VIRGINIA B. UICHANCO, EDUARDO LIM AND MERCEDES B. UICHANCO, PETITIONERS, VS. FIDEL GUTIERREZ, ETC., AL., RESPONDENTS.

Uichanco versus Gutierrez

The Case

This is a constitutional challenge brought by landowners against their own share tenants. Virginia Uichanco, Eduardo Lim, and Mercedes Uichanco owned small rice farms in Calamba, Laguna, which they cultivated through share tenants under a verbal arrangement: the tenants bore the expenses of production and the harvest was divided fifty-fifty. In 1960 the tenants demanded that their relationship be converted from share tenancy to leasehold tenancy, invoking a right expressly granted by statute. When the landowners refused, five separate litigations arose. The case matters because it settles, in the context of a contract already in existence, whether the State may constitutionally give the tenant the power to change the tenancy system over the objection of the landowner.

Procedural History

The five cases were brought before the Court of Agrarian Relations of the Fifth Regional District, sitting at Santa Cruz, Laguna. That court upheld the tenants' demand, following the provisions of the law, and rendered judgment accordingly, fixing the rentals to be paid and the distribution of the harvests on the basis of a leasehold system which it deemed established upon the tenants' demand. The landowners appealed in due time to the Supreme Court, tendering the single issue of the validity of the statute. At the time the appeal was filed in September 1962, the question had not yet been resolved, and a suit on the same issue was pending before the Court. The Court thereafter resolved that question in two later decisions, upholding the constitutional validity of the statute, and it decided this appeal consistently with those rulings.

Facts

The petitioners owned small rice farms in Calamba, Laguna. The five respondents were, in the year 1960 and before, share tenants of the petitioners. Under their verbal tenancy agreement, the tenants shouldered the expenses of production and the harvest was divided on a fifty-fifty basis.

In 1960, the tenants demanded the conversion of their relationship from share tenancy to leasehold tenancy. They invoked the right granted by Section 14 of Republic Act Number 1199, as amended. The landowners opposed the demand, and so these five litigations ensued.

The Court of Agrarian Relations upheld the tenants' demand and rendered judgment accordingly. On appeal, the landowners raised only the constitutional question, and the Court noted that the parties apparently entered the verbal tenancy relationship in 1956 at the earliest, because the first harvest mentioned in the decision were those of October 1957.

Issues

• Whether or not Section 14 of Republic Act Number 1199, as amended, is constitutional, as against the objection that it interferes with the freedom of contract and impairs contractual rights.
• Whether or not the same provision is constitutional, as against the objection that it deprives the landowner of his property by giving the tenant the right to impose a new legal relationship without the landowner's consent.

Applicable Provisions

Section 14 of Republic Act Number 1199, as amended by Republic Act Number 2263, provides:

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. If the share tenancy contract is in writing and duly registered, the right to change from one crop sharing arrangement to another or from one tenancy system to another may be exercised at least one month before the beginning of the next agricultural year after the expiration of the period of the contract. In the absence of any registered written contract, the right may be exercised at least one month before the agricultural year when the change shall be effected.

This is the very provision the tenants invoked in demanding conversion, and the very provision the landowners assailed as unconstitutional.

Ruling

On the first issue, the Court upheld the statute. It declined to add to the reasons already explained in its two prior decisions sustaining the same law, and it rested its ruling on the circumstances of these litigations. Because the parties apparently entered the verbal tenancy relationship in 1956 at the earliest, the law then existing already gave the tenant the right to demand a leasehold arrangement in exchange for share tenancy. That right, the Court said, should be deemed included in their contract of tenancy, and the landlord may not now be heard to complain about interference with it or impairment thereof by the law. The Court applied the principle that the law existing at the time of the contract governs its interpretation and application.

On the second issue, the Court likewise upheld the statute, consistently with its previous rulings, and found no error in the computation of rentals and distribution of harvests made by the Agrarian Court on the basis of the leasehold system it deemed established upon the tenants' demand. The Court also noted, in passing, that the Land Reform Code, Republic Act Number 3844, approved on August 8, 1963, abolished agricultural share tenancy even as it reaffirmed the privilege of tenants in subsisting tenancy contracts to elect the leasehold system.

Doctrine

Section 14 of Republic Act Number 1199, as amended, is constitutional. It does not offend the freedom of contract, nor does it impair contractual rights, nor does it deprive the landowner of property without due process, because the right of the tenant to change the tenancy contract from share tenancy to leasehold tenancy is a right granted by law.

Where that law already existed when the tenancy contract was entered into, the statutory right is deemed included in the contract itself. The landowner therefore cannot complain of interference with, or impairment of, a contract that already carried that right. The law existing at the time of the contract governs its interpretation and application.

The tenant's right under Section 14 may be exercised, in the absence of any registered written contract, at least one month before the agricultural year when the change shall be effected.

Disposition

The Supreme Court affirmed the appealed decision of the Court of Agrarian Relations, without costs, and the tenants prevailed.

Remember This

Memorize this line: the tenant's right to convert share tenancy into leasehold tenancy is read into the tenancy contract, so the landowner cannot cry impairment of a contract that already contained that right. Examiners use this case to test the constitutional limits of the State's power to regulate tenancy relations and the rule that the law at the time of contracting governs the contract.