G.R. No.

L-62626 July 18, 1984

SPOUSES CAYETANO and PATRICIA TIONGSON, SPOUSES EDWARD and PACITA GO,
SPOUSES ROBERTO and MYRNA LAPERAL III, ELISA R. MANOTOK, SPOUSES IGNACIO and
PACITA MANOTOK, SEVERINO MANOTOK, JR., SPOUSES FAUSTO and MILAGROS
MANOTOK, ROSA R. MANOTOK, Minors MIGUEL A. B. SISON and MA. CRISTINA E. SISON,
represented by their judicial guardian FILOMENA M. SISON, SPOUSES MAMERTO and
PERPETUA M. BOCANEGRA, GEORGE M. BOCANEGRA, represented by his judicial guardian
MAMERTO BOCANEGRA, SPOUSES FRANCISCO and FILOMENA SISON, JOSE CLEMENTE
MANOTOK, SPOUSES JESUS and THELMA MANOTOK, Minors PHILIP MANOTOK, MARIA
TERESA MANOTOK and RAMON SEVERINO MANOTOK, represented by their judicial
guardian SEVERINO MANOTOK, JR., Minors JESUS JUDE MANOTOK, JR. and JOSE MARIA
MANOTOK, represented by their judicial guardian JESUS MANOTOK, petitioners,
vs.
HONORABLE COURT OF APPEALS and TEODORO S. MACAYA, respondents.

Romeo J. Callejo and Gil Venerando R. Racho for petitioners.

David Advincula Jr. and Jose J. Francisco for respondents.

GUTIERREZ, JR., J.:

In this petition for review on certiorari of the decision of the Court of, Appeal declaring the existence
of a landholder-tenant relationship and ordering the private respondent's reinstatement, the
petitioners contend that the appellate court committed an error of law in:

1. Disregarding the findings of fact of the Court of Agrarian Relations which are
supported by substantial evidence; and

2. Substituting the findings of fact of the Court of Agrarian Relations with its own
findings.

Briefly, the facts of the case as found by the Court of Agrarian Relations, Seventh Regional District,
Branch 1 at Pasig, Metro Manila are as follows: Sometime in 1946, the late Severino Manotok
donated and transferred to his eight (8) children and two (2) grandchildren namely: Purificacion
Manotok, Eliza Manotok, Perpetua manotok, Filomena Manotok, Severino Manotok, Jr., Jesus
Manotok, Rahula Ignacio Manotok, Severino Manotok III, Fausto Manotok and Rosa Manotok, a
thirty-four-hectare lot located in Payong, Old Balara, Quezon City covered by a certificate of title.
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 the house of 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 ed 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 (Agustin, Code of Agrarian Reforms of the Philippines,
1981, p. 19). As

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 Zone."

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 program.

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.

Under these definitions, may Macaya be considered as a tenant and Manotok as a landholder?
Significant, as the trial court noted, is that the parties have not agreed as to their contributions of the
several items of productions such as expenses for transplanting, fertilizers, weeding and application
of insecticides, etc. 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 landholder.

On this matter, the respondent Appellate Court disagreed. It held that:

... Whether the appellant was instituted as tenant therein or as bantay, as the
appellees preferred to call him, 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
essense 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 terms.

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 present.

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

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.

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.
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 by the following exhibits quoted
below:

(a) Exhibit "4" adopted and marked as Exhibit "K" for plaintiff (Macaya):

Ukol sa taon 1961

Tinanggap naniin kay G. Teodoro Macaya ang sampung (10) cavan

na palay bilang tulong niya sa pagbabayad ng amillaramiento sa lupa
ng corporation na nasa Payong, Q.C. na kaniyang binabantayan.

(b) Exhibit "9" adopted and marked as Exhibit "L" for plaintiff (Macaya):

Tinanggap namin kay Ginoong Teodoro Macaya ang TATLONG (3)

kabang palay bilang kapupunan sa DALAWAMPUNG (20) kabang
palay na kanyang tulong sa pagbabayad ng amillaramiento para sa
taong 1963 ng lupang ari ng Manotok Realty, Inc. na nasa Payong,
Quezon City, na kanyang binabantayan samantalang hindi pa
ginagawang SUBDIVISION PANGTIRAHAN.

c) Exhibit "10" adopted and marked as Exhibit "N" for plaintiff (Macaya):

Tinanggap namin kay Ginoong Teodoro Macaya ang

DALAWAMPUNG (20) kabang palay na kanyang tulong sa
pagbabayad ng amillaramiento para sa taong 1964 ng lupang ari ng
Manotok Realty Inc., na nasa Payong, Quezon City, na kanyang
binabantayan samantalang hindi pa ginagawang SUBDIVISION
PANG TAHANAN.

d) Exhibit "11" adopted and marked as Exhibit "M" for plaintiff (Macaya):

Tinanggap namin kay Ginoong Teodoro Macaya ang

DALAWAMPUNG (20) kabang ng palay na kanyang tulong sa
pagbabayad ng amillaramiento para sa taong 1965 ng lupang ari ng
Manotok Realty, Inc., na nasa Payong, Quezon City, na kanyang
binabantayan samantalang hindi pa ginagawang SUBDIVISION
PANG TAHANAN.

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.

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 and cultivate a three-
hectare portion while it was not being developed for housing purposes was granted.

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.

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.
G.R. No. 154048 November 27, 2009

STANFILCO EMPLOYEES AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE

COOPERATIVE, Petitioner,
vs.
DOLE PHILIPPINES, INC. (STANFILCO DIVISION), ORIBANEX SERVICES, INC. and SPOUSES
ELLY AND MYRNA ABUJOS, Respondents.

DECISION

BRION, J.:

Before this Court is the petition for review on certiorari1 filed by petitioner Stanfilco Employees
Agrarian Reform Beneficiaries Multi-Purpose Cooperative (SEARBEMCO). It assails:

(a) the decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 66148 dated November 27,
2001; and

(b) the CA’s resolution3 of June 13, 2002 in the same case, denying SEARBEMCO’s motion
for reconsideration.

THE FACTUAL ANTECEDENTS

On January 29, 1998, SEARBEMCO, as seller, and respondent DOLE Philippines, Inc. (Stanfilco
Division) (DOLE), as buyer, entered into a Banana Production and Purchase Agreement4 (BPPA).
The BPPA provided that SEARBEMCO shall sell exclusively to DOLE, and the latter shall buy from
the former, all Cavendish bananas of required specifications to be planted on the land owned by
SEARBEMCO. The BPPA states:

The SELLER agrees to sell exclusively to the BUYER, and the BUYER agrees to buy all Cavendish
Banana of the Specifications and Quality described in EXHIBIT "A" hereof produced on the
SELLER’S plantation covering an area of 351.6367 hectares, more or less, and which is planted and
authorized under letter of instruction no. 790 as amended on November 6, 1999 under the terms and
conditions herein stipulated. The SELLER shall not increase or decrease the area(s) stated above
without the prior written approval of the BUYER. However, the SELLER may reduce said area(s)
provided that if the SELLER replaces the reduction by planting bananas on an equivalent area(s)
elsewhere, it is agreed that such replacement area(s) shall be deemed covered by the Agreement. If
the SELLER plants an area(s) in excess of said 351.6367 hectares, the parties may enter into a
separate agreement regarding the production of said additional acreage. SELLER will produce
banana to the maximum capacity of the plantation, as much as practicable, consistent with good
agricultural practices designed to produce banana of quality having the standards hereinafter set
forth for the duration of this Banana Production and Purchase Agreement.

SEARBEMCO bound and obliged itself, inter alia, to do the following:

V. SPECIFIC OBLIGATIONS OF THE SELLER

xxx

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. [Emphasis supplied.]

Any dispute arising from or in connection with the BPPA between the parties shall be finally settled
through arbitration. To quote the BPPA:

IX. ARBITRATION OF DISPUTE

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 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 Regional Trial Court5 (RTC) against
SEARBEMCO, the spouses Elly and Myrna Abujos (spouses Abujos), and Oribanex Services, Inc.
(Oribanex) for specific performance and damages, with a prayer for the issuance of a writ of
preliminary injunction and of a temporary restraining order. DOLE alleged that SEARBEMCO sold
and delivered to Oribanex, through the spouses Abujos, the bananas rejected by DOLE, in violation
of paragraph 5(p), Article V of the BPPA which limited the sale of rejected bananas for "domestic
non-export consumption." DOLE further alleged that Oribanex is likewise an exporter of bananas
and is its direct competitor.

DOLE narrated in its complaint how SEARBEMCO sold and delivered the rejected bananas to
Oribanex through the spouses Abujos:

9.) That, however, on April 12, 2000 at about 5:00 o’clock in the afternoon, [DOLE] through
its authorized security personnel discovered that defendant SEARBEMCO, in violation of
Section 5(p) Article V of the Banana Production and Purchase Agreement, packed the
bananas rejected by [DOLE] in boxes marked "CONSUL" in Packing Plant 32 in DAPCO
Panabo and sold and delivered them to defendant Abujos;

10.) That about 373 "CONSUL" marked boxes were packed and knowingly sold by
defendant SEARBEMCO to ORIBANEX SERVICES, INC. through defendants 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 Receipt, a copy of which is hereto attached as Annex "B";

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" and, in violation of paragraph 5(p) Article V of the Banana Production and
Purchase Agreement, sold and delivered them to defendant ORIBANEX SERVICES, INC.,
for export, through defendants Abujos;

12.) That about 648 "CONSUL" marked boxes were packed and knowingly sold by
defendant SEARBEMCO to ORIBANEX SERVICES, INC., through defendants Abujos who
carried and loaded the same on board a red Isuzu Forwarder, bearing plate no. LCV 918,
and delivered to defendant ORIBANEX for export at the TEFASCO Wharf covered by Abujos
Delivery Receipt, a copy of which is hereto attached and marked as Annex "C";
 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 defendant SEARBEMCO to defendant
ORIBANEX SERVICES, INC. through defendant Abujos is in utter violation of the Agreement
between plaintiff [DOLE] and defendant SEARBEMCO that SEARBEMCO may sell bananas
rejected by plaintiff to parties for domestic non-export consumption only.

SEARBEMCO responded with a motion to dismiss on the grounds of lack of jurisdiction over the
subject matter of the claim, lack of cause of action, failure to submit to arbitration which is a condition
precedent to the filing of a complaint, and the complaint’s defective verification and certification of
non-forum shopping.6 SEARBEMCO argued that:

1) the Department of Agrarian Reform Adjudication Board (DARAB) has exclusive jurisdiction
over the action filed by DOLE, pursuant to Sections 1 and 3(e) of Administrative Order No.
09, Series of 19987 (AO No. 9-98) and Section 5(a) and (c) of Administrative Order No. 02,
Series of 19998 (AO No. 2-99) 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 resolve;

2) the filing of the complaint is premature, as the dispute between DOLE and 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 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. Reynaldo Echavez to execute the requisite Verification and
Certification Against Forum Shopping and, therefore, the same is fatally defective.

DOLE opposed SEARBEMCO’s motion to dismiss alleging, among others, that:

1) the dispute between the parties is not an agrarian dispute within the exclusive jurisdiction
of the DARAB under Republic Act No. 665710 (RA No. 6657); and

2) the Arbitration Clause of the BPPA is not applicable as, aside from SEARBEMCO, DOLE
impleaded other parties (i.e., the spouses Abujos and Oribanex who are not parties to the
BPPA) as defendants.11

Subsequently, DOLE filed on February 2, 2001 an amended complaint,12 the amendment consisting
of the Verification and Certification against forum shopping for DOLE executed by Danilo C. Quinto,
DOLE’s Zone Manager.

THE RTC RULING

The RTC denied SEARBEMCO’s motion to dismiss in an Order dated May 16, 2001.13 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 in its Order of July 12, 2001.15

THE CA RULING
On July 26, 2001, SEARBEMCO filed a special civil action for certiorari16 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 is an agri-business venture agreement
contemplated by DAR’s AO No. 9-98. Thus, any dispute arising from the interpretation and
implementation of the BPPA is an agrarian dispute within the exclusive jurisdiction of the DARAB.

In a decision dated November 27, 2001,17 the CA found that the RTC did not gravely abuse its
discretion in denying SEARBEMCO’s motion to dismiss and motion for reconsideration. 1avv phi1

The CA ruled that "the [DAR] has no jurisdiction, under said [AO No. 9-98], over actions 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."18 It held that the case is not an agrarian dispute within the purview of Section 3(d) of RA No.
6657,19 but is an action to compel SEARBEMCO to comply with its obligations under the BPPA; it
called for the application of the provisions of the Civil Code, not RA No. 6657.

The CA likewise disregarded SEARBEMCO’s emphatic argument that DOLE’s 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; in its
complaint, DOLE included the spouses Abujos and Oribanex as defendants. According to the CA, "if
[DOLE] referred its dispute with [SEARBEMCO] to a Panel of Arbitrators, any judgment rendered by
the latter, whether for or against [DOLE] will not be binding on the [spouses Abujos] and [Oribanex],
as case law has it that only the parties to a suit, as well as their successors-in-interest, are bound by
the judgment of the Court or quasi-judicial bodies."20

On SEARBEMCO’s argument that the Verification and Certification Against Forum Shopping under
DOLE’s amended complaint is defective for failure to state that this was based on "personal
knowledge," the CA ruled that the omission of the word "personal" did not render the Verification and
Certification defective.

SEARBEMCO moved for reconsideration of the decision, but the CA denied the motion for lack of
merit in its resolution of June 13, 2002.21

ASSIGNMENT OF ERRORS

In the present petition, SEARBEMCO submits that the CA 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 within the exclusive jurisdiction of the DARAB;

2.) the complaint of DOLE states a cause of action, despite the fact that SEARBEMCO has
not violated any provision of the BPPA; and

3.) the filing of the complaint is not premature, despite DOLE’s failure to submit its claim to
arbitration – a condition precedent to any juridical recourse.

THE COURT’S RULING

We do not find the petition meritorious.

DOLE’s complaint falls within the jurisdiction of the regular courts, not the DARAB.

SEARBEMCO mainly relies on Section 5022 of RA No. 6657 and the characterization of the
controversy as an agrarian dispute or as an agrarian reform matter in contending that the present
controversy falls within the competence of the DARAB and not of the regular courts. The BPPA,
SEARBEMCO claims, is a joint venture and a production, processing and marketing agreement, as
defined under Section 5 (c) (i) and (ii) of DAR AO No. 2-99;23 hence, any dispute arising from the
BPPA is within the exclusive jurisdiction of the DARAB. SEARBEMCO also asserts that the parties’
relationship in the present case is not only that of buyer and seller, but also that of supplier of land
covered by the CARP and of manpower on the part of SEARBEMCO, and supplier of agricultural
inputs, financing and technological expertise on the part of DOLE. 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.

We clarify at the outset that what we are reviewing in this petition is the legal question of whether the
CA correctly ruled that the RTC committed no grave abuse discretion in denying SEARBEMCO’s
motion to dismiss. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to the appellate court; we have to
examine the CA decision from the prism of whether it correctly determined the presence or absence
of grave abuse of discretion in the RTC ruling before it, not on the basis of whether the RTC ruling
on the merits of the case was correct. In other words, we have to be keenly aware that the CA
undertook a Rule 65 review, not a review on appeal, of the challenged RTC ruling. A court acts with
grave abuse of discretion amounting to lack or excess of jurisdiction when its action was performed
in a capricious and whimsical exercise of judgment equivalent to lack of discretion. The abuse of
discretion must be so patent and gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of the law, as where the
power is exercised in an arbitrary and despotic manner by reason or passion or personal hostility.24

As the CA found, the RTC’s action was not attended by any grave abuse of discretion and the
RTC correctly ruled in denying SEARBEMCO’s motion to dismiss. We fully agree with the CA.

Section 3(d) of RA No. 6657 is clear in defining an agrarian dispute: "any controversy relating to
tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to
agriculture, including dispute concerning farm-workers’ associations or representations 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 this Act
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."25

RA No. 6657 is procedurally implemented through the 2003 DARAB Rules of Procedure where
Section 1, Rule II26 enumerates the instances where the DARAB shall have primary and exclusive
jurisdiction. A notable feature of RA No. 6657 and its implementing rules is the focus on agricultural
lands and the relationship over this landthat serves as the basis in the determination of whether a
matter falls under DARAB jurisdiction.

In Heirs of the Late Hernan Rey Santos v. Court of Appeals,27 we held that:

For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the
parties. x x x. In Vda. De Tangub v. Court of Appeals (191 SCRA 885), we held that 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 non-agricultural uses.
[Emphasis supplied].

The case of Pasong Bayabas Farmers Association, Inc. v. Court of Appeals28 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."

The parties in the present case have no tenurial, leasehold, or any other agrarian relationship that
could bring their controversy within the ambit of agrarian reform laws and within the jurisdiction of the
DARAB. In fact, SEARBEMCO has no allegation whatsoever in its motion to dismiss regarding any
tenancy relationship between it and DOLE that gave the present dispute the character of an agrarian
dispute.

We have always held that tenancy relations cannot be presumed. The elements of tenancy must 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.29

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

Notably, the requirement of the existence of tenurial relationship has been relaxed in the cases of
Islanders CARP-Farmers Beneficiaries Muti-Purpose Cooperative, Inc. v. Lapanday Agricultural and
Dev’t. Corporation30and Cubero v. Laguna West Multi-Purpose Cooperative, Inc.31 The Court,
speaking through former Chief Justice Panganiban, declared in Islanders that:

[The definition of ‘agrarian dispute’ in RA No. 6657 is] broad enough to include disputes arising from
any tenurial arrangement beyond the traditional landowner-tenant or lessor-lessee relationship. xxx
[A]grarian reform extends beyond the mere acquisition and redistribution of land, the law
acknowledges other modes of tenurial arrangements to effect the implementation of CARP.32

While Islanders and Cubero may seem to serve as precedents to the present case, a close analysis
of these cases, however, leads us to conclude that significant differences exist in the factual
circumstances between those cases and the present case, thus rendering the rulings in these cited
cases inapplicable.

Islanders questioned (through a petition for declaration of nullity filed before the RTC of Tagum City)
the lack of authority of the farmer-beneficiaries’ alleged representative to enter into a Joint
Production Agreement with Lapanday. The farmers-beneficiaries assailed the validity of the
agreement by additionally claiming that its terms contravened RA No. 6657.

Cubero likewise involved a petition to declare the nullity of a Joint Venture Agreement between the
farmer-beneficiaries and Laguna West Multi-Purpose Cooporative, Inc. The successors of the
farmer-beneficiaries assailed the agreement before the RTC of Tanauan, Batangas for having been
executed within the 10-year prohibitory period under Section 27 of RA No. 6657.

In both cases, the Court ruled that the RTC lacked jurisdiction to hear the complaint and declared
the DARAB as the competent body to resolve the dispute. 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.

Carefully analyzed, the principal issue raised in Islanders and Cubero referred to the management,
cultivation, and use of the CARP-covered agricultural land; the issue of the nullity of the joint
economic enterprise agreements in Islanders and Cubero would directly affect the agricultural land
covered by CARP. Those cases significantly did not pertain to post-harvest transactions involving
the produce from CARP-covered agricultural lands, as the case before us does now.

Moreover, the resolution of the issue raised in Islanders and Cubero required the interpretation and
application of the provisions of RA No. 6657, considering that the farmer-beneficiaries claimed that
the agreements contravened specific provisions of that law. In the present case, DOLE’s 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 SEARBEMCO’s 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

We find SEARBEMCO’s reliance on DAR AO No. 9-98 and AO No. 2-99 as bases for DARAB’s
alleged expanded jurisdiction over all disputes arising from the interpretation of agribusiness
ventures to be misplaced. DARAB’s jurisdiction under Section 50 of RA No. 6657 should be read in
conjunction with the coverage of agrarian reform laws; administrative issuances like DAR AO Nos. 9-
98 and 2-99 cannot validly extend the scope of the jurisdiction set by law. In so ruling, however, we
do not pass upon the validity of these administrative issuances. We do recognize the possibility that
disputes may exist between parties to joint economic enterprises that directly pertain to the
management, cultivation, and use of CARP-covered agricultural land. Based on our above
discussion, these disputes will fall within DARAB’s jurisdiction.

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 DOLE’s 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.

DOLE’s complaint validly states a cause of action

SEARBEMCO asserts that the pleading containing DOLE’s 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 DOLE’s complaint was
SEARBEMCO’s 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 SEARBEMCO’s argument.

In the case of Jimenez, Jr. v. Jordana,34 this Court had the opportunity to discuss the sufficiency of
the allegations of the complaint to uphold a valid cause of action, as follows:

In a motion to dismiss, a defendant hypothetically admits the truth of the material allegations of the
plaintiff’s complaint. This hypothetical admission extends to the relevant and material facts pleaded
in, and the inferences fairly deductible from, the complaint. Hence, to determine whether the
sufficiency of the facts alleged in the complaint constitutes a cause of action, the test is as follows:
admitting the truth of the facts alleged, can the court render a valid judgment in accordance with the
prayer?

To sustain a motion to dismiss, the movant needs to show that the plaintiff’s claim for relief does not
exist at all. On the contrary, the complaint is sufficient "if it contains sufficient notice of the cause of
action even though the allegations may be vague or indefinite, in which event, the proper recourse
would be, not a motion to dismiss, but a motion for a bill of particulars.35

In applying this authoritative test, we must hypothetically assume the truth of DOLE’s allegations,
and determine whether the RTC can render a valid judgment in accordance with its prayer.

We find the allegations in DOLE’s complaint to be sufficient basis for the judgment prayed for.
Hypothetically admitting the allegations in DOLE’s complaint 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 DOLE’s 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 counter-statement 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 DOLE’s
allegations of ultimate sale to Oribanex, through the spouses Abujos, to be true, we hold – following
the test of sufficiency in Jordana – that DOLE’s prayer for specific performance and damages may
be validly granted; hence, a cause of action exists.

The filing of the complaint is not premature since arbitration proceedings are not necessary
in the present case

SEARBEMCO argues that DOLE failed to comply with a condition precedent before the filing of its
complaint with the RTC, i.e., DOLE did not attempt to settle their controversy through arbitration
proceedings. SEARBEMCO relies on Article V, Section 30(g) of DAR AO No. 9-9836 and Section 10
of DAR AO No. 2-9937 which provide that "as a rule, voluntary methods such as mediation or
conciliation, shall be preferred in resolving disputes involving joint economic enterprises."
SEARBEMCO also cites Section IX of the BPPA which provides that all disputes arising out of or in
connection with their agreement shall be finally settled through arbitration.

Following our conclusion that agrarian laws find no application in the present case, we find – as the
CA did – that SEARBEMCO’s arguments anchored on these laws are completely baseless.
Furthermore, the cited DAR AO No. 2-99, on its face, only mentions a "preference," not a strict
requirement of referral to arbitration. The BPPA-based argument deserves more and closer
consideration.

We agree with the CA ruling that the 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 as parties the
spouses Abujos and Oribanex since they are necessary parties, i.e., they were directly involved in
the BPPA violation DOLE alleged, and their participation 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 Motor Philippines Corp. v. Court of
Appeals38which 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.

Unfortunately, the ruling in the Toyota case has been superseded by the more recent cases of Heirs
of Augusto L. Salas, Jr. v. Laperal Realty Corporation39 and Del Monte Corporation-USA v. Court of
Appeals.40

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 held:

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 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 petitioner’s rights as against theirs in a single and complete proceeding.41

The case of Del Monte is more direct in stating that the doctrine held in the Toyota case has already
been abandoned:

The Agreement between 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 respondents MMI and its 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.

xxxx

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

Following these precedents, the CA was therefore correct in its conclusion that the parties’
agreement to refer their dispute to arbitration applies only where the parties to the BPPA are solely
the disputing parties.

Additionally, the inclusion of third parties in the complaint supports our declaration that the present
case does not fall under DARAB’s jurisdiction. DARAB’s quasi-judicial powers under Section 50 of
RA No. 6657 may be invoked only when there is prior certification from the Barangay Agrarian
Reform Committee (or BARC) that the dispute has been submitted to it for mediation and
conciliation, without any success of settlement.43 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 DARAB’s jurisdiction; hence, there will be no compliance with Section 53 of RA No. 6657.

WHEREFORE, premises considered, we hereby DENY the petition for certiorari for lack of merit.
The Regional Trial Court, Branch 34, Panabo City, is hereby directed to proceed with the case in
accordance with this Decision. Costs against petitioner SEARBEMCO.
G.R. No. 165676 November 22, 2010

JOSE MENDOZA,* Petitioner,

vs.
NARCISO GERMINO and BENIGNO GERMINO, Respondents.

DECISION

BRION, J.:

Before us is the petition for review on certiorari1 filed by petitioner Jose Mendoza to challenge the
decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 48642.4

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

On June 27, 1988, the petitioner and Aurora C. Mendoza5 (plaintiffs) filed a complaint with the
Municipal Trial Court (MTC) of Sta. Rosa, Nueva Ecija against respondent 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 (subject property) under Transfer Certificate of Title No. 34267.
Sometime in 1988, respondent Narciso unlawfully entered the subject property by means of strategy
and stealth, and without their knowledge or consent. Despite the plaintiffs’ repeated demands,
respondent Narciso refused to vacate the subject property.7

On August 9, 1988, respondent Narciso filed his answer, claiming, among others, that his brother,
respondent Benigno Germino, was the plaintiffs’ agricultural lessee and he merely helped the latter
in the cultivation as a member of the immediate farm household.8

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.

Without conducting a hearing, and despite respondent Narciso’s objection, the MTC issued an order
on October 27, 1995, remanding the case to the DARAB, Cabanatuan City for further proceedings.9

On December 14, 1995, the plaintiffs10 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 agricultural lessee of the subject property.
Respondent Benigno unlawfully entered the subject property in 1982 or 1983 through strategy and
stealth, and without their knowledge or consent. He withheld possession of the subject property up
to 1987, and appropriated for himself its produce, despite repeated demands from the plaintiffs for
the return of the property. In 1987, they discovered that respondent Benigno had transferred
possession of the subject property to respondent Narciso, who refused to return the possession of
the subject property to the plaintiffs and appropriated the land’s produce for himself. The subject
property was fully irrigated and was 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 season for the five-hectare land, the plaintiffs alleged that the respondents were
able to harvest a total of 13,000 cavans of palay from the time they unlawfully withheld possession of
the subject property in 1982 until the 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 damages, to return possession of the subject property, and to pay P15,000.00
as attorney’s fees.11

On January 9, 1996, the respondents filed their answer denying the allegations in the complaint,
claiming, among others, that the plaintiffs had no right over the subject property as they agreed to
sell it to respondent Benigno forP87,000.00. As a matter of fact, respondent Benigno had already
made a P50,000.00 partial payment, 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.12

THE PARAD RULING

In a March 19, 1996 decision, PARAD Romeo Bello found that the respondents were mere usurpers
of the subject property, noting that they failed to prove that respondent Benigno was the plaintiffs’
bona fide agricultural lessee. The PARAD ordered the respondents to vacate the subject property,
and pay the plaintiffs 500 cavans of palay as actual damages.13

Not satisfied, the respondents filed a notice of appeal with the DARAB, arguing that the case should
have been dismissed because the MTC’s referral to the DARAB was void with the enactment of
Republic Act (R.A.) No. 6657,14 which repealed the rule on referral under Presidential Decree (P.D.)
No. 316.15

THE DARAB RULING

The DARAB decided the appeal on July 22, 1998. It held that it acquired jurisdiction because of the
amended complaint that sufficiently alleged an agrarian dispute, not the MTC’s referral of the case.
Thus, it affirmed the PARAD decision.16

The respondents elevated the case to the CA via a petition for review under Rule 43 of the Rules of
Court.17

THE CA RULING

The CA decided the appeal on October 6, 2003.18 It found that the MTC erred in transferring the
case to the DARAB since the material allegations of the complaint and the relief sought show a case
for forcible entry, not an agrarian dispute. It noted that the subsequent filing of the amended
complaint did not confer jurisdiction upon the DARAB. Thus, the CA set aside the DARAB decision
and remanded the case to the MTC for further proceedings.

When the CA denied19 the subsequent motion for reconsideration,20 the petitioner filed the present
petition.21

THE PETITION

The petitioner insists that the jurisdiction lies with the DARAB since the nature of the action and the
allegations of the complaint show an agrarian dispute.
 THE CASE FOR THE RESPONDENTS

The respondents submit that R.A. No. 6657 abrogated the rule on referral previously provided in
P.D. 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.

THE ISSUE

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

OUR RULING

We deny the petition.

Jurisdiction is determined by the allegations in the complaint

It is a basic rule that jurisdiction over the subject matter is determined by the allegations in the
complaint.22 It is determined exclusively by the Constitution and the law. It cannot be conferred by
the voluntary act or agreement of the parties, or acquired through or waived, enlarged or diminished
by their act or omission, nor conferred by the acquiescence of the court. Well to emphasize, it is
neither for the court nor the parties to violate or disregard the rule, this matter being legislative in
character.23

Under Batas Pambansa Blg. 129,24 as amended by R.A. No. 7691,25 the MTC shall have exclusive
original jurisdiction over cases of forcible entry and unlawful detainer. The RRSP26 governs the
remedial aspects of these suits.27

Under Section 5028 of R.A. No. 6657, as well as Section 3429 of Executive Order No. 129-A,30 the
DARAB has primary and exclusive jurisdiction, both original and appellate, to determine and
adjudicate all agrarian disputes involving the implementation of the Comprehensive Agrarian Reform
Program, and other agrarian laws and their implementing rules and regulations.

An agrarian dispute refers to any controversy relating to, among others, tenancy over lands devoted
to agriculture.31 For a case to involve an agrarian dispute, the following essential requisites of an
agricultural tenancy relationship must be present: (1) the parties are the landowner and the tenant;
(2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5)
there is personal cultivation; and (6) there is sharing of harvest or payment of rental.32 1avvphil

In the present case, the petitioner, as one of the plaintiffs in the MTC, made the following allegations
and prayer in the complaint:

3. Plaintiffs are the registered owners of a parcel of land covered by and described in
Transfer Certificate of Title Numbered 34267, with an area of five (5) hectares, more or less
situated at Bo. Soledad, Sta. Rosa, Nueva Ecija. x x x;

4. That so defendant thru stealth, strategy and without the knowledge, or consent of
administrator x x x much more of the herein plaintiffs, unlawfully entered and occupied said
parcel of land;

5. Inspite of x x x demands, defendant Germino, refused and up to the filing of this complaint,
still refused to vacate the same;
 6. The continuos (sic) and unabated occupancy of the land by the defendant would work and
cause prejudice and irreparable damage and injury to the plaintiffs unless a writ of
preliminary injunction is issued;

7. This prejudice, damage or injury consist of disturbance of property rights tantamount to

deprivation of ownership or any of its attributes without due process of law, a diminution of
plaintiffs’ property rights or dominion over the parcel of land subject of this dispute, since
they are deprived of freely entering or possessing the same;

8. The plaintiffs are entitled to the relief demanded or prayed for, and the whole or part of
such relief/s consist of immediately or permanently RESTRAINING, ENJOINING or
STOPPING the defendant or any person/s acting in his behalf, from entering, occupying, or
in any manner committing, performing or suffering to be committed or performed for him, any
act indicative of, or tending to show any color of possession in or about the tenement,
premises or subject of this suit, such as described in par. 3 of this complaint;

9. Plaintiffs are ready and willing to post a bond answerable to any damage/s should the
issuance of the writ x x x;

10. As a consequence of defendant’s malevolent refusal to vacate the premises of the land
in dispute, plaintiffs incurred litigation expenses of P1,500.00, availing for the purpose the
assistance of a counsel at an agreed honorarium of P5,000.00 and P250.00 per appearance/
not to mention the moral damages incurred due to sleepless nights and mental anxiety,
including exemplary damages, the award and amount of which are left to the sound
discretion of this Honorable Court.

PRAYER

WHEREFORE, it is respectfully prayed of this Honorable Court that pending the resolution of the
issue in this case, a restraining order be issued RESTRAINING, ENJOINING, or STOPPING the
defendant or any person/s acting in his behalf, from ENTERING OR OCCUPYING the parcel of land,
or any portion thereof, described in paragraph 3 of this complaint, nor in any manner committing,
performing or suffering to be committed or, performed for him, by himself or thru another, any act
indicative of, or tending to show any color of possession in or about the premises subject of this suit;

THEREAFTER, making said writ of preliminary injunction PERMANENT; and on plaintiffs’ damages,
judgment be rendered ordering the defendant to pay to the plaintiffs the sum alleged in paragraph 10
above.

GENERAL RELIEFS ARE LIKEWISE PRAYED FOR.33

Based on these allegations and reliefs prayed, it is clear that the action in the MTC was for forcible
entry.

Allegation of tenancy does not divest the MTC of jurisdiction

Although respondent Narciso averred tenancy as an affirmative and/or special defense in his
answer, this did 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, jurisdiction is not affected by the pleas or the theories set
up by the defendant in an answer or a motion to dismiss. Otherwise, jurisdiction would become
dependent almost entirely upon the whims of the defendant.35

Under the RRSP, the MTC is duty-bound to conduct a preliminary conference36 and, if necessary, to
receive evidence to determine if such tenancy relationship had, in fact, been shown to be the real
issue.37 The MTC may even opt to conduct a hearing on the special and affirmative defense of the
defendant, although under the RRSP, such a hearing is not a matter of right.38 If it is shown during
the hearing or conference that, indeed, tenancy is the issue, the MTC should dismiss the case for
lack of jurisdiction.39

In the present case, instead of conducting a preliminary conference, the MTC immediately referred
the case to the DARAB. This was contrary to the rules. Besides, Section 240 of P.D. No. 316, which
required the referral of a land dispute case to the Department of Agrarian Reform for the preliminary
determination of the existence of an agricultural tenancy relationship, has indeed been repealed by
Section 7641 of R.A. No. 6657 in 1988.

Amended complaint did confer jurisdiction on the DARAB

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.