David vs. Court of Appeals

Share tenants in sugarlands may automatically convert their tenancy relationship with the landowner from share tenancy to leasehold even in the absence of a presidential proclamation sanctioning such change, because Section 4 of Republic Act No. 3844, as amended, declares agricultural share tenancy contrary to public policy and mandates its abolition, and sugarlands are neither included in the exempted lands under Section 35 of the Code nor shown to be covered by marketing allotments that would jeopardize international commitments.

The private respondents were share tenants of Patricio David in his 36-hectare land in barangays San Pablo and San Agustin in Magalang, Pampanga, with each tenant holding four to five hectares devoted entirely to sugarcane production. The sugarcane was milled and processed into sugar by the Pampanga Sugar Development Company (PASUDECO) in San Fernando, Pampanga. The case arose against the backdrop of the Agricultural Land Reform Code (Republic Act No. 3844), which declared agricultural share tenancy contrary to public policy and provided for its abolition, as amended by Republic Act No. 6389 to provide for automatic conversion to leasehold. The second proviso of Section 4 required that lands devoted to crops covered by marketing allotments be made the subject of a separate presidential proclamation ensuring adequate provisions for efficient management of the agricultural and processing phases of such crops.

The nine private respondents were share tenants of Patricio David in his 36-hectare land in barangays San Pablo and San Agustin in Magalang, Pampanga, with each tenant holding four to five hectares devoted entirely to sugarcane production, which was milled and processed into sugar by the Pampanga Sugar Development Company (PASUDECO) in San Fernando, Pampanga. As dictated by the practice in Central Luzon, the landowner advanced the expenses of production including the subsistence of the tenants. The landowner transacted with PASUDECO during the milling season, took charge of transporting the sugarcane from the fields to the millers, recruited cane cutters to whom he extended cash advances, and procured farm machineries. He exercised general supervision and control of the farm and attended to the needs of the tenants, including extending loans to them and providing for the fertilizers used in the plantation. On their part, the tenants provided labor during the milling season from November to March each year and were allowed to undertake additional jobs to augment their earnings even if they were also tenants in the landowner's riceland. Liquidation and accounting usually ensued a few days after the sugarcane had been milled, and the landowner and the tenants shared 50%-50% the net proceeds of the sale of the sugarcane, as well as the molasses, additional sugar seasonally given by PASUDECO, the bag rebates, incentive bonuses and other benefits granted by the millers.

Effective in the 1979-80 agricultural year, Patricio David leased his sugarland to his son, Wilfredo David, who shared with the tenants the net proceeds of the sugarcane produced on the 50%-50% arrangement for said year. As early as August 15, 1979, the private respondents notified Wilfredo David of their intention to elect the leasehold tenancy system starting from agricultural year 1980-81. Wilfredo David objected not only because he had prepared for said agricultural year by applying for a crop loan from the Philippine National Bank but also because he believed that his tenants were financially incapable to undertake the venture. Hence, he allegedly halted the cutting of the canes which had started sometime in November, 1979.

Through the help of the Bureau of Agrarian Legal Assistance of the then Ministry of Agrarian Reform, the private respondents individually filed complaints in the Court of Agrarian Relations in Angeles City, which in effect sought to compel David to shift to the leasehold tenancy system. They prayed for an interlocutory order authorizing the Deputy Sheriff to supervise the harvesting, milling and hauling of the standing crops which would thereafter be shared on a 50%-50% basis, and also proposed a temporary arrangement on the sharing should the case continue before the harvest of the 1980-81 crop. In his answer, David contended that the private respondents were not entitled to automatic conversion to leasehold tenancy because Section 4 of Republic Act No. 3844, as amended, was not applicable to sugarlands inasmuch as the production of sugar was covered by marketing allotments and subject to international commitments. He averred that under a presidential proclamation on September 21, 1979, sugarlands should be managed and cultivated under the corporate farming scheme. He denied having stopped the harvest of the crops but alleged that the Philippine National Bank refused to release portions of the crop loans he had obtained.

The Philippine National Bank, in whose favor Wilfredo David executed a chattel mortgage on September 14, 1979 covering 1,805.76 piculs of "A" and "B" sugar of the 1980-81 crop to secure a loan of P124,000, sought intervention in the case, contending that the private respondents were not entitled to elect the leasehold system as a matter of right in view of Section 4 of Republic Act No. 3844. The court disallowed the intervention. The Court of Agrarian Relations rendered a decision ordering the change of relationship from share tenancy to the leasehold system starting with agricultural year 1980-81 and fixed the rentals of each tenant. Wilfredo David appealed to the Court of Appeals, which affirmed the decision of the Court of Agrarian Relations. The petitioner does not question the correctness of the rentals imposed by the Court of Agrarian Relations, and the instant petition zeroes in solely on the legal issue of whether tenants in plantations exclusively devoted to sugarcane production may automatically convert their relationship with the landowner from sharing to leasehold system in the absence of a presidential proclamation sanctioning such change of relationship.

• Inapplicability of Section 4 to Sugarlands: Petitioner contended that private respondents were not entitled to an automatic conversion to leasehold tenancy because Section 4 of Republic Act No. 3844, as amended, was not applicable to sugarlands inasmuch as the production of sugar was covered by marketing allotments and subject to international commitments.
• Presidential Proclamation on Corporate Farming: Petitioner averred that under a presidential proclamation on September 21, 1979, sugarlands should be managed and cultivated under the corporate farming scheme.
• Financial Incapacity of Tenants: Petitioner objected to the conversion because he had prepared for the agricultural year by applying for a crop loan from the Philippine National Bank and because he believed that his tenants were financially incapable to undertake the venture.
• Crop Loan Release: Petitioner denied having stopped the harvest of the crops but alleged that the Philippine National Bank refused to release portions of the crop loans he had obtained.

• Right to Change System under RA 1199: Private respondents anchored their arguments on Section 14 of Republic Act No. 1199, as amended, which states that the tenant shall have the right to change the tenancy contract from one of share tenancy to leasehold tenancy and vice-versa, and from one crop sharing arrangement to another of the share tenancy, with the right exercisable at least one month before the beginning of the next agricultural year.
• Automatic Conversion under RA 3844 as Amended: Private respondents relied on Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389, which provides for automatic conversion to agricultural leasehold from agricultural share tenancy, which is declared contrary to public policy.
• Execution Pending Appeal: Private respondents filed a motion for execution pending appeal based on the provisions of Section 5 of Republic Act No. 5434 and Section 18 of Presidential Decree No. 946, which states that an appeal shall not stay the decision or order of the Court of Agrarian Relations except where the ejectment of a tenant-farmer, agricultural lessee or tiller, settler, or amortizing owner-cultivator is directed.

• Automatic Conversion of Sugarland Tenants: Whether tenants in plantations exclusively devoted to sugarcane production may automatically convert their relationship with the landowner from sharing to leasehold system in the absence of a presidential proclamation sanctioning such change of relationship.

• Automatic Conversion of Sugarland Tenants: Yes. Sugarland share tenants may automatically convert their relationship with the landowner to the leasehold system despite the absence of a presidential proclamation, because Section 4 of Republic Act No. 3844, as amended, mandates the automatic conversion of share tenants to leaseholders, and sugarlands are not among the exempted lands enumerated in Section 35 of the Code.

• Automatic Conversion of Sugarland Tenants: The Court reasoned that Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389, provides for an "automatic conversion" to agricultural leasehold from agricultural share tenancy, which is declared contrary to public policy. The amendment retains the proviso on crops covered by marketing allotments, which requires a separate presidential proclamation that adequate provisions have been made to insure efficient management on all matters requiring synchronization of the agricultural with the processing phases of such crops. Sugarlands are not mentioned as among the areas covered by the Agricultural Land Reform Code, but neither are they included in the exempted lands which, as enumerated in Section 35 of said Code, include fishponds, saltbeds and those principally planted to citrus, coconuts, cacao, coffee, durian and other similar permanent trees. While it is true that there have been no presidential proclamations to the effect that measures have been adopted to insure efficient management of the agricultural and processing phases of crops covered by marketing allotments, it would be nothing short of regressive to deny sugarland share tenants of their right to elect the leasehold system. Considering the policy of the government as enunciated in Section 4 of the Code as amended, which mandates the automatic conversion of share tenants to leaseholders, individual sugarland tenants should not be discriminated against. Hence, any share tenant in sugarlands may, in accordance with law, exercise his option to change his relationship with the landowner into the leasehold system. However, all sugarland tenants who do not avail of said option may still be subject to existing lawful arrangements with the landowner in the absence of the presidential proclamation adverted to in Section 4.

The Court quoted with approval the Court of Appeals decision, which stated that the policy and the law are clear: share tenancy is contrary to public policy and must be abolished, and any interpretation of the law which tends to prolong any share tenancy relationship can be indulged in only when such an interpretation is inescapable and may not be avoided. The Court of Appeals adopted a strict construction against exemptions to leasehold tenancy, citing the principle that where the language of a statute is fairly susceptible to two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted. The Court of Appeals also found that there was absolutely no showing from the facts of the case that the crops harvested from the appellant's landholding are covered by marketing allotments or that to convert the tenancy relationships would jeopardize any international commitments, noting that the Philippines no longer depends on the marketing allotment or quota which the sugar industry was committed to fill for the American market, as sugar is now sold in the world open market.

The Court further noted that Presidential Decree No. 1425 was issued to strengthen the prohibition against agricultural share tenancy by providing penalties for violation thereof, and that more recent developments portend the transformation of tenants to owner-farmers. Under the 1987 Constitution, a comprehensive rural development and agrarian reform shall be promoted, and President Corazon C. Aquino issued on July 22, 1987 Proclamation No. 131 instituting a comprehensive agrarian reform program, and Executive Order No. 229 providing the mechanisms for the implementation of the said program, both stating that all public and private agricultural lands shall be covered by an agrarian reform program. The Court applied a liberal interpretation of the Agricultural Land Reform Code to give full force and effect to its clear intent which, under Section 2[2] and [6] of said Code, is "to achieve a dignified existence for the small farmers" and to make them "more dependent, self-reliant and responsible citizens, and a source of genuine strength in our democratic society."

• Automatic Conversion of Share Tenancy to Leasehold — Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389, mandates the automatic conversion of agricultural share tenancy to agricultural leasehold, declaring share tenancy contrary to public policy. The Court applied this doctrine to hold that sugarland share tenants may exercise their option to convert to leasehold despite the absence of a presidential proclamation, as sugarlands are not among the exempted lands under Section 35 of the Code.

• Strict Construction Against Exemptions to Leasehold Tenancy — Where the language of a statute is fairly susceptible to two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted, and a construction should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the legislator sought to attain by its enactment. The Court applied this principle to reject the petitioner's interpretation that would prolong share tenancy in sugarlands.

• Liberal Interpretation of the Agricultural Land Reform Code — The Agricultural Land Reform Code should be liberally interpreted to give full force and effect to its clear intent, which under Section 2[2] and [6] of said Code, is "to achieve a dignified existence for the small farmers" and to make them "more dependent, self-reliant and responsible citizens, and a source of genuine strength in our democratic society." The Court applied this doctrine to favor the conversion of sugarland share tenants to leasehold.

• "While it is true that there have been no presidential proclamations to the effect that measures have been adopted to insure efficient management of the agricultural and processing phases of crops covered by marketing allotments, it would be nothing short of regressive to deny sugarland share tenants of their right to elect the leasehold system." — This passage articulates the Court's core reasoning that the absence of a presidential proclamation should not bar sugarland tenants from exercising their right to convert to leasehold, as doing so would be regressive and discriminatory.

• "The policy and the law are clear. Share tenancy is contrary to public policy and must be abolished. Any interpretation of the law which tends to prolong any share tenancy relationship can be indulged in only when such an interpretation is inescapable and may not be avoided. But where it is possible to construe an abolition of share tenancy, then such a construction must perforce be adopted." — This passage, quoted with approval from the Court of Appeals decision, states the canonical formulation of the policy favoring the abolition of share tenancy and the strict construction against interpretations that prolong it.

• "There is absolutely no showing from the fact of this case that the crops harvested from the appellant's landholding are covered by marketing allotments or that to convert the tenancy relationships in this case from an out-moded and more oppressive system to one of leasehold would jeopardize any international commitments." — This passage, quoted with approval from the Court of Appeals decision, establishes the factual basis for rejecting the petitioner's argument that the marketing allotment proviso applied to the case.

• Ty Sue vs. Hord, 12 Phil. 485 — Cited as controlling authority for the principle of statutory construction that where the language of a statute is fairly susceptible to two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted.

• Catorce vs. Court of Appeals, G.R. No. 59762, May 11, 1984, 129 SCRA 210, 215 — Cited in support of the Court's application of a liberal interpretation of the Agricultural Land Reform Code to give full force and effect to its clear intent to achieve a dignified existence for small farmers.

• Section 4, Republic Act No. 3844 (Agricultural Land Reform Code), as amended by Republic Act No. 6389 — Declares agricultural share tenancy contrary to public policy and provides for its abolition, with the amendment providing for "automatic conversion" to agricultural leasehold. The Court applied this provision to hold that sugarland share tenants may convert to leasehold despite the absence of a presidential proclamation.

• Section 14, Republic Act No. 1199 (Agricultural Tenancy Act), as amended — Provides that the tenant shall have the right to change the tenancy contract from one of share tenancy to leasehold tenancy and vice-versa, and from one crop sharing arrangement to another of the share tenancy. The private respondents anchored their arguments on this provision.

• Section 35, Republic Act No. 3844 (Agricultural Land Reform Code) — Enumerates exempted lands, including fishponds, saltbeds and those principally planted to citrus, coconuts, cacao, coffee, durian and other similar permanent trees. The Court noted that sugarlands are not included in the exempted lands.

• Section 2[2] and [6], Republic Act No. 3844 (Agricultural Land Reform Code) — States the policy of the Code "to achieve a dignified existence for the small farmers" and to make them "more dependent, self-reliant and responsible citizens, and a source of genuine strength in our democratic society." The Court applied these provisions to support a liberal interpretation of the Code.

• Section 5, Republic Act No. 5434 — Cited as basis for the grant of execution pending appeal.

• Section 18, Presidential Decree No. 946 — States that an appeal shall not stay the decision or order of the Court of Agrarian Relations except where the ejectment of a tenant-farmer, agricultural lessee or tiller, settler, or amortizing owner-cultivator is directed. Cited as basis for the grant of execution pending appeal.

• Presidential Decree No. 1425 — Issued to strengthen the prohibition against agricultural share tenancy by providing penalties for violation thereof. Cited by the Court to support the policy of automatic conversion.

• Proclamation No. 131 (July 22, 1987) — Issued by President Corazon C. Aquino instituting a comprehensive agrarian reform program. Cited by the Court to show that all public and private agricultural lands shall be covered by an agrarian reform program.

• Executive Order No. 229 — Provides the mechanisms for the implementation of the comprehensive agrarian reform program. Cited by the Court to show that all public and private agricultural lands shall be covered by an agrarian reform program.

Yap, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concurred. Gutierrez, Jr., and Griño-Aquino, JJ., took no part.