February 16, 1994

DAR OPINION NO. 16-94

Atty. Ceferino P. Padua
6th Floor, G.E. Antonino Building
T.M. Kalaw  Street, Ermita
Manila

Dear Atty. Padua:

        This has reference to the issues you have raised on behalf of BAPA relative to the policies laid down in Department of Agrarian Reform Administrative Order No. 5, Series of 1993. You contend that said policies "invade the realm of legislation as they now expand the rights of the tenant-lessee, to the absolute exclusion of the rights of the owner-lessor".  Specifically, you allege the following:

1.         It is now the tenant-lessee (not the owner-lessor) who can by himself (no longer the owner) enter into contract with the sugar central/millers for the milling of sugar cane without as yet owning the land. Any subsisting contract between owner-lessor and tenant-lessee is just set aside. The 25% rental share of owner-lessor is not even mentioned.

2.         The 30-day written notice for the sale of sugar and other by-products covering the entire crop is now given to the tenant-lessee alone. The owner-lessor does not appear to be entitled even to notice.

3.         In effect, the rights of owner-lessor over his own property, pending eventual transfer or rentals on retained areas to tenant-lessee, are rendered ineffectual and inconsequential, deserving of no protection at all under Administrative Order No.5.

       Anent the foregoing, you argue that Administrative Order No. 5 Series of 1993 gives the agricultural lessee more rights over the produce than what Sec. 23 of RA 3844 actually gives him, which is, the right to deal with millers and processors and attend to the issuance of quedans and warehouse receipts only for the produce due him. Moreover, you allege that Section 12 of R.A. 6657 "does not authorize the DAR and its officials to go beyond its assigned task to 'determine and fix' rental". You therefore request that A.O. 5 be nullified or amended to conform with R.A. 3844.

     We believe that no such nullification or amendment of A.O. 5 is necessary.

     Under the leasehold system, the lease rental to be paid by the lessee is pre-determined and fixed on the basis of the average normal harvest. Once fixed, it constitutes the consideration for the use of the land, and the lessee is under obligation to pay the same, even in case of crop failure to the extent of seventy-five percent as a result of fortuitous event.  Since the lease rental is fixed, and the lessee is mandated to pay the same when it falls due on pain of dispossession from his farmlot, the rationale in Section 23 giving the agricultural lessee the right to deal with millers and processors and attend to the issuance of quedans and warehouse receipts is based principally on the notion that the lessee enjoys physical possession as well as management of the farm. (Sec. III C, AO No. 5 S. 1993, in relation to Sec. 23 of RA 3844) otherwise stated, once the lease rental is established, payment thereof is incumbent upon the lessee regardless of the produce, hence, the landowner need not be made a party to the milling contract nor in the issuance of quedans and warehouse receipts. Such being the case, and considering that Section 49 of R.A. 6657 empowers the PARC and the DAR to issue rules and regulations, whether substantive or procedural, to carry out the objects and purposes thereof, the DAR has resolved to give the lessee control over the produce, in conformity with the objective laid down in Section 12 of R.A. 6657 to protect and improve the tenurial and economic status of the farmers.

       We maintain that the spirit of agrarian reform should not narrowly construe the relationship of the lessee with the millers only to his share, or what is "due to him", as you have mentioned. We believe that what is "due him" is the management of the entire produce, without prejudice to the payment of the lease rental due the owner.

       We see no need to mention the leasehold rental in the milling contract because, as previously stated, the payment thereof is mandated by law, and it is an obligation that the lessee must comply with under the leasehold contract between him and the lessor, whether or not the same is stated in said milling contract. In the same token, not giving the landowner written notice regarding the sale of the produce will not diminish his claim over the leasehold rental due him.

    The issuance of Administrative Order No. 5, Series of 1993 was necessitated by the shift from share tenancy to agricultural leasehold. Although said Administrative Order lays emphasis on the rights of the agricultural lessee, the same by no means diminishes the rights of the agricultural lessor which are provided in RA 3844, as amended.

Nevertheless, because of the many important issues that you have raised, I have directed the Regional Director of Region IV to convene a meeting to examine and review the operationalization of AO No. 5, within thirty days from today.  We hope to inform your association of the outcome of that review in due time.

     We trust we have clarified matters for you.

Very truly yours,

(SGD.) ERNESTO D. GARILAO
Secretary