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In 1946, the late Severino Manotok donated a 34hectare lot (w/ certificate of title) to his eight (8)
children and two (2) grandchildren. Severino Manotok
who was appointed judicial guardian of his minor
children 'accepted on their behalf the aforesaid
donation. At that time, there were no tenants or other
persons occupying the said property.
In that same year, Teodoro Macaya accompanied by
Vicente Herrera, the overseer of the property, went to
Manotok in Manila and pleaded that he be allowed to
live on the Balara property so that he could at the
same time guard the property and prevent the entry of
squatters and the theft of the fruits and produce of the
fruit trees planted by the owner. Manotok allowed
Macaya to stay in the property as a guard (bantay)
but imposed the conditions that at any time that the
owners of the property needed or wanted to take over
the property, Macaya and his family should vacate the
property immediately; that while he could raise
animals and plant on the property, he could do so
only for his personal needs; that he alone could plant
and raise animals on the property; and that the
owners would have no responsibility or liability for
said activities of Macaya. Macaya was allowed to use
only three (3) hectares. These conditions, however,
were not put in writing.
On December 5, 1950, the property-owners organized
themselves into a corporation engaged primarily in
the real estate business known as the Manotok
Realty, Inc. The owners transferred the 34-hectare lot
to the corporation as part of their capital contribution
or subscription to the capital stock of the corporation.
From 1946 to 1956, Macaya did not pay, as he was
not required to pay anything to the owners or
corporation whether in cash or in kind for his
occupancy or use of the property. However, the
corporation noted that the realty taxes on the property
had increased considerably and found it very
burdensome to pay the said taxes while on the other
hand, Macaya had contributed nothing nor even
helped in the payment of the taxes. Thus, Macaya
upon the request of the owners agreed to help by
remitting ten (10) cavans of palay every year as his
contribution for the payment of the realty taxes
beginning 1957.
On June 5, 1964, the corporation requested Macaya
to increase his contribution from ten (10) cavans to
twenty (20) cavans of palay effective 1963 because

the assessed value of the property had increased

considerably. Macaya agreed.
In 1967, Macaya informed the corporation that he
could not afford anymore to deliver any palay
because the palay dried up. He further requested that
in the ensuring years, he be allowed to contribute only
ten (10) cavans of palay. The corporation said that if
that was the case, he might as well not deliver
anymore. Thus, from 1967 up to 1976, Macaya did
not deliver any palay.
On January 31, 1974, Manotok Realty, Inc. executed
a "Unilateral Deed of Conveyance" of the property in
favor of Patricia Tiongson, Pacita Go, Roberto
Laperal III, Elisa Manotok, Rosa Manotok, Perpetua
M. Bocanegra, Filomena M. Sison, Severino Manotok,
Jr., Jesus Manotok, Ignacio S. Manotok, Severino
Manotok III and Fausto Manotok.
Sometime in 1974, Macaya was informed by the
Manotoks that they needed the property to construct
their houses thereon. Macaya agreed but pleaded
that he be allowed to harvest first the planted rice
before vacating the property.
However, he did not vacate the property as verbally
promised and instead expanded the area he was
working on.
In 1976, the Manotoks once more told Macaya to
vacate the entire property including those portions
tilled by him. At this point, Macaya had increased his
area from three (3) hectares to six (6) hectares
without the knowledge and consent of the owners. As
he was being compelled to vacate the property,
Macaya brought the matter to the Department (now
Ministry) of Agrarian Reforms. The Manotoks, during
the conference before the officials of the Department
insisted that Macaya and his family vacate the
property. They threatened to bulldoze Macaya's
landholding including his house, thus prompting
Macaya to file an action for peaceful possession,
injunction, and damages with preliminary injunction
before the Court of Agrarian Relations.
The sole issue to be resolved in the present petition is
whether or not a tenancy relationship exists between
the parties. The Court of Agrarian Relations found
that Macaya is not and has never been a share or
leasehold tenant of Severino Manotok nor of his
successors-in-interest over the property or any
portion or portions thereof but has only been
hired as a watchman or guard (bantay) over the
same. On Macaya's appeal from the said decision,
the respondent appellate court declared the existence
of an agricultural tenancy relationship and ordered
Macaya's reinstatement to his landholding.

Since what is involved is agricultural tenancy, we refer

to Republic Act No. 1199 as amended by Republic
Act No. 2263. Section 3 thereof defines agricultural
tenancy as:
xxx xxx xxx
... the physical possession by a
person of land devoted to agriculture
belonging to, or legally possessed by,
another for the purpose of production
through the labor of the former and of
the members of his immediate farm
household, in consideration of which
the former agrees to share the harvest
with the latter, or to pay a price
certain, either in produce or in money,
or in both.
Thus, the essential requisites of tenancy relationship
are: 1) the parties are the landholder and the tenant;
2) the subject is agricultural land; 3) there is consent;
4) the purpose is agricultural production; and 5) there
is consideration.
xxx xxx xxx
All these requisites are necessary in
order to create tenancy relationship
between the parties and the absence
of one or more requisites do not make
the alleged tenant a de facto tenant,
as contra-distinguished from a de jure
tenant, This is so because unless a
person has established his status as a
de jure tenant, he is not entitled to
security of tenure nor is he covered by
the Land Reform Program of the
Government under existing tenancy
laws. ...
The key factor in ascertaining whether or not there is
a landowner-tenant relationship in this case is the
nature of the disputed property.
Is the thirty-four (34) hectare lot, of which the six (6)
hectares occupied by the private respondent form a
part, against agricultural land? If not, the rules on
agrarian reform do not apply.
From the year 1948 up to the present, the tax
declarations of real property and the annual receipts
for real estate taxes paid have always classified the
land as "residential". The property is in Balara,
Quezon City, Metro Manila, not far from the correctly
held by the trial court:

University of the Philippines and near some fast

growing residential subdivisions. The Manotok family
is engaged in the business of developing subdivisions
in Metro Manila, not in farming.
The trial court observed that a panoramic view of the
property shows that the entire 34 hectares is rolling
forestal land without any flat portions except the small
area which could be planted to palay. The
photographs of the disputed area show that flush to
the plantings of the private respondent are adobe
walls separating expensive looking houses and
residential lots from the palay and newly plowed soil.
Alongside the plowed or narrowed soil are concrete
culverts for the drainage of residential subdivisions.
The much bigger portions of the property are not
suitable for palay or even vegetable crops.
The trial court noted that in a letter dated April 12,
1977, the City Engineer of Quezon City certified on
the basis of records in his office that the property in
question falls within the category of "Residential I
The respondent court ignored all the above
considerations and noted instead that the appellees
never presented the tax declarations for the previous
year, particularly for 1946, the year when Macaya
began cultivating the property. It held that while the
petitioners at that time might have envisioned a
panoramic residential area of the disputed property,
then cogonal with some forest, that vision could not
materialize due to the snail pace of urban
development to the peripheral areas of Quezon City
where the disputed property is also located and
pending the consequent rise of land values. As a
matter of fact, it found that the houses found thereon
were constructed only in the 70's.
Whatever "visions" the owners may have had in 1946,
the fact remains that the land has always been
officially classified as "residential" since 1948. The
areas surrounding the disputed six hectares are now
dotted with residences and, apparently, only this case
has kept the property in question from being
developed together with the rest of the lot to which it
belongs. The fact that a caretaker plants rice or
corn on a residential lot in the middle of a
residential subdivision in the heart of a
metropolitan area cannot by any strained
interpretation of law convert it into agricultural
land and subject it to the agrarian reform
On this score alone, the decision of the respondent
court deserves to be reversed.

Another requisite is that the parties must be

landholder and tenant. Rep. Act No. 11 99 as
amended defines a landholder
Sec. 5(b) A landholder shall mean a
person, natural or juridical, who, either
as owner, lessee, usufructuary, or
legal possessor, lets or grants to
another the use or cultivation of his
land for a consideration either in
shares under the share tenancy
system, or a price certain under the
leasehold tenancy system.
On the other hand, a tenant is defined as
Sec. 5(a) A tenant shall mean a
person who, himself and with the aid
available from within his immediate
farm household, cultivates the land
belonging to, or possessed by,
another with the latter's consent for
purposes of production, sharing the
produce with the landholder under the
share tenancy system or paying to the
landholder a price certain in produce
or in money or both, under the
leasehold tenancy system.
May Macaya be considered as a tenant and Manotok
as a landholder? In the absence of an agreement as
to the respective contributions of the parties or other
terms and conditions of their tenancy agreement, the
lower court concluded that no tenancy relationship
was entered into between them as tenant and
On this matter, the respondent Appellate Court
disagreed. It held that:
... Whether the appellant was
instituted as tenant or as bantay, the
inevitable fact is that appellant
cleared, cultivated and developed the
once unproductive and Idle property
for agricultural production. Appellant
and Don Severino have agreed and
followed a system of sharing the
produce of the land whereby, the
former takes care of all expenses for
cultivation and production, and the
latter is only entitled to 10 cavans of
rice per harvest. This is the essence of
leasehold tenancy.
It should be noted, however, that from 1967 to the
present, Macaya did not deliver any cavans of palay
to the petitioners as the latter felt that if Macaya could

no longer deliver the twenty (20) cavans of palay, he

might as well not deliver any. The decision of the
petitioners not to ask for anymore contributions from
Macaya reveals that there was no tenancy
relationship ever agreed upon by the parties. Neither
can such relationship be implied from the facts as
there was no agreed system of sharing the produce of
the property. Moreover, from 1946 to 1956 at which
time, Macaya was also planting rice, there was no
payment whatsoever. At the most and during the
limited period when it was in force, the arrangement
was a civil lease where the lessee for a fixed price
leases the property while the lessor has no
responsibility whatsoever for the problems of
production and enters into no agreement as to the
sharing of the costs of fertilizers, irrigation,
seedlings, and other items. The private respondent,
however, has long stopped in paying the annual rents
and violated the agreement when he expanded the
area he was allowed to use. Moreover, the duration of
the temporary arrangement had expired by its very
Going over the third requisite which is consent, the
trial court observed that the property in question
previous to 1946 had never been tenanted. During
that year, Vicente Herrera was the overseer. Under
these circumstances, coupled by the fact that the land
is forested and rolling, the lower court could not see
its way clear to sustain Macaya's contention that
Manotok had given his consent to enter into a verbal
tenancy contract with him. The lower court further
considered the fact that the amount of ten (10) cavans
of palay given by Macaya to the owners from 1957 to
1964 which was later increased to twenty (20) cavans
of palay from 1964 to 1966 was grossly
disproportionate to the amount of taxes paid by the
owners. The lot was taxed as residential land in a
metropolitan area. There was clearly no intention on
the part of the owners to devote the property for
agricultural production but only for residential
purposes. Thus, together with the third requisite, the
fourth requisite which is the purpose was also not
The last requisite is consideration. This is the produce
to be divided between the landholder and tenant in
proportion to their respective contributions. We agree
with the trial court that this was also absent.
As earlier stated, the main thrust of petitioners'
argument is that the law makes it mandatory upon the
respondent Court of Appeals to affirm the decision of
the Court of Agrarian Relations if the findings of fact in
said decision are supported by substantial evidence,
and the conclusions stated therein are not clearly
against the law and jurisprudence. On the other hand,
private respondent contends that the findings of the
Court of Agrarian Relations are based not on

substantial evidence alone but also on misconstrued

or misinterpreted evidence, which as a result thereof,
make the conclusions of the Court of Agrarian
Relations clearly contrary to law and jurisprudence.

and cultivate a three-hectare portion while it was not

being developed for housing purposes was granted.

It bears re-emphasizing that from 1946 to 1956, there

was no agreement as to any system of sharing the
produce of the land. The petitioners did not get
anything from the harvest and private respondent
Macaya was using and cultivating the land free from
any charge or expense. The situation was rather
strange had there been a tenancy agreement
between Don Severino and Macaya.

We can understand the sympathy and compassion

which courts of justice must feel for people in the
same plight as Mr. Macaya and his family. However,
the petitioners have been overly generous and
understanding of Macaya's problems. For ten years
from 1946 to 1956, he lived on the property, raising
animals and planting crops for personal use, with only
his services as "bantay" compensating for the use of
another's property. From 1967 to the present, he did
not contribute to the real estate taxes even as he
dealt with the land as if it were his own. He abused
the generosity of the petitioners when he expanded
the permitted area for cultivation from three hectares
to six or eight hectares. Mr. Macaya has refused to
vacate extremely valuable residential land contrary to
the clear agreement when he was allowed to enter it.
The facts of the case show that even Mr. Macaya did
not consider himself as a true and lawful tenant and
did not hold himself out as one until he was asked to
vacate the property.

From 1957 to 1964, Macaya was requested to

contribute ten (10) cavans a year for the payment of
the realty taxes. The receipts of these contributions
are evidenced.

WHEREFORE, the petition is GRANTED. The

decision of the respondent Court of Appeals is hereby
REVERSED and SET ASIDE and the decision of the
Court of Agrarian Relations is AFFIRMED.

From the above-quoted exhibits, it clearly appears

that the payment of the cavans of palay was Macaya's
contribution for the payment of the real estate taxes;
that the nature of the work of Macaya is that of a
watchman or guard (bantay); and, that the services of
Macaya as such watchman or guard (bantay) shall
continue until the property shall be converted into a
subdivision for residential purposes.


After painstakingly going over the records of the case,

we find no valid and cogent reason which justifies the
appellate court's deviation from the findings and
conclusions of the lower court. It is quite clear from
the 44-page decision of the trial court, that the latter
has taken extra care and effort in weighing the
evidence of both parties of the case. We find the
conclusions of the respondent appellate court to be
speculative and conjectural.

The respondent appellate court disregarded the

receipts as self-serving. While it is true that the
receipts were prepared by petitioner Perpetua M.
Bocanegra, Macaya nevertheless signed them
voluntarily. Besides, the receipts were written in the
vernacular and do not require knowledge of the law to
fully grasp their implications.
Furthermore, the conclusion of the respondent
appellate court to the effect that the receipts having
been prepared by one of the petitioners who happens
to be a lawyer must have been so worded so as to
conceal the real import of the transaction is highly
speculative. There was nothing to conceal in the first
place since the primary objective of the petitioners in
allowing Macaya to live on the property was for
security purposes. The presence of Macaya would
serve to protect the property from squatters. In return,
the request of Macaya to raise food on the property

application may be made to such court for

judicial acceptance of the award and as
order of enforcement, as the case may be.



On December 11, 2000, DOLE filed a complaint with the

RTC against SEARBEMCO, spouses Abujos, and Oribanex
for specific performance and damages, with a prayer for the
issuance of a writ of preliminary injunction and of a


order. DOLE



SEARBEMCO sold and delivered to Oribanex, through the

On January 29, 1998, SEARBEMCO, as seller, and DOLE

spouses Abujos, the bananas rejected by DOLE, in

Philippines, Inc. (Stanfilco Division) (DOLE), as buyer,

violation of paragraph 5(p), Article V of the BPPA which


limited the sale of rejected bananas for domestic non-export




(BPPA). The






consumption. DOLE further alleged that Oribanex is

SEARBEMCO shall sell exclusively to DOLE, and the

likewise an exporter of bananas and is its direct competitor.

latter shall buy from the former, all Cavendish bananas of

required specifications to be planted on the land owned by

DOLE narrated in its complaint how SEARBEMCO sold


and delivered the rejected bananas to Oribanex through the

spouses Abujos:

SEARBEMCO bound and obliged itself, inter alia,

to do the following:
p.) Sell exclusively to the BUYER all
bananas produced from the subject
plantation, except those rejected by the
BUYER for failure to meet the
specifications and conditions contained in
Exhibit A hereof. In the case of any such
rejected bananas, the SELLER shall
have the right to sell such rejected
bananas to third parties, for domestic
non-export consumption. The SELLER
shall only sell bananas produced from the
plantation and not from any other source.
Any dispute arising from or in connection with the BPPA

9.) That, however, on April 12, 2000 at

about 5:00 oclock in the afternoon,
[DOLE] through its authorized security
personnel discovered that SEARBEMCO
packed the bananas rejected by DOLE in
boxes marked CONSUL in Packing Plant
32 in DAPCO Panabo and sold and
delivered them to Abujos;
10.) That about 373 CONSUL marked
boxes were packed and knowingly sold by
SERVICES, INC. through Abujos who
carried and loaded the same on board a
blue Isuzu Canter bearing plate no. LDM
976 and delivered to defendant
ORIBANEX for export at the TEFASCO
Wharf covered by Abujos Delivery

between the parties shall be finally settled through

arbitration. To quote the BPPA:
All disputes arising in connection with
this Agreement shall be finally settled
under the Rules of Conciliation and
Arbitration of the International Chamber
of Commerce by three (3) Arbitrators
appointed in accordance with said Rules.
The Arbitration shall be held in a venue to
be agreed by the parties. Judgment upon
the award rendered may be entered in any
Philippine Court having jurisdiction or

11.) That the following day, April 13,

2000, again the same security found that
defendant SEARBEMCO continued to
pack the bananas rejected by plaintiff in
boxes marked as CONSUL, sold and
SERVICES, INC., for export, through
12.) That about 648 CONSUL marked
boxes were packed and knowingly sold by
SERVICES, INC., through Abujos who

carried and loaded the same on board a

red Isuzu Forwarder, bearing plate no.
LCV 918, and delivered to ORIBANEX
for export at the TEFASCO Wharf
covered by Abujos Delivery Receipt;

third-party buyers and not exporters of

bananas; and
4) the complaint is fatally defective as the
Board of Directors of DOLE did not
approve any resolution authorizing Atty.

13.) That the sale of a total of 712 boxes

of rejected bananas covering April 12 and
13, 2000, or any other dates prior thereto
or made thereafter by SEARBEMCO to
through defendant Abujos is in utter
violation of the Agreement between
SEARBEMCO may sell bananas rejected
by plaintiff to parties for domestic nonexport consumption only.

Reynaldo Echavez to execute the requisite

Verification and Certification Against
Forum Shopping and, therefore, the same
is fatally defective.
DOLE opposed SEARBEMCOs motion to dismiss
alleging, among others, that:
1) the dispute between the parties is not an

SEARBEMCO responded with a motion to dismiss on the

arbitration which is a condition precedent to the filing of a




jurisdiction of the DARAB under Republic

grounds of lack of jurisdiction over the subject matter of

the claim, lack of cause of action, failure to submit to


Act No. 6657[10] (RA No. 6657); and

2) the Arbitration Clause of the BPPA is not
applicable as, aside from SEARBEMCO,

complaint, and the complaints defective verification and


certification of non-forum shopping.[6] SEARBEMCO

impleaded other parties (i.e., the

spouses Abujos and Oribanex who are not

argued that:

parties to the BPPA) as defendants.[11]

1) the Department of Agrarian Reform




exclusive jurisdiction over the action filed

by DOLE, pursuant to Sections 1 and 3(e)



No. 09, Series of 1998[7] (AO No. 9-98)

and Section 5(a) and (c) of Administrative
Order No. 02, Series of 1999[8] (AO No. 299) of the Department of Agrarian Reform
(DAR), since the dispute between the
parties is an agrarian dispute within the
exclusive competence of the DARAB to
2) the filing of the complaint is premature, as







amended complaint,


on February 2,

2001 an

the amendment consisting of the

Verification and Certification against forum shopping for

DOLE executed by Danilo C. Quinto, DOLEs Zone
The RTC denied SEARBEMCOs motion to dismiss. The
trial court stated that the case does not involve an agrarian
conflict and is a judicial matter that it can resolve.
SEARBEMCO moved for the reconsideration of the RTC
Order.[14] The RTC denied the motion for lack of merit.

SEARBEMCO has not been referred to

and resolved by arbitration, contrary to
Article IX of the BPPA and Article V,
Sec. 30(g)[9] of AO No. 9-98 of the DAR;
3) it did not violate Section 5(p), Article V
of the BPPA, since the rejected bananas
were sold to the spouses Abujos who were

On July 26, 2001, SEARBEMCO filed a special civil
action for certiorari[16] with the CA alleging grave abuse
of discretion on the part of the RTC for denying its motion
to dismiss and the subsequent motion for reconsideration.

SEARBEMCO argued that the BPPA the parties executed

SEARBEMCO moved for reconsideration of the decision,

is an agri-business venture agreement. Thus, any dispute

but the CA denied the motion for lack of merit.

arising from the interpretation and implementation of the

BPPA is an agrarian dispute within the exclusive


jurisdiction of the DARAB.

In the present petition, SEARBEMCO submits that the CA
CA found that the RTC did not gravely abuse its discretion
in denying SEARBEMCOs motion to dismiss and motion
for reconsideration.

erred in ruling that:

1.) the RTC has jurisdiction over the subject
matter of the complaint of DOLE, considering
that the case involves an agrarian dispute

CA ruled that DAR has no jurisdiction over actions

within the exclusive jurisdiction of the

between SEARBEMCO and DOLE for enforcement of the


said Agreement when one commits a breach thereof and for

redress by way of specific performance and damages
inclusive of injunctive relief.


It held that the case is not

an agrarian dispute but is an action to compel

2.) the complaint of DOLE states a cause of

action, despite the fact that SEARBEMCO has
not violated any provision of the BPPA; and

SEARBEMCO to comply with its obligations under the

BPPA; it called for the application of the provisions of the

3.) the filing of the complaint is not premature,

despite DOLEs failure to submit its claim to

Civil Code, not RA No. 6657.

arbitration a condition precedent to any






juridical recourse.

argument that DOLEs complaint was prematurely filed

because of its failure to first resort to arbitration. The
arbitration clause under the BPPA, said the CA, applies
only when the parties involved are parties to the agreement;


We do not find the petition meritorious.
DOLEs complaint falls within the jurisdiction of the
regular courts, not the DARAB.

in its complaint, DOLE included the spouses Abujos and

Oribanex as defendants. According to the CA, if [DOLE]

SEARBEMCO mainly relies on Section 50[22] of RA No.

referred its dispute with [SEARBEMCO] to a Panel of

6657 and the characterization of the controversy as an

Arbitrators, any judgment rendered by the latter, whether

agrarian dispute or as an agrarian reform matter in

for or against [DOLE] will not be binding on the [spouses

contending that the present controversy falls within the

Abujos] and [Oribanex], as case law has it that only the

competence of the DARAB and not of the regular

parties to a suit, as well as their successors-in-interest, are

courts. The BPPA, SEARBEMCO claims, is a joint venture

bound by the judgment of the Court or quasi-judicial

and a production, processing and marketing agreement,



hence, any dispute arising from the BPPA is within the

exclusive jurisdiction of the DARAB. SEARBEMCO also

On SEARBEMCOs argument that the Verification and

asserts that the parties relationship in the present case is not

Certification Against Forum Shopping under DOLEs

only that of buyer and seller, but also that of supplier of

amended complaint is defective for failure to state that this

land covered by the CARP and of manpower on the part of

was based on personal knowledge, the CA ruled that the

SEARBEMCO, and supplier of agricultural inputs,

omission of the word personal did not render the

financing and technological expertise on the part of DOLE.

Verification and Certification defective.

Therefore, SEARBEMCO concludes that the BPPA is not

an ordinary contract, but one that involves an agrarian
element and, as such, is imbued with public interest.

indispensable elements for a tenancy relationship to exist:

As the CA found, the RTCs action was not attended by

(1) the parties are the landowner and the tenant or

any grave abuse of discretion and the RTC correctly

agricultural lessee; (2) the subject matter of the

ruled in denying SEARBEMCOs motion to dismiss. We

relationship is an agricultural land; (3) there is consent

fully agree with the CA.

between the parties to the relationship; (4) the purpose of

the relationship is to bring about agricultural production;

Section 3(d) of RA No. 6657 is clear in defining an

(5) there is personal cultivation on the part of the tenant or

agrarian dispute: any controversy relating to tenurial

agricultural lessee; and (6) the harvest is shared between

arrangements, whether leasehold, tenancy, stewardship or

the landowner and the tenant or the agricultural lessee.

otherwise, over lands devoted to agriculture, including




The parties in the present case have no tenurial,


leasehold, or any other agrarian relationship that could

maintaining, changing or seeking to arrange terms or

bring their controversy within the ambit of agrarian reform

conditions of such tenurial arrangements. It includes any

laws and within the jurisdiction of the DARAB. In fact,

controversy relating to compensation of lands acquired

SEARBEMCO has no allegation whatsoever in its motion

under this Act and other terms and conditions of transfer of

to dismiss regarding any tenancy relationship between it

ownership from landowners to farmworkers, tenants and

and DOLE that gave the present dispute the character of an

other agrarian reform beneficiaries, whether the disputants

agrarian dispute.







stand in the proximate relation of farm operator and

beneficiary, landowner and tenant, or lessor and lessee.[25]

We have always held that tenancy relations cannot

be presumed. The elements of tenancy must first be proved

RA No. 6657 is procedurally implemented through the

by substantial evidence which can be shown through

2003 DARAB Rules of Procedure where Section 1, Rule

records, documents, and written agreements between the



enumerates the instances where the DARAB shall

parties. A principal factor, too, to consider in determining

have primary and exclusive jurisdiction. A notable feature

whether a tenancy relationship exists is the intent of the

of RA No. 6657 and its implementing rules is the focus


on agricultural

lands and the




land that serves as the basis in the determination of whether

a matter falls under DARAB jurisdiction.

SEARBEMCO has not shown that the abovementioned indispensable elements of tenancy relations are
present between it and DOLE. It also cannot be gleaned

For DARAB to have jurisdiction over a

case, there must exist a tenancy
relationship between the parties.
The jurisdiction of the Department of
Agrarian Reform is limited to the
following: a.) adjudication of all matters
involving implementation of agrarian
reform; b.) resolution of agrarian conflicts
and land tenure related problems; and c.)
approval and disapproval of the
conversion, restructuring or readjustment
of agricultural lands into residential,
commercial, industrial, and other nonagricultural uses.

from the intention of the parties that they intended to form

a tenancy relationship between them. In the absence of any
such intent and resulting relationship, the DARAB cannot
have jurisdiction. Instead, the present petition is properly
cognizable by the regular courts, as the CA and the RTC
correctly ruled.
[The definition of agrarian dispute in RA
No. 6657 is] broad enough to include
disputes arising from any tenurial
arrangement beyond the traditional
relationship. xxx [A]grarian reform
extends beyond the mere acquisition and
acknowledges other modes of tenurial

arrangements to effect the implementation

of CARP.[32]
The Court declared that when the question
involves the rights and obligations of persons engaged in
the management, cultivation, and use of an agricultural
land covered by CARP, the case falls squarely within the
jurisdictional ambit of the DAR.
DOLEs complaint for specific performance and
damages before the RTC did not question the validity of the
BPPA that would require the application of the provisions
of RA No. 6657; neither did SEARBEMCOs motion to
dismiss nor its other pleadings assail the validity of the
BPPA on the ground that its provisions violate RA No.
6657. The resolution of the present case would therefore
involve, more than anything else, the application of civil
law provisions on breaches of contract, rather than agrarian
reform principles. Indeed, in support of their arguments, the
parties have capitalized and focused on their relationship as
buyer and seller. DOLE, the buyer, filed a complaint
against SEARBEMCO, the seller, to enforce the BPPA
between them and to compel the latter to comply with its
obligations. The CA is thus legally correct in its declaration
that the action before the RTC does not involve an agrarian
dispute, nor does it call for the application of Agrarian
Reform laws. x x x. The action of [DOLE] involves and
calls for the application of the New Civil Code, in
tandem with the terms and conditions of the [BPPA] of
[SEARBEMCO] and [DOLE].[33]
Even assuming that the present case can be
classified as an agrarian dispute involving the interpretation
or implementation of agribusiness venture agreements,
DARAB still cannot validly acquire jurisdiction, at least
insofar as DOLEs cause of action against the third parties
the spouses Abujos and Oribanex is concerned. To prevent
multiple actions, we hold that the present case is best
resolved by the trial court.
DOLEs complaint validly states a cause of action
SEARBEMCO asserts that the pleading containing DOLEs
claim against it states no cause of action. It contends that it

did not violate any of the provisions of the BPPA, since the
bananas rejected by DOLE were sold to the spouses Abujos
who are third-party buyers and are not exporters of bananas
transactions that the BPPA allows. Since the sole basis of
DOLEs complaint was SEARBEMCOs alleged violation of
the BPPA, which SEARBEMCO insists did not take place,
the complaint therefore did not state a cause of action.
Due consideration of the basic rules on lack of cause of
action as a ground for a motion to dismiss weighs against
SEARBEMCOs argument.
In applying this authoritative test, we must hypothetically
assume the truth of DOLEs allegations, and determine
whether the RTC can render a valid judgment in
accordance with its prayer.
We find the allegations in DOLEs complaint to be
sufficient basis for the judgment prayed for. Hypothetically






that SEARBEMCO sold the rejected bananas to Oribanex,

a competitor of DOLE and also an exporter of bananas,
through the spouses Abujos, a valid judgment may be
rendered by the RTC holding SEARBEMCO liable for
breach of contract. That the sale had been to the spouses
Abujos who are not exporters is essentially a denial of
DOLEs allegations and is not therefore a material
consideration in weighing the merits of the alleged lack of
cause of action. What SEARBEMCO stated is a counterstatement of fact and conclusion, and is a defense that it
will have to prove at the trial. At this point, the material
consideration is merely what the complaint expressly
alleged. Hypothetically assuming DOLEs allegations of
ultimate sale to Oribanex, through the spouses Abujos, to
be true, we hold following the test of sufficiency
in Jordana that DOLEs prayer for specific performance and
damages may be validly granted; hence, a cause of action
The filing of the complaint
is not premature since
arbitration proceedings are
not necessary in the present

Agrarian laws find no application in the present case.

BPPA arbitration clause does not apply to the present case
since third parties are involved. Any judgment or ruling to
be rendered by the panel of arbitrators will be useless if
third parties are included in the case, since the arbitral
ruling will not bind them; they are not parties to the
arbitration agreement. In the present case, DOLE included

arbitration between petitioners and

respondent Laperal Realty, would in effect
result in multiplicity of suits, duplicitous
procedure and unnecessary delay. On the
other hand, it would be in the interest of
justice if the trial court hears the
complaint against all herein respondents
and adjudicates petitioners rights as
against theirs in a single and complete

as parties the spouses Abujos and Oribanex since they

are necessary parties, i.e., they were directly involved in

The case of Del Monte is more direct in stating that the

the BPPA violation DOLE alleged, and their participation

doctrine held in the Toyota case has already been

are indispensable for a complete resolution of the dispute.


To require the spouses Abujos and Oribanex to submit

themselves to arbitration and to abide by whatever
judgment or ruling the panel of arbitrators shall make is
legally untenable; no law and no agreement made with their
participation can compel them to submit to arbitration.
In support of its position, SEARBEMCO cites the case
of Toyota








which holds that, the contention that the

arbitration clause has become dysfunctional because of the

presence of third parties is untenable. Contracts are
respected as the law between the contracting parties. As
such, the parties are thereby expected to abide with good
faith in their contractual commitments. SEARBEMCO
argues that the presence of third parties in the complaint
does not affect the validity of the provisions on arbitration.
Heirs of Salas involved the same issue now before us:
whether or not the complaint of petitioners-heirs in that
case should be dismissed for their failure to submit the
matter to arbitration before filing their complaint. The
petitioners-heirs included as respondents third persons who
were not parties to the original agreement between the
petitioners-heirs and respondent Laperal Realty. In ruling
that prior resort to arbitration is not necessary, this Court
Respondent Laperal Realty, as a
contracting party to the Agreement, has
the right to compel petitioners to first
arbitrate before seeking judicial relief.
However, to split the proceedings into
arbitration for respondent Laperal Realty
and trial for the respondent lot buyers, or
to hold trial in abeyance pending

petitioner DMC-USA and private
respondent MMI is a contract. The
provision to submit to arbitration any
dispute arising therefrom and the
relationship of the parties is part of
that contract and is itself a contract.
As a rule, contracts are respected as
the law between the contracting
parties and produce effect as between
them, their assigns and heirs. Clearly,
only parties to the Agreement, i.e.,
petitioners DMC-USA and its
Managing Director for Export
Sales Paul E. Derby, and private
Managing Director Lily Sy are
bound by the Agreement and its
arbitration clause as they are the
only signatories thereto. Petitioners
Daniel Collins and Luis Hidalgo, and
private respondent SFI, not parties to
the Agreement and cannot even be
considered assigns or heirs of the
parties, are not bound by the
Agreement and the arbitration clause
therein. Consequently, referral to
arbitration in the State of California
pursuant to the arbitration clause and
the suspension of the proceedings in
Civil Case No. 2637-MN pending the
return of the arbitral award could be
called for but only as to petitioners
DMC-USA and Paul E. Derby, Jr.,
and private respondents MMI and
Lily Sy, and not as to other parties in
this case, in accordance with the
recent case of Heirs of Augusto L.
Salas, Jr. v. Laperal Realty
Corporation, which superseded that
of [sic] Toyota Motor Philippines
Corp. v. Court of Appeals.



The object of arbitration is to allow

the expeditious determination of a
dispute. Clearly, the issue before us
could not be speedily and efficiently
resolved in its entirety if we allow
simultaneous arbitration proceedings
and trial, or suspension of trial
pending arbitration. Accordingly, the
interest of justice would only be
served if the trial court hears and
adjudicates the case in a single and
complete proceeding.[42]

On June 27, 1988, the petitioner and Aurora C.

Mendoza[5] (plaintiffs) filed a complaint with the Municipal
Trial Court (MTC) of Sta. Rosa, Nueva Ecija against
Narciso Germino for forcible entry.[6]

The plaintiffs claimed that they were the registered

owners of a five-hectare parcel of land in Soledad, Sta.
Rosa, Nueva Ecija under Transfer Certificate of Title No.

Following these precedents, the CA was therefore correct

34267. Sometime in 1988, respondent Narciso unlawfully

in its conclusion that the parties agreement to refer their

entered the subject property by means of strategy and

dispute to arbitration applies only where the parties to

stealth, and without their knowledge or consent. Despite the

the BPPA are solely the disputing parties.

plaintiffs repeated demands, respondent Narciso refused to

Additionally, the inclusion of third parties in the

vacate the subject property.[7]

complaint supports our declaration that the present case

does not fall under DARABs jurisdiction. DARABs quasi-

On August 9, 1988, respondent Narciso filed his

judicial powers under Section 50 of RA No. 6657 may be

answer, claiming, among others, that his brother,

invoked only when there is prior certification from


the Barangay Agrarian Reform Committee (or BARC) that

agricultural lessee and he merely helped the latter in the

the dispute has been submitted to it for mediation and

cultivation as a member of the immediate farm

conciliation, without any success of settlement.


Since the







present dispute need not be referred to arbitration

(including mediation or conciliation) because of the
inclusion of third parties, neither SEARBEMCO nor DOLE
will be able to present the requisite BARC certification that
is necessary to invoke DARABs jurisdiction; hence, there

After several postponements, the plaintiffs filed a

motion to remand the case to the Department of Agrarian
Reform Adjudication Board (DARAB), in view of the
tenancy issue raised by respondent Narciso.

will be no compliance with Section 53 of RA No. 6657.


Without conducting a hearing, and despite

hereby DENY the petition for certiorari for lack of merit.

Narcisos objection, the MTC issued an order on October

The Regional Trial Court, Branch 34, Panabo City, is

27, 1995, remanding the case to the DARAB, Cabanatuan

hereby directed to proceed with the case in accordance with

City for further proceedings.[9]

WHEREFORE, premises


this Decision. Costs against petitioner SEARBEMCO.

On December 14, 1995, the plaintiffs[10] filed an

amended complaint with the Provincial Agrarian Reform
Adjudicator (PARAD), impleading respondent Benigno as
additional defendant.

The plaintiffs alleged that Efren Bernardo was the

PARAD Romeo Bello found that the respondents

agricultural lessee of the subject property. Respondent

were mere usurpers of the subject property, noting that they

Benigno unlawfully entered the subject property in 1982 or

failed to prove that respondent Benigno was the

1983 through strategy and stealth, and without their

plaintiffs bona

knowledge or consent. He withheld possession of the

ordered the respondents to vacate the subject property, and

subject property up to 1987, and appropriated for himself

pay the plaintiffs 500 cavans of palay as actual damages.[13]

fide agricultural




its produce, despite repeated demands from the plaintiffs

for the return of the property. In 1987, they discovered that

Not satisfied, the respondents filed a notice of

respondent Benigno had transferred possession of the

appeal with the DARAB, arguing that the case should have

subject property to respondent Narciso, who refused to

been dismissed because the MTCs referral to the DARAB

return the possession of the subject property to the

was void with the enactment of Republic Act (R.A.) No.


6657,[14] which repealed the rule on referral under







himself. The subject property was fully irrigated and was

Presidential Decree (P.D.) No. 316.[15]

capable of harvest for 2 cropping seasons. Since the subject

property could produce 100 cavans of palay per hectare for


each cropping season, or a total of 500 cavans per cropping

The DARAB decided the appeal on July 22,

season for the five-hectare land, the plaintiffs alleged that

1998. It held that it acquired jurisdiction because of the

the respondents were able to harvest a total of 13,000

amended complaint that sufficiently alleged an agrarian

cavans of palay from the time they unlawfully withheld

dispute, not the MTCs referral of the case. Thus, it affirmed

possession of the subject property in 1982 until the

the PARAD decision.[16]

plaintiffs filed the complaint. Thus, they prayed that the

respondents be ordered to jointly and severally pay 13,000
cavans of palay, or its monetary equivalent, as actual

The respondents elevated the case to the CA via a

petition for review under Rule 43 of the Rules of Court.[17]

damages, to return possession of the subject property, and

to pay P15,000.00 as attorneys fees.[11]

It found that the MTC erred in transferring the case

On January 9, 1996, the respondents filed their

to the DARAB since the material allegations of the

answer denying the allegations in the complaint, claiming,

complaint and the relief sought show a case for forcible

among others, that the plaintiffs had no right over the

entry, not an agrarian dispute. It noted that the subsequent

subject property as they agreed to sell it to respondent

filing of the amended complaint did not confer jurisdiction

Benigno for P87,000.00. As a matter of fact, respondent

upon the DARAB. Thus, the CA set aside the DARAB

Benigno had already made a P50,000.00 partial payment,

decision and remanded the case to the MTC for further

but the plaintiffs refused to receive the balance and execute


the deed of conveyance, despite repeated demands. The

respondents also asserted that jurisdiction over the
complaint lies with the Regional Trial Court since
ownership and possession are the issues.

When the CA denied the subsequent motion for

reconsideration, the petitioner filed the present petition.



The petitioner insists that the jurisdiction lies with

land; (3) there is consent; (4) the purpose is agricultural

the DARAB since the nature of the action and the

production; (5) there is personal cultivation; and (6)

allegations of the complaint show an agrarian dispute.

there is sharing of harvest or payment of rental.[


The respondents submit that R.A. No. 6657

Based on these allegations and reliefs prayed, it is

clear that the action in the MTC was for forcible entry.

abrogated the rule on referral previously provided in P.D.

Allegation of tenancy does not divest the MTC of

No. 316. Moreover, neither the Rules of Court nor the


Revised Rules on Summary Procedure (RRSP) provides

that forcible entry cases can be referred to the DARAB.







affirmative and/or special defense in his answer, this did

The core issue is whether the MTC or the DARAB
has jurisdiction over the case.

not automatically divest the MTC of jurisdiction over the

complaint. It continued to have the authority to hear the
case precisely to determine whether it had jurisdiction to
dispose of the ejectment suit on its merits.[34] After all,

We deny the petition.

jurisdiction is not affected by the pleas or the theories set

up by the defendant in an answer or a motion to dismiss.

Jurisdiction is determined by the allegations in the

Otherwise, jurisdiction would become dependent almost


entirely upon the whims of the defendant.[35]

Under BP129,[24] as amended by R.A. No.

Under the RRSP, the MTC is duty-bound to

7691,[25] the MTC shall have exclusive original jurisdiction

conduct a preliminary conference[36] and, if necessary, to

over cases of forcible entry and unlawful detainer. The

receive evidence to determine if such tenancy relationship

RRSP[26] governs the remedial aspects of these suits.[27]

had, in fact, been shown to be the real issue.[37] The MTC

may even opt to conduct a hearing on the special and

Under Section 50[28] of R.A. No. 6657, as well as

affirmative defense of the defendant, although under the

Section 34[29] of Executive Order No. 129-A,[30] the

RRSP, such a hearing is not a matter of right.[38] If it is

DARAB has primary and exclusive jurisdiction, both

shown during the hearing or conference that, indeed,

original and appellate, to determine and adjudicate all

tenancy is the issue, the MTC should dismiss the case for

agrarian disputes involving the implementation of the

lack of jurisdiction.[39]

Comprehensive Agrarian Reform Program, and other

agrarian laws and their implementing rules and regulations.

In the present case, instead of conducting a

preliminary conference, the MTC immediately referred the

An agrarian dispute refers to any controversy

case to the DARAB. This was contrary to the

relating to, among others, tenancy over lands devoted to

rules. Besides, Section 2[40] of P.D. No. 316, which

agriculture.[31] For a case to involve an agrarian dispute, the

required the referral of a land dispute case to the

following essential requisites of an agricultural tenancy

Department of Agrarian Reform for the preliminary

relationship must be present: (1) the parties are the

determination of the existence of an agricultural tenancy

landowner and the tenant; (2) the subject is agricultural

relationship, has indeed been repealed by Section 76[41] of

R.A. No. 6657 in 1988.

Amended complaint did confer jurisdiction on the

Neither did the amendment of the complaint confer
jurisdiction on the DARAB. The plaintiffs alleged in the
amended complaint that the subject property was
previously tilled by Efren Bernardo, and the respondents
took possession by strategy and stealth, without their
knowledge and consent. In the absence of any allegation of
a tenancy relationship between the parties, the action was
for recovery of possession of real property that was within
the jurisdiction of the regular courts.[42]

The CA, therefore, committed no reversible error

in setting aside the DARAB decision. While we lament the
lapse of time this forcible entry case has been pending
resolution, we are not in a position to resolve the dispute
between the parties since the evidence required in courts is
different from that of administrative agencies.[43]

WHEREFORE, the petition is DENIED. The

October 6, 2003 Decision and October 12, 2004 Resolution
of the Court of Appeals in CA-G.R. SP No. 48642
are AFFIRMED. No pronouncement as to costs.