G.R. No. L-32362. Sep 19, 1973 (152 Phil. 458)


Review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 42409-R (CAR), affirming the judgment of the Court of Agrarian Relations at Gapan, Nueva Ecija, granting the reduction of the annual rental of 40 to 31.8 cavans of palay, of the lessee, and after compensating the excess and short rentals on the land in question, directing the lessee to pay the lessor the sum of P243.70 representing the short rentals for the agricultural years 1960-1961, 1961-1962, 1962-1963, 1963-1964, 1964-1965, 1965-1966, and 1966-1967.

There is no dispute as to the facts. The parcel of land involved in this action contains an area of about two hectares situated at Bo. Caisiwan, San Antonio Nueva Ecija, and devoted to the production of palay and is a part of the 72 hectares belonging to Santiago Gancayco, which petitioner Ineceta Alfanta leased from Gancayco since 1953, and which, in turn, petitioner delivered to fourteen tenants to cultivate. The leasehold relationship between the parties herein commenced in agricultural year 1960-1961. The agreed annual lease rental was 40 cavans of palay. In the complaint filed by Noe with the agrarian court, respondent tenant alleged, among others, that the said agreed rental was in excess of the maximum rental allowed by law. He accordingly prayed for a reduction thereof and for payment to him by petitioner landholder of a sum equal to the value of the excess rentals he had paid in previous crop seasons. In her answer, petitioner landholder alleged that her lease contract with respondent tenant was a civil lease, hence, it was covered by the provisions of the Civil Code and not by the laws on tenancy.

After due trial, the agrarian court found that a leasehold relationship was established between the parties which commenced in agricultural year 1960-1961, and that, therefore, in determining the annual lease rental, the same should be based on the annual harvests for the three agricultural years preceding the establishment of the leasehold, which correspond to agricultural years (1) 1957-1958, 170 cavans; (2) 1958-1959, 186 cavans; and (3) 1959-1960, of which no evidence on the produce was presented by either party. In ascertaining the annual lease rental, the said court stated that: "Since the evidence presented by defendant-landholder-lessor as basis for the computation of the rental is incomplete, it would be fair and reasonable to include one of the normal harvests of the landholding after the inception of the leasehold relationship which is the quantity of 100 cavans." The trial court thereupon proceeded with its computation. It added 170 cavans, 186 cavans and 100 cavans, and obtained a yearly average of 152 cavans. From this it deducted the seedlings consisting of 2 cavans, reaping expenses equal to 15 cavans, and threshing expenses equivalent to 7-1/2 cavans, thus arriving at 127.3 cavans as the average net produce. It then multiplied this by 25%, arriving at 31.8 cavans as the correct yearly rental which respondent tenant should pay to petitioner landholder. The court, finding that respondent tenant had an unpaid balance of 20 cavans and 16.1 kilos of palay for the crop years 1960-1961 to 1966-1967, at the price of P12.00 per cavan, ordered him to pay petitioner landholder the sum of P243.70 representing the short rental. The Court of Appeals in giving its imprimatur to the judgment of the agrarian court declared:
"Since the lower court found that the leasehold relationship has commenced from agricultural year 1960-1961, therefore, the 3 preceding normal harvests would be those that correspond to agricultural years (1) 1957-1958, 170 cavans; (2) 1958-1959, 186 cavans; and (3) 1959-1960, no evidence on the produce was presented by either party. In order to remedy the situation and prevent a delay of the case, the lower court said: 'Since the evidence presented by defendant-landholder-lessor as basis for the computation of the rental is incomplete, it would be fair and reasonable to include one of the normal harvests of the landholding after the inception of the leasehold relationship which is the quantity of 100 cavans' (see order of December 7, 1967, amending the decision, rec. 191-193). It will be noted that the 100 cavans picked by the trial court representing the gross production for crop year 1964-1965 is far below the gross harvest for basic crop year 1957-1958, 170 cavans, and basic crop year 1958-1959, 186 cavans. Despite the cautious attitude of the lower court, defendant-lessor assails the procedure adopted stating 'We understand it to be the law in this country that the tenant who is seeking a reduction of rental must be the one to prove a justification for the same. If he fails to show to the Court any ground for the reduction, as what happened in the case at bar, the complaint ought to be dismissed and the agreed and implemented rentals should not be disturbed. The Court below totally deviated from this principle and even went to the extent of picking one of the harvests after the commencement of the leasehold relationship as basis for reducing the rentals' (defendant-lessor-appellant's brief, p. 32). The Agrarian Counsel, on behalf of plaintiff-tenant-lessee, countered by stating that 'the discretion exercised by the lower court in picking the same as one of the normal harvests of the landholding is a courageous manifestation of judicial statesmanship in upholding the noble policy of the agricultural tenancy law enunciated in Sec. 36, RA1199, as amended, that courts shall solve all grave doubts in favor of the tenant' (plaintiff-appellee's brief, p. 7). We find the Court's exercise of discretion on this point to be proper, practical and expeditious. At any rate, it did not cause any damage to the defendant-landowner as shown by the fact that the figure selected is very much lower than the normal harvest for the first two preceding years."
In this appeal, however, the question no longer touches upon the character of the lease contract, for it is now agreed that such con­tract is an agricultural lease. Petitioner's thesis is that while an agreement entered into by and between a tenant and a landholder may be declared illegal where the agreed rental exceeds that authorized by law, the burden of proof is upon the tenant to show the harvests for the three crop years immediately preceding the crop year when the leasehold relationship began. In this case, while the said three crop years are 1957-1958, 1958-1959 and 1959-1960, respondent-tenant-lessee did not adduce evidence to prove the normal harvest for 1959-1960 and because of that failure, according to petitioner, there can be no valid basis for determining the proper rental, in which event the rental agreed upon between the parties should be maintained. According to the petitioner, the agrarian court had no authority to pick the harvest of 100 cavans of palay in agricultural year 1964-1965 to supply the lacking evidence as toe the produce in agricultural year 1959-1960, for that constituted a deviation from Section 48 of Republic Act No. 1199, and from the doctrine enunciated in Velasco v. CAR, et al. (109 Phil., 642).

The real question, however, before this Court is: May the agrarian court, in determining what should be the annual lease rental, if direct evidence on the normal harvest of one of the three preceding agricultural years, prior to the establishment of leasehold, is not available, consider evidence circumstantial in character in order to prevent a delay in the settlement of the conflict between the agricultural lessor and lessee?

The provision of law which the parties correctly concede is applicable, is Section 46 of Republic Act No. 1199, as amended by Section 14 of Republic Act No. 2263, which states in part:
"(a) The fixed consideration for the use of ricelands, shall not be more than the equivalent of twenty-five per centum in case of first class land and twenty per centum in case of second class land of the average gross produce, after deducting the same amount of palay used as seed and the cost of harvesting and threshing of the past three normal harvest; Provided, That if the landholder introduced improvements on the farm which will increase its productivity, he may demand for an increase in the rental proportionate to the increase in production resulting from such improvements. In case of disagreement the Court shall determine the reasonable increase in rental. Classification of ricelands shall be determined by productivity; first class lands being those which yield more than forty cavans per hectare and second class lands being those which yield forty cavans or less, the same to be computed upon the normal average harvest of the three preceding years."
  1. It is true that in Velasco v. Court of Agrarian Relations,[1] We declared that where the legality of the annual lease rentals of an agricultural leasehold is disputed, the party who claims the rentals as excessive has the burden of proving that the same are excessive and are not conformable to law. In the Velasco case, however, there is no question that there was factual basis for the annual rentals fixed, as the lessor in fact introduced evidence on the normal harvests for the three agricultural years preceding the leasehold. The circumstance that the agrarian court refused to accord credence to this evidence of the lessor is of no moment. Here, We cannot assume that the annual rental fixed by the lessor is in accordance with law as there is not even any adequate factual basis for such annual lease rental, considering that the lessor herself could not even show the normal harvest for the agricultural year 1959-1960, which under the law is one of the bases for the determination of the annual rental. While it is true as a general rule that it is incumbent on the lessee challenging the reasonableness of the rentals to prove that the same are excessive, in the peculiar circumstances of the case, We feel that the lessee has sufficiently discharged such burden by showing by evidence which may be considered circumstantial, the improbability that the normal harvest for the agricultural year 1959-1960 could have exceeded 100 cavans. It would have been pointless for the agrarian court to require the lessee to prove the normal harvest for that agricultural year, since it is a fact found by both the agrarian court and the Court of Appeals, that respondent lessee only commenced working on the land during the agricultural year 1960-1961 at the commencement of the leasehold, as prior thereto the land was cultivated by other tenants. There is no question that proof of collateral facts and circumstances may be allowed provided the existence of the main fact may be reasonably inferred therefrom according to reason and common experience. On the basis of the facts thus shown during the trial, the agrarian court ascertained that the normal harvest for the agricul­tural year 1959-1960 was, therefore, 100 cavans. As stated hereto­fore, this finding of fact was sustained by the Court of Appeals.
  2. It must be, observed that the aforementioned statute has been enacted by Congress pursuant to the constitutional mandate that the "promotion of social justice to ensure the well-being and economic security of all the people shall be the concern of the state" and of the obligation of the state to accord protection to labor and to regulate the relations between landowner and tenant. Social justice, in the words of Justice Laurel in Calalang v. Williams,[2] means the "humanization of laws and the equalization of social and economic forces by the State so that justice in the rational and objectively secular conception may at least be approximated." The statute was, therefore, designed to improve the lot of the sharecropper by granting to him a more equitable participation in the produce of the land which he cultivates. Viewed within the context of the constitutional mandate and obvious legislative intent, the provisions of the law should be construed to further their purpose of redeeming the tenant from his bondage of misery, want and oppression arising from the onerous terms of his tenancy and to uplift his social and financial status. As we said in Hidalgo v. Hidalgo,[3] under the established jurisprudence of the Court, in the interpretation of tenancy and labor legislation, "it will be guided by more than just an inquiry into the letter of the law as against its spirit and will ultimately resolve grave doubts in favor of the tenant and worker."
It is for this purpose that Section 10 of Republic Act No. 1267, as amended by Republic Act No. 1409, creating the Court of Agrarian Relations, provides that "in the hearing, investigation and determination of any question or controversy and in exercising any duty and power under this Act, the Court shall, in the hearing and determination of cases pending before it, not be bound strictly by the technical rules of evidence." Complementary to this provision is Section 155 of the Agricultural Land Reform Code, which provides that "in the hearing, investigation and determination of any question or controversy pending before them, the Courts without impairing substantial rights, shall not be bound strictly by the technical rules of evidence and procedure, except in expropriation cases."[4] We find, therefore, that the decision of the agrarian court is not only in accord with the spirit and intent of the Agricultural Tenancy Act and Land Reform Code but, more important, with the aforecited principles of the Constitution.

In the environment of a new social order We can do no less. Thus, under the new Constitution, property ownership has been impressed with a social function. This implies that the owner has the obligation to use his property not only to benefit himself but society as well. Hence, it provides under section 6 of Article II thereof, that in the promotion of social justice, the State "shall regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property ownership and profits." The Constitution also ensures that the worker shall have a just and living wage which should assure for himself and his family an exist­ence worthy of human dignity and give him opportunities for a better life (Sections 7, & 9, of Article II).

WHEREFORE, the judgment of the Court of Appeals appealed from is affirmed. Without costs.


Makalintal, Acting C.J., Zaldivar, Ruiz Castro, Barredo, Makasiar, and Esguerra, JJ., concur.
Fernando, J., concurs and submits in addition a brief expression of his views.
Teehankee, J., concurs in the result.

[1] 109 Phil., 642.

[2] 70 Phil., 726

[3] L-25326-27, May 29, 1970, 33 SCRA 105, 120, citing Maniego v. Castelo, 101 Phil., 293 (1957); Vda. de Santos v. Garcia, L-16894, May 31, 1963, 8 SCRA 194; Quimson v. de Guzman, L-18240, Jan. 31, 1963, 7 SCRA 158; and PagdaƱgan v. Court of Agrarian Relations, 108 Phil., 590 (1960).

[4] Masa v. Baes, et al., L-29784, May 21, 1969, 28 SCRA 263, 267.

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