POTENCIANO ILUSORIO and TERESA ILUSORIO vs.

THE COURT OF AGRARIAN RELATIONS

G.R. No. L-20344
May 16, 1966

FACTS:

• The Petitioners, Potenciano Ilusorio and Teresa Ilusorio, are co-owners of a parcel of land situated in the Barrio of Bantug,
Municipality of San Miguel, Province of Bulacan.
• The main respondents (15)* respondents have for years worked on said land under the share tenancy system.
• Before the beginning of the agricultural year 1960-1961, they gave notice to the petitioners, in conformity with the provisions of
Section 14 of Republic Act No. 1199, as amended, that they (respondents) wanted to change their tenancy contract from
said system to leasehold tenancy.
• The Ilusorios refused to agree thereto
• The respondents then brought suit against the Illusorios before the Court of Agrarian Relations.
• The Court of Agrarian Relations ruled in favor of the respondents and upheld the constitutionality of Section 14, RA No. 1199
• Hence, this present Appeal

ISSUE:
Whether or not Section 14 of Republic Act No. 1199 is unconstitutional upon the ground that it violates the freedom of contract and
impairs property rights, as well as the obligation of contracts

HELD:
• No. The prohibition contained in constitutional provisions against impairing the obligation of contracts is not an
absolute one and is not to be read with literal exactness like a mathematical formula. Such provisions are restricted to contracts
with respect property, or some object of value, and confer rights which may be asserted in a court of justice, and have no
application to statute relating to public subjects within the domain of the general legislative powers of the State, and involving
the public right and public welfare of the entire community affected by it. They do not prevent proper exercise by the
State of its police powers. By enacting regulations reasonably necessary to secure the health, safety, morals, comfort, or
general welfare of the community, even the contracts may thereby be affected; for such matter cannot be placed by contract
beyond the power of the State to regulate and control them. (Ongsiako vs. Gamboa, et al., 86 Phil. 50.)

• Republic Act 1199**, like the previous tenancy law enacted by our law-making body, was passed by Congress in compliance with
the constitutional mandate that "the promotion of social justice to insure the well-being and economic security of all the
people should be the concern of the State" (Art. II, sec. 5) and that "the State shall regulate the relations between landlord and
tenant ... in agriculture ... ." (Art. XIV, see. 6).

_____________

*1. Miguel Sta. Ana

2. Domingo Santiago
3. Timoteo Magcalas
4. Leandro Maningas
5. Valentin Pacheco
6. Gonzalo Santiago
7. Salvador Santiago
8. Emiliano Pacheco
9. Santiago Pangilinan
10. Jose Sta. Ana
11. Graciano Mangalindan
12. Ricardo Balmero
13. Ireneo dela Cruz
14. Jose Mallari
15. Artemio Gabriel

**Section 14 of R.A. No. 1199 was not expressly stated or described in the case. However, this might help, just in case : )  
     Republic Act No. 1199
AN ACT TO GOVERN THE RELATIONS BETWEEN LANDHOLDERS AND TENANTS OF AGRICULTURAL LANDS
(LEASEHOLDS AND SHARE TENANCY)

Section 14. Change of System. - The tenant shall have the right to change the tenancy contract from one of share tenancy to the
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 is duly registered, the right may be exercised at the expiration of the period of the contract. In the absence
of any written contract, the right may be exercised at the end of the agricultural year. In both cases the changed to the leasehold
system shall be effective one agricultural year after the tenant has served notice of his intention to change upon the landholder.