G.R. No. L-26344. June 30, 1987
HAWAIIAN-PHILIPPINE COMPANY, APPELLANT, VS. ASOCIACION DE HACENDEROS DE SILAY-SARAVIA, INC., ARSENIO J. JISON, CONRADO MANALANSAN, IN HIS CAPACITY AS ACTING ADMINISTRATOR, SUGAR…
PARAS, J.:
These are appeals taken
by both parties from a decision of the then Court of First Instance of Manila
(Branch II) in Civil Case No. 50760*, entitled, “HAWAIIAN-PHILIPPINE COMPANY v. ASOCIACION DE
HACENDEROS DE SILAY-SARAVIA, INC., et al.“, which upheld the constitutionality of Republic Acts Nos. 809, 1825 and
1072, as well as from its Order dated February 11, 1966, denying the separate
motions for reconsideration filed by both parties.
Hawaiian-Philippine
Company, Inc. (hereinafter referred to as Central) is a corporation duly
organized and existing under and
by virtue of the laws of the Philippines. It
owns and operates a sugar mill situated at Silay-Hawaiian
Central, in the Silay-Saravia Mill District, Negros Occidental.
Asociacion de Hacenderos de Silay-Saravia, Inc. (hereinafter referred to as the
Association) is a corporation duly organized and existing under the laws of
the Philippines and is the bargaining representative of
some sugar cane planters.
A plantation is adherent
by virtue of sugar cane being delivered therefrom to
a mill regardless of contract relations between the mill company and the
plantation owner and/or any other
person cultivating sugar cane on the plantation (Act 4166, Sec. 1, par. 4 [c]).
The facts of this case
are as follows:
On March
30, 1953, Central
and the association, acting in behalf of the individual sugarcane planters of
the Silay-Saravia District adherent to the
petitioner, entered into a memorandum agreement (Joint Record on Appeal, Vol.
I, pp. 35-51) wherein it was agreed that:
(a) the period of the individual milling contract shall cover twelve
(12) crops up to and including the 1963-1964 crop; (b) the sharing of the
sugar and molasses between the Planter and the Mill for the first six sugar crops will be 63% for the Planter and
37% for the Mill and from the seventh crop (1958-1959) up to
and including the twelfth crop, (1963-1964) 63½% for the Planter and
36½% for the Mill; and (c) in the event that the total production for any one crop reaches 1,200,000 piculs or more, the sharing will be 64% for the Planter and 36% for the Mill.
It was also agreed that the Central recognizes the Asociacion de Hacenderos de Silay-Saravia
or its successors in interest as the sole agent of the planters of the Silay-Saravia Mill District and that the mill binds itself
not to enter into milling contracts with any individual planter except through
the Asociacion de Hacenderos
de Silay-Saravia.
In 1961, the Association made it known to the petitioner that
respondents Jison, et al., wanted to open
negotiations for a new milling contract.
Central was at first reluctant to enter into any negotiation because the
milling contract had still three (3) years to run, but finally acceded to the wishes of the Association, et
al. In the course of
the negotiations, the Association acting for the sugar planters
adherent to Central, demanded a new milling contract on the basis of 70%
participation for the planters and 30% for the sugar mill, and eventual
purchase by the Association, et al. of the Central. At first, Central made it known to the Association et al that
its majority stockholders were not willing to sell. Later, however, Central made a counter offer
and expressed willingness to sell for $14,000,000.00. The planters finally agreed on the price of $14,000,000 which is well above their
original offer of P30,000,000. However, they could not agree on the terms of
payment and the negotiations finally collapsed. In April, 1962, the Association et al pressed
its demand for a 70-30 participation and eventual purchase of the Central and
made it known to Central that unless the sale pushed through, the planters
would purchase and install a new mill in the Silay-Saravia
District to be operated by the sugar planters.
Thereafter, the Association et al organized the Agricultural Industrial
Development Company of Silay-Saravia District to be
operated by the sugar planters with the primary purpose of establishing and operating
a sugar mill and the utilization of its by-products, as well as the acquisition
and maintenance and operation of such equipment to carry out its purposes. A 15-year milling contract starting from the
1964-1965 crop between the Agricultural Industrial Development Company of the Silay-Saravia and the planters was prepared and the latter
negotiated for
the purchase of a sugar mill abroad. The
planters then addressed a letter dated May
14, 1962 to the Acting Administrator of the Sugar Quota
Administration informing him of their intention to construct and operate their own central. The Sugar Quota Administrator endorsed the
said letter to the Philippine Sugar Association for its comment and
recommendation (CFI Joint Record on Appeal, pp. 831-833). However, before the Philippine Sugar
Association could give its comment, Civil Case No. 50760, for Declaratory Relief,
was filed by petitioner Hawaiian-Philippine Company, Inc. against the
Association de Hacenderos de Silay-Saravia,
Inc., Arsenio J. Jison
and other individual sugar cane planter adherent to the Central members of
respondent Association in the Court of First Instance of Manila on June 20,
1962, later amended on July 27, 1962, praying for judgment: (1) Declaring Section 1 and related ones of
Republic Act No. 809 and Section 4 and concordant ones of Republic Act No. 1825
unconstitutional and hence, null and
void; (2) In any
event, defining the rights and obligations of Central and Arsenio
B. Jison, et al. and other sugar cane planters similarly
situated under the statutory provisions herein referred to, more particularly
declaring that, under said provisions:
(a) the sugar cane planter or plantation owner is not the owner of the
totality of the sugar production allowance or quota; (b) the sugar production
allowance, or sugar production coefficient (totality of the quota as to each
plantation) is indivisible and intransferable except
as a whole and with the consent of both mill and plantation owner or planter;
(c) the plantation owner or sugar cane planters can not establish a new central
in a district where there is a milling contract in force and the existing
central can satisfactorily meet the milling needs of planters therein; (d) the
plantation owner or sugar cane planter can not transfer the production
allowance and coefficient or quota to a central which did not produce sugar
during the pre-war years specified under Philippine and American sugar quota legislations;
(e) the plantation owner or sugar cane planter can hot transfer the quota to
any other central, so long as the existing central in the district is willing
to grant him the sharing participations established under Section 1 of Republic
Act No. 809 in the absence of a written milling contract, assuming the
constitutionality and effectiveness of said Act (Amended Petition, Joint
Record on Appeal, Vol. 1, pp. 116-117).
Still later on February 10, 1964, the petition was further amended
reiterating the above prayer and praying further that Section 9 of Act 4166 as
amended by Section 3 of R.A. 1072 be declared constitutional and that it has
– not been modified, repealed or
replaced by Section 4 or any
other provision of R.A. 1825 (Ibid.,
pp. 457-458).
On July 30,
1965, the lower
court rendered its Decision declaring the constitutionality of the assailed laws. The dispositive
portion of said decision reads:
“WHEREFORE, judgment is hereby rendered declaring that Sections 1 and 2,
Republic Act 809, Section 4, Republic Act 1825, and Section 3, Republic Act
1072, are valid and constitutional; that the respondent planters cannot
transfer their export sugar, or “A” and “AA” sugar to a central
which did not produce sugar in 1940; and that the respondent planters cannot
transfer their export quota, or “A” and “AA” sugar to any
other central as long as the petitioner is willing to grant them the
participations provided for in Section 1, Republic Act 809 in the absence of a
milling contract, without pronouncement as to costs.
“SO
ORDERED.”
(Joint Records on Appeal, Vol. II, p. 873)
Both parties moved for
the reconsideration of the above decision.
With the denial of the Motion, both parties appealed.
In brief, Central as
appellant raised the following issues:
(1) Constitutionality of:
Sections 1, 4 and 9 of Republic Act 809, Sections 4 and 5 of Republic Act 1825 and Section 3 of Republic Act 1072 amending Section 9 of Act 4166,
for being violative of the constitutional guarantees
against impairment of the freedom of contracts, denial of equal protection of
the laws, taking of private property for public use without due process and
without just compensation and impairment of vested rights and (2) validity
of: aforesaid laws for being violative of treaty commitments previously entered into by the Government of the Republic
of the Philippines.
On the other hand, the
Association et al as appellants raised as their main issue: whether or not planters whose 1953
memorandum agreement or milling contract with petitioner has already expired
with the 1963-64 Crop and have no new milling contract with Central, may
validly adhere their plantations to their own central and thereby transfer the
quotas attached to such plantations to the new central without the consent of
petitioner Hawaiian Philippines.
As incidents thereto, the
Association et al raised the following issues:
(a) whether or not they as planters may transfer their export and
domestic quotas despite Central’s willingness to give them the
participation under Republic Act 809; (b) whether or not the planters in the
absence of, or upon termination of written milling contracts, establish and
operate their own central, adhere their plantation thereto and transfer their
quotas to the same without the consent of the old Central; (c) whether or not
the export production allowance which may be transferred from one mill district
to another under Section 4 of Republic Act 1825 includes not only the planter
marketing allotment but also the mill marketing allotment and (d) whether or
not Central, in entering into a memorandum agreement where it is required to
tear down its railway tracks within two years after the expiration of the agreement, waived its absolute right to mill
the planters’ sugarcane.
The main issue raised by
Central in this case is the
constitutionality of the sugar
laws above enumerated.
The question of constitutionality of Republic Act 809 was laid to
rest in the case of Associacion de Agricultores de Talisay-Silay, Inc. vs. Talisay-Silay
Milling Co., Inc. (88 SCRA [1979]) where the Supreme Court squarely
ruled that:
“Republic Act
809 is a social justice and police power measure for the promotion of labor
conditions in sugar plantations, hence whatever rational degree of constraint
it exerts on freedom of contract and existing contractual obligations is
constitutionally permissible.“
Anent the indictment that
Republic Act 809 violates the equal protection clause of the Constitution, the
Supreme Court in ruling in favor of the constitutionality of the law, upheld
the standard used by the legislature which is the amount of production in each
district.
Republic Act 1825 and Republic Act 1072 amending Act 4166
covering as they do the same subject, i.e. sugar production, partake of the
same nature as Republic Act 809 and for the same reasons as above stated,
cannot be considered constitutionally objectionable.
In fact, the Supreme
Court ruled in Lutz v. Araneta (52 Off. Gaz., p. 1997
NOs. 4-6 [1956]) as follows:
“This Court can take judicial notice of the fact that sugar production
is one of the great industries of our nation, sugar occupying a leading
position among its export products, that it gives employment to thousands of
laborers in field and factories; that it is a great source of the state’s wealth, is one of the
important sources of foreign
exchange needed by our government, and is thus pivotal in the plans of a regime
committed to a policy of currency stability.
Its promotion, protection and advancement therefore, redounds
greatly to the general welfare. Hence it
was competent for the legislature to find that the general welfare demanded
that the sugar industry should be stabilized in turn, and in the wide field of
its police power, the lawmaking body could provide that the distribution of
benefits therefrom be readjusted among its components
x x x.
“Once it is conceded as it must, that the protection and
promotion of the sugar industry is a matter of public concern it follows that
the legislature may determine within reasonable bounds what is necessary for
its protection and expedient for its promotion.
Here the legislative discretion must be allowed full play, subject only
to the test of reasonableness.“
Republic Act 1825, Section 4 refers to the transfer of export
production allowances (quota) from one mill district to another which may be
done under two conditions, namely: (a)
when there is no milling contract between the planter and miller or when said
contract shall have expired; and (b) when the mill of the district in which the
land of the planter lies is not willing to
give him the participation laid down in Section one of Republic Act Numbered
Eight hundred nine regarding the division of shares between the sugar mill and plantation owner.
On the other hand, Section 9 of Act 4166 as amended by Republic Act
1072 refers to the transfer of domestic quotas which may be done under the sole
condition of absence or expiration of a milling contract.
It is Central’s view that
aforesaid legislations are a deprivation
of its vested rights without due process of law and without just compensation
as well as a denial of equal protection
of the laws. It claims that it has property rights in the
sugar production allowance or
quota appertaining to the Silay-Saravia Milling
District which had become vested long before Republic Act 1825 went into
effect.
This is not correct. There
is no vested right in sugar quotas, because they depend on future contingencies.
And even granting that quotas can be considered as vested rights,
it is beyond dispute that they, like any property rights, are subject to the
regulation and control of the State under its police power. In recognition of this power of the State,
the Supreme Court in Suarez v. Mt. Arayat Sugar Co.,
(96 Phil. 722) held that in case the central and the planter cannot agree on
the disposition of the quota, it
is within the competence of the Sugar Quota Administrator, now the Sugar Quota
Board, to reallocate the quota without compensation.
In case the mill and the planters cannot agree, as in the case at
bar, no plausible reason can be found why
the State cannot legislate and provide the sharing system that will prevent an impasse which is disastrous
to the sugar industry.
Likewise, there can be no argument, that in the absence of a
milling contract or the expiration of one, planters may transfer their quotas
for domestic sugar to the AID SISA Mill
established by them even without the consent of Central.
On the other hand, the
Association et al’s contention that as planters they can adhere
their plantations with their corresponding quotas to the new central they established in the same district,
despite Central’s willingness to give them the participation provided in Republic
Act 809, is untenable. To allow this
would be less than fair, eminently less than just.
Finally, the memorandum
agreement between the mill and the plantation owners where the former is
required to tear down its railway tracks after the expiration of the agreement
cannot be taken as a waiver of its absolute right to mill the planters’
sugarcane. Nowhere has it been shown
that Central had abandoned its right and obligation to mill the sugarcane of
the planters. On the contrary, it has
manifested that it would abide by the terms of the agreed sharing basis, if the
Court finds the same valid and
enforceable.
PREMISES CONSIDERED, the Court RESOLVED to DISMISS both appeals, and to AFFIRM the assailed decision.
Yap, Narvasa, Melencio-Herrera,
Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, and Cortes, JJ., concur.
Teehankee, C.J., no part. I was counsel for Asociacion
de Hacenderos de Silay-Saravia,
Inc.
Fernan, J., no part, as my wife is related to the wife of counsel for petitioner.
* Penned by Judge Jose N. Leuterio