Dayrit vs. Court of Appeals

A share tenant in a sugarland exclusively devoted to sugar production may elect to change the tenancy relationship from share tenancy to leasehold under Section 14 of Republic Act No. 1199 and Section 4 of Republic Act No. 3844, as amended, even in the absence of a separate presidential proclamation for crops covered by marketing allotments; sugarland tenants who do not avail of the option remain subject to existing lawful arrangements.

Carlos Dayrit owned a sugarland in Barangay San Francisco, Magalang, Pampanga, with an area of approximately three hectares, exclusively devoted to planting and harvesting sugar cane. Cornelio Santos was his share tenant, and the two shared the proceeds of sales of sugar and other by-products, such as molasses, and other monetary benefits and additional sugar given by the millers, on an "equal 50%-50% sharing" after deducting from the gross the different items of expenses of production. The governing statutory backdrop included Section 14 of Republic Act No. 1199, which granted tenants the right to change the tenancy contract from share tenancy to leasehold, and Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389, which abolished agricultural share tenancy and provided for automatic conversion to agricultural leasehold, subject to certain provisos for crops covered by marketing allotments.

Carlos Dayrit owned a sugarland situated in Barangay San Francisco, Magalang, Pampanga, with an area of approximately three hectares, exclusively devoted to planting and harvesting sugar cane. Cornelio Santos was his share tenant. Under their arrangement, Dayrit and Santos shared in the proceeds of the sales of sugar and other by-products such as molasses, and other monetary benefits and additional sugar given by the millers, on an "equal 50%-50% sharing" after deducting from the gross the different items of expenses of production.

In July 1977, Santos verbally notified Dayrit of his election of the leasehold system starting with the agricultural year 1979-1980, which was to begin in November 1980. The notice was in compliance with the one-month requirement of Section 14 of Republic Act No. 1199.

On October 31, 1979, Santos filed a complaint with the then Court of Agrarian Relations of Angeles City, praying for an order allowing the change of his tenancy relationship from share tenancy to the leasehold system and for the fixing of lease rentals on his landholding, invoking Section 14 of Republic Act No. 1199. Dayrit opposed the complaint, contending that in the absence of a separate proclamation by the President allowing tenants in sugarlands to change from crop-sharing to leasehold, Santos could not opt to effect such change.

On January 5, 1981, the Court of Agrarian Relations rendered a decision ordering and allowing the change of tenancy relationship to the leasehold system. The trial court also ruled that Santos could automatically change from crop sharer to leasehold without the necessity of an executive proclamation. The facts material to the Supreme Court's analysis were that the land was exclusively devoted to sugar cane, the relationship was share tenancy, and Santos had served the statutory notice of intention to change before filing his complaint.

• Repeal and Presidential Proclamation: Petitioner countered that Section 14 of Republic Act No. 1199 had been repealed by Section 4 of Republic Act No. 3844, as amended, and that the leasehold system of tenancy in sugar industries cannot as yet be effected without a separate proclamation to be issued by the President of the Republic of the Philippines as provided in the said law.
• Scope of Automatic Conversion: Petitioner argued that automatic conversion to leasehold under Republic Act No. 3844 refers only to palay and/or corn lands and that the same law expressly exempts lands devoted to crops covered by marketing allotments, i.e., sugarlands.
• Absence of Proclamation: Petitioner maintained that up to the present there has been no separate proclamation issued by the President of the Republic, so the change to leasehold in sugarlands could not be effected.

• Individual Option, Not Automatic Conversion: Private respondent insisted that it is not automatic conversion that is being sought but the exercise of the individual option to change to leasehold after complying with the required notice requirement for the intention to change under Section 4 of Republic Act No. 3844.
• Administrative Recognition and Support: Private respondent argued that the land reform agencies recognize the right of share tenants in lands devoted to crops other than rice and corn to shift to leasehold even before any separate proclamation could be issued by the President.
• Government Support for Shifting Tenants: Private respondent further maintained that the Government in its land reform program has endeavored to establish support and allied agencies to provide technical assistance and financial support to farmers so that those who may venture to shift to the leasehold system could be weaned away from the umbilical cord that ties them to their landholders pending the full implementation of the total prescription of share tenancy in all agricultural ventures.

• Election of Leasehold in Sugarlands: Whether tenants on sugar plantations exclusively devoted to sugar production could elect the leasehold system pending the issuance or even in the absence of a separate proclamation issued by the President, pursuant to Section 4 of Republic Act No. 3844, as amended.

• Election of Leasehold in Sugarlands: Yes. A share tenant in sugarlands may exercise the option to change to the leasehold system even pending or in the absence of the separate presidential proclamation, under Section 14 of Republic Act No. 1199 and Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389; those who do not avail of the option remain subject to existing lawful arrangements.

• Election of Leasehold in Sugarlands: The only issue had already been settled in Wilfredo David vs. Court of Appeals, G.R. Nos. 57719-21, promulgated on May 6, 1988. Under identical facts, Republic Act No. 6389, which later amended Section 4 of Republic Act No. 3844 by providing for an "automatic conversion" from agricultural share tenancy to agricultural leasehold, was held applicable to sugarland tenants. The Court reasoned that while there had been no presidential proclamations to the effect that measures had 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 sugarlands should not be discriminated against. Thus, 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.

• Sugarland Share Tenants' Right to Elect Leasehold — Under Section 4 of Republic Act No. 3844, as amended by Republic Act No. 6389, and Section 14 of Republic Act No. 1199, a share tenant in a sugarland exclusively devoted to sugar production may elect to change the tenancy relationship to the leasehold system even pending or in the absence of a separate presidential proclamation for crops covered by marketing allotments. The Court applied this rule to affirm the change allowed by the lower courts.
• Non-Electing Sugarland Tenants Remain Under Existing Lawful Arrangements — Sugarland tenants who do not avail of the option to change to leasehold may still be subject to existing lawful arrangements with the landowner in the absence of the presidential proclamation referred to in Section 4 of Republic Act No. 3844. This qualification was expressly adopted from Wilfredo David vs. Court of Appeals.
• Automatic Conversion and Individual Option — The policy of the government under Section 4 of the Code as amended mandates the automatic conversion of share tenants to leaseholders; individual sugarlands should not be discriminated against, and any share tenant in sugarlands may exercise the option to change to leasehold in accordance with law. The Court reconciled the automatic-conversion policy with the tenant's individual option after notice.
• Stare Decisis — The issue had already been settled in Wilfredo David vs. Court of Appeals, and the Court applied that ruling to identical facts.

• "The only issue in this case is whether or not tenants on sugar plantations exclusively devoted to sugar production could elect leasehold system pending the issuance or even in the absence of a separate proclamation issued by the President, pursuant to Section 4 of Republic Act No. 3844, as amended." — This passage frames the sole legal question resolved by the Court.
• "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 states the Court's ratio for rejecting the absence of a presidential proclamation as a bar to the tenant's election.
• "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 sugarlands should not be discriminated against." — This articulates the policy basis for extending the leasehold option to sugarland tenants.
• "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." — This is the controlling formulation of the sugarland tenant's option and the qualification for those who do not elect leasehold.

• Wilfredo David vs. Court of Appeals, G.R. Nos. 57719-21, May 6, 1988 — The Court treated this as controlling precedent, holding under identical facts that Republic Act No. 6389's amendment to Section 4 of Republic Act No. 3844, providing for automatic conversion from agricultural share tenancy to agricultural leasehold, applies to sugarland tenants and allows them to elect leasehold despite the absence of a presidential proclamation. The Court stated the issue had already been settled by this case.

• Section 14, Republic Act No. 1199 — Grants the tenant the right to change the tenancy contract from share tenancy to leasehold tenancy and vice versa; in the absence of a written contract, the right may be exercised at the end of the agricultural year, and the change to leasehold is effective one agricultural year after notice. Santos's July 1977 verbal notice complied with the one-month requirement, and his complaint invoked this provision.
• Section 4, Republic Act No. 3844 (Agricultural Land Reform Code), as amended — Declares agricultural share tenancy contrary to public policy and abolishes it; existing share tenancy contracts continue until the National Land Reform Council proclaims that government machineries for leasehold are operating, unless the tenant sooner exercises his option to elect leasehold. The proviso for crops covered by marketing allotments requires a separate proclamation to insure efficient management, but the Court held this did not bar sugarland tenants from electing leasehold.
• Republic Act No. 6389 (September 10, 1971) — Amended Section 4 of Republic Act No. 3844 by providing for automatic conversion from agricultural share tenancy to agricultural leasehold; the Court held this amendment applicable to sugarland tenants, so individual sugarlands should not be discriminated against.

Yap, C.J.; Fernan; Narvasa; Melencio-Herrera; Cruz; Feliciano; Gancayco; Padilla; Bidin; Sarmiento; Cortes; and Medialdea, JJ., concurred. Griño-Aquino, J., took no part; Gutierrez, Jr., J., was on leave.