that can be explored, Your Honor.
JUSTICE CARPIO-MORALES:
So, are you saying that was an exercise in futility for the parties to the compromise agreement to have forge that.
SOLICITOR GENERAL CADIZ:
Your Honor, I do not want to substitute my judgment to their judgment. They Probably thought that it was lawful. Unfortunately, the position of the Republic, Your Honor, is not agreeable to their position.
JUSTICE CARPIO-MORALES:
In other words, as you were saying, you are willing to give the benefit of the doubt to the forgers of this agreement because as you say at the time the MOA was agreed upon, it was still in novel concept.
SOLICITOR GENERAL CADIZ:
Agree, Your Honor.
JUSTICE CARPIO-MORALES:
Thank you, Your Honor.
CHIEF JUSTICE CORONA:
Justice Abad.
JUSTICE ABAD:
Counsel . . .
SOLICITOR GENERAL CADIZ:
Good afternoon, Your Honor.
JUSTICE ABAD:
You said that all possible summation of revolution about the land but I am not asking you question but I was thinking about it and I thought that recent revolutions all over throw the government have not been about land I mean in the early days maybe that's true but historically it is been about getting freedom from totalitarian regime that a lot this recent issue has been based on that but at any rate, there is a point that we raised by Justice here that I did not get it right. Paragraph B of Section 5 of A.O. 10, provides as criteria for evaluating the proposal for SDO and I quote, "that the plan for stock distribution to qualified beneficiaries would result in increase income and greater benefits to them than if the land were divided and distributed to them individually, when you said that the farmers did not benefit as a result of the SDO, are you saying that HLI did not comply with the provision of the SDO.
SOLICITOR GENERAL CADIZ:
Your Honor, this corporation from the very start were burdened with liabilities and it is not a great surprise at all that 20 years or 21 years, it is losing money. It was burdened with an original sin and the original sin, was the liabilities of the corporation at the time that it started.
JUSTICE ABAD:
But please answer the question. Is it your position that HLI did not comply with this provision of A.O. 10 that it should result and increase income and better benefits to the beneficiaries, is that your position?
SOLICITOR GENERAL CADIZ:
Yes, Your Honor.
JUSTICE ABAD:
But would you agree that Section 5, of AO 10 is entitled to a "Criteria for a Evaluation Proposals." Precisely it says, "the stock distribution plans submitted by corporate land owners applicant shall meet the following criteria so that the probability of that plan would result in increase income and greater benefits of the beneficiaries is a criterion for evaluating the SDO proposal, is that right.
SOLICITOR GENERAL CADIZ:
I agree, your Honor, but I think we have to put this in a proper context and the context . . .
JUSTICE ABAD:
What context?
SOLICITOR GENERAL CADIZ:
If I maybe allowed.
JUSTICE ABAD:
Sure.
SOLICITOR GENERAL CADIZ:
And the context, Your Honor, is that CARL is essentially for land distribution and the stock development option is an exception to the general rule that land has to be distributed. That is why, your Honor, there are strict criteria for evaluation and strict standard to evaluate the success of the SDOP and one strict criteria, Your Honor, is that this plan must result in increased income and greater benefit. Now, the question is, had we distributed the land, would it have resulted into a greater income and greater benefits to the farmers. It may not, but at the very least, the farmer controls its economic destiny.
JUSTICE ABAD:
Yes, but as we are saying these criteria was evaluation to be made when the application was filed with the PARC, so the PARC will have to decide at that point of time. Is there a probability that if this goes to SDOA, it will be better for the farmers, it could be better if we just distribute the land. So, at that point and time, at that point where the evaluation was to be made, the future is not there yet. This is a matter of the PARC evaluating the probabilities, whether it will be better for the farmer, don't you agree?
SOLICITOR GENERAL CADIZ:
I agree, your Honor, but there is also the basic principle.
JUSTICE ABAD:
Yes, now, that paragraph B, Section 5 of AO 10, does not say that it is a condition for continued validity of the SDO proposal, Can you show me a provision of AO 10 that says, that the criteria should be achieved for SDO to continue to be valid.
SOLICITOR GENERAL CADIZ:
I respectfully disagree, your Honor, because it is written there.
JUSTICE ABAD:
Please read to me if it is written there.
SOLICITOR GENERAL CADIZ:
It must result in increased income and greater benefit to them, so it is not only at that time when it is being evaluated that the regulator is thinking, that it will result into greater benefit in the future, they must undergo the test of time to the proof of the eating is in the padding.
JUSTICE ABAD:
So your position then is that, at that time the A.O. 10 intended this to be the guarantee that the SDOA guarantees that it will result in greater benefit for the farmers. Isn't that the essence of CARL that the government guarantees that will result in the betterment of the lives of the farmers? Is that the essence? If that is the essence, I have seen of the lot of failed farmers who have gotten their land and have not improved their situation. Did they recover, were they able to have some remedy to call for a guarantee, that guarantee that their lives will improve?
SOLICITOR GENERAL CADIZ:
I agree with you, Your Honor, however, least when you distribute the land, the future of the farmer is in his own hands and not in this SDOP where a minority stock holder and he does not have a say in the management of the corporation.
JUSTICE ABAD:
Well, I go to that. You said in the HLI, it has been losing money and the fisheries did not have control of the management. Therefore, they should not suffer the losses of that company and they should have the option to get out of the company . . .
SOLICITOR GENERAL CADIZ:
They have improved for the past thirty years.
JUSTICE ABAD:
They made profits for a while, I understand in the first six years (6) whatever. And then they stopped farming after a while I understand also. But did not the beneficiaries know that when they approved the MOA that it is possible that this company will not do well?
ATTY. CADIZ:
I don't think that was the situation, Your Honor. The poor farmer, the uneducated unlettered farmer was probably told that it would have an effect of a greater economic benefit to him, a better life, a better education for his children.
JUSTICE ABAD:
I understand that they have lawyers and leaders at that time when they agreed to this. They would have advice of counsel and they have elected an organization and they have leaders who are articulate and who argued and knew this point, and examined this thing. So are you saying that agreement was void? And that when they agreed in 1989 and they signed that approval, that SDOA because it is not out of their free will or intelligent will?
ATTY. CADIZ:
Your Honor, the ones who signed the MOA were the individual farm workers. It was not an organization, Your Honor, which has a lawyer to represent them. They were the ones who individually signed the MOA, Your Honor.
JUSTICE ABAD:
We're already in 1989 people were not exactly ignorant in 1989 or cannot read or things like that. They were well organized and they cannot understand how you can say that when . . . did they object or did they file an action after 1989 to annul this SDOA?
ATTY. CADIZ:
In 2003, Your Honor.
JUSTICE ABAD:
2003 how long after 1989? That would be a lot of years.
ATTY. CADIZ:
Your Honor, the farm workers gave this SDOP the chance to succeed.
JUSTICE ABAD:
That's what I mean, they agreed to it. And now you're saying they wanted it to succeed, but it did not. And so you are saying that because it failed by profit, they have the right to get out of it now and go back to the situation where they will get their shares of the land?
That is your position?
ATTY. CADIZ:
Not because it failed, Your Honor, but because there were wanton and gross violations of the SDOP . . .
JUSTICE ABAD:
Well we'll go into that. Now you said that the company . . . compromise agreement, just a while ago I heard that the compromise agreement was contrary to the law but I think I heard you earlier say that you had no time to study this compromise agreement, so how can you say that it is contrary to law?
ATTY. CADIZ:
If I may correct,, Your Honor, I did not say that it was contrary to law. In fact, I was categorical that I have not gone over it. And what I said, Your Honor, because I have to dispute that statement, what I said, Your Honor, is that it is not contrary to law, and public policy, then the compromise agreement must be approved.
JUSTICE ABAD:
I'm sorry I thought I heard you wrong. Because the way you were saying it, it is as if the compromise agreement is already contrary to law, contrary to morals and against the interest of the . . . so I'm sorry about that. I'll go to another point.
ATTY. CADIZ:
I did not say that. Apology is accepted, Your Honor.
JUSTICE ABAD:
Okay. Now, after the PARC approved the SDOA, we said that the farmers did not immediately challenge the validity or its approval, right? Now, in fact, as according to you the farmers began to agitate against it only in 2002 or 2003?
ATTY. CADIZ:
The petition was filed, Your Honor, I think in 2003.
JUSTICE ABAD:
2003. All right. Now so that the farmer workers . . . let me see . . . are you saying that the SDOA did not result in increased economic and greater benefits to the beneficiaries?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE ABAD:
All right, convince me. Before the SDOA, the beneficiaries were receiving wages as workers of the Hacienda, is that right?
ATTY. CADIZ:
The beneficiaries were . . .
JUSTICE ABAD:
Were workers receiving wages before the SDOA? Their incomes dependent on the wages they received from the Hacienda, is that correct?
ATTY. CADIZ:
They are farm workers, Your Honor.
JUSTICE ABAD:
So wages that was their benefits?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE ABAD:
Did they continue to receive wages as workers after the SDOA was put in place?
ATTY. CADIZ:
I submit, Your Honor.
JUSTICE ABAD:
Now, did they receive three percent (3%) of gross sales of HLI before the SDOA? Before the SDOA did they get three percent (3%) of gross sales of the Hacienda?
ATTY. CADIZ:
No, Your Honor, There was no sale, Your Honor.
JUSTICE ABAD:
But after the SDOA, you said that they receive three percent (3%) although you said incomplete, but you acknowledged that they received in some parts this three percent (3%) of the gross sales?
ATTY. CADIZ:
I submit, Your Honor.
JUSTICE ABAD:
So in other words, before they relied only on their wages, now they will get three percent (3%) of the gross sales of the company. Now, did the beneficiaries receive shares from the company of its sales of the land of the Hacienda prior to the SDOA?
ATTY. CADIZ:
No, Your Honor.
JUSTICE ABAD:
Did they receive shares from the HLI of the shares' profits of the land sold after the effectivity of the SDOA?
ATTY. CADIZ:
The converted land, Your Honor?
JUSTICE ABAD:
Yes. They received three percent (3%) according to . . .
ATTY. CADIZ:
There was a claim that the farm workers were given three percent (3%) of the sale.
JUSTICE ABAD:
Do you dispute that? Do you have evidence?
ATTY. CADIZ:
I don't dispute that, Your Honor.
JUSTICE ABAD:
Okay. So to that extent also their earnings improved?
ATTY. CADIZ:
They could not have been entitled to that, Your Honor, without the SDOP. I concede, Your Honor.
JUSTICE ABAD:
Okay. Now did the value of the land increase these many years from 1989, especially after portions of the Hacienda became industrial and residential?
ATTY. CADIZ:
Even the agricultural land I think, Your Honor, thirty (30) years ago it increased in value.
JUSTICE ABAD:
Well but because of the sale the conversion of portion of the land into industrial and residential, did that improve also the value of the land that have not been converted?
ATTY. CADIZ:
Not specifically out of that, Your Honor, I will not concede that, but there is a general increase in the price of land all over, Your Honor.
JUSTICE ABAD:
Well I think you will agree that if you have a farm in one place and SM mall suddenly rise in that place or vicinity, well the land value will improve. In this case it was raw land before, and agricultural. Now you have industrial and residential areas, I think you can agree that you can impute increase in the value of land from these activities, do you agree?
ATTY. CADIZ:
In the immediate vicinity of the Park, Your Honor, but not in so many, many kilometers away, Your Honor. This is a five-thousand hectare land.
JUSTICE ABAD:
So some part of the agricultural land gained value because of these activities, you said, that is your concession to me. So some parts gained value because of this activity?
ATTY. CADIZ:
In the immediate vicinity, Your Honor.
JUSTICE ABAD:
Now since the share of the beneficiaries in HLI constitutes thirty-three percent (33%) of the total assets of the company, would you agree that the holdings of the beneficiaries increased in economic value because of these activities of HLI?
ATTY. CADIZ:
Can you please repeat the question, Your Honor?
JUSTICE ABAD:
Since the shares of the beneficiaries constitutes thirty-three (33%) of the total assets of the company, of this land, would you then agree that their holdings increased in economic value because of these activities of the company?
ATTY. CADIZ:
They are still losing money, Your Honor. I don't see the increase in economic value.
JUSTICE ABAD:
No, no, increase in the economic value of the land.
ATTY. CADIZ:
The land?
JUSTICE ABAD:
Yes.
ATTY. CADIZ:
Yes, Your Honor, but . . . (interrupted)
JUSTICE ABAD:
Well I'm after the land. Now, did they enjoy this opportunity to have a share of the incremental values of the land arising from the company's strategy that HLI had adopted before the SDOA?
ATTY. CADIZ:
No, Your Honor.
JUSTICE ABAD:
Now are you sure that the beneficiaries would be better off if the Court annuls the SDOA and orders the partition of the lands of the Hacienda into ten thousand (10,000) lots?
ATTY. CADIZ:
Your Honor, nothing is certain in the future. But with the distribution . . . (interrupted)
JUSTICE ABAD:
Well, but you are advocating . . . (interrupted)
ATTY. CADIZ:
Can I finish my discourse please?
JUSTICE ABAD:
Please
ATTY. CADIZ:
But with the land in their hands, they will have the future in their hands. Not in a corporation which has been losing money for the past twenty (20) years.
JUSTICE ABAD:
But we all know that the right to the use of land can be regulated by the government for the greater benefit of the whole, of all. It's not really as if, if you put land in the hand of one person and he is free to do whatever he wants with it. He has to abide with the reasonable laws passed by the government, is that correct?
ATTY. CADIZ:
In fact, under CARL, Your Honor, he should have a piece of the land and some regulations to that effect, but he has this land as his own property.
JUSTICE ABAD:
Well, my question was are you sure . . . I'm asking for certainty from your part. That if the beneficiaries would be better off if the Court annuls the SDOA and orders the partition of the land of the Hacienda to total ten thousand (10,000) lots, can you assure us that this will happen?
ATTY. CADIZ:
I think I can assure this Court that he will not be worse off today when he receives the land.
JUSTICE ABAD:
All right that is your position. After the sale of the converted land and their transformation into industrial estate and those portions were no longer suitable for planting of sugar cane or rice. Only about four thousand (4,000) hectares more or less are left, divided by ten thousand (10,000) beneficiaries but I heard it's eleven thousand (11,000). But assuming it's ten thousand (10,000) beneficiaries, what remains would be only four thousand (4,000) square meters per beneficiary, if I am not wrong with my computation. Do you consider that an economically viable farm lot for each of the ten thousand (10,000) workers?
ATTY. CADIZ:
Your Honor, but if we divide it by six thousand (6,000), you'll have almost a hectare, Your Honor. Because after the six thousand (6,000) original beneficiaries, these were the products of the man days which I think we are saying is illegal and should be voided by this Honorable Court. So with a hectare of land I think . . .
JUSTICE ABAD:
It's not one (1) hectare if you divide it by six thousand (6,000), it would be less . . .
ATTY. CADIZ:
It is almost a hectare including the converted land . . .
JUSTICE ABAD:
Less than a hectare. So in other words, your position is that damn the four thousand (4,000). Damn the four thousand (4,000) distribution of land. But keep it to the six thousand (6,000) who were original beneficiaries, that is your position?
ATTY. CADIZ:
No, Your Honor, . . .
JUSTICE ABAD:
That's why you are saying six thousand (6,000). Please make your position clear.
ATTY. CADIZ:
No, Your Honor, I did not say that four-letter word, Your Honor. What I'm saying . . .
JUSTICE ABAD:
Well that's just the word I used but you were dropping them. Actually, you were saying they are not entitled to anything, six thousand (6,000) only.
ATTY. CADIZ:
Because under the law, Your Honor, only the six thousand (6,000) beneficiaries should have benefited from this land. I think that is the foundation where we should look at.
JUSTICE ABAD:
All right. Well, I'll be the one to say damn them in this case. Now, of course, probably they could organize a cooperative. But with such irreconcilable differences even among them, they are represented by various lawyers, various groupings. I am not ready to believe that they can come around together and organize themselves into one united cooperative. And it is possible that the farm lots could form a checkered pattern, you know, some want this and others like this and that would not be suitable for organized farming anymore . . .
ATTY. CADIZ:
Like a prospective Palestinian Estate. Zigzags?
JUSTICE ABAD:
That is right. If the Court orders the partition and distribution of the hacienda among the beneficiaries, do you have already the government? Do you already have a concrete plan or plans for helping the beneficiaries plant sugar cane or rice on their less than one hectare land? Do you have a plan for that?
ATTY. CADIZ:
I cannot speak in their behalf, Your Honor.
JUSTICE ABAD:
No, no, the government I am saying. You will speak for the government.
ATTY. CADIZ:
As far as the future plans of the farm workers to the land is concerned, I cannot speak in their behalf.
JUSTICE ABAD:
No, what I am saying is that is the government ready to help them with money?
ATTY. CADIZ:
Your Honor, we have a very progressive government now, a very progressive Secretary of Agrarian Reform. I think he can do it.
JUSTICE ABAD:
But you know the government furthermore the government will pay for the land not only the government must finance the farmers. The government must also pay Hacienda Luisita just compensation for the land. And you say the land, it's valued already, how much? Nine hundred million (P900,000,000)? I don't know, I don't really know. Just a figure I heard, but it is a lot of money. And then the farmers will not be productive in the immediate period and they will need to be . . . to get probably subsidy from the government for a period of one or two years before they can plant sugarcane in their less than a hectare lot. Part of it may not be suitable for rice. Now do you have interim financing for the needs of their families while the farmers are organizing themselves?
ATTY. CADIZ:
Your Honor, the Department of Agrarian Reform is mandated to extend support services.
JUSTICE ABAD:
So not yet. Have you lined up banks to give the farmers financing for the agricultural activities?
ATTY. CADIZ:
Your Honor, would it be possible for the Secretary of Agrarian Reform who is here to speak on that . . .?
JUSTICE ABAD:
Yes, sure because from what I know, no bank today really have agricultural portfolio for this kind of . . . that's why land reform is somewhat been a failure because it is really lack financing, no commercial bank would expose itself to receive emancipation title as collateral.
ATTY. CADIZ:
We have the Landbank, Your Honor.
JUSTICE ABAD:
The Landbank? I don't know if the Landbank . . .
ATTY. CADIZ:
It is a very big bank, Your Honor, very liquid. I think the Secretary of Agrarian Reform wants to be recognized, Your Honor.
JUSTICE ABAD:
Yes, please.
SECRETARY DELOS REYES:
Thank you, Your Honor. Right now the Department of Agrarian Reform, Your Honor, the Congress has also passed a new law which amended the agrarian reform agriculture debt or loan program. The government is prepared to extend support based on R.A. 9700. We are mandated to extend credit support to the farmer beneficiaries, not only in Hacienda Luisita, but also in the other areas that we are acquiring land. But like the Solicitor General, Your Honor, said there is no guarantee.
JUSTICE ABAD:
Well historically that has been the commitment of government historically even from the time of President Corazon Aquino was that the government will finance and help the farmers and even GMA and the other Presidents. That was their agenda and now it's the agenda of the present administration. But how could you say this when all I read in the papers the government has no money. You want to finance individual farmers in this when you are crying for money just to support the daily requirements of government.
SECRETARY DELOS REYES:
Your Honor please if we were to take that argument at this point then we should stop the entire agrarian reform program.
JUSTICE ABAD:
No, but we have to be realistic. I'm saying is that if we do this now, in this particular case, do you have enough support for the farmers? And can you guarantee that they will be able to farm their hectare land?
SECRETARY DELOS REYES:
Yes, Your Honor. It will take around Twenty Thousand (P20,000) to Thirty Thousand (P30,000) Pesos per hectare of sugar land for us to be able to support production on that sugarcane land. And right now we just had discussions with the Secretary of Agriculture, the Agriculture Competitive Enhancement Fund which is the ACEF and also the Agriculture Guarantee Fund is now ready and we are preparing a program for sugarcane lands because as you know, Your Honor, the balance of land that is supposed to be covered under the agrarian reform program is a lot of sugar land. And we are preparing a program specifically for sugar land not only for Hacienda Luisita but in all the other areas as well, Your Honor.
JUSTICE ABAD:
Well, historically, as I said, has not the previous governments been doing this.
SECRETARY DELOS REYES:
Your Honor, it is not only just government that is intervening in making sure that the lands are productive. There are also private initiatives that are occurring in order to make these lands productive. In fact, Your Honor, in Negros Occidental there are some areas where the farmer beneficiaries themselves on self help basis in organizing themselves are able to access fertilizer and seeds and planting materials in order to make their lives better.
JUSTICE ABAD:
So you believe that this can be done in Hacienda Luisita?
SECRETARY DELOS REYES:
Yes, Your Honor. And if I may please make another point regarding the ten thousand (10,000) farmers cutting up the land into ten thousand (10,000) lots, I submit, Your Honor, that the Solicitor General has talked about the six thousand (6,000) farmers in 1989. But also another alternative that we can look at is if we look at the list of shareholders of Hacienda Luisita, Your Honor, there are many people who come from one family. In fact, if we look at the listing of shareholders, you will realize that there are five (5) or six (6) shareholders with a common name and some of them with a common middle initial, so that the reckoning point of cutting up the land can be based on a family basis. And if we look at the number of shares that they have, it will turn out we have inputed six thousand (6,000) names into our database, Your Honor, and their shareholdings. There are some families will in fact be getting one (1) to two (2) or three (3) hectares if we look at it on a family basis which is similar to the formula proposed by the Solicitor General that we revert back to the listing of the beneficiaries in 1989. So I would just like to disabuse the Court of any notion that we will in fact be distributing four thousand (4,000) plus hectares and divide it by ten thousand (10,000). Because the shareholdings will not reflect this kind of distribution, Your Honor.
JUSTICE ABAD:
Have you already proposed that to the present workers, to their organizations? It's as if that the government will be the one to decide how much each will get. Is that your proposal?
SECRETARY DELOS REYES:
Your Honor, under Section 22 and under the CARL it is in fact a duty of the government to determine how much each beneficiary is allowed to get under this circumstances.
JUSTICE ABAD:
Okay. That is good. Thank you.
ATTY. CADIZ:
Thank you, Your Honor.
JUSTICE ABAD:
You gave me comfort that if we annul this SDOA at least the government will answer for the result?
SECRETARY DELOS REYES:
Yes, Your Honor.
CHIEF JUSTICE CORONA:
Justice del Castillo.
JUSTICE DEL CASTILLO:
Counsel, I only have one question because my other concerns have already been addressed by the other Justices. Assuming that the Supreme Court sustains the revocation of the approval of the 1989 SDOA . . ., the Hacienda now goes under compulsory coverage? You are saying that the beneficiaries should just be limited to the six thousand two hundred ninety six (6,296) farmer beneficiaries in 1989. My question is what happens now to the rest because they are also tillers of the land.
ATTY. CADIZ:
Your Honor, the statement by the Secretary of Agrarian Reform was a revelation and in his study, Your Honor, he says that there are really probably just about six thousand (6,000) families also. So in other words, Your Honor, we will not quote unquote D-A-M-N and any body here because most of them belong to just one family. So if we have distribute the land to the nuclear family, then we can just come up with probably, as the secretary said just six thousand (6,000) plus beneficiaries.
JUSTICE DEL CASTILLO:
Because in 2004 they ballooned to eleven thousand (11,000 +) plus?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE DEL CASTILLO:
And now they're down to ten thousand five hundred two (10,502). I'm just guided by that figure. So I'm just curious what happens now to all these others if they don't belong to these extended families? If they are tilling the land there also, they're there living miserable lives. You will just eject them there? Eject them out of this Hacienda?
ATTY. CADIZ:
Your Honor, it's not to prejudice other farm workers, Your Honor, but the CARL was envisioned primarily, Your Honor, to benefit the farm workers tilling the land at that time that the CARL was enacted. That could be some way, Your Honor, I don't have the facts at this point but there's could be some way by which he can uplift also or they care all the farm workers were not in the original list of six thousand (6,000). The Secretary of Agrarian Reform has said and I said it was a revelation that most of the names are related to each other and therefore if they can be grouped into one unit, then you will have a bigger land for the family and then a more viable land to till, Your Honor.
JUSTICE DEL CASTILLO:
Thank you, counsel.
ATTY. CADIZ:
Salamat po.
CHIEF JUSTICE CORONA:
Justice de Castro.
JUSTICE DE CASTRO:
Good afternoon, Solicitor General.
ATTY. CADIZ:
Good afternoon po, Your Honor.
JUSTICE DE CASTRO:
I just have a few questions. This is about the stock distribution plan. Under Section 31 the qualified beneficiaries are given the right to purchase such proportion of the capital stock of the corporation. This connotes the payment of valuable consideration for the stocks?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE DE CASTRO:
Now let's look at the MOA. It says that the stocks will be given to the beneficiaries free of charge. But they are required to render man hours tilling the land. Now let's put this in concrete terms. Assuming that for this particular year a farm worker is granted so many shares because of the man hours that he spent tilling the land. Now what will happen the following year to the shares of stocks which were granted to him because of the man hours that he spent on the land?
ATTY. CADIZ:
The way I understood it, Your Honor, is that the shares that he gain by doing the man hours is his. It's his. It is his shares regardless of whether he works again in the future. However, Your Honor, may I just correct or give an explanation that it's not really for free. He is working for it. He has wages and you know in companies, Your Honor, part of the compensation package is a stock distribution option that is very, very common in companies nowadays. So it's not for free I think we have to have a clear mind on this. Farm worker is not getting anything for free. In fact, Your Honor, he should have gotten the shares in two (2) years as mandated by law. Or if not the land again I want to go back to the thesis that the SDOP is an exception to the rule of land distribution and therefore the SDOP must really, really be shown to benefit the farm workers.
JUSTICE DE CASTRO:
You said that the stocks are his. Are you saying that there is no danger of losing the shares at any point in time?
ATTY. CADIZ:
In fact, Your Honor, as the Honorable Justice Abad has said, the watering down of the stocks goes on and on and on for the next thirty (30) years and in this case mercy it has been cut down to one half of the thirty (30) years. It is now fifteen (15) years but I agree, Your Honor, that he earned that share in the year 1989. The value of that share would had been limited with the avalanche of shares being distributed to the other farm workers.
JUSTICE DE CASTRO:
To refer to the watering down of the stocks, what about completely losing the entire stocks? For failure to render man hours say for two years?
ATTY. CADIZ:
Your Honor, if the company goes down under, I think the farmer will completely lose the value of his shares.
JUSTICE DE CASTRO:
But if the farm worker got sick on the third year or fifth year, and he is not able to render any work in the farm, what will happen to his share?
ATTY. CADIZ:
I think in my understanding, Your Honor, the shares are his, however, it will not anymore increase over time because he has not rendered man hours in the future.
JUSTICE DE CASTRO:
How do you explain the provision in the MOA saying that the shares owned by the farmer will depend on the number of man hours he spent and this is determined annually. So I take it that if he does not render any work on a particular year, he may lose his stocks . . .
ATTY. CADIZ:
My understanding, Your Honor, is that if he works thirty-seven (37) hours in a year he gets one share. Now if he does not work anymore in the future, I would presume that he will be stuck with one (1) share.
JUSTICE DE CASTRO:
So you're saying that the farm worker will not lose his share that he already earned for a particular year?
ATTY. CADIZ:
That is my understanding, Your Honor. But he will be stuck with just that share. He will not have the benefit of increasing his number of shares, Your Honor.
JUSTICE DE CASTRO:
Now what about the total number of shares that is assured the farm workers, this is thirty-three (33%), do I get it that this assurance only pertains to the farm workers as a group?
ATTY. CADIZ:
Your Honor, I think individually they have shares and I think based on the presentation of the petitioner the vesting of shares has been shortened from thirty (30) to fifteen (15) years and therefore I think at this point in time we already have the maximum number of shares distributed.
JUSTICE DE CASTRO:
The thirty-three percent (33%) belongs to the farm workers as a group and the composition of this group may vary from year to year, is that correct?
ATTY. CADIZ:
I think not as a group, Your Honor, but as a cumulative number of people now totaling eleven thousand (11,000 +) plus.
JUSTICE DE CASTRO:
That would mean that while the group is assured of thirty-three percent (33%), the number of shares or the value of the shares distributed to the farm workers may vary from year to year?
ATTY. CADIZ:
Depending on the performance of the company, Your Honor, yes.
JUSTICE DE CASTRO:
And depending on the composition of the group as you said if the number of farm workers composing that group increases then necessarily the value of their stocks will go down?
ATTY. CADIZ:
That is the watering down of the shares as explained last week, Your Honor.
JUSTICE DE CASTRO:
So there is no assurance as to the value of the shares that each of the farm workers owns?
ATTY. CADIZ:
That is the whole point why we think this SDOP is inherently unfair, Your Honor.
CHIEF JUSTICE CORONA:
Justice Sereno and then Justice Perez after.
JUSTICE SERENO:
May I request the Secretary of Agrarian Reform to be ready to answer if the Solicitor General is not willing to answer this.
The stock distribution option is an exception and one of the excepting features of stock option distribution is that there is a risk, a high risk of the possibility that the corporate vehicle may not be able to earn money and therefore the stocks will lose its capital value and there may not even be dividends that are to be distributed. That is why I was trying to talk of the possibility that this is a suspensive condition to the requirement that dividends be requires to be distributed. But my question has to do with the policy reason behind allowing stocks instead of making the farmers just become secured bond holders of the corporation. Was that ever discussed as an option by legislators?
SECRETARY DELOS REYES:
We are not aware if this was discussed, Your Honor. The stock distribution option first came out as a concept in an Executive Order signed by then President Aquino in 1987. And this was again engrafted in RA 6657, so I'm not sure if this was ever discussed with the legislators at that time, Your Honor.
JUSTICE SERENO:
At that time I know that you have been starting land reform for such a long time. Was the risk attendant to farmers holding shares of stocks . . . Now being a stockholder is quite a sophisticated position to be in. Was that ever discussed in any administrative proceedings, meetings, task forces in the DAR?
SECRETARY DELOS REYES:
At present, Your Honor, the PARC has several pending cases for revocation of these some several stock distribution options and I believe this will be come to fore in the coming days, Your Honor. But not at this point.
JUSTICE SERENO:
You mean it took all of these years for those issues to surface?
SECRETARY DELOS REYES:
Unfortunately, yes, Your Honor, the first attempts to revoke SDOs is I think occurred towards the latter part, a good ten years after. In fact, there is even one SDO application of one farm which was filed within the period allowed by 6657 but has not yet been acted upon by the PARC.
JUSTICE SERENO:
The information drives that the DAR has participated in because there is an allegation by the petitioners that even DAR personnel re-accompanying the information drive to get the signatures to support the MOA or the compromise agreement or whatever, was DAR ever conscious of trying to clarify to the farmers that when you are a stockholder, you are actually entering into a business relationship with attendant risks. Has that ever been explained to farmers?
SECRETARY DELOS REYES:
I am not aware of the acts they did but there are several studies that are being conducted now. These are academic studies to find this out but right now, we have no conclusive reports, Your Honor.
JUSTICE SERENO:
The reason why this is important for me to consider is that it is from the Solicitor General himself who said that the possibility of an alternative dispute resolution is not really closed to the government. At the same time you were saying you are ready to support the farmers with the program. Now I cannot jump into the minds of a farmer and put myself into the shoes of one who is willing to enter still into a relationship with the corporation or one who is willing to then be an entrepreneur for himself. Because that is basically the option of land distribution is that the farmers must learn to be an entrepreneur. And because there is the prohibition against selling of the land for a lock in period then he has to really know how to earn money from that. But I don't know whether at this point we are ready to say that each of the farmer beneficiaries must be compelled to be an entrepreneur at this point. So it is not completely a foreclosed solution considering that there are habits, habits of dependency on the land which is not really good. Which the farmers must find liberation from at one point. But we are trying to transform it into a relationship of a stockholder with a corporation. Now to what extent are you prepared to create a program for this transformation of the farmer? As an entrepreneur of course your have outlined steps, and then a farmer into a stockholder because if you are saying that there are about ten (10) or eleven (11) SDOs and many of them are being questioned, then we might find ourselves with a possibility that even this exception is not really viable under that concept. So is the DAR ready to try to give lessons in corporate citizenship in being a stockholder to his farmer beneficiaries?
SECRETARY DELOS REYES:
Yes, Your Honor, in the same way that we are prepared to transform the farmers into entrepreneurs. We are prepared to undertake that task.
JUSTICE SERENO:
In the evaluation records may be you have seen this and the impression I'm getting from the Solicitor General is that DAR did not step in to try find a good valuation formula for this. Is this correct? Do you affirm this?
SECRETARY DELOS REYES:
The records, Your Honor, are not clear on the process of valuation in 1989. We have tried to look at the records in the proceedings before the PARC. All we can find at the submissions of the parties of HLI into these things, we are bereft of records on how this process was undertaken.
JUSTICE SERENO:
Is it then the position of the Republic that the conversion was illegal because of the fact that you are saying that the fragmentation provision, the anti-fragmentation provision of the AO is deemed written into the MOA, are you basically saying that the conversion of the land is illegal?
SECRETARY DELOS REYES:
Yes, Your Honor.
JUSTICE SERENO:
Are you saying that the conversion of any portion of a land that is subject to SDO because of the AO is therefore illegal and it can only be kept as a sole unitary unit operating as a farming business?
SECRETARY DELOS REYES:
That is the essence of the AO, Your Honor.
JUSTICE SERENO:
In this way, you are basically saying that farmers can enter into a corporate business as a corporation but they can only engage in one business and if their business requirements demand it, they cannot at all partition any portion of the land, is that your position?
ATTY. CADIZ:
That is the restriction imposed, Your Honor on the SDOP.
JUSTICE SERENO:
So that even if farming becomes a non-viable business you are going to compel the farmers to remain in that business. Is that your position?
ATTY. CADIZ:
It will never be a non-viable business. Agriculture will not be a non-viable business, Your Honor.
JUSTICE SERENO:
But you heard Justice Abad himself, he was saying that he has seen many agricultural businesses fail. In other words, it can be viable in the future but as a corporate entity, it is still a risk because there is really no such thing as a risk-free business. Otherwise, it is not business at all. Are you basically saying that your understanding is that they are compelled to go into corporate farming regardless of the business opportunities that are available to them? And they cannot pursue any other line of business except farming and that farming must be retained as a single unit, unfragmented?
ATTY. CADIZ:
If we are looking, Your Honor, from the sole prism that this is a corporate vehicle, I will concede that, Your Honor. But the SDOP arises from CARL and the SDOP I will submit is even an aberration of CARL. And therefore I think the restrictions indicated therein must be strictly followed. This is not just an ordinary corporate vehicle. This is not just an ordinary corporation engaging in trade or a bank or an importer or a manufacturing plant. No, Your Honor, this is agriculture. And the SDOP is only a vehicle for CARL. Let us not . . . the context, Your Honor, always is the Comprehensive Agrarian Reform Law.
JUSTICE SERENO:
We understand the context. But basically when you are saying that farmers who enter into corporate farming . . . In other words, look at it from another frame. The criteria that you said that there must be an assurance on the improvement of the farmers can be considered as a stipulation that is not required to be performed rather it is an assumption that should have actually been put in the whereas clauses of the AO. In other words, whereas we are going to institute criteria that will ensure that the farmers get the maximum benefits from the corporate vehicle that is going to be created under the SDO. Do you not agree that that should have been the way that the AO should have been drafted?
ATTY. CADIZ:
Well, Your Honor, we have the present AO I cannot second guess the drafters of the AO, Your Honor.
JUSTICE SERENO:
Because the AO cannot actually assure something that is subject to the forces of the will of man, or the forces of nature and even the inherent nature of business because any business activity is inherently risky.
ATTY. CADIZ:
I agree, Your Honor. I agree full heartedly. However, Your Honor, that is why the farmer upon failure of the conditions precedent to happen, has the option to petition the DAR and the PARC to revoke the SDOP and that is where we are at present, Your Honor.
JUSTICE SERENO:
In other words, a business success is a condition for the validity of an SDO? Business success?! I've never heard any regulatory framework saying that something can be revoked simply because it did not turn out to be a business success?
ATTY. CADIZ:
It shows in the AO, Your Honor.
JUSTICE SERENO:
Is that logical?
ATTY. CADIZ:
It is logical. The framework, Your Honor, is that the farmer holding minority shares of thirty-three percent (33%), he is dependent on the other partner who put in sixty-seven percent (67%). He has no say in the way this corporation is run. So the law protects him fully, such that, if it is mismanaged, if it is not assured of the returns and in fact in this situation the liabilities were carried over, it started below zero, then the farmer will have the option to get out through a petition for revocation of the SDOP. This is the essence of this, Your Honor. I think we must see this SDOP in isolation not as an ordinary corporation, Your Honor. I think if we have that kind of prism, we will be able to understand the farmer who was trying to improve his lot through the social justice principle of the Constitution and the CARP.
JUSTICE SERENO:
We understand that social justice principle and the desire of the CARP to come up with this. It is simply because you see the complications that we have right now is simply because the law tried to inject a very complicated arrangement. One that should normally be arrived at between businessmen of equal acumen. Now something was inserted and we are trying to figure that out and even I am trying to figure out the AO because as you see the AO is rife with social justice concepts such as it requires guarantees for the farmers. But the vehicle is a corporate business vehicle. So you understand that there are contradictions there. And I wanted to actually find out from Secretary Delos Reyes if in fact under the . . . with the problems that have been elucidated here, are you getting the sense that an SDO is still a viable option for agrarian reform to be pursued?
SECRETARY DELOS REYES:
Given the assumptions, Your Honor, has made on this vehicle being imposed, superimposed on a social justice provision, I think it is right to look at it and re-examine it considering that right now we have ten (10) or eleven (11) pending revocation in the PARC. And we have one which is up for approval. I think the time is ripe to revisit this particular section.
JUSTICE SERENO:
In which case I also have to ask the government to review the effect of conversion orders on this kinds of SDO schemes. Because at one point or another you can find that there are infrastructures being laid out across the countryside some may traverse agricultural areas that are subject to stock distribution systems. Now you cannot prevent investors from making inquiries and you cannot prevent agricultural land holders from thinking about the possibility of conversion. But what you are saying is that because of the stock distribution option where you have something that had been approved, that had a scheme that needed to be rolled out in thirty (30) years or in this case the truncated fifteen (15) year version, you have the possibility of even opening conversion processes into question, conversions that had been done more than ten (10) years ago. Are we ready for the policy implication of that possibility?
ATTY. CADIZ:
That is something that we will have to really study hard, Your Honor, because the way I would see the case before the Court right now is that the counterpart concept it may have in corporation law is the issue of appraisal right. So that what we have here is a petition for revocation before the Court where the farm worker beneficiaries are in effect saying that this vehicle at least as they said in at 2003 is something that is not working for us. And that is why if we look at AO 10, 1988, the Solicitor General has already stated that this is a special form of compliance with the Comprehensive Agrarian Reform Laws and the closest concept I can look at here is an issue of an appraisal right of shareholder in corporate law.
JUSTICE SERENO:
If we use that analogy or if we use that concept then we have to revisit everything because you yourself are bereft of any information as to the valuation system that was used in 1989, then we have to start with day one. Day one what was the value at that time, how should the liabilities have been imputed, how should the proportion have been arrived at, and then you are saying that there has to be an adjustment of the actual farmer beneficiaries some of whom may even get between one (1) and two (2) hectares. Okay. The other question will be with the impact of existing liens on the land. I don't know if there are existing liens but we have to figure that out also. So I hope that this can be fully disclosed by the parties whether there are existing liens because this problem is not something that is easily worked out, you have to unravel all the loose pieces that have been lying around the entire place all these years. And indeed, if we are going to have with what I am hearing now it might even be the strong stand of the Solicitor General on the fact that LIPCO and RCBC cannot be innocent purchasers for value, that is something, that you have to try to find solutions, or to find its proper relation to the fact that there has been a push by government to create industrial parks and some of these actually are formerly agricultural lands. Are we ready to unravel all of these policy nuisances, Secretary Delos Reyes?
SECRETARY DELOS REYES:
I have no answer at this point in time, Your Honor, for the other policy implications of annulling conversions over industrial parks. I'm only at this point prepared to answer and take the position of the Solicitor General in relation to this particular parcels of land that should be included in the mass that should be distributed to the farmers. And a solution, I agree must be found in terms of how this can happen.
JUSTICE SERENO:
I'll insert one more point. Can we find the magnitude, we need the order of magnitude of conversions in similar situations if it is possible if such data is available to the government because we have to look at the impact of what we are going to say here, to the future of our economic growth.
ATTY. CADIZ:
Your Honor, as regards conversion I think this only converted land covered by SDOP, the other converted lands are not covered by SDOP. So in other words, the other converted lands are not affected by this instant case that we have before this Honorable Court.
SECRETARY DELOS REYES:
I think . . . we are not a hundred percent sure that there is no conversion in other SDP lands. But right now we are not aware of any other conversions in other SDP lands. In the national figure for conversions, Your Honor, from 1989 to 2010 is thirty-four thousand (34,000) hectares. But I don't have the figure at my fingertips right now which one is industrial park and which one is residential.
JUSTICE SERENO:
Thank you. And may you please indulge me by putting all those policy nuances in your submissions?
SECRETARY DELOS REYES:
Yes, Your Honor.
JUSTICE PEREZ:
From a simple mind because I have been so confused about the nuances of stock distribution option and all the problems that it has entailed for every one. I go back to my proposition that I stated two days ago that we would not have had this problem if we do not insist on stock distribution option. That stock distribution option is not really an option in a situation where the corporation is the farmer. In which case the farmer gets the entire land, it becomes a cooperative where it wants to be a cooperative, it becomes the planter and if there is this mill then its produce goes to the mill. Everybody is happy. We have a problem because we have this stock distribution option that we forced upon ourselves. And so right at the outset you said it was an arrangement which was bound to fail because the land which is supposed to be the biggest asset of a farming corporation was valued as only thirty-three percent (33%) vis-a-vis the entire asset of the corporation and there lies the problem because the farmers who ought to be the central figure in a land reform arrangement becomes a minority stockholder. And the company is run by the landholder. So that there is conversion, so that there is sale of fragmentation and all these things. I say that because the drift of the argument of the Solicitor General seems to be that land distribution is it and that this is at this point the only viable choice. The only choice for that matter and I say that you have a firm legal support for that. You go to Section 29 and you need not go to all this rationalizations and everything because Section 29 is the applicable provision, not Section 31. And then we will pursue your point that this was some sort of an experiment going to 31 which proved to be unsuccessful. What I'm driving at is that it was a situation or an arrangement which was not void from the beginning and so from that point until that time that we are saying it is not workable, let us leave all the things that happened as they are. LIPCO this industrial park, let it be. And start from this point where the choice or the only option is land distribution. Just that point I'm saying that the Solicitor General has a social legal basis for the position that it has taken, and it is right there in the law, Section 29.
ATTY. CADIZ:
Thank you very much, Your Honor.
CHIEF JUSTICE CORONA:
Justice Peralta.
JUSTICE PERALTA:
Good afternoon.
ATTY. CADIZ:
Good afternoon, Your Honor.
JUSTICE PERALTA:
So I just would like to sum up your position on this petition. Correct me if I'm wrong. Your position is that the PARC did not gravely abuse its discretion in revoking the SDOA?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE PERALTA:
And that there was also a legal basis in revoking the SDOA?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE PERALTA:
And that Luisita Industrial Park Corporation or LIPCO and Rizal Commercial Banking Corporation (RCBC) are not purchaser for value or purchaser in good faith?
ATTY. CADIZ:
They are not innocent purchasers for value, Your Honor. They would have known the conditions of the conversion.
JUSTICE PERALTA:
Now because of the questions of Justices Abad and Velasco, I would like to refer you again to Section 5 paragraph B. It is your contention that this Section 5 Paragraph B is a criterion in granting or denying a SDOP or a Stock Distribution Option Plan.
ATTY. CADIZ:
In deciding, Your Honor, whether to revoke it, but that is not the only condition that we have explained before this Honorable Court this afternoon.
JUSTICE PERALTA:
Correct me if I'm wrong. What I got from you is that this is one of the criteria that should be followed by PARC in approving or disapproving a SDOP?
ATTY. CADIZ:
And in monitoring the execution of the SDOP, Your Honor.
JUSTICE PERALTA:
So in other words this one covers the implementation of the SDOA?
ATTY. CADIZ:
Yes, Your Honor, that is my submission.
JUSTICE PERALTA:
Now my question to you is that under Section 5 Paragraph B, the stock distribution to qualified beneficiaries would result in increased income and greater benefits to them than where the lands divided and distributed to them individually. That is the law, is it not? That is provided for in Section 5B?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE PERALTA:
Do you find a similar provision in CARL that economic viability is a condition in the distribution of lands to qualified farmers? Is there such a similar condition that in the award or the distribution of lands to the qualified farmers, economic viability is a condition?
ATTY. CADIZ:
No, Your Honor, but our submission is that Section 31 is an aberration and that therefore because it allowed an exception then it must be monitored in a very, very strict manner, so that the lives of the farm workers will be uplifted.
JUSTICE PERALTA:
So in other words, that economic viability will only become important if the farmers opt to SDOA?
ATTY. CADIZ:
Agree, Your Honor, yes.
JUSTICE PERALTA:
But the lands are distributed to them whatever they will do with that land, that economic viability is not a condition precedence?
ATTY. CADIZ:
Subject to the restriction of land reform, Your Honor.
JUSTICE PERALTA:
That is correct.
ATTY. CADIZ:
Your Honor, I just would like to go back to the exposition of the Honorable Justice Perez. And from the bottom of my heart I thank you, Your Honor, for the compliment that you've given. But as I have said, Your Honor, earlier, we should not be averse as mandated by the ADR to find an acceptable solution by all parties. And the Honorable Justice Sereno has already explained one option which could be taken into consideration by both parties.
JUSTICE BERSAMIN:
Thank you, Chief.
Mr. Solicitor General, I am clear about your position as far as the Republic is concerned that the SDOA should be nullified, but you are prepared to tell us how you would approach the ensuing situation, will you attempt to implement the CARL to its fullest without the SDOA as an obstacle?
ATTY. CADIZ:
If the SDOP. . . .
JUSTICE BERSAMIN:
SDOA, SDOP, since you are after its nullification?
ATTY. CADIZ:
Yes, Your Honor, the Secretary of Agrarian Reform has said that this government is prepared.
JUSTICE BERSAMIN:
Is that Republic prepared to enforce the CARL to its fullest?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE BERSAMIN:
All right. Some of the lands have already been converted to non-agricultural uses and I heard a while ago the operation of this doctrine, called the operative facts doctrine, will you recognize that doctrine in your enforcement of the CARL?
ATTY. CADIZ:
Vis-a-vis, Your Honor, the principle that RCBC and LIPCO are not innocent purchasers for value and the overriding principle that the benefit of the farm worker must prevail, then I think the operative fact principle should give way to the overriding principle of justice for the farm worker.
JUSTICE BERSAMIN:
All right I will not go too far into that because I don't know how you will do it. But let me ask you now what is the valuation you will use in reference to that aspect of that situation which would require you to compensate the owner?
ATTY. CADIZ:
Your Honor, the Department of Agrarian Reform. . . .
JUSTICE BERSAMIN:
When will you reckon the valuation?
ATTY. CADIZ:
May I ask the Secretary, Your Honor, to make that presentation?
JUSTICE BERSAMIN:
Of course.
SECRETARY DELOS REYES:
If, Your Honor please, the reckoning point since this will be considered as taking at this point, we will be using the current formula for land valuation of the agricultural land.
JUSTICE BERSAMIN:
And when is that reckoning point?
SECRETARY DELOS REYES:
It would be the time of coverage, Your Honor. The department has issued I think a notice of coverage as of January 2 or 3, 2006. That would be the reckoning point of the valuation, Your Honor.
JUSTICE BERSAMIN:
But the SDOA is not the reckoning point, the execution of the SDOA was not the reckoning point?
SECRETARY DELOS REYES:
Frankly, Your Honor, we have not studied that point whether it will be 1989 or 2006. The fact is the notice of coverage issued by the DAR was only issued in 2006.
JUSTICE BERSAMIN:
But will you be disregarding the fact that the SDOA favored also the owner? You will have to take that into account?
SECRETARY DELOS REYES:
Yes, Your Honor, we will have to.
JUSTICE BERSAMIN:
All right, Mr. Secretary, now that you are on the floor, I heard you say a while ago that this appraisal right of a stockholder may be useful. Is that correct under the Corporation Code?
SECRETARY DELOS REYES:
As a parallel concept, Your Honor.
JUSTICE BERSAMIN:
Parallel concept. So you would not like that to apply strictly to the HLI?
SECRETARY DELOS REYES:
Well the only so I mentioned that, Your Honor, is that in this situation the conditions or what the farmers had hoped for, that they would get when they entered into the SDO did not happen. So it would be possible for them to move for revocation considering that what they had hoped for had not occurred. And therefore if this land were to be distributed, redistributed, then Section 29 can be a possible avenue open to the department.
JUSTICE BERSAMIN:
I just wanted to ask you if you were very serious about your mention of appraisal right because I don't see it at all as fair to the farmer beneficiaries. How will you apply that under the conditions of the Corporation Code because I heard the Solicitor General here very clearly telling us that HLI has always been a losing proposition. And a condition in the Corporation Code for the exercise of appraisal right is that there must be excess earnings?
SECRETARY DELOS REYES:
Yes, Your Honor. In the sense it would be in the concept of a dissenting shareholder who would want to disengage from the agreement that was made. Because as the Solicitor General has stated, this particular situation must be analyzed both under the agrarian reform law and under the Corporation Code. And I cited that, Your Honor, as a parallel concept in the case of a dissenting shareholder.
JUSTICE BERSAMIN:
That is of course on the assumption that the SDOA is going to be sustained?
SECRETARY DELOS REYES:
Yes, Your Honor.
JUSTICE BERSAMIN:
Now, the Solicitor General, I would like him to go back. Based on your position that the SDOA should be nullified and yet you are insisting that ADR may be a good approach. How can that be if your position is that the SDOA was illegal from the beginning, how can you solve a problem through ADR when the problem is not legally feasible or has no validity at all?
ATTY. CADIZ:
Your Honor, that was something asked of me earlier and I said that the Supreme Court has this program of alternative dispute resolution. I therefore would say, Your Honor, that the agreed upon compromise agreement must not contain the illegal and unlawful provisions. The Honorable Justice Sereno has already given a proposition about bonds being given to the farm workers. Then, I am not very, very familiar with that concept, Your Honor, but I think arising from the program of this Honorable Court, to mediate, to conciliate, and to arbitrate disputes, then that should be something that must be seriously looked at. But as I've said, one, it must be acceptable to all parties, the farm workers, and the other party to HLI. Number 2, it must not be against the law nor should it be against public policy, nor morals.
JUSTICE BERSAMIN:
All right, I would like to know from you what is your position regarding the SDOA? Is that not properly a form of taking in the sense that if the property could not be distributed under CARL at least the time of the execution of the SDOA should be the time when we will reckon the valuation if we were to distribute the land?
ATTY. CADIZ:
Your Honor, I'm not really very much aware about how these things are valuated but I think the . . .
JUSTICE BERSAMIN:
No, it's not the how side of it, it's the legality of it. Will you consider the execution of the SDOA the time of the execution of the SDOA as the time of taking of the property considering that so many years have elapsed?
ATTY. CADIZ:
I think in fairness to all parties concerned, we could consider, Your Honor, subject to DAR's assent to have the valuation at present.
JUSTICE BERSAMIN:
Now I also heard you say that HLI under Section 31 of the CARL was an aberration. I do not know and I cannot understand why you chose that word but my sense of aberration is that it is not something that should be allowed. Why don't you tell that to the Congress?
ATTY. CADIZ:
The context , Your Honor, is that it is an exception to the general rule of land distribution. That is the kind of meaning that I attached to it. I apologize, Your Honor, if I somehow. . . .
JUSTICE BERSAMIN:
No, do not apologize to me apologize to the Congress. You tell them that they are guilty of an aberration. I think that is better because I see . . . . well, I have not yet made up my mind, of course, but I just would like to blurt out this observation, that you could probably resolve all this, if all the parties agree by having the law revised.
ATTY. CADIZ:
By. . . .?
JUSTICE BERSAMIN:
By having the law revised. If you do not like to agree with Justice Perez here to go to Section 29, you have to change the law and do that in Congress.
JUSTICE BERSAMIN:
Thank you, Chief. Thank you, Mr. Solicitor General.
ATTY. CADIZ:
Thank you, Your Honor.
CHIEF JUSTICE CORONA:
Justice Velasco.
JUSTICE VELASCO:
Counsel, Mr. Solicitor General, there is a view or opinion made that if the High Court orders land distribution, then it is possibly also a no-win situation. I don't know what he means by that but based on the facts presented in the pleadings and in these two oral arguments including today, it would appear that the situation there is very, very complicated. The submission of the compromise agreement by HLI opens a window of opportunity, possibly for a win win solution. But I think the stumbling block here would be the revocation made by PARC of the SLOA. If the revocation-if PARC agrees to reconsider or recall the revocation to pave the way for a happy compromise among the parties then we can resort to mediation. My question to you is, will the government consider recommending to the PARC the recall or the lifting of the revocation to pave the way for a happy compromise among the parties? Why I'm saying that is because as we said how can there be a compromise agreement if it's contrary to law, contrary to morals, good customs, public order, public policy, but more emphasis on the law. Because it's your submission that this SLOA approved and already implemented, is actually partly violative of the law. But the law, of course, will recognize the fact that this was approved by the body, the committee of the PARC, authorized by law to favorably consider and approve such stock option plans. So why do I say it's very complicated? One: the land may be ordered to be distributed to the farmer beneficiaries but then you have to consider the fact that the other assets of HLI include roads, culverts, bridges, irrigation cannals, equipment and other structures, and even railroad system, with a value of around thirty-nine (39) million. And these land improvements may be situated in the lands that we will distribute to the farmer beneficiaries in case the Supreme Court orders the land distribution. So it's a messy situation there plus the fact that we have to consider the rights of the other purchasers of the land there. And some portions of the land transferred to HLI have been converted to residential lands and there's a big possibility, we are not sure yet, we really have to find out from HLI, if these lots have been sold to purchasers already. And in all probability that they've already sold. As a matter of fact, we received a letter from I think a farmer beneficiary this morning. And he said you have the Luisita Mall, you have Robinson Mall, Microtel Hotel, Phelps Dodge Factory, PLDT Office, Las Haciendas Village, SC Text, Central Park Hotel, Luisita Business Park, Sanyo, and other firms that have acquired lots in the land that may be affected by the land distribution. More particularly if we invalidate all these transfers made by Centenary Holdings to LIPCO or to Luisita Realty Corporation. So the proposition is will the government consider recommending to PARC the lifting or recall of the revocation of this SLOA to pave the way for a mediation among the parties to be handled by possibly a panel of mediators to be created by the Supreme Court?
ATTY. CADIZ:
I am not prepared to do that, Your Honor. But what I'm going to say is that, a mediation, a conciliation can happen even if there is such a revocation earlier made by PARC, Your Honor, the Honorable Court can exercise its ascendancy, ascendancy its moral suasion for the parties to come up with an agreement which is according to law and public policy, even with a revocation made by PARC. I think if we have to go back to PARC that will take sometime and again go back to the Court I think since the ball is right now with this Honorable Court we just have to do what needs to be done at this point, Your Honor.
JUSTICE VELASCO:
Unfortunately you have not really gone over the compromise agreement but I have read paragraph 2 of the compromise agreement. It is, the compromise agreement already offers to the farmer beneficiaries what they are asking for in this petition, if we sustain the revocation then land will be distributed to them, correct?
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
Right, if they agree to the compromise agreement and we give our imprimatur to this compromise agreement the farmers can just simply say we want the land and we attain the same result and you of course know that in this petition the constitutionality of Section 31 is not put forward is not presented for resolution by the Court, is that correct? Have you raised that point that Section 31 is unconstitutional?
ATTY. CADIZ:
We have not, Your Honor.
JUSTICE VELASCO:
You have not. But, okay. But there is a principle or jurisprudence to the effect that if we can, even if it as raised as a constitutional issue, If we can skirt that issue and decide the case on another ground then the Court can do that because we presume, we assume that the law enacted by the legislature is valid, legal and constitutional, correct?
ATTY. CADIZ:
Your Honor, even if our proposition is the revocation of the SDOP is what has to be done and what we are saying is that the provision of this particular SDOP particularly the vesting period is illegal and contrary to CARL of 1989 the compromise agreement can take another position which is not illegal, which is not against public policy and which will be acceptable to the parties. We need not be limited to this SDOP which we have said to be illegal and against CARL. So, in other words, I do not think we have to confine ourselves in the compromise agreement to the SDOP alone because primarily we are saying that this SDOP, this particular SDOP is against the law.
JUSTICE VELASCO:
Counsel, there was mention here that if we divide the four thousand one hundred two (4,102) hectares by ten thousand five hundred two (10,502) farmer beneficiaries and this is the number of farmer beneficiaries who were issued stocks already by the HLI, if you have to consider that number, well, if you consider Four Thousand One Hundred Two (4,102) and you divide that by ten thousand five or how do you . . . if you divide that, if you divide land four thousand one hundred two (4,102) by ten thousand five hundred two (10,502) you get an area of around four thousand one hundred (4,100) and when this land distribution we want the land distribution and the devotion of the land to agricultural production to be successful, that is the essence of the Agrarian Reform Program, is that correct?
ATTY. CADIZ:
Your Honor (interrupted)
JUSTICE VELASCO:
No, no, is that correct? Right?
ATTY. CADIZ:
Well, basing from your proposition, Your Honor, it maybe correct, however, my proposition is the divisor or the dividend rather is four thousand nine hundred (4,900) hectares. And as explained by the Secretary of Agrarian Reform the beneficiaries, the Nine Thousand (9,000) beneficiaries most of them have the same family names, they came from the same families and therefore they can be grouped as one family unit and when we divided that by about Six thousand or five thousand (6,000 or 5,000) plus then you will have an area of a little less than one hectare, Your Honor.
JUSTICE VELASCO:
No, the land that is transferred to HLI is only Four Thousand Nine Hundred Fifteen (4,915) or something (interrupted)
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
If you divide it by Ten Thousand Five Hundred Two (10,502) you only get around four thousand nine hundred (4,900) (interrupted)
ATTY. CADIZ:
Yes, Your Honor.
JUSTICE VELASCO:
You don't even get half a hectare (interrupted)
ATTY. CADIZ:
But our proposition (interrupted)
JUSTICE VELASCO:
Well, I read that to be economically viable a piece of land given to a farmer beneficiary should be around three (3) hectares. So, right away we have a problem as to the size of the land to be given to the farmer beneficiaries. But my thrust is that possibly, possibly the parties can sit down before a panel of mediators and hammer out a happy compromise and that will really possibly result into a win win solution but the main stambling block really is the revocation of this SDOA by PARC on the ground that it violated Section 31. But you see we have a very unique situation here because HLI's proposal for stock distribution was approved by PARC. Had it not given its approval for being contrary to Section 31 we would not be here in the first place and then land should have been distributed a long time ago but the point is the authority authorized by law to approve these things gave its approval to the Stock Option Plan and this was implemented already, although not fully, but later on they were able to distribute the land ahead, much ahead with the 30 year period and now we have the situation and we are blaming who? Are we blaming PARC, are we blaming HLI? We do not want to blame anybody but the fact is, does SDOA was approved PARC and based on that HLI acted in good faith in implementing it. So, what I am trying to point out is possibly a happy compromise can be arrived through ADR more particularly mediation. But we must have your position that you can recommend to PARC the lifting or recall of the revocation of SDOA. Do you consider that?
ATTY. CADIZ:
Is this the position of the Honorable Justice Your Honor that we cannot have a compromise unless PARC revokes the (interrupted)
JUSTICE VELASCO:
Yes of course if there is a case and if we can settle it amicably why not provided the agreement of course is not contrary to law, morals, good customs, public order and public policy. But then you did not raise the issue of constitutionality of Section 31, although I think one of the parties did that. But then that is too late in the day probably I do not know. But what I am saying is that probably a resort to mediation can really result into a win win solution to this pestering problem. So, what is your position on this, counsel?
ATTY. CADIZ:
We can resort to mediation Your Honor or ADR without asking the PARC to revoke its earlier resolution.
JUSTICE VELASCO:
Okay, that is all, Your Counsel.
CHIEF JUSTICE:
Okay thank you.
Private Respondents Alyansa ng Mangagawang Bukid ng Hacienda Luisita, Noel Mallari, United Luisita Workers Union, Eldifonso Pingol, Supervisory Group of Hacienda Luisita, Inc., Julio Zuniga, Winsor Andaya are represented by Atty. Carmelito Santoyo who will have five (5) minutes to argue.
ATTY. CADIZ:
May I be excused?
CHIEF JUSTICE:
Thank you, counsel.
ATTY. CADIZ:
Thank you.
ATTY. SANTOYO:
Good evening, Your Honors. The Alyansa ng mga Mangagawang Bukid ng Hacienda Luisita AMBALA in short, United Luisita Workers Union and the Supervisory Group of Hacienda Luisita, Inc., whom I represent are the qualified farmworkers beneficiaries of Hacienda Luisita. Incidentally, Your Honors, my said clients are the signatories to the compromise agreement submitted before this Honorable Court for approval, Your Honors. I have no hand in the preparation of this compromise agreement but then sooner thereafter and even before I talked to my clients and asked them if indeed they agreed, voluntarily signed and at the same time understood fully well them the terms and conditions of the compromise agreement. And they told me they did and I noticed incidentally that way back in 2004 the same clients of mine went to the Department of Agrarian Reform asking for the revocation of the MOA. So, that I asked them is it not your position different now or consistent with your previous position and they said no because they opted to have this SDO or this Stock Distribution because they feel that there is no change in their lives from the time that they went to the DAR for the revocation up to now. So, that they opted according to them to choose this SDO because certainly according to them it will be beneficiary to them to help their families, Your Honor, who according to them will remain forever bound to the soil if they will not choose this Stock Distribution Option. I asked them what do you expect if in the choice of the SDO if it will be granted to you or if this Compromise Agreement will be granted, they said it will create for them additional employment and additional job. Your Honor. And that they know for themselves after discussing the same that this option that they are now taking will be very, very viable for the present position, for the position of the farmers, for the lives of the farmers for a change, Your Honor please. And I asked them why they decided to execute this compromise agreement and they told me that after all there is no change in their lives for so many years and they want a change for the better and the change for the better will be for them to put an end to this mitigation, Your Honor. I carefully asked them before I accepted my services as their counsel, I even went to their place and talked to the leaders and to their members who constitute the majority of the qualified farmworkers in the Hacienda Luisita and their answer to me is the same it will be for the good of the farmworkers, Your Honor, and I told them that is it not that you are aware of the concept of social justice. They said they are aware but then even social justice has its exception or it may envision something that may not necessarily be, that may necessarily fit the concept of social justice if it will be for the cause of changes in ecology or if it will be for developmental changes or maybe for equity consideration without of course prejudice to the payment of just compensation. So, after talking to them several times finding out what really they want I was convinced that the submission of the compromise agreement is their free will that is their agreement, the terms and conditions of which they understood. So, (interrupted)
CHIEF JUSTICE:
Please wind up already.
ATTY. SANTOYO:
So, with this concept I am now submitting to this Honorable Court their compromise agreement which is not contrary to law, morals, good customs, public policy and public order, Your Honor. I submit, Your Honor.
JUSTICE BERSAMIN:
May I ask some clarificatory questions. Were you the same counsel who represented the farmers in the signing of the Memorandum of Agreement?
ATTY. SANTOYO:
No, Your Honor.
JUSTICE BERSAMIN:
But you were the counsel who filed the petition to revoke the PARC sometime in 2003?
ATTY. SANTOYO:
No, Your Honor.
JUSTICE BERSAMIN:
So, you are now only entering your appearance as counsel for the farmers who signed the compromise agreement?
ATTY. SANTOYO:
No, Your Honor.
JUSTICE BERSAMIN:
So, what is then your representation?
ATTY. SANTOYO:
Actually, when I was, when my services were engaged by my client farmworkers they had already executed the compromise agreement and even before I entered my appearance before this Honorable Court on August 13, 2001 I remember that they had already submitted this compromise agreement before this Court. But then as a lawyer I know that my duties and responsibilities to my client will not end from the execution of the compromise agreement. I believe that in the implementation of the compromise agreement I can help them, Your Honor. And in the existence of the relationship before the farmworkers, the management and the other farmworkers in the Hacienda as a counsel I can assist them, Your Honor.
JUSTICE BERSAMIN:
Now, what then is your position as to the SDO, the Stock Distribution Option, what is your position?
ATTY. SANTOYO:
I told them that this SDO I believe it is really is for the good of the farmers, Your Honor.
JUSTICE BERSAMIN:
So, it is valid, that is your position?
ATTY. SANTOYO:
Yes, Your Honor, it is in accordance with the law.
JUSTICE ABAD:
I just want to find out, do you have an idea, what percentage of the total farmworkers of the original number in 1989. In 1989 how many percentage of the farmworkers in 1989 now belong to the group you represent? Do you have an idea?
ATTY. SANTOYO:
I think they have then a percentage of more than 90%, Your Honor.
JUSTICE ABAD:
More than?
ATTY. SANTOYO:
More than 90%.
JUSTICE ABAD:
More than 90%.
ATTY. SANTOYO:
No, maybe I did not get the question correctly, Your Honor. The clients whom I represent now were the ones who filed this petition for revocation of the MOA before the DAR. But then at the time I asked these clients of mine the percentage for those who voted for the MOA and they told me more than 90%. So, that I immediately told them if it is really that they knew at the time that more than 90% in 1989 voted for the MOA (interrupted)
JUSTICE ABAD:
Can you represent evidence that you hold 90% of the membership of the farmer beneficiaries, can you present evidence?
ATTY. SANTOYO:
This (interrupted)
JUSTICE ABAD:
For example do you have the list of the beneficiaries in 1989, would you be able to get confirmation from 90% of those in that list? Because if they agree to this what is the point in this whole exercise if they agree to this compromise agreement, you are seeking an ADR when there is already a compromise supported by 90% of the farmers?
ATTY. SANTOYO:
That was approved by the Presidential Agrarian (interrupted)
JUSTICE ABAD:
So, please present evidence within the time you are required to submit your memorandum in this case to prove (interrupted)
ATTY. SANTOYO:
My information is limited only to the one given to me by the farmworkers.
JUSTICE ABAD:
That is why I asking for an evidence to you now.
ATTY. SANTOYO:
We will try to do that, Your Honor.
JUSTICE ABAD:
The signatures probably of all those in that list signature before a notary public or something or before the PARC or the local agrarian body there so that we will know so we can ascertain the real will of the majority of the farmer.
ATTY. SANTOYO:
I will try, Your Honor.
JUSTICE PEREZ:
Mr. Counsel. When you counseled your clients the farmers, did you explain to them or do you have any knowledge what the equivalent of one share of stock is to, in reference to the area, what is the area of land square meters, square inch that is equivalent to one (1) share of stock?
ATTY. SANTOYO:
I did not ask that question, Your Honor but I asked them — what is the equivalent of the share.
JUSTICE PEREZ:
Because I think that that would be needed for them to make an intelligent choice whether or not they are going to get the land equivalent of their shares of stock, what exactly is the equivalent of one (1) share of stock in landholding?
ATTY. SANTOYO:
The equivalent of one (1) share of stock as they told me is based on the working hours that they have rendered to the corporation, HLI, Your Honor.
JUSTICE PEREZ:
What is the equivalent of one (1) share of stock to the landholding that they are supposed to be entitled to as one (1) shareholder (interrupted)
ATTY. SANTOYO:
I did not ask that question, Your Honor.
JUSTICE VELASCO:
And also how sure are you that they understood what an SDO is when it took the corporate secretary of the HLI to explain what exactly is the 30% or 33% shareholding equivalent of the landholding is all about and from what was said a while ago did your clients realize or take into consideration that the 33% can be watered down or that the law says of the corporation or it should be the net worth and not all these things, were these things explained to them?
ATTY. SANTOYO:
I asked them what they understood about it, Your Honor.
JUSTICE PEREZ:
Thank you Mr. Counsel.
CHIEF JUSTICE:
Thank you Mr. Counsel. Private Respondent AMBALA, Central Foundation, Inc., is represented by Atty. Jobert Ilarde Pajilda who will have 5 minutes.
ATTY. SANTOYO:
Thank You Your Honor.
ATTY. PAJILDA:
Good afternoon, Your Honors. Given the fact that we are given 5 minutes (interrupted)
CHIEF JUSTICE:
Please watch that light there when it is the red light you are suppose to stop already.
ATTY. PAJILDA:
Yes, Your Honor. Though I will go directly to the point, Your Honor, first we take issue on the representation of Atty. Santoyo. He claims that he is the counsel of AMBALA or Alyansa ng mga Mangagawang Bukid ng Hacienda Luisita yet he did not show any proof of the authority from the farmworkers. From my understanding Your Honor is that he is representing AMBALA supposedly because Mr. Noel Mallari who is also claiming to be the President of AMBALA signed the compromise agreement. But for the record, Your Honor, Mr. Noel Mallari has never been the president of AMBALA. Records would show that from the inception of this case this representation is the counsel of the farmworkers. Mr. Noel Mallari, Your Honor, has also submitted before this Honorable Court a pleading denominated as manifestation and motion with attached comment on the petition for certiorari and prohibition and that is dated December 6 of 2006, Your Honor, and he stated therein that he voluntarily left AMBALA to established his own organization the Farm Incorporated and this Farm Incorporated Your Honor was represented by no less than Atty. Bernal in this hearing, Your Honor. But when this compromise agreement came into the picture, Your Honor, Mr. Noel Mallari misrepresented himself to be the president of AMBALA. I have here with me, Your Honor, the confirmation of authority from the farmworkers and we will submit this to the Honorable Court. This is signed by more than a thousand farmworkers who do not agree with the compromise agreement. We have already submitted to this Honorable Court our comment and opposition to the compromise agreement arguing therein that the agreement is contrary to law and is contrary to public policy. We also argued, Your Honor, that the issue of the validity of the Stock Distribution Option on whether or not the President Agrarian Reform Council committed grave abuse of discretion in revoking the Stock Distribution Option should take precedence over the compromise agreement, Your Honor. On the issues raised by the Honorable Court, Your Honor, we submit that the Presidential Agrarian Reform Council has the jurisdiction to revoke the Stock Distribution Option. First and foremost the Stock Distribution Option is an agrarian law implementation case, under Section 50 of Republic Act 6657 it is the Department of Agrarian Reform that has jurisdiction over agrarian implementation cases. Also, Your Honor, we submit that Section 31 Administrative Order No. 10, Series of 1988 although it did not expressly empowers PARC or DAR to revoke the stock distribution option has impliedly given such power, Your Honor. And may I cite the case recently decided by the Honorable Court penned by Honorable Justice Velasco in the case of Soriano vs. Laguardia and Soriano vs. Movie Television and Review Classification Board, G.R. No. 165636 April 29, 2009 the issue there is whether or not the MTRCB has the power to issue preventive suspension and Soriano argued that it was not expressly stated into the law but the Honorable Court decided that although it was not expressly stated the statute creating MTRCB has impliedly granted the power to issue preventive suspension. This is also the same ruling by the Honorable Court in Chaves vs. National Housing Authority, G.R. No. 164527 dated August 15, 2007 on the issue whether the National Housing Authority has the power to reclaim lands. And the Honorable Court has expressly stated that although it was not expressly written because NHA has the power to promulgate rules and regulations on implementation of Urban Land Reform and Housing the power to reclaim lands, Your Honor, is also vested with the NHA.
On the issue, Your Honors, of whether or not there is violation of due process rights by PARC of the rights of HLI, we submit that there is none, Your Honor.
First, HLI participated in every proceeding before the DAR of which I am the counsel for the farmworkers and they had submitted their answer and comment thereto. They also filed a motion for reconsideration of the decision of the PARC even before, and even that motion for reconsideration is pending, they went to the Honorable Court, Your Honor. My time is up.
CHIEF JUSTICE:
Okay, thank you Counsel.
Okay, Justice Abad.
JUSTICE ABAD:
Just one question. You said that you have a signature of one thousand (1,000) members of your farmworkers but that is barely 10% of the eleven thousand (11,000) workers there. So, what happened to the ten thousand (10,000) workers? You do not represent them?
ATTY. PAJILDA:
Your Honors, we secured the signatures of the farmworkers Your Honor because we were alarmed by the representation of Atty. Santoyo. We should not have secured this authority were it not for the representation and appearance of Atty. Santoyo that he is now the counsel of AMBALA or the Alyansa ng mga Mangagawang Bukid ng (interrupted)
JUSTICE ABAD:
No, I am not questioning that but the point is that you said that you secured (interrupted)
ATTY. PAJILDA:
We will secure, Your Honor, additional (interrupted)
JUSTICE ABAD:
That you secured the signature of roughly One Thousand (1,000) of your members?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE ABAD:
But there are 11,000 workers, if you represent One Thousand (1,000) that is barely 10%. So, do you agree that you barely represent 10%?
ATTY. PAJILDA:
No, Your Honor please, may I explain, Your Honor.
JUSTICE ABAD:
Yes, please.
ATTY. PAJILDA:
Your Honor the confirmation of authority was secured only on August 17, 2010 after we have learned that Atty. Santoyo is now representing as counsel for AMBALA. In a span of barely a week we have secured the signatures of these and we will be securing additional more signatures, Your Honor, for purposes of conferring authority to this representation that our (interrupted)
JUSTICE ABAD:
But that was how long ago when you filed it?
ATTY. PAJILDA:
August 17, 2010.
JUSTICE ABAD:
But we are already August 24.
ATTY. PAJILDA:
So, we gathered the signatures (interrupted)
JUSTICE ABAD:
So, can you undertake to submit proof that you represent at least the majority of the workers beneficiaries of HLI, can you present?
ATTY. PAJILDA:
We will secure additional signatures and we will submit it to the Honorable Court, Your Honor.
CHIEF JUSTICE:
Justice Velasco.
JUSTICE VELASCO:
Counsel are you representing AMBALA?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
You were the one who filed the comment for AMBALA, right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Okay. Does SDOA or the Stock Distribution Plan approved by PARC is based more or less on Section 31, is that correct?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
However it is your contention that the Stock Distribution should not be based on man hour or man days rather, right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Okay. Did you raise any issue as to the constitutionality of Section 31?
ATTY. PAJILDA:
Before the PARC, Your Honor, we did not raise any issue, Your Honor, and before the Honorable Court we did not raise but another group, Your Honor, the FARM which is represented by Atty. Monsod has raised the issue of constitutionality, Your Honor, and we would gladly adopt their position on the matter, Your Honor.
JUSTICE VELASCO:
What is your position on this — is Section 31 constitutional?
ATTY. PAJILDA:
Our position, You Honor, is it is unconstitutional.
JUSTICE VELASCO:
Unconstitutional. Why do you say that?
ATTY. PAJILDA:
Your Honor, the Constitution provides that there should be actual land distribution, not shares of stock. So, land should be distributed not piece of paper, Your Honor.
JUSTICE VELASCO:
That is your position?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Although, if you are a stockholder of a corporation owning agricultural lands in case of liquidation, in case the corporation closes and terminates its existence the stockholder will get a proportion share of the land, right?
ATTY. PAJILDA:
It is our submission, Your Honor (interrupted)
JUSTICE VELASCO:
That is the remaining asset, is that correct?
ATTY. PAJILDA:
Your Honor our position is that after the stock distribution option is revoked then the remaining agricultural lands of the corporation should be distributed in its entirety to the farmworkers because it is covered by the Agrarian Reform Program, Your Honor.
JUSTICE VELASCO:
Well, it was revoked already but that issue the validity of the revocation is here before the court for its resolution?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
But my question is — in case of the winding up of affairs of the corporation owning agricultural lands, the stockholder will get a proportionate share in the land if that will be distributed, right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
So, in effect there will be land distribution also?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Okay. So, if a corporation which implemented the stock distribution scheme is very successful and it rakes in a lot of profits then the farmers will be benefited immensely, is that correct?
ATTY. PAJILDA:
If that is the case, Your Honor, it is correct.
JUSTICE VELASCO:
Yes, all right. The SDOA, the stipulation in the SDOA are based mainly on Section 31, like 3% of the gross sales is based on the CARP, is that right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
And even the home lots it is based on the CARL, the only problem is the period of distribution and the basis for distribution, correct?
ATTY. PAJILDA:
Yes, Your Honor, and the representation of HLI, Your Honor, when they applied for stock distribution option that the lives of the farmworkers will considerably improve had not been realized, Your Honor, that is one of the reason why PARC revoked the MOA, Your Honor.
JUSTICE VELASCO:
Well, that was discussed thoroughly also and it is not in the MOA because nobody can assure success in any undertaking. But nevertheless, when the proposal for the stock distribution plan was submitted by TADECO or HLI to PARC the farmer beneficiaries were consulted, is it not?
ATTY. PAJILDA:
There was a referendum, Your Honor.
JUSTICE VELASCO:
There was a referendum, prior to the referendum were there meetings held to discuss and explain the terms and conditions of the SDOA?
ATTY. PAJILDA:
I am sorry I am not privy to the negotiations, Your Honor, at the time but records of the case would show Your Honor that there were supposedly meetings that happened.
JUSTICE VELASCO:
So, when did you come in as lawyer for AMBALA?
ATTY. PAJILDA:
When we filed the petition to revoke the stock distribution option in December of 2003 at the Department of Agrarian Reform, Your Honor.
JUSTICE VELASCO:
Did the farmer beneficiaries have any lawyer at that time that the proposal for the stock distribution option plan was submitted to PARC?
ATTY. PAJILDA:
I am not aware, Your Honor.
JUSTICE VELASCO:
You are not aware. Although you admit that there were meetings held to explain the terms and conditions of the SDOA, right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Your clients want land distribution, is that correct?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
We are saying that if that is distributed to the ten thousand fifty-two (10,052) farmer beneficiaries, one gets only four thousand nine hundred (4,900) more or less?
ATTY. PAJILDA:
But there is also another option Your Honor provided in Section 29 were the farmworkers could create a cooperative and that cooperative will manage the land, Your Honor, the business of the farmworkers, Your Honor.
JUSTICE VELASCO:
That is correct the farmers can bond together and form a cooperative or a farmer organization, right?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Okay. So, we proposed a while ago of the possibility that there can be resort to mediation and that a panel of mediators can possibly be created by this Court to mediate between the parties, are you amenable to such recourse?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE VELASCO:
Okay. I think that is all.
JUSTICE DE CASTRO:
Are you representing AMBALA?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE DE CASTRO:
Who is the president of AMBALA?
ATTY. PAJILDA:
The present president, Your Honor, is Felix Napkil in fact in January of this year we have filed a manifestation and motion before the Honorable Court and the pleading was already verified by President Felix Napkil.
JUSTICE DE CASTRO:
A party to the compromise agreement?
ATTY. PAJILDA:
According to the document, Your Honor, AMBALA is a party to the compromise agreement supposedly represented by Mr. Noel Mallari who claims to be the president of AMBALA but as I have said, Your Honor, records of this case would show that as early as December of 2006 Mr. Mallari has manifested before this Honorable Court that he is no longer connected with AMBALA and that he formed his own organization the Farm Incorporated. And in that pleading he wanted his organization Farm to take the place of AMBALA, Your Honor. So, I submit, Your Honor, and it is our position that Mr. Noel Mallari is misrepresenting to this Honorable Court.
JUSTICE DE CASTRO:
So, you are saying that Noel Mallari is not authorized to sign for AMBALA this compromise agreement?
ATTY. PAJILDA:
Yes, Your Honor, in fact, not only Noel Mallari because we have received a letter sent through e-mail by the president or the chairperson of the United Luisita Workers Union who is represented in the compromise agreement supposedly by the vice president Idelfoso Pingol and the president Mr. Rene Galang has written to us a letter telling us to oppose the compromise agreement that was submitted to the Honorable Court.
JUSTICE DE CASTRO:
So, the compromise agreement as far as you are concerned was entered into by Noel Mallari for AMBALA without (interrupted)
ATTY. PAJILDA:
Yes, Your Honor, without authority.
CHIEF JUSTICE:
Justice Sereno first then Justice Bersamin.
JUSTICE SERENO:
Mr. Counsel, Can you again clarify to the Court whether you agree with the suggestion that as long as the terms are acceptable to the farmers you are willing to enter into mediation?
ATTY. PAJILDA:
Yes, Your Honor and as long as the farmers would agree to the terms, Your Honor, and that it is not one sided it is just and it is for their own benefit, Your Honor. So, it is for the farmers to decide, Your Honor.
JUSTICE SERENO:
So, it is not that their minimum position is that land at all costs, it is not that?
ATTY. PAJILDA:
At present, Your Honor, their position is land.
JUSTICE SERENO:
Okay.
ATTY. PAJILDA:
Instead of stock, we revoke the stock distribution option and four thousand (4,000) also that remains of the agricultural land of Hacienda Luisita be distributed to them. But if there is another agreement then we will not foreclose the possibility of entertaining that, Your Honor, and we will counsel our clients on the effects of the terms and conditions that they will enter into, Your Honor.
JUSTICE SERENO:
Thank you.
JUSTICE BERSAMIN:
Thank you Chief. Attorney, if you were to get your wish and the SDOA is nullified or at least the action of the PARC on it is affirmed by the Court, will you also attempt to undo the conversion orders issued during the time of President Ramos, the five hundred (500) hectares?
ATTY. PAJILDA:
In fact, Your Honor, our contention when we filed our petition before the Agrarian Reform is that the conversion of the five hundred (500) hectares is illegal but we also recognize the fact that there are already buildings standing on the land. So, our contention is — if that whole of five hundred (500) hectares could not be returned to the farmers then the value from the proceeds of the sale corresponding to 33% should be given to the farmers as their rightful share not just the 3%.
JUSTICE BERSAMIN:
One other thing — were you part of the agreement in 1989 that consented to the 33% of allocation?
ATTY. PAJILDA:
The individual farmworkers Your Honor entered into that agreement not the organization AMBALA, Your Honor.
JUSTICE BERSAMIN:
But some of those were members of AMBALA?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE BERSAMIN:
And AMBALA did not take any steps later on to correct the proportion?
ATTY. PAJILDA:
In 2003, Your Honor, precisely we filed the petition with the Department of Agrarian Reform to revoke the stock distribution option.
JUSTICE BERSAMIN:
Was this put into a vote among the members of AMBALA who took part in the approval in 1989?
ATTY. PAJILDA:
Your Honor as far as I can remember the petition had with it the signature of five thousand three hundred thirty-three (5,333) farmworkers from the original of six thousand two hundred (6,200) farmworkers, Your Honor.
JUSTICE BERSAMIN:
And how many of those who took part and who were members of AMBALA wanted the revocation?
ATTY. PAJILDA:
It is five thousand thirty-three * (5,333), Your Honor.
JUSTICE BERSAMIN:
All of them?
ATTY. PAJILDA:
Yes, Your Honor, that was, their signatures were submitted to the Department of Agrarian Reform on December 4 of 2003 together with the petition, Your Honor, to revoke the stock distribution option.
JUSTICE BERSAMIN:
Now, I asked the government a while back regarding the time when we should reckon the value of the property for purposes of expropriation, if that were to be the case. What about you what is your position in respect of that matter?
ATTY. PAJILDA:
Our position, Your Honor, that it should be reckoned in 1989 when the lands were already subjected to stock distribution option because there was already taking, Your Honor. Our position here, Your Honor, is that after the stock distribution option is revoke the distribution of the land is unnecessary consequence, DAR should not go back to square one because this is only a continuation of the Agrarian Law, ah, implementation of Agrarian Reform in Hacienda Luisita because in 1989 there was already a valuation and the valuation of . . . . pay for the amortization of the value of the land.
JUSTICE BERSAMIN:
All right, the last question that I would like you to answer is this — is this land if it were to be distributed among your members included, among the farmers your members included, would you go back to sugar production or sugar cane production or planting?
ATTY. PAJILDA:
It is a matter not yet discussed by the group but our contention Your Honor is that if the whole of the agricultural land of Luisita should be awarded to the farmworkers it should not be parcelized and given to them individually but it should owned or under the control and management of the farmers cooperative where this cooperative will be the one to run the business of the organization, Your Honor.
JUSTICE BERSAMIN:
So, you would fall back on Section 29?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE BERSAMIN:
Okay, thank you Chief, I have enough.
JUSTICE ABAD:
Just two questions. So, can you assure us that you can get 100% cooperation among all those eleven thousand workers (11,000) workers that they will join your cooperative; even now as you stand there you said there are divisions among them?
ATTY. PAJILDA:
Your Honor to be candid I could not assure the Honorable Court given the fact that there are already other organizations who are representing, who are representatives here, Your Honor, there is Atty. Santoyo and the group of Mr. Mallari, the group of Mr. Pingol although we were the counsel at the inception of this case of the supervisory union.
JUSTICE ABAD:
Thank you for being candid. Can I just ask one question? The standard rule is that the property that is expropriated is valued at the time of taking by the government but here the government did not take the property in 1998, 1989 but it will only put it under CARP. under land reform for land distribution only if the petition is granted this year. So, the devaluation will be at the time of taking and we cannot avoid that fact that according to you the land is already priced even beyond the reach of the farmers?
ATTY. PAJILDA:
Your Honor our position is that in 1989 there was already taking only that Hacienda Luisita did not ask for just compensation for the value of the agricultural land that was placed under SDO. Under Section 31, Your Honor, it provides there that farmworkers has the right to purchase, the right to purchase such portion of the land that corresponds the agricultural land holdings, Your Honor. So, on that time, Your Honor, Hacienda Luisita did not ask for the payment of this 4,000 but instead informed PARC that they will forgo with this and they will give the farmworkers 33% free but as it turned out it is based on man days as was already discussed.
JUSTICE ABAD:
Well, actually there could be a valid period if you say that there was actual taking in 1989 also since the government compelled the landowners to agree to this SDO in a sense that would amount to taking and the valuation should be made as of 1989. I think, although, there is no precedent concerning that.
JUSTICE PEREZ:
Just one point. Are you willing to negotiate on the value of the land just in case mediation conciliation happens?
ATTY. PAJILDA:
Yes, Your Honor.
JUSTICE DEL CASTILLO:
Just two questions. Is it your position that we can enter into some sort of a compromise agreement without first tackling the validity of the SDOA?
ATTY. PAJILDA:
Our position, Your Honor, is that the validity of the decision of the Presidential Agrarian Reform Council on whether it committed grave abuse of discretion should first be resolved by the Honorable Court because if ever the Honorable Court would decide that PARC has jurisdiction to revoke the SDO because the revocation is premised on the fact that according to PARC, SDO and Luisita is contrary to public policy and is in contravention version of the law then the present compromise agreement should not be considered until and unless there is a resolution on the jurisdiction of PARC.
JUSTICE DEL CASTILLO:
Because if a new agreement is to be entered into it would seem that this would be in violation of CARL already because in CARL within 2 years from the effectivity of that law in 1988 a plan has already supposed to be forwarded to the CARL before approval?
ATTY. PAJILDA:
Yes, Your Honor. And in fact, Your Honor, in our comment and opposition to the compromise agreement we have raised certain violations committed by the parties, Your Honor, and in fact, they stipulation in the compromise agreement are in contravention of the law, Your Honor.
JUSTICE DEL CASTILLO:
Thank you counsel.
CHIEF JUSTICE:
All right, thank you, you are excused.
ATTY. PAJILDA:
Thank you, Your Honor.
ATTY. SANTOYO:
May we request for one minute, Your Honor.
CHIEF JUSTICE:
Anyway you will be given a chance to submit your memorandum.
Private Respondent Rene Galang is represented by Atty. David ERRO who will have five (5) minutes.
ATTY. ERRO:
Good evening, Your Honors. I am representing private respondent Rene Galang.
Considering time limitation, Your Honor, my arguments would be just brief and will be highlighting on main points.
First, Your Honor, we humbly submit that Section 31 of R.A. 57 or the Stock Distribution Option is unconstitutional as it runs contrary to the provisions of the Constitution that there must be actual distribution.
Second, Your Honor, even Section 32 or the production sharing agreement is also unconstitutional. In fact, the whole chapter of Chapter 8 which deals with corporate farms must be revisited by this Honorable Court as it contains unconstitutional provision.
Now, going to the assumption that Section 31 is constitutional the implementing rules and regulations or DAR Administrative Order 10, Series of 1988 is void considering the fact that in this Administrative Order it provides for a spin off corporation. Under Section 31 of R.A. 6657 it does not provide any spin off corporation, it only applies or the intention of the provision was for existing corporations at the time of the passage of R.A. 6657 which is or June 15, 1988. Actually, Your Honor, it was the opinion then at that time in 1988 that Administrative Order No. 10 was only tailored for Hacienda Luisita. Given the fact that Hacienda Luisita was incorporated on August 23, 1988 and DAR Administrative Order No. 20 providing for a spin off corporation was made effective on October 26, 1988, meaning, Hacienda Luisita was, a spin off corporation was already incorporated without DAR Administrative Order providing for a spin off corporation. Lastly, of course we note that then President Aquino did not implement Agrarian Reform Program had not for the January 22 incident which is the now famous called Mendiola Massacre, it was precisely the reason why President Aquino then formulated Agrarian Reform.
Now, considering further that on the assumption that Administrative Order No. 10 is valid considering the fact also that it was well, enacted or promulgated by the DAR Secretary then Philip Elawico an appointee of then President Corazon C. Aquino just the same the Memorandum of Agreement is invalid because Section 31 contemplates that the farmers in connection with the land, land equity they have a stock shares in the company. Meaning, the farmers do not have to work on the land because they have already a stocks in relation to the land assets of the corporation. So, the man days as contemplated in the Memorandum of Agreement is likewise void. Going to the points considering the time limitation, Your Honor, the conversion order of Secretary Garilao is likewise void as it violates Section 31 of R.A. 57 assuming that Section 31 is constitutional.
First, the idea of Stock Distribution Option was that the land must be not fragmented and in fact must not be converted because later on if the corporation will not follow the provision of the said Stock Distribution Option then it will be distributed. It is not a question of, because the same was already fragmented then the conversion is invalid. The reason we submit, Your Honors, is that because conversion is irreversible if you fragment a land the same can still be distributed to the farmers as long as it will be devoted to agriculture. However, if the land is being converted since conversion is irreversible you can no longer distribute that to farmers. That is precisely the reason why conversion is illegal in that case and in fact the said Order of Secretary Garilao is void and this Honorable Supreme Court must revisit the said Order in relation, in the issue of stock distribution. Now, of course on the issues paused by this Honorable Court PARC has jurisdiction it extends from the powers of PARC and DAR under Executive Order 229, R.A. 57, DAR E.O. 10 assuming DAR Administrative Order No. 10 is valid. Another point, Your Honor, is that whether or not there is a legal basis for the revocation of stock distribution option the PARC has already ruled that there was a violation of the SDO or Section 31 of R.A. 57. With respect, Your Honor, to whether or not the petitioners before the PARC are real parties they admitted it they are real parties in interest. With respect to the qualification, who are the qualified farmer beneficiaries? we humbly submit, Your Honor, that the original signatories of the MOA done in May 1989 are the original farmer beneficiaries. On the question of whether or not (interrupted)
JUSTICE MORALES:
Counsel, excuse me please wind up your arguments.
ATTY. ERRO:
Lastly, Your Honor, the Luisita Industrial PARC Corporation and Rizal Commercial Banking Corporation are not innocent purchaser for value considering the fact that they admitted that they knew of the DAR conversion order of Secretary Garilao and in that conversion order it was stated there that there will be no conversion. Thank you, Your Honors.
JUSTICE MORALES:
Justice Velasco.
JUSTICE VELASCO:
You said that there can be no spin off corporation under CARL, does Section 31 prohibit the creation of spin off corporation which will substantially absorb the landholdings and assets of the corporate landowner originally owning those assets? Is there a prohibition under Section 31?
ATTY. ERRO:
There was no prohibition, Your Honor, but the intent, the clear intent of said prohibition was for ongoing corporation before the passage. Otherwise, Your Honor, if a spin off corporation will be incorporate in that Section then it will be opened by abuse by other corporations.
JUSTICE VELASCO:
You said A.O. 10, Series of 1988 is unconstitutional?
ATTY. ERRO:
It can be said unconstitutional, Your Honor, assuming that Section 31 is valid because it is only an implementing Rule of Section 31 of R.A. 6657.
JUSTICE VELASCO:
So, if Section 31 is unconstitutional necessarily A.O. 10 is unconstitutional?
ATTY. ERRO:
Yes, Your Honor.
JUSTICE VELASCO:
All right. But you are saying also that the conversion is not allowed, the conversion of the Five Hundred (500) hectares is not allowed under CARL?
ATTY. ERRO:
Yes, Your Honor, considering the fact under SDO, Your Honor, any conversion must not be allowed because of the provision that in case a corporate owner failed to follow what was stated in the SDO plan, Your Honor, then it must be distributed to the farmers by virtue of compulsory acquisition. Therefore, conversion must not be allowed because if you convert a land that is already irreversible different from if you fragment the same. You can fragment the same or convey it to others as long it is devoted to agriculture it can be acquired by the true agrarian reform.
JUSTICE VELASCO:
If there is an A.O., or administrative rule or regulations that is in conflict or collides with an existing provision of law, which will prevail?
ATTY. ERRO:
Your Honor the law, Your Honor.
JUSTICE VELASCO:
Is there a conflict between Section 65 of R.A. 6657 on conversion of land with A.O. 10, Series of 1988?
ATTY. ERRO:
Assuming that A.O. 10, DAR A.O. 10 is valid, Your Honor, there is a conflict, Your Honor, because the main idea of SDO, Your Honor, as I have stated a while ago, Your Honor, was to prevent fragmentation and based on the provision, Your Honor, the conversion of the land because after all it will be distributed to the farmers. In fact, Section 65 must be revisited also in connection with this case, Your Honor. Because under Section 65, it states there that after the award of five (5) years then the land maybe converted. Now, it is the contemplation at the last paragraph of the said Section 65 provided that the beneficiary has already paid their obligation. Obligation refers to amortization, Your Honor, in this case SDO Your Honor there has been no amortization to speak of because it was a prolong land redistribution considering that it provided thirty (30) years to avail. Incidentally, Your Honor, thirty (30) years as it appears, Your Honor, the reason why they provided thirty (30) years in the MOA because under the Cory Agrarian Reform Program the amortization runs for thirty (30) years.
JUSTICE VELASCO:
What do you mean amortization by whom?
ATTY. ERRO:
By the farmers, Your Honor.
JUSTICE VELASCO:
But the shares are for free, it will be given for free.
ATTY. ERRO:
Pardon, Your Honor.
JUSTICE VELASCO:
The shares are for free it will be distributed to the farmworker beneficiaries for free.
ATTY. ERRO:
No, Your Honor, it is not for free. As the SDO speaks, Your Honor, the stocks were based on man days.
JUSTICE VELASCO:
Correct but are they not receiving salaries for the man days or the days work for the firm, they are precisely receiving salaries, are they not?
ATTY. ERRO:
They are receiving, Your Honor, but (interrupted)
JUSTICE VELASCO:
So, they are being paid for it?
ATTY. ERRO:
Precisely, Your Honor.
JUSTICE VELASCO:
So, why are you saying that they are paying for the stocks to be distributed by HLI or, which they have in fact as they alleged had already distributed in full?
ATTY. ERRO:
In effect they are paying because the stocks being distributed to them were based on man days.
JUSTICE VELASCO:
Well, that is your view.
ATTY. ERRO:
Yes, Your Honor, but the contemplation of the law, Your Honor, is that since the equity on land, Your Honor, were the stocks where based, Your Honor, then even the farmers, Your Honor, after the approval of the plan kahit hindi na po sila gumawa because they have already shares in the corporation.
JUSTICE VELASCO:
Anyway, my question to you is — there is a seeming conflict as you said between A.O. 10, Series of 1988 specifically with that provision under Section 5, that the land should not be fragmented and you are saying it cannot be converted for other uses or that its nature could no longer be changed. And I am saying that there appears to be a conflict or there is actually a conflict between A.O. 10, Series of 1988 more particularly Section 5 with Section 65 of R.A. 6657, I am asking you which should prevail, will A.O. 10, Series of 1988 being a mere administrative order prevail over a legal provision or a provision of law which is R.A. 6657?
ATTY. ERRO:
Assuming that Administrative Order No. 10, Series of 1988 is valid, Your Honor, then Section 65 will prevail considering that (interrupted)
JUSTICE VELASCO:
So, conversion can be hand.
ATTY. ERRO:
However, Your Honor, there is a special case in this Hacienda Luisita that under the said Administrative Order No. 10, the same can never be a subject of a conversion.
JUSTICE VELASCO:
But that is only an Administrative Order nevertheless I will ask you — if the land is distributed to a farmer beneficiary and after five (5) years he wants conversion, can the beneficiary be granted conversion by DAR or PARC under Section 65? No, provided all the conditions are present?
ATTY. ERRO:
Yes, Your Honor.
JUSTICE VELASCO:
Can that be done?
ATTY. ERRO:
Yes, Your Honor.
JUSTICE VELASCO:
So, but another way of complying with the CARL is the Stock Distribution Scheme and it is also that right to convert certain portions of land is also given to the corporate landowner so there is nothing wrong with Section 65 or the conversion of certain portions of the Hacienda Luisita, correct?
ATTY. ERRO:
No, Your Honor.
JUSTICE VELASCO:
No?
ATTY. ERRO:
I maintain my position, Your Honor (interrupted)
JUSTICE VELASCO:
What applies to the beneficiary of the land, of a portion of a land, does not apply to a corporate landowner who merely avails of provision of law for stock distribution?
ATTY. ERRO:
In general terms, Your Honor, there must be no equal footing between a corporate owner and a farmer under the Agrarian Reform Program. As we have stated, Your Honor, it is a social justice law so there can be no, in fact, Your Honor, as I have stated that the provision on Section 31 and even Section 29 are unconstitutional because you cannot, by history, Your Honor, you cannot reconcile the differences of a landowner and a farmer. And in this Section of R.A. 6657 it deals with the partnership between a corporation which is the class of a landowner and a farmer.
JUSTICE VELASCO:
Okay. Can you tell us if the five hundred (500) hectares which are subject of the conversion order still economically feasible and sound for agricultural purposes?
ATTY. ERRO:
Right now, Your Honor, only (interrupted)
JUSTICE VELASCO:
Right now.
ATTY. ERRO:
Passing by Tarlac, Your Honor, Hacienda Luisita only a portion can be said as not suitable for agriculture but the rest, Your Honor, they can be still devoted to agriculture.
JUSTICE VELASCO:
It can still be devoted?
ATTY. ERRO:
Yes, Your Honor.
JUSTICE VELASCO:
All right. Thank you, Madam Presiding Officer.
JUSTICE MORALES:
I do not see anyone raising his/her hand. So, you are excused Mr. Counsel. Thank you.
ATTY. ERRO:
Thank you, Your Honors.
JUSTICE MORALES:
May I call on Atty. Monsod, to represent the FARM?
ATTY. MONSOD:
Good Evening, Your Honors, I am sorry to keep you up. Justice Cecilia Muñoz Palma said that the heart of the 1987 Constitution is social justice. The context of social justice is the gross disparities of wealth and political power which is rooted in centuries of policies and practices by the State that favored the socially undeserving few who are powerful. To redress this the State is mandated to undertake measures such as Republic Act 6657 or CARP. The basic principle in CARP is clear. The farmers and regular farmworkers get the land and the landowner gets just compensation and limited retention rights. That is the intent and the spirit of the Constitution. That is public policy that cannot be waived.
The Stock Distribution Option under Section 31 is the only modality of distribution in CARP that does not end with the farmer owning the land. The SDO has no basis or authority in the Constitution. It is an anomaly that must be annulled as inconsistent with a denial of fundamental right of farmers under Section 4, Article 13 of the Constitution which says — the State shall by law undertake an agrarian reform program founded on the right of the farmers and regular farmworkers to own directly or collectively the lands they till.
Section 31, second paragraph gives qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land bears in relation to the company total assets.
The SDO does not effect transfer of ownership on agricultural lands but only shares of stock of a corporation that owns the land. A corporation that has a separate and distinct personality from its shareholders, its properties are not the properties of a shareholders, directors and officers. The end result is the land that the farmers should totally own become the property of a corporation of which they only have minority rights. The SDO gives landowners a way out of actually distributing the land. They continue to control it, to appropriate most of its benefits beyond what the retention limits would otherwise allow. We submit, Your Honors, that the Court should address the issue of constitutionality for the following reasons:
One, the revocation of the SDO of Hacienda Luisita is welcome but this case is more than about the violation of contractual obligations under the SDO, it is about a provision that is against public policy from which no rights or obligations should arise.
Number Two, a ruling of nullity would ensure that the SDO is not resurrected by landowners who want to resist coverage.
Number Three, a ruling of nullity in Hacienda Luisita will help resolve the ten (10) petitions for revocation out of the thirteen (13) other SDOs.
And we submit as well that annulling the SDO will open the doors to the answers to some of the economic and legal issues being discussed today.
Number Four, given the high profiles circumstances of this case it is important for the future of CARP for the Court to send a strong message of political will for its implementation, a ruling of nullity is especially called for in the case of Luisita. There is basis to say that the Luisita farmers have been greatly been disadvantage by questionable exclusions, valuations of land and accounting treatments and by irregularities in its implementation by the use of false economic reasons to justify it by non-attainment of its express purposes and by the coincidence of political power that enable the Cojuangcos of Luisita to advance their economic interests and the State, through DAR, we are sorry to say failed in its duty to protect the farmers throughout the process. The farmers leave it to the wise judgment of this Court whether to adopt the orthodox view of complete nullity or to declare the SDO unconstitutional only with respect to Hacienda Luisita.
We submit, Your Honors, but because a social justice principle is involved this Court must address the issue of constitutionality, that is what the Court said in Central Bank Employee . . .
In closing, Your Honors, this Court in upholding CARP said it should be continuously re-examined and re-honed so that it may be sharper instruments for the better protection of the farmers right.
The Court further said — "by the decision all major legal obstacles to the program are removed to clear the way for the true freedom of the farmer. At last, his servitude will be ended forever; at last the farm on which he toils will be his farm".
We fully agree with the Court except that there is one more obstacle to be removed from the Farmers of Hacienda Luisita to be truly free, the SDO.
Thank you, Your Honors.
CHIEF JUSTICE:
Justice Morales.
JUSTICE MORALES:
Just one question, Atty. Monsod.
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE MORALES:
Do I recall correctly that you were a member of the Constitutional Commission which drafted the 1987 Constitution?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE MORALES:
Given your position that Section 31 of the CARP Law is unconstitutional, did it not occur to you to assail the constitutionality of that law after it was passed?
ATTY. MONSOD:
Frankly, Your Honor, at the time I think everybody was hoping that the CARP would work and the, I do not think everybody foresaw what the problems would be with respect to that. However, I note, we were trying to look at the deliberations of Congress and there is no justification, it just ended up in the law, it looks like it was taken wholly from Executive Order 229, Your Honor.
JUSTICE MORALES:
So, had in your view the CARP succeeded would you have still complained about the unconstitutionality of Section 31?
ATTY. MONSOD:
I might have, Your Honor, yes, because it really, the principle in the Constitutional Commission was that the farmers must get the land.
JUSTICE MORALES:
Even if it succeeded, the SDO Plan even if it is succeeded?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE MORALES:
You should have still assailed its Constitutionality?
ATTY. MONSOD:
Yes, Your Honor.
ATTY. MONSOD:
Yes, Your Honor, because there are alternative ways for the farmers to reach the same success. The whole agrarian reform program Your Honor is not only about land transfer. It is about agrarian reform it is about support services, it's about structures, about irrigation, it's about credit and the whole program was designed that way. However, one of the problems, Your Honor, I think there are several studies which shows what happened to Agrarian Reform, there were some successes, some failures but the point was that Congress did not appropriate the funds. The cost of the agrarian reform was supposed to be over Two Hundred (200) Billion over ten (10) years. The Congress only allowed Hundred and Seventy (170) Billion and we are getting, we are worried today because there is enough funds, there is supposed to Hundred fifty (150) Billion and support services are beginning, we do not know whether the, yes, same problem that we hope will not happen again. But as far as the farmer is concerned it is also proven from the studies that agrarian reform does work. There is so much evidence of that, Your Honor, provided the support services are there. And the approach that the Department of Agrarian Reform finds the most feasible, is what they call the ARC, the Agrarian Reform Community approach where the government focuses on an integrated manner in an area where there is predominance of farmer beneficiaries and puts the resources there. This work, the 50% were it work all over the country agrarian reform were associated with agrarian reform communities, Your Honor.
JUSTICE MORALES:
Thank you.
CHIEF JUSTICE CORONA:
Justice de Castro.
JUSTICE DE CASTRO:
Atty. Monsod, are you willing to have this case settled amicably at the negotiating table?
ATTY. MONSOD:
Your Honor, our position is that any amicable settlement or discussions here must be within the framework of CARL and not with the framework of the SDO.
JUSTICE DE CASTRO:
So, it would seem that you are amenable to a compromise agreement?
ATTY. MONSOD:
Yes, Your Honor, provided it is not within the framework of the SDO.
JUSTICE DE CASTRO:
Now, under what condition will this negotiation be undertaken so that we can be assured of the equal bargaining position of the two (2) parties?
ATTY. MONSOD:
Actually there were certain initiatives in the past few weeks several Bishops wanted to talk to President Aquino to see whether in fact they can be part of group that will try to see if there is a possible solution but they could not get an appointment with the President.
JUSTICE PEREZ:
Atty. Monsod, you are saying that Section 31 is beyond redemption?
ATTY. MONSOD:
Yes, Your Honor, I think the discussion today showed that, there are so many limitations to it and it was not really, the way it appears now it was not really designed to improve the lives of the Farmers, it was designed to allow the landowner to keep the land.
JUSTICE PEREZ:
My sense is that, that is correct if it is being applied, I mean, the stock option agreement is being applied in a situation where the corporation is the farmer such as Hacienda Luisita. But in a situation where the corporation is engaged in another business other than farming and it happens to own land which is tenanted then Section 31 should apply or can apply. Because in that sense or in that situation the farmers of that landholding of the corporation which is not engage in farming can choose whether it can work in the farm or join the corporation of the landowner?
ATTY. MONSOD:
Your Honor, in that case DAR must cover the agricultural land of that corporation (interrupted)
JUSTICE PEREZ:
Yes (interrupted)
ATTY. MONSOD:
Must cover, is not, what I am saying is that the corporation is not exempt from agrarian reform.
JUSTICE PEREZ:
Yes, yes it is not exempt (interrupted)
ATTY. MONSOD:
Yes, so, the land that you are talking about where the corporation is engaged in other businesses that's agricultural land that land must be covered (interrupted)
JUSTICE PEREZ:
Yes.
ATTY. MONSOD:
And must be given to farmers.
JUSTICE PEREZ:
But the farmers is given the option under 31, they are not forced to join the corporation, they may join the corporation because they may see that the landowner's businesses that thriving and that it can go there, it can join that corporation, can remain as a farmer if he wants to.
ATTY. MONSOD:
Your Honor there are many instances where the land is distributed to the farmer and then they go into contract growing, they have a relationship, continuing relationship, with the company. There are even instances where the farmers who get that land that is part of the corporation can lease it back to the corporation. There are many modalities but the important thing is the land must be owned by the farmer, the title to the land must go to the farmer.
JUSTICE PEREZ:
That is possible under Section 31. What I am saying is, we can save Section 31, it is just that the application of 31 to Hacienda Luisita is what is unconstitutional.
ATTY. MONSOD:
As we said, Your Honor, we trust the wisdom of the Court to look at it from either an absolute nullity or a relative constitutionality.
JUSTICE SERENO:
Mr. Counsel, may I proceed?
CHIEF JUSTICE:
Justice Sereno.
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE SERENO:
Mr. Counsel, may we know if you know of no other country in the world that has a stock distribution option for farms that are being subject to land reform?
ATTY. MONSOD:
I cannot say off hand, Your Honor, but in our part of the world in fact the Agrarian Reform implementation in our part of the world was mainly under authoritarian rule and those who objected to it in some of these countries were simply shot. So, I do not know whether frankly they had this other option.
JUSTICE SERENO:
That is also too strong a word to say about an option but may I also ask the government to comment on that if there is any stock distribution option. Because what I am trying to resolve here is whether this is inherent illogic in putting land reform lands under a Stock Distribution Option. The idea of Justice Perez is something that I would like to expound on. Basically, he is saying that Section 31 maybe inappropriate for Luisita, for Hacienda Luisita but it is not inappropriate for other situations. In other words, the idea of a farmer being able to enjoy the profits of an ongoing concern should still be an option to farmers. And I would like you to maybe address that issue later in your Memorandum; I will not request the (interrupted)
ATTY. MONSOD:
Can I just have a brief answer to that?
JUSTICE SERENO:
Yes.
ATTY. MONSOD:
I think there are two (2) parts to the use of the land there is the income now from the land and there is the hidden value in the land. And part of the Social Justice Program is precisely to distribute wealth and wealth is in the land and in many cases the wealth is still hidden and cannot be realized yet. But that is the whole purpose of Agrarian Reform not just to lift the income of the farmer but to give him wealth.
CHIEF JUSTICE CORONA:
Justice Mendoza.
JUSTICE MENDOZA:
Is it your position that you are open to any settlement with the landowner, your group?
ATTY. MONSOD:
Your Honor provided it is not with the framework of the SDO but of CARL of the law not the SDO.
JUSTICE MENDOZA:
You have read the compromise agreement submitted before the Court?
ATTY. MONSOD:
May I beg your pardon, Your Honor?
JUSTICE MENDOZA:
You have read the compromise agreement submitted before the Court?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE MENDOZA:
Are you against that compromise agreement?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE MENDOZA:
Can you explain to the Court why you are against that compromise agreement?
ATTY. MONSOD:
The compromise agreement presents the farmers with two (2) false choices.
JUSTICE MENDOZA:
Two false choices, can you explain.
ATTY. MONSOD:
Both of them bad. Yes, Your Honor, because the farmers have other options than merely accepting one thousand three Hundred or one thousand four hundred square meters where they put in Seven Thousand Eight Hundred square meters into the enterprise. They can have the land, if they get the land there are many modalities, there are many ways by which they can be helped by government by which they can earn more from the land and if you read Your Honor all the answers of the farmers on why they got the money, there is not a single one I read, maybe you did, but I did not read a single answer of the farmers saying it was excellent, it was a good deal for us. They say — we have no money, we have no food better there is cash now, you know, I need it, how long will I have to wait for the case, it has been four (4) years I cannot wait much longer at least there is something here that I am getting and maybe 20 Million, maybe another 30 Million to do it. I have not read any reply of the farmer that does not reflect the fact that he is in a desperate, no choice situation that means there is something wrong with it. Now, for example, Your Honor, there is a portion there that says — you will get that measly one thousand three hundred or one thousand four hundred square meters because of the thirty three (33%) thing. And said — if you want to sell, Hacienda Luisita has a right of first refusal, it is three hundred sixty (360) days right of first refusal. If a farmer needs money very badly there is a good offer from his land and he needs it, he goes to Hacienda Luisita and Hacienda Luisita will make him wait to three hundred sixty (360) days, don't you think he will accept a much lower price because precisely he is on the edge of survival. This is the kind of option that has been given to the farmer. DAR was not asked to participate in this process, when they are asked why the DAR was not participating they said DAR can say its opinion in the Supreme Court. But precisely DAR was needed in order to make sure that the consent of the farmer was not vitiated that there was a reciprocity of values which there is none here.
JUSTICE MENDOZA:
Even if this compromise agreement, would you have objected if this was under the supervision of the DAR?
ATTY. MONSOD:
That would have helped but I think that the farmers should be presented with more than two (2) options, both of them bad.
JUSTICE MENDOZA:
Thank you.
JUSTICE ABAD:
Actually I share that ideal that land reform is intended not only to give land to the farmers buts also to distribute wealth in a sense but the reality is that, did those farmers who got their land continue to farm those lots, we have lots of cases here where the awardees have sold their land to, they moved to the United States to join their children and the reality is that the land is dynamic, the ownership of the land cannot be controlled by law and say — land for the farmer will stay as land for the farmer for all time but that the nature of the business, the nature of the way we live our lives is that we hold things temporarily and a lot of farmers who were beneficiaries before have transferred their rights to others and maybe to businessmen who are now leasing it to others. And so that ideal that you have although it is a good ideal, don't you think that it does not work on the grounds where or the realities that we have?
ATTY. MONSOD:
Actually we have actual cases. I worked with the farmers group called task force mapalad and we have farmers in fifteen (15) provinces all over the country. The farmers are working on 93,000 hectares of private agricultural lands and about ninety-two or ninety-three thousand of public land which includes indigenous peoples, Your Honor. And while not all the places are doing them, many of them are doing them. For example, in sugar which just won a very problematic land in Negros Occidental called Dilis Malaga were in that area of Negros 15 of our farmer leaders have been killed. We were able to get and the farmers had less than one (1) hectare, less than one (1) hectare each and they are making a go of it because they have a muscovado plant, well, fortunately sugar prices are high and they form themselves into a cooperative. Here in Hacienda Luisita there are farmers who are now cultivating pieces of land, while they are being allowed they are growing vegetables, they told us they get about seventy-five thousand to one hundred thousand net per hectare per year. If they do sugar it is less than that, so, the question earlier I think was raised here — do they have to continue planting sugar? The answer is, no, I also agree with Justice Velasco that this thing about, you know, preventing them from converting the land is wrong because if you look at that provision it says that the farmers to increase, to improve their lives and productivity where if you increase your productivity you may lead a smaller piece of land in order to produce even more and if that land that there is as piece that is not a suitable to agriculture why not convert it that is fine let the farmers realize wealth from his land.
JUSTICE ABAD:
Yes, but when you distribute land to a farmer and he gets his piece of land he has discretion of what to do with it. He does not have to join your cooperative (interrupted)
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE ABAD:
And as I said you are citing some very successful situations but I have seen some cases where those who received their land sold their lands, we have a lot of cases like that. So, what I mean is that when a farmer gets his land still under the Land Reform Law they have the option to decide what to do with that land. It does not mean that they have to themselves farm it. As a matter of fact, if they paid the bank the value of the land they can sell it to others already and like the old provision that the sale is prohibited. Now, they can also transfer it. So, is it not fair also that the farmers of Luisita should when they are assigned, when the law assigns to them a piece of land they sign to some other option anyway that is their land, that is their right.
The government tells people that we know better for you and this what we want this done and so, I do not think that is fair to say the farmers. In 1989 when everybody is able to read and write already and have communication we are not in the pre-war era, we are already in the 1989.
ATTY. MONSOD:
Your Honor, the farmers, they may know how to plant, they may know certain things very, very well but when it comes to situation like the SDO, I am sorry, they really need help for that.
JUSTICE ABAD:
So, who will decide that for them?
ATTY. MONSOD:
The Agrarian Reform Program Your Honor assumes that the government will come in and help the farmers start, that is part of the Agrarian Reform. As I said it is not only land transfer, it is Agrarian Reform and many of those instances you cited the farmers did not get government support, they had nothing, they just had the land and so in desperation since they did not get the support that they needed they sold or they mortgaged it and forgot about it. But the fact is that the government must come in, it is, we know that the farmer need it, that is why even the new CARP law even provides money for their initial capital that will make a difference because if you are planting season is 5-6 months, how do you eat? What do you eat during the period?
JUSTICE ABAD:
Well, precisely that is the reality that is why some of these farmers thought that since they will not receive support from the government they must as well go for this SDOP?
ATTY. MONSOD:
Yes, well, I understand that but today I think the President can help here to send DAR there and tell them what we will do is make this whole area an agrarian reform community and make it a model for the country, the President's land will be a model for Agrarian Reforms and you cannot imagine what that will do to the country, Your Honor.
JUSTICE BERSAMIN:
Thank you, Chief, Atty. Monsod, I did not hear anything from you about whether you are willing to concede that RCBC and LIPCO are purchaser, innocent purchasers for value, will you please say something there?
ATTY. MONSOD:
Yes, Your Honor if Section 31, second paragraph is annulled as unconstitutional, then everybody goes back to 1989 and then if the DAR will then cover it will go through its processes and in that process RCBC and LIPCO can present their evidence, can present their approvals and so on and in that fresh start not only four thousand nine hundred fifteen — six thousand four hundred forty-three hectares should be notified for coverage because in that the deduction of one thousand five hundred to arrive at four thousand nine hundred from six thousand four we do not have, we wish there was a forensic study of this but there is an item there for example — six hundred fifty-two hectares and it is designated for possible housing for employees in case what has not been allocated of one hundred twenty hectares is not sufficient were six hundred fifty-two hectares for housing is equivalent for housing for over thirty thousand workers.
Now, so the question is — why was that land not included into the land that was supposed to go to the farmers then I think Justice Velasco also pointed out for example about the valuation the land that was attributed to the farmers was valued at forty thousand per hectare that the land that was contributed by Hacienda Luisita for the farmers houses, home lots is valued at five hundred thousand per hectare. There is also the matter of the standing crops, there is a hundred and six million allocated for standing crops. Under the law, the standing crops belong to the land owner he can harvest it if he wants where they put it into Hacienda Luisita, is that the same, no it is not, because it increase the equity of Hacienda Luisita and gave it far more value than what they would have gotten if they simply harvested it. So, there are many things, Your Honor, that have to be looked into when and if this land is again covered.
JUSTICE BERSAMIN:
All right, based on the answers that you have just given and on the exchanges a while back, my final question to you is — you have nothing anymore, you do not object at all to the conversion of the five hundred hectares (interrupted)
ATTY. MONSOD:
No, in the case, I am just saying as a rule, I think Justice Velasco is correct that Section 65 is there but in the case of the specific five hundred hectares that was sold if RCBC and LIPCO can show for example — that this land is really no longer suitable for agriculture anyway, the issue there is the 1.2 Billion, what happened to the 1.2 Billion? You know when Hacienda Luisita asked for this conversion they gave several reasons — they said — with this conversion we will pay our debts, with this conversion we will increase productivity, we will buy new machinery, we will put the Hacienda in good operating condition and there is a chance for dividends and profit, this was in 1996. In 2004 Hacienda Luisita admitted that they had not been making money. What happened to the promises for the 1.2 Billion and what happened to the 1.2 Billion? I think the farmers are entitled an accounting of that money.
JUSTICE BERSAMIN:
As a final point — you speak for Farm East Foundation?
ATTY. MONSOD:
Farm, it is only Farm.
JUSTICE BERSAMIN:
Only Farm. That is a group of farmers.
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE BERSAMIN:
Also in Hacienda Luisita?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE BERSAMIN:
How many are they? 28?
ATTY. MONSOD:
Yes, Your Honor. The Farmers — they are 27 farmers.
JUSTICE BERSAMIN:
Okay, thank you. Thank you Chief.
JUSTICE VELASCO:
Atty. Monsod, is it your position that Section 31 is unconstitutional?
ATTY. MONSOD:
Yes, Your Honor, second paragraph.
JUSTICE VELASCO:
And you will agree that the policy behind CARL is to enhance the dignity and improve the quality of lives of landless farmers to greater productivity of agricultural lands?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE VELASCO:
And you are saying that the main objective is really to distribute wealth to the landless farmers or farmworkers?
ATTY. MONSOD:
It is both equity — it is both income and wealth.
JUSTICE VELASCO:
Income and wealth, correct?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE VELASCO:
Now, under Section 31, it is provided that the Agrarian Reform will be implemented through a stock distribution plan whereby a corporation or a corporate landowner will distribute shares to the farmer beneficiaries of the land owned by the corporation, correct?
ATTY. MONSOD:
Yes, Your Honor.
JUSTICE VELASCO:
I tend to agree with the statement made by Justice Perez that it is possible that it is the application of Section 31 that is erroneous and that it should have been DAR and PARC that should have applied it correctly. What I am trying to point out is the fact that in this DOA of HLI, the farmer beneficiaries were made only minority stockholders but in order to achieve the policy behind the CARL to distribute income and wealth to the landless farmers then it must be a condition for the approval of the SDOA that the farmer beneficiaries should be the majority stockholders, or more importantly, that they should actually be the only stockholders of the corporation. Meaning to say, they have full control over the use of the landholdings of the corporation. In such a situation, it is as if the landholdings are being owned and managed by a cooperative of farmer beneficiaries or a farmer organization owns it and in such a situation the policies, the goals, behind the CARL can still be achieved, do you agree with that?
ATTY. MONSOD:
That would be Section 29, Your Honor.
JUSTICE VELASCO:
No, that is different, I am not referring to that I am still referring to stock distribution option plan whereby DAR or PARC should only have approved stock distribution schemes where the farmer beneficiaries are majority stockholders of the corporation owning the land or if possible practically all the shares are owned by the farmer beneficiaries because in such a situation it is as if land is actually given to the farmer beneficiaries, is that correct?
ATTY. MONSOD:
Well, if the idea, Your Honor, is that the farmers control the corporation but that you keep on the landowner for whatever reason, if the idea is the landowner maybe knows better than the farmers on how to manage a corporation or a big plantation, there is a modality for that it is called land administration where all the land is given to the farmers and the farmers hire the former landowners to help them administer the land. Now, during the time Your Honor, when this, there was discussions on this apparently there was a proposal by Mangahas at the time that it is okay to have this stock distribution and just give the farmers 3% a year after 17 years they should have 51%, that was turned down.
JUSTICE VELASCO:
Well, that is a good scheme also. Yes, but under Section 31, if the farmers own the majority of the stockholdings and they will have a say over the operations and activities of the corporation then they are the ones who will have actual control and they will be the ones to determine whether the business of the corporation will be successful or not. So, in the end actually there is nothing wrong with Section 31. It is the application of Section 31 because SDOA here of HLI, the farmers only have 33% and they do not make the decisions while if they have the majority of the stockholdings then they chart their own course, they do whatever they want and with the full support of DAR and the government the Hacienda Luisita Agrarian Reform Project could have been successful, do you agree with that?
ATTY. MONSOD:
No, Your Honor, because that is not in the law. The law doesn't say that provided that the farmers have 67% or 80% of the shares, that is precisely what is wrong with the law, does it allows the landowners to keep control of the land through the corporate system. Now, if you are saying maybe that the law is amended that is something else but as it stands it is unconstitutional.
JUSTICE VELASCO:
No, I am not saying that the law should be amended what I am saying is that it is DAR that should be determine the value of the landholdings to be contributed to the corporation and also the other assets that will be transferred or should be retained by that corporate land owner. But in this case the other assets are more valuable than the landholdings, the other assets are valued at 393 Million while the landholdings are only valued at 196 Million. And so in such a situation the farmer beneficiaries will have necessarily have only a minority share. Well, it will constitute the minority stockholders but if DAR or PARC did not allow that to happen and could have segregated the landholdings and that will constitute the main bulk of the assets of the corporate land owner which proposed the SDOA, then things would have been different. So, what I am saying is that it is the application of Section 31 where we could have attained the goals or policies and objectives of the CAR. So, in that view or in that sense, I feel there is nothing wrong or even unconstitutional with Section 31.
ATTY. MONSOD:
The way it is written, Your Honor, is what is wrong.
JUSTICE VELASCO:
The what?
ATTY. MONSOD:
The way the whole Section.
ATTY. MONSOD:
The way the whole Section is written is what is wrong with it, is what makes it unconstitutional.
JUSTICE VELASCO:
Well, even if that is worded that way I still feel that if DAR and PARC decided on the proposal correctly then the objective behind the CAR could still be attain. Thank you, counsel. You may have a different position and I respect that.
ATTY. MONSOD:
Thank you, Sir.
CHIEF JUSTICE CORONA:
Justice de Castro.
JUSTICE DE CASTRO:
I fully agree with your position that Agrarian Reform is not just about land transfer it is a complete package. So, the law provides for support services, availability of credit to the farmers, subsidies for irrigation, identification of market, assistance in research and so forth. So, the ability of the farmers to maintain the economic viability of the land that is transferred to them is address by the provisions of the law and most important provision here is the funding source. Section 63 of the law contains an ambitious funding source for this comprehensive agrarian reform. Now, since you seem to be very knowledgeable about the implementation of this law, can you tell us what happened to the funding source, all the proceeds from the disposition of ill gotten wealth should all go to CARP, the disposition of the properties by the Asset Privatization Trust should all go to CARP there is an appropriation of 50 Billion pesos that should be done by Congress and there are many other funding sources provided for under Section 63, what happened to all of these money provided for by law?
ATTY. MONSOD:
That is a very complex question, Your Honor, but what happened is that some of these funding were diverted to other uses but I am not in a position to, no, I have haven't really looked at it in that way but that is what it seems to have happened and when we are asking the DAR people for example about these dollars that were supposed to go to Agrarian Reforms they said that the money was put into the operations of DAR. That should have been funded by regular appropriation instead of putting it in the programs of DAR but I do not know the details I have not really done study, I am sorry, Your Honor . . .
CHIEF JUSTICE CORONA:
Thank you Counsel, you are excused.
Can we recall the Corporate Secretary of Hacienda Luisita and also Atty. Asuncion to the podium Justice Velasco has some few questions . . .
JUSTICE VELASCO:
I will just profound a question to the Corporate Secretary. — Seven Hundred Fifty Million were paid by LIPCO to Centenary Holdings, is that correct?
CORPORATE SECRETARY:
Yes, Your Honor.
JUSTICE VELASCO:
How was the Seven Hundred Fifty Million used by Centenary?
CORPORATE SECRETARY:
Well, Your Honor I would like to explain it this way. The Seven Hundred Fifty Million was the total purchase price of the land. This was payable in 5 tranches, Your Honor. The first year the whole 3% for the entire Seven Hundred Fifty Million was paid by HLI to farmworker beneficiaries. The balance of the amount went to operations, Your Honor and also the payments of some of its obligations. As far as that time is concerned, Your Honor, HLI was still in operation.
JUSTICE VELASCO:
Okay, How about the other amounts like January 21, 1999, Hundred Fifty Million, how was it (Interrupted)
CORPORATE SECRETARY:
I was referring Your Honor to the entire thing, Your Honor.
JUSTICE VELASCO:
Ah, to the entire thing.
CORPORATE SECRETARY:
Yes, Your Honor, this was paid every One Hundred Fifty Million.
JUSTICE VELASCO:
Right I know. But can you, I think we will order the submission of the respective memoranda, can you put the breakdown of the expenses pertaining to Seven Hundred Fifty Million?
CORPORATE SECRETARY:
We will do that, Your Honor.
JUSTICE VELASCO:
All right, so, at present is there anything left of the Seven Hundred Fifty Million?
CORPORATE SECRETARY:
I am not really aware Your Honor, this is a finance matter, Your Honor, but I think that the entire amount has been put into the operations of Hacienda Luisita (interrupted)
JUSTICE VELASCO:
Does the company Hacienda Luisita still have liabilities as of the present time?
CORPORATE SECRETARY:
Well, Your Honor, HLI is not actually in operation at present since the time the strike overtook the company.
JUSTICE VELASCO:
No, I am talking about liabilities.
CORPORATE SECRETARY:
There are liabilities of course, Your Honor.
JUSTICE VELASCO:
Do you know how much would be the liabilities as of the present time?
CORPORATE SECRETARY:
Well, I am not in a position right now to say because I do not have the records.
JUSTICE VELASCO:
Can you also put that in the memorandum so that we will have a complete picture of the dispute.
CORPORATE SECRETARY:
We will do that, Your Honor.
JUSTICE VELASCO:
Thank you. We will just ask some questions to Atty. Asuncion.
ATTY. ASUNCION:
Yes, Your Honor.
JUSTICE VELASCO:
Atty. Asuncion 184 hectares were transferred to RCBC, Hundred Fifteen point Eighty-Six (115.86) hectares still remain with LIPCO, is that correct up to the present time?
ATTY. ASUNCION:
I would check it with the Corporate Secretary, he is the one in-charge with the land distribution.
JUSTICE VELASCO:
Okay, you can inquire.
CORPORATE SECRETARY:
May I please get the question again, Your Honor?
JUSTICE VELASCO:
Yes., 184.13 hectares were transferred to RCBC and that there was dacion en pago of the loan of 431 Million, correct?
CORPORATE SECRETARY:
Your Honor, this is a purely transaction after Centenary sold this property to LIPCO, this is a transaction purely between LIPCO and RCBC.
JUSTICE VELASCO:
I am asking Atty. Asuncion if he is familiar with this and he pointed to you.
CORPORATE SECRETARY:
Maybe he was referring to the Corporate Secretary of LIPCO, Your Honor.
JUSTICE VELASCO:
Ah, okay, is she around?
Can we . . .
CORPORATE SECRETARY OF LIPCO:
Yes, Your Honor,
JUSTICE VELASCO:
Can you identify yourself.
CORPORATE SECRETARY OF LIPCO:
Yes, Your Honor, my name is Maria Celia Fernandez Estavillo.
JUSTICE VELASCO:
In LIPCO what remained after 184 hectares were transferred to RCBC is 115.86 hectares ?
CORPORATE SECRETARY OF LIPCO:
Yes, Sir.
JUSTICE VELASCO:
How was this used, are there improvements there is this devoted to any project or anything (interrupted)
CORPORATE SECRETARY OF LIPCO:
On the 115.87 hectares, Your Honor.
JUSTICE VELASCO:
Yes.
CORPORATE SECRETARY OF LIPCO:
There is a road network, a complete network there, there is water treatment facilities, there are fiber optics that have been installed and some electric facilities that had also been placed.
JUSTICE VELASCO:
What will be the use for these 116, are you going to sell it to individual purchasers?
CORPORATE SECRETARY OF LIPCO:
Originally Your Honor LIPCO was intending to have locators by let us say 10 hectares per plot so that they could have an industrial park in the area. Unfortunately we were not able to get any locators so the facilities are still as they are.
JUSTICE VELASCO:
Right now there are no improvements or structures on the 115 hectares?
CORPORATE SECRETARY OF LIPCO:
There are, Your Honor, we have the roads and the waste water facilities treatment and the fiber optics as well as the (interrupted)
JUSTICE VELASCO:
How about the structures, buildings?
CORPORATE SECRETARY OF LIPCO:
There are simple buildings just the entrance and the administrative building that has already grown old but there are no locators.
JUSTICE VELASCO:
So, up to now the 115 hectares are still intact, this is still owned by LIPCO.
CORPORATE SECRETARY OF LIPCO:
Still owned by LIPCO, yes.
JUSTICE VELASCO:
Aside from 115 hectares what other assets of LIPCO, what are the other assets?
CORPORATE SECRETARY OF LIPCO:
LIPCO has no assets in fact Your Honor it has great amount of debt comprising the shareholder advances that had been paid by the shareholders. So, LIPCO has about 1.8 Billion in debt to the shareholders and the only asset is the 115 hectares of land that is now currently being contested.
JUSTICE VELASCO:
So, it is in the red, that is what you are saying?
CORPORATE SECRETARY OF LIPCO:
Yes.
JUSTICE VELASCO:
LIPCO transferred 200 hectares to Luisita Realty Incorporated, correct?
CORPORATE SECRETARY OF LIPCO:
Your Honor, no, Centenary Holdings sold to LIPCO 300 hectares and we never had any dealings with Luisita Realty.
JUSTICE VELASCO:
Ah, it was Centenary. Okay, you are excused.
CORPORATE SECRETARY OF LIPCO:
Thank you, Your Honor.
JUSTICE VELASCO:
Can we call the Corporate Secretary again of Centenary, Chief, because I want to ask about the 200 or Luisita.
JUSTICE VELASCO:
I am sorry we recalled you again. I just want to know 200 hectares was transferred by Centenary to Luisita Incorporated, correct?
CORPORATE SECRETARY OF CENTENARY:
No, Your Honor.
JUSTICE VELASCO:
No?
CORPORATE SECRETARY OF CENTENARY:
It is actually Centenary who transferred 300 hectares to LIPCO.
JUSTICE VELASCO:
No, no, I am talking about 200 hectares to Luisita Realty Incorporated.
CORPORATE SECRETARY OF CENTENARY:
HLI transferred that, Your Honor.
JUSTICE VELASCO:
HLI, correct.
CORPORATE SECRETARY OF CENTENARY:
Yes, Your Honor.
JUSTICE VELASCO:
Is that covered by a deed of sale or any documents showing the conveyance?
CORPORATE SECRETARY OF LIPCO:
They are covered, Your Honor.
JUSTICE VELASCO:
And what is the consideration for the transfer of 200 hectares?
CORPORATE SECRETARY OF LIPCO:
500 Million, Your Honor.
JUSTICE VELASCO:
And HLI is in possession of the 500 Million?
CORPORATE SECRETARY OF LIPCO:
This was transferred way back in 199 . . . I may be, if I can remember, Your Honor, first 100 hectares was first transferred to Luisita Realty for 250 Million Pesos and on the following year I think another 100 hectares was transferred to Luisita Realty Incorporation they are both covered by the deed of absolute sale.
JUSTICE VELASCO:
Can you submit copies of that and attached it to the Memorandum?
CORPORATE SECRETARY OF CENTENARY:
Yes, We will do that, Your Honor.
JUSTICE VELASCO:
And can you tell us how this 200 Million was utilized by HLI?
CORPORATE SECRETARY OF CENTENARY:
First of all we also paid the 3% to the farmworker beneficiaries amounting to 15 Million. 7.5 Million for the first year of sale which is 1996-1997 followed by another 7.5 Million something like 1998. Again, Your Honor, these amounts were also used for the operations of HLI way back then because they are also operating, Your Honor.
JUSTICE VELASCO:
Can you also submit the details on the expenditures pertaining to the 200 Million?
CORPORATE SECRETARY OF CENTENARY:
Yes, Your Honor.
JUSTICE VELASCO:
What is the financial condition of HLI now?
CORPORATE SECRETARY OF CENTENARY:
Well, Your Honor, like I mentioned earlier HLI has liabilities but I am not in the position to tell what exactly is the amount, also we are aware Your Honor that the company is not actually in operations, in farming operations, Your Honor.
JUSTICE VELASCO:
Can you also submit a probably a report on that by your accounting department or the financial officer of HLI?
CORPORATE SECRETARY OF CENTENARY:
Yes, Your Honor, we will do that.
JUSTICE VELASCO:
Thank you.
CHIEF JUSTICE CORONA:
Thank You, you are excused.
We would like to decide this case as soon as we can so simultaneous filing of memoranda within non extendible period of 20 days from today.
Okay, Justice Velasco is suggesting 30 days but we are creating a special committee to try to resort to mediation. So, not 20 days simultaneous filing of memoranda, 30 days without prejudice to that avenue of mediation. Thank you.
Session adjourned —
CERTIFICATION
We hereby certify that the foregoing transcript of the stenographic notes are true and correct to the best of our knowledge, skill and ability.
(SGD.) CARIDAD A. PINOTE
ANNALOU BAQUIRAN-ABAYA
MILAGROS R. CRUZ
FAMELA Z. CAMACHO
BENJAMIN ANCHETA
* Note: Copied verbatim from the official copy, discrepancy between the amount in word and figures.