EDUARDA S. VDA. DE GENUINO, PETITIONER, VS. THE COURT OF AGRARIAN RELATIONS, ET AL., RESPONDENTS.

Eduarda S. Vda, de Genuino is the judicial adminis­tratrix of the estate
of the deceased Jacinto Genuino, Jr., part
of which were lands in Mandili and Mapaniqui, Can­daba, Pampanga, all devoted to rice production.  On May
25, 1964, the share tenants of said lands filed the following complaints against Eduarda S. Vda. de Genuino be­fore the Court of Agrarian Relations of Angeles
City, Pampanga:

(1)  CAR Case No 21-P-64 filed by the following 8 te­nants occupying 24 hectares in Mandili, Candaba, Pampanga:  Benigno Manabat, Donato Lacanilao, Benjamin Sangalang, Luciano Pelayo, Julio Tancuanco, Emilio Quilantang, Ruben Manalastas and Juan Manalastas.

(2) CAR Case No.
23-P-64 filed by the following 14 tenants occupying 44 hectares in Mapaniqui, Candaba, Pam­panga:  Leon Campo, Hermogenes
Turla, Ricardo de la Vega, Gualberto
Puno, Marcelino Reyes, Servillano Punzalan, Jose de la Cruz,
Gaudencio Reyes, Homer Lacanilao,
Candido Punzalan, Florentino Punzalan, Jose G. de la Cruz, Eleuterio
Amurao and Jacinto Pamintuan.

The purpose of these complaints was the conversion of the tenancy
relationship from share tenancy to lease­hold tenancy pursuant to Section 4 of Republic Act 3844,^[1]
in relation to Section 14 of Republic Act 1199,^[2] as amen­ded. 
The normal average produce for the past three agri­cultural years, less expenses, was alleged in the com­plaints.

Eduarda S. Vda.
de Genuino, in separate answers, on September 22, 1964, denied the
alleged normal average produce and as an affirmative defense, questioned the
cons­titutionality of Sections 4 and
34 of Republic Act 3844.

After both cases, being on the same point of law were
consolidated, the parties, on November 9,
1964, sti­pulated for
purposes only of the preliminary hearing of the defendant’s special and
affirmative defenses, that the gross produce of the lands^[3]
involved are as alleged in the complaints but from which should be deducted
seed, thresh­ing, reaping and hauling expenses for purposes of deter­mining
lease rentals.

On January 23, 1965, after the parties had filed their memoranda,
the Court of Agrarian Relations denied defen­dant’s prayer for dismissal
on the ground that the issue of constitutionality of Sections 4 and 34 of the Agricul­tural Land Reform Code (Republic Act 3844) will not direct­ly affect the
tenants’ rights in the case because even if said sections were declared
unconstitutional, Section 14 of
Republic Act 1199, providing also for change from sharehold
to leasehold tenancy, which was already held constitutional by the Supreme
Court, would still apply.  As to the
limitation in Section 34 of the Agricultural Land Re­form Code of the maximum
rental, it ruled that the limita­tion was not really burdensome, for the
decrease of 5% of the owner’s share,^[4]
is offset by the advantages he gets under the law.

A reconsideration was denied the defendant and the Court of Agrarian
Relations subsequently, on August 31, 1965, promulgated its decision granting
and authorizing the leasehold system starting from agricultural year 1965-1966
on the ground that the issue had become moot since the Supreme Court had upheld
the legality of the change from sharehold to
leasehold tenancy at the tenant’s op­tion pursuant to Section 14 of Republic
Act 1199, as amen­ded.  And hence, this
petition for review before Us.

Section 4 of the Agricultural Land Reform Code in part provides:

“Agricultural share tenancy, as herein defined, is hereby
declared to be contrary to public policy and shall be abolished:  Provided, That existing share tenancy contracts may continue in form and effect
in any region or locality, to be
governed in the meantime by the pertinent provision of Republic Act Numbered
Eleven hundred and ninety-nine, as amended, until the end of the agricultural
year when the National Land Reform Council pro­claims that all the government
machineries and agencies in that region or locality relating to leasehold
envisioned in this Code are ope­rating, unless such contracts provide for a
shorter period or the tenant sooner exercises his option to elect the leasehold
system:  x x x“

The abolition of the share tenancy and the compulsion on the
landowner and/or tenant to enter into the leasehold system is questioned as
unconstitutional on the ground that the freedom of contract is violated and
that it is a deprivation of property without due process of law.  This is not the case.  Said legislation
is justified by the right of the state to
exercise its police powers.  The sponsor
of said legislation before the Senate, on June 14, 1963, aptly stated in his
address similar instances where the state imposed its will in its exercise of police po­wer; the
enactment of the Social Security System Law, Child Labor Law, Law on Company
Unions, Blue Sunday Law, and the law declaring the charge of
15% interest on loans illegal.  Here,
individual rights to contract and to pro­perty, had to give way to police power
exercised for pu­blic welfare.

In the case at bar, the exercise of such a power was the result
of the intention of Congress to do away with the share tenancy completely.  However, as this was then considered
premature, a compromise was arrived at by giv­ing the tenant the choice between
continuing with share tenancy or electing leasehold tenancy.^[5]
This right was embodied in section 14 of Republic Act 1199, as amended, the
constitutionality of which We have already upheld in several decisions,^[6]
the latest of which is Gamboa v. Pal­larca, L-20407, March 31, 1966.  Realizing that despite the option, conditions
were such that the tenants, com­pletely controlled by landholders, were not in
a position to exercise the same Congress stepped in and exercising the police
power of the state, abolished share tenancy.

And, besides, as the
Court of Agrarian Relations cor­rectly held then that even if the challenged
provisions of the Agricultural Land Reform Code be declared unconstitutional, the effect would be the same for
the Code provides that while the National Land Reform Council has not declared the Code operative
in the region, the provisions of
Republic Act 1199, as amended, would apply. 
Section 14 of Republic Act 1199, which grants this option to choose the
leasehold relationship to the tenant and binding to the landowner, is as
earlier pointed out, constitutional.  Consequently,
regardless of the Land Reform Code, petitio­ner Eduarda
S. Vda. de Genuino must
give in to the desired change of system.

The exercise of police power is alleged to be unrea­sonable
because share tenancy does not involve health, mo­rals and public safety; that
the constitutionality of Sec­tion 14 of
Republic Act 1199 was
upheld as a valid exercise of police power
as against the freedom to contract and not against deprivation of property without due pro­cess
of law.  The argument is
unacceptable.  Police power is broad
enough to be exercised on the basis of the economic need^[7]
for the public welfare.  And, We do not see why public welfare
when clashing with the individual right to property should not be made to prevail through the state’s exercise
of its police power.

Finally, it is alleged that
rentals fixed by the court based on the stipulation of facts yield an unreasonable return of only 3.42% to
4.56% to the estate, amounting to a confiscation of property without due process of law.  It must be pointed out that just compensation is not required in
the exercise of police power.  And
besides, the consti­tutionality of a
law may not be made to depend on the ef­fects of a conclusion based on a
stipulation of facts entered into by the parties.  Otherwise, the law would be constitutional in
certain cases and unconstitutional in others. 
And when questions of fact may condition the cons­titutionality of a law, the presumption of
constitutionality must prevail
unless some factual foundation of record is proved.^[8]
Undoubtedly, this factual foundation must be shown to exist independently of mere
stipulation of facts.

As regards the rentals to
be paid, the Court of Agra­rian Relations erred in not deducting
expenses from the gross harvest, so that the rentals computed are higher.  We observe however, that the tenants did not appeal.  This point,
therefore, cannot now be disturbed.

WHEREFORE, the decision appealed from is hereby af­firmed
and herein petitioner is ordered to abide with the same in all respects.  Costs against petitioner.

SO ORDERED.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles,
and Fernando, JJ., concur.

Castro, J., in the result.

^[1]
Agricultural Land Reform Code.

^[2]
Agricultural Tenancy Act.

^[3]
First class lands worth P3,000 to P4,000 per hectare.

^[4]
Before it was 70-30%, now it is 75-25% under the Agri­cultural Land Reform
Code.

^[5]
Congressional Record, Senate, 3rd Congress, First Ses­sion, Vol. 1, No. 76, May 19, 1954, p. 1348; No. 8, July 24, 1964, p. 104.

^[6]
Ramos v. CAR, L-19555, May
29, 1964; Macasaet v.
CAR, L-19750, July 17, 1964; Uychangco v.
Gutierrez, L-20275-79, March 31, 1965.

^[7]
Veix v. Sixth
Ward Building
& Loan Association, 310 US, 32.

^[8]
Ermita-Malate Hotel & Motel Operators Association, Inc. v. City
of Manila, L-24693, July 31, 1967.