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Republic of the Philippines

ARBITRAL TRIBUNAL
Davao City
Wonderful Banana,
Inc.
Applicant,
- versus Masipag Farmers
Cooperative,
X - - - - -Respondents.
- - - - - - - - - - - - - - - - - - - -X

APPLICANTS POSITION PAPER


APPLICANT, through the undersigned counsel, submits
its position to this Honorable Tribunal and respectfully states:

STATEMENT OF FACTS
Applicant is a German corporation, had a 25 year contract
with Respondent where members of the Cooperative would plant,
harvest, and exclusively sell bananas to the corporation for
$2/box. The Cooperative would be responsible for all other
expenses, including those incurred to buy fertilizers, pesticides,
and agricultural equipment. On the 5th year of the contract period,
the Respondent alleged that the contract was void for failing to
comply with the required signature by the Regional Director of the
Department of Agrarian Reform.
The Applicant provided all fertilizers, pesticides, and
agricultural equipment at the plantation and just billed these to
the farmers cooperative on an annual basis. For five years, the
cooperative failed to pay for these expenses. Consequently, the
Applicant initiated a collection case against the Respondent
before the Regional Trial Court of Davao and now wishes to
petition this Honorable Tribunal to arbitrate the dispute.

ISSUES
- Whether or not the Dispute Resolution Board of the
Department of Agrarian Reform (DAR) has jurisdiction
over the matter
- Who has jurisdiction to determine the validity of
the principal contract and the arbitration clause?

DISCUSSION/ARGUMENTS
The Dispute Resolution Board of the Department of
Agrarian Reform (DAR) has no jurisdiction over the matter
The Masipag Farmers Cooperative invokes the jurisdiction of this
Honorable Tribunal to decide on a case for declaration of nullity.
However, the cases or matters that may be adjudicated by the
DAR or any of its instrumentalities are prescribed by law, and a
case for the declaration of nullity of a contract is not one of them.
In the case of Department of Agrarian Reform v. Paramount
Holdings Equities, Inc. (G.R. No. 176838, June 13, 2013), a petition
was filed before the DAR which sought to nullify a contract of sale
concerning several parcels of land. The PARO argued that the
properties were agricultural land, yet their sale was effected
without DAR Clearance as required under Republic Act No. 6657
(R.A. No. 6657), otherwise known as the Comprehensive Agrarian
Reform Law (CARL). Allegedly, the PARO came to know of the
transactions only after he had received a directive from the
Secretary of Agrarian Reform to investigate the matter following
the latters receipt of a letter-request from persons who claimed
to be the tenant-farmers of the properties previous owners.
However, the Supreme Court ruled that the DAR did not have
jurisdiction to declare the contract void. The Court said:
The jurisdiction of the DARAB (Department of
Agrarian Reform Adjudication Board) is limited
under the law, as it was created under Executive
Order (E.O.) No. 129-A specifically to assume
powers and functions with respect to the

adjudication of agrarian reform cases under E.O. No.


229 and E.O. No. 129-A. Significantly, it was
organized under the Office of the Secretary of
Agrarian Reform. The limitation on the authority of
it to mere agrarian reform matters is only consistent
with the extent of DARs quasi-judicial powers under
R.A. No. 6657 and E.O. No. 229.1
The Court declared that a case for declaration of nullity did not
fall within the phrase agrarian reform matters or agrarian
disputes under the jurisdiction of the DAR. It referred to Section
3(d) of R.A. No. 6657, which defines an agrarian dispute in this
manner:
(d) Agrarian dispute refers to any controversy
relating to tenurial arrangements, whether
leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes
concerning
farmworkers
associations
or
representation of persons in negotiating, fixing,
maintaining, changing or seeking to arrange terms
or conditions of such tenurial arrangements. It
includes any controversy relating to compensation
of lands acquired under R.A. 6657 and other terms
and conditions of transfer of ownership from
landowners to farmworkers, tenants and other
agrarian reform beneficiaries, whether the
disputants stand in the proximate relation of farm
operator and beneficiary, landowner and tenant,
or lessor and lessee.2
The Court then concluded that, It is easily discernable that the
cause of action before the DAR sufficiently established a suit for
the declaration of the sale of the subject landholdings null and
void (in violation of Administrative Order No. 1, Series of 1989).
Obviously, however, it does not involve an agrarian suit, hence,
does not fall under the jurisdiction of the DARAB. It must be
emphasized that, "(t)here must be a tenancy relationship
between the party litigants for the DARAB to validly take
1 Department of Agrarian Reform v. Paramount Holdings Equities, Inc., G.R. No.
176838
2 Section 3(d) of R.A. No. 6657

cognizance of a controversy." (Suarez vs. Saul, 473 SCRA 628) 3.


Also, it is necessary that the controversy must relate to "tenurial
arrangements, whether leasehold, tenancy, stewardship or
otherwise, over lands devoted to agriculture, including disputes
concerning farmworkers associations or representation of persons
in negotiating, fixing, maintaining, changing or seeking to arrange
terms or conditions of such tenurial arrangements," (Section 3 (d),
Chapter I in relation to Section 50, Chapter XII, R.A. 6657 and
Section 1, Rule II, DARAB Rules of [Procedure]). Here, an
allegation to declare null and void a certain contract involving
farmers does not ipso facto make the case an agrarian dispute.
The facts of the case above are analogous to the facts of the
present case before this Honorable Tribunal. The Masipag Farmers
seek to have their contract with Wonderful Bananas, Inc. declared
a nullity. They claim that the contract was effected without the
necessary signature of the DAR Regional Director, in violation of
Regulation 52 of the Department of Agrarian Reform, section 4.
Apparently, the Cooperative only came to know about this alleged
defect on the 5th year of the contract period. However, much like
in the Paramount Holdings Equities case mentioned above, an
action for declaration of nullity for failure to comply with DAR
requirements is not an agrarian reform matter or an agrarian
dispute within the jurisdiction of the DARAB.
In another analogous case titled Stanfilco Employees Agrarian
Reform Beneficiaries Multi-purpose Cooperative v. DOLE (G.R. No.
154048, November 27, 2009), a farmers cooperative entered into
a Banana Production and Purchase Agreement with the
respondent corporation. The petitioner cooperative argued that
the DAR had jurisdiction to rule on the validity of the contract
because it was a joint venture agreement between the farmers
(tenants) and the corporation (landlord). They claimed that such
joint venture qualified as an agrarian reform matter pursuant to
Section 5 (c) (i) and (ii) of DAR AO No. 2-99. However, the Court
ruled that DAR did not have jurisdiction because although the
corporation owned the land where the farming occurred, there
was no tenurial or tenancy relationship between the farmers and
the corporation. According to the court:
We have always held that tenancy relations
cannot be presumed. The elements of tenancy must
3 Suarez vs. Saul, 473 SCRA 628

first be proved by substantial evidence which can


be shown through records, documents, and written
agreements between the parties. A principal factor,
too, to consider in determining whether a tenancy
relationship exists is the intent of the parties. 4
The case of Pasong Bayabas Farmers Association, Inc. v. Court of
Appeals lists down the indispensable elements for a tenancy
relationship to exist: (1) the parties are the landowner and the
tenant or agricultural lessee; (2) the subject matter of the
relationship is an agricultural land; (3) there is consent between
the parties to the relationship; (4) the purpose of the relationship
is to bring about agricultural production; (5) there is personal
cultivation on the part of the tenant or agricultural lessee; and (6)
the harvest is shared between the landowner and the tenant or
the agricultural lessee.5
In the case before this Honorable Tribunal, the land does not
belong to Wonderful Banana Corporation. In fact, being a German
Corporation, it cannot acquire ownership over agricultural land. 6
Therefore the first element of tenancy relations is already absent.
Moreover, the contract between Masipag Farmers Cooperative
and Wonderful Banana, Inc. is very clear. The intent of the parties
was to enter into a commercial agreement, specifically, a
Production and Purchase agreement. The farmers cooperative
entered the role of independent contractor exclusively selling
items (the bananas) to the corporation. They did not assume the
role of tenants.
The sixth element of tenancy relations is also absent. The harvest
was not shared between Masipag Farmers Cooperative and
Wonderful Banana, Inc. As earlier mentioned, the contract was for
the farmers to produce and for the corporation to buy the
products. There was no mention of the sharing of harvest.
The only difference between the present case before this
Honorable Tribunal and the cases mentioned above is that this
case was not brought before the DARAB but instead before DARs
4 Stanfilco Employees Agrarian Reform Beneficiaries Multi-purpose Cooperative v.
DOLE, G.R. No. 154048
5 Pasong Bayabas Farmers Association, Inc. v. Court of Appeals, G.R. 142359
6 Art. XII, Section 7, 1987 Constitution

Dispute Resolution Board. However, we submit that this is a


distinction without a difference because of the following:
1. This Honorable Dispute Resolution Board is still an
instrumentality of the DAR. Hence, it is bound by the same
rules that govern the DAR, particularly the rules that govern
the DARAB. Since the DARAB does not have jurisdiction over
non-agrarian disputes, it follows that the Dispute Resolution
Tribunal is also bereft of any such jurisdiction. It is a basic
tenet in Philippine domestic law that an entity possessing
delegated or subordinate authority (Dispute Resolution
Board) cannot exceed the authority prescribed by law to a
higher or similarly situated entity (DARAB). Hence, the
jurisdictional limits of the DARAB also apply to the
jurisdictional limits of the Dispute Resolution Board.
2. The farmers cooperative invokes the non-compliance of
Regulation 52, a regulation which is a part of the rules and
regulations of the DAR. Hence, implicit in this invocation is
the acceptance of the fact that we must refer to the rules
and regulations of the DAR in terms of deciding how to
proceed with this case. However, these rules and regulations
that Masipag Farmers rely on for the basis of their action, are
the same rules and regulations which say that the DAR has
no jurisdiction over matters which do not qualify as an
agrarian dispute.

The above reasons show that even though the case is now
before the DARs Dispute Resolution Board and not before the
DARAB, such circumstance has no legal bearing as to the
jurisdictional limits relevant to this case. We once again assert
that the jurisdictional limits for both the Dispute Resolution
Board and the DARAB are the same. Neither can decide on an
action for declaration of nullity since such an action is not an
agrarian reform matter.
Lastly, the Masipag Cooperative cannot invoke the rules on
domestic arbitration in the Philippines (R.A. 876, R.A. 9285)
because they did not bring this case before this Board pursuant
to the arbitration clause in the subject contract. This case was
brought before this Board by virtue of the rules and regulations
of the Department of Agrarian Reform. Hence, the rules and

regulations of the DAR apply, and according to such, this


Honorable Board has no jurisdiction over this action.
The proper jurisdiction jurisdiction to determine the
validity of the principal contract and the arbitration
clause lies before the regular courts
Actions brought before the DAR which do not fall within the
term agrarian dispute have been consistently referred by the
Supreme Court to the regular courts. In the Stanfilco and
Paramount Holdings cases above, the Court said that since
there was no tenancy relationship between the cooperative and
the corporation (no agrarian dispute), and because of the fact
that the case pertained to post-harvest transactions, the case
is properly cognizable before the regular courts.
We have already discussed how Masipag Farmers Cooperative
lack the legal basis to bring this case before this Honorable
Tribunal. Now we will assert how, on the other hand, Wonderful
Banana Inc. has solid basis to bring the issue of the validity of
both the contract and the arbitration clause before the regular
courts.
It is important to first acknowledge that the validity of the
arbitration clause does not depend on the validity of the
principal contract. Such is pursuant to Article 16 of the Model
Law on International Commercial Arbitration which provides
that, an arbitration clause which forms part of a contract shall
be treated as an agreement independent of the other terms of
the contract.7
Therefore, we need to present different legal bases for the
authority of the regular courts to decide on the validity of the
arbitration clause and their authority to decide on the validity
of the principal contract. In this case, there are legal bases for
both.
The regular courts have the authority to decide on the validity
of the arbitration clause pursuant to Section 4 of R.A. 876 or
The Arbitration Law which provides that, The making of a
contract or submission for arbitration described in Section 2
hereof, providing for the arbitration of any controversy, shall be
deemed a consent of the parties to the jurisdiction of the Court
7 Section 16, UNCITRAL Model Law on International Commercial Arbitration

of First Instance (now RTC) of the province or city where any of


the parties resides, to enforce such contract or submission. 8
The courts will not enforce an arbitration contract that is void,
hence, it may be reasonably inferred that along with its
authority to enforce, the courts also have the authority to
determine the validity of the arbitration agreement. This is in
line with the tenor of Section 24 of R.A. 9285 otherwise known
as the Alternative Dispute Resolution Act of 2004 which
provides that the court may allow the parties to go into
arbitration unless it finds the agreement null and void,
inoperative, or incapable of being performed. This illustrates
the courts authority to rule on the validity of an arbitration
clause or agreement.
As regards the validity of the principal contract, it is also the
regular courts who have the jurisdiction over such cases.
According to Section 1 (2) of R.A. 7691, the regular courts have
the exclusive jurisdiction to rule on actions for the declaration
of nullity of contracts. This was also confirmed by the Supreme
Court in its ruling on the case of Heirs of Juanita Padilla v.
Dominador Magdua (G.R. No. 176858, September 15, 2010). 9
As earlier stated, the present case was brought by Masipag
Farmers Cooperative before this Honorable Tribunal in order to
declare the subject contract a nullity. However, once again, we
submit that this Board has no jurisdiction over this case
because:
1. this Honorable Board has jurisdiction only in agrarian reform
matters or agrarian disputes. The case at present is not
such a dispute because an action for the declaration of
nullity is not an agrarian dispute and the principal contract
did not involve tenancy relations.
2. this Honorable Board is not the arbitral tribunal designated in
the arbitration clause. It is an instrumentality of the DAR,
and thus, has no jurisdiction over this matter. The validity of
the arbitration clause in this case can only be determined by
either an Ad Hoc Tribunal or the regular courts.
3. declarations of nullity of principal contracts are civil actions
under the exclusive jurisdiction of the regular courts.
8 Section 4, R.A. 876
9 Heirs of Juanita Padilla v. Dominador Magdua, G.R. No. 176858

WHEREFORE, premises considered, it is most respectfully


prayed that this Honorable Board decide accordingly.
Other reliefs just and equitable in the premises are likewise
sought.
Davao City, July 27, 2015.

Atty. Naokichi Donggay


Counsel for the Applicant
Silliman Avenue, Dumaguete City
Roll of Attorneys No. 137098
IBP Lifetime Membership No. 04218,Dumaguete City
PTR No. 7236058, 01/05/2015, Dumaguete City
MCLE Compliance No.IV-0021224; 07-13-15

Republic of the Philippines)


City of Davao. . . . . . . . . . . . .) S. S.
X - - - - - - - - - - - - - - - - -/

VERIFICATION

I, MARJORIE PORCINA, of legal age and Filipino, after having been


duly sworn to in accordance with law, depose and state THAT:

I am the president of Wonderful Banana Incorporated,


the applicant in the above-entitled case, that I have caused
the preparation and filing of the foregoing POSITION PAPER
and I have read and understood the contents thereof and the
same are true and correct to the best of my personal
knowledge and based on authentic records on hand;
AFFIANT SAYETH NAUGHT.

IN WITNESS WHEREOF, I hereunto affix my signature this 27 th


day of July, 2015.

MARJORIE PORCINA
Affiant
Passport Number 21739874893

SUBSCRIBED AND SWORN to before me this ____ day of


_________, 2015.; affiant exhibited to me her Passport Number
21739874893 a competent and government issued I.D.

DOC. NO. ____


PAGE NO. ____

NOTARY PUBLIC

BOOK NO. ____


Series of 2015.

Copy furnished:

MASIPAG FARMERS COOPERATIVE


Respondent