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.
SO ORDERED.

STANFILCO EMPLOYEES
AGRARIAN REFORM
BENEFICIARIES MULTIPURPOSE COOPERATIVE,
Petitioner,
-

versus -

G.R. No. 154048

Present:
CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,
BRION,
DEL CASTILLO, and
ABAD, JJ.

DOLE PHILIPPINES, INC.

Promulgated:
(STANFILCO DIVISION),
ORIBANEX SERVICES, INC. and
November 27, 2009
SPOUSES ELLY AND MYRNA
ABUJOS,
Respondents.
x ------------------------------------------------------------------------------------------x
DECISION

BRION, J.:

Before this Court is the petition for review on certiorari[1] filed by petitioner Stanfilco Employees
Agrarian Reform Beneficiaries Multi-Purpose Cooperative (SEARBEMCO). It assails:
(a) the decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 66148 dated November 27,
2001; and
(b) the CAs resolution[3] of June 13, 2002 in the same case, denying SEARBEMCOs 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
Agreement[4] (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 SELLERS 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 Court [5] (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 nonexport 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 oclock 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 complaints 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
[7]
No. 09, Series of 1998 (AO No. 9-98) and Section 5(a) and (c) of Administrative Order
No. 02, Series of 1999 [8] (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 SEARBEMCOs 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. 6657[10] (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,
DOLEs Zone Manager.
THE RTC RULING
The RTC denied SEARBEMCOs 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 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 is an agri-business venture agreement
contemplated by DARs 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 SEARBEMCOs motion to dismiss and motion for reconsideration.
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 SEARBEMCOs emphatic 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; 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 SEARBEMCOs argument that the Verification and Certification Against Forum Shopping under
DOLEs 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 DOLEs failure to submit its claim to
arbitration a condition precedent to any juridical recourse.
THE COURTS RULING
We do not find the petition meritorious.
DOLEs complaint falls within
thejurisdiction of the regular courts,
not the DARAB.

SEARBEMCO mainly relies on Section 50 [22] 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
SEARBEMCOs 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 RTCs action was not attended by any grave abuse of discretion and the
RTC correctly ruled in denying SEARBEMCOs 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 II[26] 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 land that 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 Appeals [28] 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 anagricultural 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 Devt. Corporation[30] and 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 lessorlessee 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 woulddirectly affect the
agricultural land covered by CARP. Those cases significantly did not pertain to postharvest transactions involving theproduce 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, 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]

We find SEARBEMCOs reliance on DAR AO No. 9-98 and AO No. 2-99 as bases for DARABs
alleged expanded jurisdiction over all disputes arising from the interpretation of agribusiness ventures
to be misplaced. DARABs 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 DARABs 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 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 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 plaintiffs 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 plaintiffs 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 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 admitting the allegations in DOLEs 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 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 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 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 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. 9-98 [36]
and Section 10 of DAR AO No. 2-99 [37] 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 SEARBEMCOs 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
Appeals[38] 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.
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 Corporation [39] 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 petitionersheirs 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 petitioners 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 DARABs jurisdiction. DARABs 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 DARABs
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.
SO ORDERED.

JOSE MENDOZA,*
Petitioner,

versus -

G.R. No. 165676

Present:
CORONA, C.J.,**
CARPIO MORALES, Chairperson,
BRION,
VILLARAMA, JR., and
SERENO, JJ.

Promulgated:
NARCISO GERMINO and BENIGNO
November 22, 2010
GERMINO,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BRION, J.:
Before us is the petition for review on certiorari[1] filed by petitioner Jose Mendoza to challenge
the decision[2] and the resolution[3]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. Mendoza [5] (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
Soledad, Sta. Rosa, Nueva Ecija (subject property) under Transfer Certificate of
34267. Sometime in 1988, respondent Narciso unlawfully entered the subject property by
strategy and stealth, and without their knowledge or consent. Despite the plaintiffs
demands, respondent Narciso refused to vacate the subject property.[7]

of land in
Title No.
means of
repeated

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 Narcisos 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 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 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 lands 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 attorneys 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 for P87,000.00. 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 MTCs 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 MTCs 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 denied[19] 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 RRSP[26] governs
the remedial aspects of these suits.[27]
Under Section 50[28] of R.A. No. 6657, as well as Section 34 [29] 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]
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 defendants 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.
P R AY E R
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 conference [36] 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 2[40] 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 76[41]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.

SO ORDERED.