Legal Notes – Void or Valid? : The legal acrobatics of the Supreme Court decision in Hacienda Luisita

Legal Notes

Rep. Kaka Bag-ao

Akbayan Party-list

North-wing 616, House of Representatives

Phone – 9316026 or 9315001 loc 7435 | Email: repbagao@gmail.com

Contact Adrian Baccay (09088849546 / 09274308021)

 

Void or Valid? : The legal acrobatics of the Supreme Court decision in Hacienda Luisita

 

Decision or Confusion?

In its decision dated July 5, 2011, the Supreme Court affirmed the resolution of the Presidential Agrarian Reform Council (PARC) revoking the Stock Distribution Plan (SDP) of the Hacienda Luisita Inc. (HLI). At first glance, it may seem that the decision is a victory for the farmers. However, a close reading of the lengthy decision will show that it leaves much to be desired.

To be fair, the decision did have some positive aspects.  It made an assertion that the revocation of the SDP is not an intra-corporate dispute and that the SDOA is a special contract imbued with public interest and is primarily governed by the provisions of RA 6657.

The SC also agreed with the findings of the PARC that HLI did not fully comply with the distribution of homelots to the farmworker-beneficiaries (FWBs), that the use of “man-days” formula in the distribution of stocks effectively diluted the shares of the qualified FWBs in the corporation and that the provision of the SDP which called for a 30-year timeframe for the distribution of the stocks was violative of the mandated 3-month period to complete the transfer process of shares.

However, the good news all ended there.  These favorable declarations seemed very insignificant compared to the alarming statements plaguing the decision.

First, the decision disagreed with PARC’s argument that the SDP failed to enhance the dignity and improve the quality of the lives of the FWBs because it is not a guarantee of the law.

Proceeding with this view of the SC, SDPs, in general, are not expected to uplift the status of our farmers.  While the other farmers who have been granted their own lands under compulsory acquisition are already enjoying the benefits of tilling their own lands, their counterparts who have become subjects to the stock distribution option, such as the FWBs of HLI, are placed at the mercy of the corporate gods. If the corporation proved to be unprofitable, the FWBs are forced to accept their fate. In local parlance, “sorry na lang sila.”   This is the picture that the decision conveys.  Despite the fact that HLI is far from profitable, having admitted to be deep in debts, the SC still gave the FWBs the worthless option of staying as a stockholder of an ailing corporation contrary to the dictates of social legislation. Pursuant to its fundamental role as defender of the oppressed, it should have intervened and decided in favor of land distribution because it is clearly the better alternative for the FWBs. It cannot wash its hands by saying that the FWBs took the risk when they opted for stock distribution.  If the stock option failed to achieve the fundamental objective of agrarian reform, the distribution of the lands to the FWBs becomes imperative.

Second, the decision disagreed with the pronouncement of PARC that the conversion of the lands violated the SDP.  As a justification, it maintained that it is not the agricultural land which the law mandates to remain intact but the viability of the corporate operations.  If we subscribe by the logic of the decision, HLI can just dispose the agricultural lands and merely claim that it is necessary for the viability of the corporation. It will result to the fragmentation of ownership and will serve to deprive the FWBs of their livelihood and a portion of their share of the land. This is contrary to the very heart of agrarian reform which is the ownership by the farmers of the land they till.  Clearly, the physical integrity of the farmlands must remain inviolable.

Third, the decision overturned the pronouncement of PARC that the 2-year period under the law does not pertain to the implementation of the SDP or the distribution of the stocks but applies to the approval of or application for the stock distribution option. However, in its discussion on the period of implementation, it held that the corporate landowner is compelled to complete, not merely initiate, the transfer process of shares within a three (3) month timeframe.  Now, which is which? Apparently, even the Court is confused.

 

Stock Distribution Option : Constitutional or Unconstitutional?

One of the biggest confusions created by the decision concerns the issue of the constitutionality of the mechanism of stock distribution.

The decision stated that the constitutionality issue was rendered moot by the passage of RA 9700 (CARPER) in 2009.  Not only was the issue moot, the SC likewise held that it was not the lis mota of the case, which means that its resolution is not critical and that the tribunal can still rule upon the case using other grounds.  However, despite these clear pronouncements, the Supreme Court treaded dangerous grounds by discussing and impliedly ruling in favor of constitutionality. This may have an undesirable impact on the other 14 SDOs, 12 of which have been petitioned for revocation, existing throughout the country.

The Supreme Court impliedly upheld the constitutionality of the stock distribution option by stating that it falls within the ambit of the second mode of land distribution which is collective ownership.  In the decision, the SC interpreted the words “collective ownership” to mean as “sama-samang paggawa sa isang lupain o isang bukid”, an example of which is the HLI SDP.

In a stock distribution option, farmers are given shares of stocks in corporations instead of lands. In the case of the HLI, the corporation owns the land and the FWBs were given stocks amounting to just 33% of the total number of shares.

As mere minor stockholders, the FWBs have no ownership or control over the land and may even be deprived of it by the simple expedient of conversion and sale of the lands by the corporation. Through this mechanism, the FWBs of HLI will never become the owners of the lands. Yes, they may have stocks, but they are still landless. For years, they will be tilling and remain slaves to lands belonging to corporate landowners. Worse, the corporation may even dispose of the majority of the lands under the guise of “sustaining corporate viability” leaving the FWBs with no land at all.  Emphatically, the freedom from bondage to the soil envisioned by the true land reform will never be realized.

The words of Justice Mendoza in his dissenting opinion are instructive:

In a genuine land reform, the qualified FWBs should be given, directly or collectively, ownership of the land they till with all legal rights and entitlement, subject only to the limitations under the law, like the retention limits, expropriation and payment of just compensation. Under a collective ownership, if they are not in control of the cooperative or association, it cannot be considered a compliance with the law.”

Clearly, if the Supreme Court intended to uphold the tenets of true agrarian reform, it should have ruled against the constitutionality of Section 31.

 

Is the Stock Distribution Option Agreement valid?

It bears emphasis that the nullification of the SDP by PARC was affirmed by the SC. The obvious and necessary consequence of the nullification is that the SDP no longer exists.

The Supreme Court, however, took a different view.  Under the cloak of the principle called “operative fact”, it justified the continued existence of the SDP after having declared it to be void.  This is borne by the directive of the Supreme Court to allow the farmers the option to remain as stockholders of HLI.

This pronouncement of the SC finds no basis in fact and in law and confuses the public.

The “operative fact” doctrine declares that when a law is found to be unconstitutional, its effects prior to its nullification may be respected as a matter of equity and fair play. It must only be applied in cases where there is a vacuum as to the applicability of any law or jurisprudence. In the case of HLI, there is no vacuum created because Section 31 of CARP categorically states that in the event that a stock distribution is not completed, direct land distribution should be resorted to. Thus, when the SC nullified the SDP, the Court should have applied Section 31 and ordered the distribution of the land.

Furthermore, it must be stressed that the application of the doctrine should be demanded only by equity. Is it equitable to allow the farmers to be stockholders of a corporation that is not only deep in debts but is also highly unprofitable? Is it equitable to allow a corporation to perpetuate injustice to the farmers and circumvent the noble purposes of agrarian reform though the conversion and sale of agricultural lands? Is it equitable to deprive the farmers of their lands for more than two decades? Common sense answers otherwise.

 

The Supreme Court’s directive to conduct a referendum has no basis.

After declaring the nullity of the SDP, the Supreme Court nonetheless proceeded to allow the FWBs to choose a legally baseless agreement. In her dissenting opinion, Justice Lourdes Sereno stated that:

“Without any legal basis left to support the SDP after the pronouncement of the complete nullity of the administrative approval thereof, the majority proceeded to allow the farmworker-beneficiaries (FWBs) of Hacienda Luisita the option to choose a completely legally baseless arrangement. It is legally baseless because an SDP and its operating agreement, a Stock Distribution Option Agreement (SDOA), can only be valid with the corresponding PARC approval. There is not a single legal twig on which the order to proceed with the voting option can hang, except the will of this Court’s majority.”

It must be remembered that the nullification was based on the violations of the provisions of the SDP and ensuing injustice to the farmers. Despite this, the SC still allowed them to remain in the same prejudicial set-up. The SC attempted to validate it by transferring the weight to the farmers through referendum. This is nothing short of a coward decision and is an abrogation of the high court’s fundamental role of upholding social justice. As further opined by Justice Sereno in her dissent, “to allow the FWBs, the disadvantaged sector sought to be uplifted through agrarian reform, to remain in an illegal arrangement simply because they choose to so remain is completely contrary to the mandatory character of social justice legislation.”

Referendum should not be treated as an actual option. As admitted by the FWBs themselves, their past experiences with elections (approval 1989 SDOA and the 2010 compromise agreement) indicate that there can never be a truthful referendum and that there is no environment of free and informed choice in HLI.  Additionally, referendum is not anchored on any law. In fact, the Supreme Court overstepped its authority by encroaching upon the executive functions of the Department of Agrarian Reform (DAR).

 

Encroachment on the executive function to implement agrarian reform

In its decision, the Supreme Court instructed DAR to immediately conduct information dissemination activities and ask the farmers whether they want land or stocks. It is akin to issuing an administrative order incorporated in a Supreme Court decision. What is wrong about this is that the instructions clearly show that the SC is not competent to determine the implementation mechanism of the Agrarian Reform Program. The CARP/CARPER provides mechanisms to implement agrarian reform, the details of which are left to the DAR.  The law never limited the process to information and asking the farmers to choose between land and stock.  As previously stated, choosing stock finds no basis in law.

First, the Supreme Court tried to act as an executive agency by telling the DAR how to do its job.  By changing the process provided by agrarian reform laws, do (the Supreme Court) they want now to become legislators?

 

The Road Ahead

Since the SDP, which is essentially the same as the SDOA, has already been nullified by the Supreme Court, the logical and only step the government, particularly the DAR, should take is to resort to compulsory acquisition and the ultimate distribution of the lands to the FWBs.

The President and his administration are called to proceed with the coverage of the lands.  Since the Temporary Restraining Order has already been lifted, there exists no legal obstacle for the DAR to put the lands under compulsory coverage.

It is time to give the lands to the FWBs. While it may be said that the distribution of the lands may give rise to questions on the economic viability of the small lands, nothing prevents them from pooling their lands and organizing into a cooperative.  What is important is that we empower the FWBs by allowing them to decide for themselves, not as slaves to the land, but as proud landowners.

Unless and until there is actual land distribution, there can be no agrarian reform. The Constitution mandates ownership of the land and liberation from bondage to the soil.  We should not settle for anything less than that. And not even a confusing decision can stop us.

 

 

*** A lawyer by profession, AKBAYAN Rep. Kaka Bag-ao was the Convenor of the Alternative Legal Group, a network of NGOs providing legal support to marginalized communities. She was the legal counsel of the Sumilao farmers.

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