EN BANC

[G.R. No. 86889 : December 4, 1990.]

192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF
AGRARIAN REFORM, Respondent.

DECISION

PARAS, J.:

This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent
injunction against the Honorable Secretary of the Department of Agrarian Reform for acting without
jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure Implementing
Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein petitioner, and
further from performing an act in violation of the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising of
livestock, poultry and swine in its coverage (Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures
Implementing Production and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo,
p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations
implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and
together with others in the same business allegedly stands to be adversely affected by the enforcement of
Section 3(b), Section 11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise
known as Comprehensive Agrarian Reform Law and of the Guidelines and Procedures Implementing
Production and Profit Sharing under R.A. No. 6657 promulgated on January 2, 1989 and the Rules and
Regulations Implementing Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp.
2-36).: rd
Hence, this petition praying that aforesaid laws, guidelines and rules be declared unconstitutional.
Meanwhile, it is also prayed that a writ of preliminary injunction or restraining order be issued enjoining
public respondents from enforcing the same, insofar as they are made to apply to Luz Farms and other
livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among others, Luz Farms' prayer for the
issuance of a preliminary injunction in its Manifestation dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said Motion for
Reconsideration regarding the injunctive relief, after the filing and approval by this Court of an injunction
bond in the amount of P100,000.00. This Court also gave due course to the petition and required the
parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168).
On December 22, 1989, the Solicitor General adopted his Comment to the petition as his Memorandum
(Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it:
 (a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition of
"Agricultural, Agricultural Enterprise or Agricultural Activity."
(b) Section 11 which defines "commercial farms" as "private agricultural lands devoted to
commercial, livestock, poultry and swine raising . . ."
(c) Section 13 which calls upon petitioner to execute a production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to
summarily determine the just compensation to be paid for lands covered by the Comprehensive
Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan mentioned in Section 13
". . . (W)hereby three percent (3%) of the gross sales from the production of such lands are
distributed within sixty (60) days of the end of the fiscal year as compensation to regular and
other farmworkers in such lands over and above the compensation they currently receive:
Provided, That these individuals or entities realize gross sales in excess of five million pesos per
annum unless the DAR, upon proper application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit
after tax shall be distributed to said regular and other farmworkers within ninety (90) days of the
end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657 (the
Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes the raising of livestock,
poultry and swine in its coverage as well as the Implementing Rules and Guidelines promulgated in
accordance therewith.:-cralaw
The constitutional provision under consideration reads as follows:
ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of
farmers and regular farmworkers, who are landless, to own directly or collectively the lands they
till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end,
the State shall encourage and undertake the just distribution of all agricultural lands, subject to
such priorities and reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the rights of small
landowners. The State shall further provide incentives for voluntary land-sharing.
x x x"
Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it
acknowledges the correctness of the decision of this Court in the case of the Association of Small
Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989)
affirming the constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued
that Congress in enacting the said law has transcended the mandate of the Constitution, in
including land devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131).
Livestock or poultry raising is not similar to crop or tree farming. Land is not the primary resource
in this undertaking and represents no more than five percent (5%) of the total investment of
commercial livestock and poultry raisers. Indeed, there are many owners of residential lands all
over the country who use available space in their residence for commercial livestock and raising
purposes, under "contract-growing arrangements," whereby processing corporations and other
commercial livestock and poultry raisers (Rollo, p. 10). Lands support the buildings and other
amenities attendant to the raising of animals and birds. The use of land is incidental to but not the
principal factor or consideration in productivity in this industry. Including backyard raisers, about
 80% of those in commercial livestock and poultry production occupy five hectares or less. The
remaining 20% are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry raising is embraced in the
term "agriculture" and the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He cited
that Webster's International Dictionary, Second Edition (1954), defines the following words:
"Agriculture the art or science of cultivating the ground and raising and harvesting crops, often,
including also, feeding, breeding and management of livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
Livestock domestic animals used or raised on a farm, especially for profit.
Farm a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary task in constitutional construction is
to ascertain and thereafter assure the realization of the purpose of the framers in the adoption of the
Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).: rd
Ascertainment of the meaning of the provision of Constitution begins with the language of the document
itself. The words used in the Constitution are to be given their ordinary meaning except where technical
terms are employed in which case the significance thus attached to them prevails (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful
meaning, the courts may consider the debates in the constitutional convention as throwing light on the
intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by
itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the
understanding of the convention as to what was meant by the terms of the constitutional provision which
was the subject of the deliberation, goes a long way toward explaining the understanding of the people
when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).
The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the word
"agricultural," clearly show that it was never the intention of the framers of the Constitution to include
livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform program of
the Government.
The Committee adopted the definition of "agricultural land" as defined under Section 166 of R.A. 3844, as
laud devoted to any growth, including but not limited to crop lands, saltbeds, fishponds, idle and
abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).
The intention of the Committee is to limit the application of the word "agriculture." Commissioner Jamir
proposed to insert the word "ARABLE" to distinguish this kind of agricultural land from such lands as
commercial and industrial lands and residential properties because all of them fall under the general
classification of the word "agricultural". This proposal, however, was not considered because the
Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands and
therefore, do not include commercial, industrial and residential lands (Record, CONCOM, August 7, 1986,
Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several
questions, among others, quoted as follows:
x x x
"Line 19 refers to genuine reform program founded on the primary right of farmers and
farmworkers. I wonder if it means that leasehold tenancy is thereby proscribed under this
provision because it speaks of the primary right of farmers and farmworkers to own directly or
collectively the lands they till. As also mentioned by Commissioner Tadeo, farmworkers include
those who work in piggeries and poultry projects.
 I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a
poultry project and for that purpose hires farmworkers therein, these farmworkers will
automatically have the right to own eventually, directly or ultimately or collectively, the land on
which the piggeries and poultry projects were constructed. (Record, CONCOM, August 2, 1986,
p. 618).
x x x
The questions were answered and explained in the statement of then Commissioner Tadeo,
quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan. Ipinaaalam ko kay
Commissioner Regalado na hindi namin inilagay ang agricultural worker sa kadahilanang kasama
rito ang piggery, poultry at livestock workers. Ang inilagay namin dito ay farm worker kaya hindi
kasama ang piggery, poultry at livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p.
621).
It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private agricultural
lands devoted to commercial livestock, poultry and swine raising" in the definition of "commercial farms" is
invalid, to the extent that the aforecited agro-industrial activities are made to be covered by the agrarian
reform program of the State. There is simply no reason to include livestock and poultry lands in the
coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of R.A. 6657
directing "corporate farms" which include livestock and poultry raisers to execute and implement
"production-sharing plans" (pending final redistribution of their landholdings) whereby they are called
upon to distribute from three percent (3%) of their gross sales and ten percent (10%) of their net profits to
their workers as additional compensation is unreasonable for being confiscatory, and therefore violative of
due process (Rollo, p. 21).:-cralaw
It has been established that this Court will assume jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there
must be an actual case or controversy involving a conflict of legal rights susceptible of judicial
determination, the constitutional question must have been opportunely raised by the proper party, and the
resolution of the question is unavoidably necessary to the decision of the case itself (Association of Small
Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R.
79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it will
not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at this
conclusion, its only criterion will be the Constitution and God as its conscience gives it in the light to probe
its meaning and discover its purpose. Personal motives and political considerations are irrelevancies that
cannot influence its decisions. Blandishment is as ineffectual as intimidation, for all the awesome power
of the Congress and Executive, the Court will not hesitate "to make the hammer fall heavily," where the
acts of these departments, or of any official, betray the people's will as expressed in the Constitution
(Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742;
Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it
becomes the duty of the judiciary to declare what the other branches of the government had assumed to
do, as void. This is the essence of judicial power conferred by the Constitution "(I)n one Supreme Court
and in such lower courts as may be established by law" (Art. VIII, Section 1 of the 1935 Constitution;
Article X, Section I of the 1973 Constitution and which was adopted as part of the Freedom Constitution,
and Article VIII, Section 1 of the 1987 Constitution) and which power this Court has exercised in many
instances (Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of R.A.
No. 6657 insofar as the inclusion of the raising of livestock, poultry and swine in its coverage as well as
the Implementing Rules and Guidelines promulgated in accordance therewith, are hereby DECLARED
null and void for being unconstitutional and the writ of preliminary injunction issued is hereby MADE
permanent.
 EN BANC

G.R. No. 100091 October 22, 1992

CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR. LEONARDO A.

CHUA, petitioner,
vs.
THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE COURT OF APPEALS
and ALVIN OBRIQUE, REPRESENTING BUKIDNON FREE FARMERS AGRICULTURAL LABORERS
ORGANIZATION (BUFFALO), respondents.

CAMPOS, JR., J.:

This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to nullify the proceedings
and decision of the Department of Agrarian Reform Adjudication Board (DARAB for brevity) dated
September 4, 1989 and to set aside the decision the decision * of the Court of Appeals dated August 20,
1990, affirming the decision of the DARAB which ordered the segregation of 400 hectares of suitable,
compact and contiguous portions of the Central Mindanao University (CMU for brevity) land and their
inclusion in the Comprehensive Agrarian Reform Program (CARP for brevity) for distribution to qualified
beneficiaries, on the ground of lack of jurisdiction.

This case originated in a complaint filed by complainants calling themselves as the Bukidnon Free
Farmers and Agricultural Laborers Organization (BUFFALO for brevity) under the leadership of Alvin
Obrique and Luis Hermoso against the CMU, before the Department of Agrarian Reform for Declaration
of Status as Tenants, under the CARP.

From the records, the following facts are evident. The petitioner, the CMU, is an agricultural educational
institution owned and run by the state located in the town of Musuan, Bukidnon province. It started as a
farm school at Marilang, Bukidnon in early 1910, in response to the public demand for an agricultural
school in Mindanao. It expanded into the Bukidnon National Agricultural High School and was transferred
to its new site in Managok near Malaybalay, the provincial capital of Bukidnon.

In the early 1960's, it was converted into a college with campus at Musuan, until it became what is now
known as the CMU, but still primarily an agricultural university. From its beginning, the school was the
answer to the crying need for training people in order to develop the agricultural potential of the island of
Mindanao. Those who planned and established the school had a vision as to the future development of
that part of the Philippines. On January 16, 1958 the President of the Republic of the Philippines, the late
Carlos P. Garcia, "upon the recommendation of the Secretary of Agriculture and Natural Resources, and
pursuant to the provisions of Section 53, of Commonwealth Act No. 141, as amended", issued
Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural
College, a site which would be the future campus of what is now the CMU. A total land area comprising
3,080 hectares was surveyed and registered and titled in the name of the petitioner under OCT Nos. 160,
161 and 162. 1

In the course of the cadastral hearing of the school's petition for registration of the aforementioned grant
of agricultural land, several tribes belonging to cultural communities, opposed the petition claiming
ownership of certain ancestral lands forming part of the tribal reservations. Some of the claims were
granted so that what was titled to the present petitioner school was reduced from 3,401 hectares to 3,080
hectares.
In the early 1960's, the student population of the school was less than 3,000. By 1988, the student
population had expanded to some 13,000 students, so that the school community has an academic
population (student, faculty and non-academic staff) of almost 15,000. To cope with the increase in its
enrollment, it has expanded and improved its educational facilities partly from government appropriation
and partly by self-help measures.

True to the concept of a land grant college, the school embarked on self-help measures to carry out its
educational objectives, train its students, and maintain various activities which the government
appropriation could not adequately support or sustain. In 1984, the CMU approved Resolution No. 160,
adopting a livelihood program called "Kilusang Sariling Sikap Program" under which the land resources of
the University were leased to its faculty and employees. This arrangement was covered by a written
contract. Under this program the faculty and staff combine themselves to groups of five members each,
and the CMU provided technical know-how, practical training and all kinds of assistance, to enable each
group to cultivate 4 to 5 hectares of land for the lowland rice project. Each group pays the CMU a service
fee and also a land use participant's fee. The contract prohibits participants and their hired workers to
establish houses or live in the project area and to use the cultivated land as a collateral for any kind of
loan. It was expressly stipulated that no landlord-tenant relationship existed between the CMU and the
faculty and/or employees. This particular program was conceived as a multi-disciplinary applied research
extension and productivity program to utilize available land, train people in modern agricultural technology
and at the same time give the faculty and staff opportunities within the confines of the CMU reservation to
earn additional income to augment their salaries. The location of the CMU at Musuan, Bukidnon, which is
quite a distance from the nearest town, was the proper setting for the adoption of such a program. Among
the participants in this program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor Pulao,
Danilo Vasquez, Aronio Pelayo and other complainants. Obrique was a Physics Instructor at the CMU
while the others were employees in the lowland rice project. The other complainants who were not
members of the faculty or non-academic staff CMU, were hired workers or laborers of the participants in
this program. When petitioner Dr. Leonardo Chua became President of the CMU in July 1986, he
discontinued the agri-business project for the production of rice, corn and sugar cane known as Agri-
Business Management and Training Project, due to losses incurred while carrying on the said project.
Some CMU personnel, among whom were the complainants, were laid-off when this project was
discontinued. As Assistant Director of this agri-business project, Obrique was found guilty of mishandling
the CMU funds and was separated from service by virtue of Executive Order No. 17, the re-organization
law of the CMU.

Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help project called CMU-
Income Enhancement Program (CMU-IEP) to develop unutilized land resources, mobilize and promote
the spirit of self-reliance, provide socio-economic and technical training in actual field project
implementation and augment the income of the faculty and the staff.

Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the CMU-Integrated
Development Foundation (CMU-IDF) and groups or "seldas" of 5 CMU employees, the CMU would
provide the use of 4 to 5 hectares of land to a selda for one (1) calendar year. The CMU-IDF would
provide researchers and specialists to assist in the preparation of project proposals and to monitor and
analyze project implementation. The selda in turn would pay to the CMU P100 as service fee and P1,000
per hectare as participant's land rental fee. In addition, 400 kilograms of the produce per year would be
turned over or donated to the CMU-IDF. The participants agreed not to allow their hired laborers or
member of their family to establish any house or live within vicinity of the project area and not to use the
allocated lot as collateral for a loan. It was expressly provided that no tenant-landlord relationship would
exist as a result of the Agreement.

Initially, participation in the CMU-IEP was extended only to workers and staff members who were still
employed with the CMU and was not made available to former workers or employees. In the middle of
1987, to cushion the impact of the discontinuance of the rice, corn and sugar cane project on the lives of
its former workers, the CMU allowed them to participate in the CMU-IEP as special participants.
Under the terms of a contract called Addendum To Existing Memorandum of Agreement Concerning
Participation To the CMU-Income Enhancement Program, 3 a former employee would be grouped with an
existing selda of his choice and provided one (1) hectare for a lowland rice project for one (1) calendar
year. He would pay the land rental participant's fee of P1,000.00 per hectare but on a charge-to-crop
basis. He would also be subject to the same prohibitions as those imposed on the CMU employees. It
was also expressly provided that no tenant-landlord relationship would exist as a result of the Agreement.

The one-year contracts expired on June 30, 1988. Some contracts were renewed. Those whose contracts
were not renewed were served with notices to vacate.

The non-renewal of the contracts, the discontinuance of the rice, corn and sugar cane project, the loss of
jobs due to termination or separation from the service and the alleged harassment by school authorities,
all contributed to, and precipitated the filing of the complaint.

On the basis of the above facts, the DARAB found that the private respondents were not tenants and
cannot therefore be beneficiaries under the CARP. At the same time, the DARAB ordered the segregation
of 400 hectares of suitable, compact and contiguous portions of the CMU land and their inclusion in the
CARP for distribution to qualified beneficiaries.

The petitioner CMU, in seeking a review of the decisions of the respondents DARAB and the Court of
Appeals, raised the following issues:

1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for Declaration of Status
of Tenants and coverage of land under the CARP.

2.) Whether or not respondent Court of Appeals committed serious errors and grave abuse of discretion
amounting to lack of jurisdiction in dismissing the Petition for Review on Certiorari and affirming the
decision of DARAB.

In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants Obrique, et al.
claimed that they are tenants of the CMU and/or landless peasants claiming/occupying a part or portion of
the CMU situated at Sinalayan, Valencia, Bukidnon and Musuan, Bukidnon, consisting of about 1,200
hectares. We agree with the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of the
written agreement signed by Obrique, et. al., pursuant to the livelihood program called "Kilusang Sariling
Sikap Program", it was expressly stipulated that no landlord-tenant relationship existed between the CMU
and the faculty and staff (participants in the project). The CMU did not receive any share from the
harvest/fruits of the land tilled by the participants. What the CMU collected was a nominal service fee and
land use participant's fee in consideration of all the kinds of assistance given to the participants by the
CMU. Again, the agreement signed by the participants under the CMU-IEP clearly stipulated that no
landlord-tenant relationship existed, and that the participants are not share croppers nor lessees, and the
CMU did not share in the produce of the participants' labor.

In the same paragraph of their complaint, complainants claim that they are landless peasants. This
allegation requires proof and should not be accepted as factually true. Obrique is not a landless peasant.
The facts showed he was Physics Instructor at CMU holding a very responsible position was separated
from the service on account of certain irregularities he committed while Assistant Director of the Agri-
Business Project of cultivating lowland rice. Others may, at the moment, own no land in Bukidnon but
they may not necessarily be so destitute in their places of origin. No proof whatsoever appears in the
record to show that they are landless peasants.

The evidence on record establish without doubt that the complainants were originally authorized or given
permission to occupy certain areas of the CMU property for a definite purpose to carry out certain
university projects as part of the CMU's program of activities pursuant to its avowed purpose of giving
training and instruction in agricultural and other related technologies, using the land and other resources
of the institution as a laboratory for these projects. Their entry into the land of the CMU was with the
permission and written consent of the owner, the CMU, for a limited period and for a specific purpose.
After the expiration of their privilege to occupy and cultivate the land of the CMU, their continued stay was
unauthorized and their settlement on the CMU's land was without legal authority. A person entering upon
lands of another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue
of some agreement with the owner or with one whom he believes holds title to the land, is a
squatter. 4 Squatters cannot enter the land of another surreptitiously or by stealth, and under the umbrella
of the CARP, claim rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons
guilty of committing prohibited acts of forcible entry or illegal detainer do not qualify as beneficiaries and
may not avail themselves of the rights and benefits of agrarian reform. Any such person who knowingly
and wilfully violates the above provision of the Act shall be punished with imprisonment or fine at the
discretion of the Court.

In view of the above, the private respondents, not being tenants nor proven to be landless peasants,
cannot qualify as beneficiaries under the CARP.

The questioned decision of the Adjudication Board, affirmed in toto by the Court of Appeals, segregating
400 hectares from the CMU land is primarily based on the alleged fact that the land subject hereof is "not
directly, actually and exclusively used for school sites, because the same was leased to Philippine
Packing Corporation (now Del Monte Philippines)".

In support of this view, the Board held that the "respondent University failed to show that it is using
actually, really, truly and in fact, the questioned area to the exclusion of others, nor did it show that the
same is directly used without any intervening agency or person", 5 and "there is no definite and concrete
showing that the use of said lands are essentially indispensable for educational purposes". 6 The reliance
by the respondents Board and Appellate Tribunal on the technical or literal definition from Moreno's
Philippine Law Dictionary and Black's Law Dictionary, may give the ordinary reader a classroom meaning
of the phrase "is actually directly and exclusively", but in so doing they missed the true meaning of
Section 10, R.A. 6657, as to what lands are exempted or excluded from the coverage of the CARP.

The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of
1988, are as follows:

Sec. 4. SCOPE. The Comprehensive Agrarian Reform Law of 1988 shall cover,
regardless of tenurial arrangement and commodity produced, all public and private
agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229
including other lands of the public domain suitable for agriculture.

More specifically, the following lands are covered by the Comprehensive Agrarian
Reform Program:

(a) All alienable and disposable lands of the public domain devoted to or suitable for
agriculture. No reclassification of forest of mineral lands to agricultural lands shall be
undertaken after the approval of this Act until Congress, taking into account ecological,
developmental and equity considerations, shall have determined by law, the specific
limits of the public domain;

(b) All lands of the public domain in excess of the specific limits ad determined by
Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the agricultural
products raised or that can be raised thereon.
 Sec. 10 EXEMPTIONS AND EXCLUSIONS. Lands actually, directly and exclusively
used and found to be necessary for parks, wildlife, forest reserves, reforestration, fish
sanctuaries and breeding grounds, watersheds and mangroves, national defense, school
sites and campuses including experimental farm stations operated by public or private
schools for educational purposes, seeds and seedlings research and pilot production
centers, church sites and convents appurtenant thereto, mosque sites and Islamic
centers appurtenant thereto, communal burial grounds and cemeteries, penal colonies
and penal farms actually worked by the inmates, government and private research and
quarantine centers and all lands with eighteen percent (18%) slope and over, except
those already developed shall be exempt from the coverage of this Act. (Emphasis
supplied).

The construction given by the DARAB to Section 10 restricts the land area of the CMU to its present
needs or to a land area presently, actively exploited and utilized by the university in carrying out its
present educational program with its present student population and academic facility overlooking the
very significant factor of growth of the university in the years to come. By the nature of the CMU, which is
a school established to promote agriculture and industry, the need for a vast tract of agricultural land and
for future programs of expansion is obvious. At the outset, the CMU was conceived in the same manner
as land grant colleges in America, a type of educational institution which blazed the trail for the
development of vast tracts of unexplored and undeveloped agricultural lands in the Mid-West. What we
now know as Michigan State University, Penn State University and Illinois State University, started as
small land grant colleges, with meager funding to support their ever increasing educational programs.
They were given extensive tracts of agricultural and forest lands to be developed to support their
numerous expanding activities in the fields of agricultural technology and scientific research. Funds for
the support of the educational programs of land grant colleges came from government appropriation,
tuition and other student fees, private endowments and gifts, and earnings from miscellaneous
sources. 7 It was in this same spirit that President Garcia issued Proclamation No. 476, withdrawing from
sale or settlement and reserving for the Mindanao Agricultural College (forerunner of the CMU) a land
reservation of 3,080 hectares as its future campus. It was set up in Bukidnon, in the hinterlands of
Mindanao, in order that it can have enough resources and wide open spaces to grow as an agricultural
educational institution, to develop and train future farmers of Mindanao and help attract settlers to that
part of the country.

In line with its avowed purpose as an agricultural and technical school, the University adopted a land
utilization program to develop and exploit its 3080-hectare land reservation as follows: 8

No. of Hectares Percentage

a. Livestock and Pasture 1,016.40 33

b. Upland Crops 616 20

c. Campus and Residential sites 462 15

d. Irrigated rice 400.40 13

e. Watershed and forest reservation 308 10

f. Fruit and Trees Crops 154 5

g. Agricultural
Experimental stations 123.20 4
 3,080.00 100%

The first land use plan of the CARP was prepared in 1975 and since then it has undergone several
revisions in line with changing economic conditions, national economic policies and financial limitations
and availability of resources. The CMU, through Resolution No. 160 S. 1984, pursuant to its development
plan, adopted a multi-disciplinary applied research extension and productivity program called the
"Kilusang Sariling Sikap Project" (CMU-KSSP). The objectives 9 of this program were:

1. Provide researches who shall assist in (a) preparation of proposal; (b) monitor project
implementation; and (c) collect and analyze all data and information relevant to the
processes and results of project implementation;

2. Provide the use of land within the University reservation for the purpose of establishing
a lowland rice project for the party of the Second Part for a period of one calendar year
subject to discretionary renewal by the Party of the First Part;

3. Provide practical training to the Party of the Second Part on the management and
operation of their lowland project upon request of Party of the Second Part; and

4. Provide technical assistance in the form of relevant livelihood project specialists who
shall extend expertise on scientific methods of crop production upon request by Party of
the Second Part.

In return for the technical assistance extended by the CMU, the participants in a project pay a nominal
amount as service fee. The self-reliance program was adjunct to the CMU's lowland rice project.

The portion of the CMU land leased to the Philippine Packing Corporation (now Del Monte Phils., Inc.)
was leased long before the CARP was passed. The agreement with the Philippine Packing Corporation
was not a lease but a Management and Development Agreement, a joint undertaking where use by the
Philippine Packing Corporation of the land was part of the CMU research program, with the direct
participation of faculty and students. Said contracts with the Philippine Packing Corporation and others of
a similar nature (like MM-Agraplex) were made prior to the enactment of R.A. 6657 and were directly
connected to the purpose and objectives of the CMU as an educational institution. As soon as the
objectives of the agreement for the joint use of the CMU land were achieved as of June 1988, the CMU
adopted a blue print for the exclusive use and utilization of said areas to carry out its own research and
agricultural experiments.

As to the determination of when and what lands are found to be necessary for use by the CMU, the
school is in the best position to resolve and answer the question and pass upon the problem of its needs
in relation to its avowed objectives for which the land was given to it by the State. Neither the DARAB nor
the Court of Appeals has the right to substitute its judgment or discretion on this matter, unless the
evidentiary facts are so manifest as to show that the CMU has no real for the land.

It is our opinion that the 400 hectares ordered segregated by the DARAB and affirmed by the Court of
Appeals in its Decision dated August 20, 1990, is not covered by the CARP because:

(1) It is not alienable and disposable land of the public domain;

(2) The CMU land reservation is not in excess of specific limits as determined by
Congress;

(3) It is private land registered and titled in the name of its lawful owner, the CMU;
 (4) It is exempt from coverage under Section 10 of R.A. 6657 because the lands are
actually, directly and exclusively used and found to be necessary for school site and
campus, including experimental farm stations for educational purposes, and for
establishing seed and seedling research and pilot production centers. (Emphasis
supplied).

Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of the DARAB is
limited only to matters involving the implementation of the CARP. More specifically, it is restricted to
agrarian cases and controversies involving lands falling within the coverage of the aforementioned
program. It does not include those which are actually, directly and exclusively used and found to be
necessary for, among such purposes, school sites and campuses for setting up experimental farm
stations, research and pilot production centers, etc.

Consequently, the DARAB has no power to try, hear and adjudicate the case pending before it involving a
portion of the CMU's titled school site, as the portion of the CMU land reservation ordered segregated is
actually, directly and exclusively used and found by the school to be necessary for its purposes. The
CMU has constantly raised the issue of the DARAB's lack of jurisdiction and has questioned the
respondent's authority to hear, try and adjudicate the case at bar. Despite the law and the evidence on
record tending to establish that the fact that the DARAB had no jurisdiction, it made the adjudication now
subject of review.

Whether the DARAB has the authority to order the segregation of a portion of a private property titled in
the name of its lawful owner, even if the claimant is not entitled as a beneficiary, is an issue we feel we
must resolve. The quasi-judicial powers of DARAB are provided in Executive Order No. 129-A, quoted
hereunder in so far as pertinent to the issue at bar:

Sec. 13. AGRARIAN REFORM ADJUDICATION BOARD There is hereby created

an Agrarian Reform Adjudication Board under the office of the Secretary. . . . The Board
shall assume the powers and functions with respect to adjudication of agrarian reform
cases under Executive Order 229 and this Executive Order . . .

Sec. 17. QUASI JUDICIAL POWERS OF THE DAR. The DAR is hereby vested
with quasi-judicial powers to determine and adjudicate agrarian reform matters and shall
have exclusive original jurisdiction over all matters including implementation of Agrarian
Reform.

Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows:

The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian
reform matters and shall have original jurisdiction over all matters involving the
implementation of agrarian reform. . . .

Section 17 of Executive Order No. 129-A is merely a repetition of Section 50, R.A. 6657. There is
no doubt that the DARAB has jurisdiction to try and decide any agrarian dispute in the
implementation of the CARP. An agrarian dispute is defined by the same law as any controversy
relating to tenurial rights whether leasehold, tenancy stewardship or otherwise over lands devoted
to
agriculture. 10

In the case at bar, the DARAB found that the complainants are not share tenants or lease holders of the
CMU, yet it ordered the "segregation of a suitable compact and contiguous area of Four Hundred
hectares, more or less", from the CMU land reservation, and directed the DAR Regional Director to
implement its order of segregation. Having found that the complainants in this agrarian dispute for
Declaration of Tenancy Status are not entitled to claim as beneficiaries of the CARP because they are not
share tenants or leaseholders, its order for the segregation of 400 hectares of the CMU land was without
legal authority. w do not believe that the quasi-judicial function of the DARAB carries with it greater
authority than ordinary courts to make an award beyond what was demanded by the
complainants/petitioners, even in an agrarian dispute. Where the quasi-judicial body finds that the
complainants/petitioners are not entitled to the rights they are demanding, it is an erroneous interpretation
of authority for that quasi-judicial body to order private property to be awarded to future beneficiaries. The
order segregation 400 hectares of the CMU land was issued on a finding that the complainants are not
entitled as beneficiaries, and on an erroneous assumption that the CMU land which is excluded or
exempted under the law is subject to the coverage of the CARP. Going beyond what was asked by the
complainants who were not entitled to the relief prayed the complainants who were not entitled to the
relief prayed for, constitutes a grave abuse of discretion because it implies such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction.

The education of the youth and agrarian reform are admittedly among the highest priorities in the
government socio-economic programs. In this case, neither need give way to the other. Certainly, there
must still be vast tracts of agricultural land in Mindanao outside the CMU land reservation which can be
made available to landless peasants, assuming the claimants here, or some of them, can qualify as
CARP beneficiaries. To our mind, the taking of the CMU land which had been segregated for educational
purposes for distribution to yet uncertain beneficiaries is a gross misinterpretation of the authority and
jurisdiction granted by law to the DARAB.

The decision in this case is of far-reaching significance as far as it concerns state colleges and
universities whose resources and research facilities may be gradually eroded by misconstruing the
exemptions from the CARP. These state colleges and universities are the main vehicles for our scientific
and technological advancement in the field of agriculture, so vital to the existence, growth and
development of this country.

It is the opinion of this Court, in the light of the foregoing analysis and for the reasons indicated, that the
evidence is sufficient to sustain a finding of grave abuse of discretion by respondents Court of Appeals
and DAR Adjudication Board. We hereby declare the decision of the DARAB dated September 4, 1989
and the decision of the Court of Appeals dated August 20, 1990, affirming the decision of the quasi-
judicial body, as null and void and hereby order that they be set aside, with costs against the private
respondents.
G.R. No. 112526 October 12, 2001

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, JUAN B. AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P.
AYENDE, LETICIA P. BALAT, FILOMENA B. BATINO, ANICETO A. BURGOS, JAIME A. BURGOS,
FLORENCIA CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS, REYNALDO CARINGAL,
QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A. CRUZAT, GREGORIO F. CRUZAT,
RUFINO C. CRUZAT, SERGIO CRUZAT, SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO
DE SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES, GREGORIO GONZALES,
LEODEGARIO N. GONZALES, PASCUAL P. GONZALES, ROLANDO A. GONZALES, FRANCISCO A.
JUANGCO, GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M. MANDANAS, CRISANTO
MANDANAS, EMILIO M. MANDANAS, GREGORIO A. MANDANAS, MARIO G. MANDANAS,
TEODORO MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B. MARQUEZ, ARMANDO P.
MATIENZO, DANIEL D. MATIENZO, MAXIMINO MATIENZO, PACENCIA P. MATIENZO, DOROTEA L.
PANGANIBAN, JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ, INOCENCIA S.
PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F. PETATE, JUANITO PETATE, PABLO A. PLATON,
PRECILLO V. PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA, DOMINGO VILLA, JUAN T.
VILLA, MARIO C. VILLA, NATIVIDAD A. VILLA, JACINTA S. ALVARADO, RODOLFO ANGELES,
DOMINGO A. CANUBAS, EDGARDO L. CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ,
CLAUDIA P. GONZALES, FELISA R. LANGUE, QUINTILLANO LANGUE, REYNALDO LANGUE,
ROMEO S. LANGUE, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B. FERNANDEZ,
ZACARIAS HERRERA, ZACARIAS HERRERA, REYNARIO U. LAZO, AGAPITO MATIENZO,
DIONISIO F. PETATE, LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO, ROSA C.
AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE SECRETARY OF AGRARIAN REFORM,
DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, LAND BANK OF THE
PHILIPPINES, REGISTER OF DEEDS OF LAGUNA, DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES REGIONAL EXECUTIVE DIRECTOR FOR REGION IV, and REGIONAL
AGRARIAN REFORM OFFICER FOR REGION IV, respondents.

PARDO, J.:

The case before the Court is a petition for review on certiorari of the decision of the Court of
Appeals1 affirming the decision of the Department of Agrarian Reform Adjudication Board2 (hereafter
DARAB) ordering the compulsory acquisition of petitioner's property under the Comprehensive Agrarian
Reform Program (CARP).

Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC) was the registered owner of
two parcels of land, situated at Barangay Casile, Cabuyao, Laguna covered by TCT Nos. 81949 and
84891, with a total area of 254.6 hectares. According to petitioner, the parcels of land are watersheds,
which provide clean potable water to the Canlubang community, and that ninety (90) light industries are
now located in the area.3

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the
ecosystem. Sometime in December 1985, respondents filed a civil case4 with the Regional Trial Court,
Laguna, seeking an easement of a right of way to and from Barangay Casile. By way of counterclaim,
however, petitioner sought the ejectment of private respondents.

In October 1986 to August 1987, petitioner filed with the Municipal Trial Court, Cabuyao, Laguna separate
complaints for forcible entry against respondents.5

After the filing of the ejectment cases, respondents petitioned the Department of Agrarian Reform (DAR)
for the compulsory acquisition of the SRRDC property under the CARP.
On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna issued a notice
of coverage to petitioner and invited its officials or representatives to a conference on August 18,
1989.6 During the meeting, the following were present: representatives of petitioner, the Land Bank of the
Philippines, PARCCOM, PARO of Laguna, MARO of Laguna, the BARC Chairman of Barangay Casile
and some potential farmer beneficiaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was
the consensus and recommendation of the assembly that the landholding of SRRDC be placed under
compulsory acquisition.

On August 17, 1989, petitioner filed with the Municipal Agrarian Reform Office (MARO), Cabuyao,
Laguna a "Protest and Objection" to the compulsory acquisition of the property on the ground that the
area was not appropriate for agricultural purposes. The area was rugged in terrain with slopes of 18%
and above and that the occupants of the land were squatters, who were not entitled to any land as
beneficiaries.7

On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the protest and
objection stating that the slope of the land is not 18% but only 5-10% and that the land is suitable and
economically viable for agricultural purposes, as evidenced by the Certification of the Department of
Agriculture, municipality of Cabuyao, Laguna.8

On September 8, 1989, MARO Belen dela Torre made a summary investigation report and forwarded the
Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter,
PARO).9

On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory acquisition
to the Secretary of Agrarian Reform.

On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and
Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders covering the landholding of
SRRDC, covered by TCT Nos. T-81949 and T-84891 to the President, Land Bank of the Philippines for
further review and evaluation.10

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2) notices of
acquisition11 to petitioner, stating that petitioner's landholdings covered by TCT Nos. 81949 and 84891,
containing an area of 188.2858 and 58.5800 hectares, valued at P4,417,735.65 and P1,220,229.93,
respectively, had been placed under the Comprehensive Agrarian Reform Program.

On February 6, 1990, petitioner SRRDC in two letters12 separately addressed to Secretary Florencio B.
Abad and the Director, Bureau of Land Acquisition and Distribution, sent its formal protest, protesting not
only the amount of compensation offered by DAR for the property but also the two (2) notices of
acquisition.

On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings to
determine just compensation under R. A. No. 6657, Section 16.

On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review and
evaluation to the Director of BLAD mentioning its inability to value the SRRDC landholding due to some
deficiencies.

On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land Bank President Deogracias
Vistan to forward the two (2) claim folders involving the property of SRRDC to the DARAB for it to conduct
summary proceedings to determine the just compensation for the land.
On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its property under
the aforesaid land titles were exempt from CARP coverage because they had been classified as
watershed area and were the subject of a pending petition for land conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders (CACF's) to
the Executive Director of the DAR Adjudication Board for proper administrative valuation. Acting on the
CACF's, on September 10, 1990, the Board promulgated a resolution asking the office of the Secretary of
Agrarian Reform (DAR) to first resolve two (2) issues before it proceeds with the summary land valuation
proceedings.13

The issues that need to be threshed out were as follows: (1) whether the subject parcels of land fall within
the coverage of the Compulsory Acquisition Program of the CARP; and (2) whether the petition for land
conversion of the parcels of land may be granted.

On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for Operations
(Assistant Secretary for Luzon Operations) and the Regional Director of Region IV, submitted a report
answering the two issues raised. According to them, firstly, by virtue of the issuance of the notice of
coverage on August 11, 1989, and notice of acquisition on December 12, 1989, the property is covered
under compulsory acquisition. Secondly, Administrative Order No. 1, Series of 1990, Section IV D also
supports the DAR position on the coverage of the said property. During the consideration of the case by
the Board, there was no pending petition for land conversion specifically concerning the parcels of land in
question.

On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the hearing
for the administrative valuation of the subject parcels of land on March 6, 1991. However, on February 22,
1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC, wrote the Board requesting for its
assistance in the reconstruction of the records of the case because the records could not be found as her
co-counsel, Atty. Ricardo Blancaflor, who originally handled the case for SRRDC and had possession of
all the records of the case was on indefinite leave and could not be contacted. The Board granted
counsel's request and moved the hearing to April 4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDC's petition
for exemption from CARP coverage before any administrative valuation of their landholding could be had
by the Board.

On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different dates of
hearing were set without objection from counsel of SRRDC. During the April 15, 1991 hearing, the
subdivision plan of subject property at Casile, Cabuyao, Laguna was submitted and marked as Exhibit "5"
for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a period of one month to value the
land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B. Opina was
presented. The certification issued on September 8, 1989, stated that the parcels of land subject of the
case were classified as "industrial Park" per Sanguniang Bayan Resolution No. 45-89 dated March 29,
1989.14

To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on April
30, 1991, petitioner filed a petition15 with DARAB to disqualify private respondents as beneficiaries.
However, DARAB refused to address the issue of beneficiaries.

In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a
decision,16 finding that private respondents illegally entered the SRRDC property, and ordered them
evicted.
On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land Bank of
the Philippines to open a trust account in favor of SRRDC, for P5,637,965.55, as valuation for the
SRRDC property.

On December 19, 1991, DARAB promulgated a decision, the decretal portion of which reads:

"WHEREFORE, based on the foregoing premises, the Board hereby orders:

"1. The dismissal for lack of merit of the protest against the compulsory coverage of the
landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title Nos.
81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of Cabuyao,
Province of Laguna under the Comprehensive Agrarian Reform Program is hereby affirmed;

"2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation the
amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred Ninety Seven Pesos
and Sixty-Four centavos (P7,841,997.64) for its landholdings covered by the two (2) Transfer
Certificates of Title mentioned above. Should there be a rejection of the payment tendered, to
open, if none has yet been made, a trust account for said amount in the name of Sta. Rosa
Realty Development Corporation;

"3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer certificate of
Title Nos. 84891 and 81949 and new one be issued in the name of the Republic of the
Philippines, free from liens and encumbrances;

"4 The Department of Environment and Natural Resources either through its Provincial Office in
Laguna or the Regional Office, Region IV, to conduct a final segregation survey on the lands
covered by Transfer certificate of Title Nos. 84891 and 81949 so the same can be transferred by
the Register of Deeds to the name of the Republic of the Philippines;

"5. The Regional Office of the Department of Agrarian Reform through its Municipal and
Provincial Agrarian Reform Office to take immediate possession on the said landholding after
Title shall have been transferred to the name of the Republic of the Philippines, and distribute the
same to the immediate issuance of Emancipation Patents to the farmer-beneficiaries as
determined by the Municipal Agrarian Reform Office of Cabuyao, Laguna."17

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision in Civil Case No.
B-233318ruling that respondents were builders in bad faith.

On February 6, 1992, petitioner filed with the Court of Appeals a petition for review of the DARAB
decision.19 On November 5, 1993, the Court of Appeals promulgated a decision affirming the decision of
DARAB. The decretal portion of the Court of Appeals decision reads:

"WHEREFORE, premises considered, the DARAB decision dated September 19, 1991 is
AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation ventilating
its case with the Special Agrarian Court on the issue of just compensation." 20Hence, this
petition.21

On December 15, 1993, the Court issued a Resolution which reads:

"G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of Appeals, et. al.)
Considering the compliance, dated December 13, 1993, filed by counsel for petitioner, with the
resolution of December 8, 1993 which required petitioner to post a cash bond or surety bond in
the amount of P1,500,000.00 Pesos before issuing a temporary restraining order prayed for,
 manifesting that it has posted a CASH BOND in the same amount with the Cashier of the Court
as evidenced by the attached official receipt no. 315519, the Court resolved to ISSUE the
Temporary Retraining Order prayed for.

"The Court therefore, resolved to restrain: (a) the Department of Agrarian Reform Adjudication
Board from enforcing its decision dated December 19, 1991 in DARAB Case No. JC-R-IV-LAG-
0001, which was affirmed by the Court of Appeals in a Decision dated November 5, 1993, and
which ordered, among others, the Regional Office of the Department of Agrarian Reform through
its Municipal and Provincial Reform Office to take immediate possession of the landholding in
dispute after title shall have been transferred to the name of the Republic of the Philippines and to
distribute the same through the immediate issuance of Emancipation Patents to the farmer-
beneficiaries as determined by the Municipal Agrarian Officer of Cabuyao, Laguna, (b) The
Department of Agrarian Reform and/or the Department of Agrarian Reform Adjudication Board,
and all persons acting for and in their behalf and under their authority from entering the properties
involved in this case and from introducing permanent infrastructures thereon; and (c) the private
respondents from further clearing the said properties of their green cover by the cutting or burning
of trees and other vegetation, effective today until further orders from this Court."22

The main issue raised is whether the property in question is covered by CARP despite the fact that the
entire property formed part of a watershed area prior to the enactment of R. A. No. 6657.

Under Republic Act No. 6657, there are two modes of acquisition of private land: compulsory and
voluntary. In the case at bar, the Department of Agrarian Reform sought the compulsory acquisition of
subject property under R. A. No. 6657, Section 16, to wit:

"Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private
lands, the following procedures shall be followed:

a.) After having identified the land, the landowners and the beneficiaries, the DAR shall
send its notice to acquire the land to the owners thereof, by personal delivery or
registered mail, and post the same in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Said notice shall contain the
offer of the DAR to pay corresponding value in accordance with the valuation set forth in
Sections 17, 18, and other pertinent provisions hereof.

b.) Within thirty (30) days from the date of the receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative shall inform
the DAR of his acceptance or rejection of the offer.

c.) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30) days after he executes and delivers a deed of
transfer in favor of the government and other muniments of title.

d.) In case of rejection or failure to reply, the DAR shall conduct summary administrative
proceedings to determine the compensation for the land requiring the landowner, the LBP
and other interested parties to submit fifteen (15) days from receipt of the notice. After the
expiration of the above period, the matter is deemed submitted for decision. The DAR
shall decide the case within thirty (30) days after it is submitted for decision.

e.) Upon receipt by the landowner of the corresponding payment, or, in case of rejection
or no response from the landowner, upon the deposit with an accessible bank designated
by the DAR of the compensation in cash or in LBP bonds in accordance with this act, the
DAR shall make immediate possession of the land and shall request the proper Register
of Deeds to issue Transfer Certificate of Titles (TCT) in the name of the Republic of the
 Philippines. The DAR shall thereafter proceed with the redistribution of the land to the
qualified beneficiaries.

f.) Any party who disagrees with the decision may bring the matter to the court 23 of proper
jurisdiction for final determination of just compensation.

In compulsory acquisition of private lands, the landholding, the landowners and farmer beneficiaries must
first be identified. After identification, the DAR shall send a notice of acquisition to the landowner, by
personal delivery or registered mail, and post it in a conspicuous place in the municipal building and
barangay hall of the place where the property is located.

Within thirty (30) days from receipt of the notice of acquisition, the landowner, his administrator or
representative shall inform the DAR of his acceptance or rejection of the offer.

If the landowner accepts, he executes and delivers a deed of transfer in favor of the government and
surrenders the certificate of title. Within thirty (30) days from the execution of the deed of transfer, the
Land Bank of the Philippines (LBP) pays the owner the purchase price. If the landowner accepts, he
executes and delivers a deed of transfer in favor of the government and surrenders the certificate of title.
Within thirty days from the execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays
the owner the purchase price. If the landowner rejects the DAR's offer or fails to make a reply, the DAR
conducts summary administrative proceedings to determine just compensation for the land. The
landowner, the LBP representative and other interested parties may submit evidence on just
compensation within fifteen days from notice. Within thirty days from submission, the DAR shall decide
the case and inform the owner of its decision and the amount of just compensation.

Upon receipt by the owner of the corresponding payment, or, in case of rejection or lack of response from
the latter, the DAR shall deposit the compensation in cash or in LBP bonds with an accessible bank. The
DAR shall immediately take possession of the land and cause the issuance of a transfer certificate of title
in the name of the Republic of the Philippines. The land shall then be redistributed to the farmer
beneficiaries. Any party may question the decision of the DAR in the special agrarian courts (provisionally
the Supreme Court designated branches of the regional trial court as special agrarian courts) for final
determination of just compensation.

The DAR has made compulsory acquisition the priority mode of land acquisition to hasten the
implementation of the Comprehensive Agrarian Reform Program (CARP). Under Sec. 16 of the CARL,
the first step in compulsory acquisition is the identification of the land, the landowners and the farmer
beneficiaries. However, the law is silent on how the identification process shall be made. To fill this gap,
on July 26, 1989, the DAR issued Administrative Order No. 12, series of 1989, which set the operating
procedure in the identification of such lands. The procedure is as follows:

A. The Municipal Agrarian Reform Officer (MARO), with the assistance of the pertinent Barangay
Agrarian Reform Committee (BARC), shall:

1. Update the masterlist of all agricultural lands covered under the CARP in his area of
responsibility; the masterlist should include such information as required under the attached
CARP masterlist form which shall include the name of the landowner, landholding area, TCT/OCT
number, and tax declaration number.

2. Prepare the Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the landowners
have already filed applications to avail of other modes of land acquisition. A case folder shall
contain the following duly accomplished forms:

a) CARP CA Form 1MARO investigation report

 b) CARP CA Form No 2 Summary investigation report findings and evaluation

c) CARP CA Form 3Applicant's Information sheet

d) CARP CA Form 4 Beneficiaries undertaking

e) CARP CA Form 5 Transmittal report to the PARO

The MARO/BARC shall certify that all information contained in the above-mentioned forms have
been examined and verified by him and that the same are true and correct.

3. Send notice of coverage and a letter of invitation to a conference/meeting to the landowner

covered by the Compulsory Case Acquisition Folder. Invitations to the said conference meeting
shall also be sent to the prospective farmer-beneficiaries, the BARC representatives, the Land
Bank of the Philippines (LBP) representative, and the other interested parties to discuss the
inputs to the valuation of the property.

He shall discuss the MARO/BARC investigation report and solicit the views, objection,
agreements or suggestions of the participants thereon. The landowner shall also ask to indicate
his retention area. The minutes of the meeting shall be signed by all participants in the
conference and shall form an integral part of the CACF.

4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO).

B. The PARO shall:

1. Ensure the individual case folders are forwarded to him by his MAROs.

2. Immediately upon receipt of a case folder, compute the valuation of the land in accordance
with A.O. No. 6, series of 1988. The valuation worksheet and the related CACF valuation forms
shall be duly certified correct by the PARO and all the personnel who participated in the
accomplishment of these forms.

3. In all cases, the PARO may validate the report of the MARO through ocular inspection and
verification of the property. This ocular inspection and verification shall be mandatory when the
computed value exceeds P500,000 per estate.

4. Upon determination of the valuation, forward the case folder, together with the duly
accomplished valuation forms and his recommendations, to the Central Office.

The LBP representative and the MARO concerned shall be furnished a copy each of his report.

C. DAR Central Office, specifically through the Bureau of Land Acquisition and Distribution
(BLAD), shall:

1. Within three days from receipt of the case folder from the PARO, review, evaluate and
determine the final land valuation of the property covered by the case folder. A summary review
and evaluation report shall be prepared and duly certified by the BLAD Director and the personnel
directly participating in the review and final valuation.

2. Prepare, for the signature of the Secretary or her duly authorized representative, a notice of
acquisition (CARP Form 8) for the subject property. Serve the notice to the landowner personally
 or through registered mail within three days from its approval. The notice shall include among
others, the area subject of compulsory acquisition, and the amount of just compensation offered
by DAR.

3. Should the landowner accept the DAR's offered value, the BLAD shall prepare and submit to
the Secretary for approval the order of acquisition. However, in case of rejection or non-reply, the
DAR Adjudication Board (DARAB) shall conduct a summary administrative hearing to determine
just compensation, in accordance with the procedures provided under Administrative Order No.
13, series of 1989. Immediately upon receipt of the DARAB's decision on just compensation, the
BLAD shall prepare and submit to the Secretary for approval the required order of acquisition.

4. Upon the landowner's receipt of payment, in case of acceptance, or upon deposit of payment
in the designated bank, in case of rejection or non-response, the Secretary shall immediately
direct the pertinent Register of Deeds to issue the corresponding Transfer Certificate of Title
(TCT) in the name of the Republic of the Philippines. Once the property is transferred, the DAR,
through the PARO, shall take possession of the land for redistribution to qualified beneficiaries."

Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform Officer (MARO)
keep an updated master list of all agricultural lands under the CARP in his area of responsibility
containing all the required information. The MARO prepares a Compulsory Acquisition Case Folder
(CACF) for each title covered by CARP. The MARO then sends the landowner a "Notice of Coverage"
and a "letter of invitation" to a "conference/ meeting" over the land covered by the CACF. He also sends
invitations to the prospective farmer-beneficiaries, the representatives of the Barangay Agrarian Reform
Committee (BARC), the Land Bank of the Philippines (LBP) and other interested parties to discuss the
inputs to the valuation of the property and solicit views, suggestions, objections or agreements of the
parties. At the meeting, the landowner is asked to indicate his retention area.

The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO) who shall
complete the valuation of the land. Ocular inspection and verification of the property by the PARO shall
be mandatory when the computed value of the estate exceeds P500,000.00. Upon determination of the
valuation, the PARO shall forward all papers together with his recommendation to the Central Office of
the DAR. The DAR Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD)
shall prepare, on the signature of the Secretary or his duly authorized representative, a notice of
acquisition of the subject property. From this point, the provisions of R. A. No. 6657, Section 16 shall
apply.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of coverage and
letter of invitation to a preliminary conference sent to the landowner, the representative of the BARC,
LBP, farmer beneficiaries and other interested parties pursuant to DAR A. O. No. 12, series of 1989; and
(2) the notice of acquisition sent to the landowner under Section 16 of the CARL.

The importance of the first notice, that is, the notice of coverage and the letter of invitation to a
conference, and its actual conduct cannot be understated. They are steps designed to comply with the
requirements of administrative due process. The implementation of the CARL is an exercise of the State's
police power and the power of eminent domain. To the extent that the CARL prescribes retention limits to
the landowners, there is an exercise of police power for the regulation of private property in accordance
with the Constitution. But where, to carry out such regulation, the owners are deprived of lands they own
in excess of the maximum area allowed, there is also a taking under the power of eminent domain. The
taking contemplated is not mere limitation of the use of the land. What is required is the surrender of the
title to and physical possession of the excess and all beneficial rights accruing to the owner in favor of the
farmer beneficiary.
In the case at bar, DAR has executed the taking of the property in question. However, payment of just
compensation was not in accordance with the procedural requirement. The law required payment in cash
or LBP bonds, not by trust account as was done by DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, we held that "The
CARP Law, for its part, conditions the transfer of possession and ownership of the land to the government
on receipt of the landowner of the corresponding payment or the deposit by the DAR of the compensation
in cash or LBP bonds with an accessible bank. Until then, title also remains with the landowner. No
outright change of ownership is contemplated either."24

Consequently, petitioner questioned before the Court of Appeals DARAB's decision ordering the
compulsory acquisition of petitioner's property.25 Here, petitioner pressed the question of whether the
property was a watershed, not covered by CARP.

Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:

"Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any ground
water may be declared by the Department of Natural resources as a protected area. Rules and
Regulations may be promulgated by such Department to prohibit or control such activities by the
owners or occupants thereof within the protected area which may damage or cause the
deterioration of the surface water or ground water or interfere with the investigation, use, control,
protection, management or administration of such waters."

Watersheds may be defined as "an area drained by a river and its tributaries and enclosed by a boundary
or divide which separates it from adjacent watersheds." Watersheds generally are outside the commerce
of man, so why was the Casile property titled in the name of SRRDC? The answer is simple. At the time
of the titling, the Department of Agriculture and Natural Resources had not declared the property as
watershed area. The parcels of land in Barangay Casile were declared as "PARK" by a Zoning Ordinance
adopted by the municipality of Cabuyao in 1979, as certified by the Housing and Land Use Regulatory
Board. On January 5, 1994, the Sangguniang Bayan of Cabuyao, Laguna issued a Resolution26 voiding
the zoning classification of the land at Barangay Casile as Park and declaring that the land is now
classified as agricultural land.

The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of its
police power, not the power of eminent domain. "A zoning ordinance is defined as a local city or municipal
legislation which logically arranges, prescribes, defines and apportions a given political subdivision into
specific land uses as present and future projection of needs."27

In Natalia Realty, Inc. v. Department of Agrarian Reform28 we held that lands classified as non-agricultural
prior to the effectivity of the CARL may not be compulsorily acquired for distribution to farmer
beneficiaries.

However, more than the classification of the subject land as PARK is the fact that subsequent studies and
survey showed that the parcels of land in question form a vital part of a watershed area. 29

Now, petitioner has offered to prove that the land in dispute is a "watershed or part of the protected area
for watershed purposes." Ecological balances and environmental disasters in our day and age seem to be
interconnected. Property developers and tillers of the land must be aware of this deadly combination. In
the case at bar, DAR included the disputed parcels of land for compulsory acquisition simply because the
land was allegedly devoted to agriculture and was titled to SRRDC, hence, private and alienable land that
may be subject to CARP.

However, the scenario has changed, after an in-depth study, survey and reassessment. We cannot
ignore the fact that the disputed parcels of land form a vital part of an area that need to be protected for
watershed purposes. In a report of the Ecosystems Research and Development Bureau (ERDB), a
research arm of the DENR, regarding the environmental assessment of the Casile and Kabanga-an river
watersheds, they concluded that:

"The Casile barangay covered by CLOA in question is situated in the heartland of both
watersheds. Considering the barangays proximity to the Matangtubig waterworks, the activities of
the farmers which are in conflict with proper soil and water conservation practices jeopardize and
endanger the vital waterworks. Degradation of the land would have double edge detrimental
effects. On the Casile side this would mean direct siltation of the Mangumit river which drains to
the water impounding reservoir below. On the Kabanga-an side, this would mean destruction of
forest covers which acts as recharged areas of the Matang Tubig springs. Considering that the
people have little if no direct interest in the protection of the Matang Tubig structures they couldn't
care less even if it would be destroyed.

The Casile and Kabanga-an watersheds can be considered a most vital life support system to
thousands of inhabitants directly and indirectly affected by it. From these watersheds come the
natural God-given precious resource water. x x x x x

Clearing and tilling of the lands are totally inconsistent with sound watershed management. More
so, the introduction of earth disturbing activities like road building and erection of permanent
infrastructures. Unless the pernicious agricultural activities of the Casile farmers are immediately
stopped, it would not be long before these watersheds would cease to be of value. The impact of
watershed degredation threatens the livelihood of thousands of people dependent upon it.
Toward this, we hope that an acceptable comprehensive watershed development policy and
program be immediately formulated and implemented before the irreversible damage finally
happens.

Hence, the following are recommended:

7.2 The Casile farmers should be relocated and given financial assistance.

7.3 Declaration of the two watersheds as critical and in need of immediate rehabilitation.

7.4 A comprehensive and detailed watershed management plan and program be

formulated and implemented by the Canlubang Estate in coordination with pertinent
government agencies."30

The ERDB report was prepared by a composite team headed by Dr. Emilio Rosario, the ERDB Director,
who holds a doctorate degree in water resources from U.P. Los Banos in 1987; Dr. Medel Limsuan, who
obtained his doctorate degree in watershed management from Colorado University (US) in 1989; and Dr.
Antonio M. Dano, who obtained his doctorate degree in Soil and Water management Conservation from
U.P. Los Banos in 1993.

Also, DENR Secretary Angel Alcala submitted a Memorandum for the President dated September 7,
1993 (Subject: PFVR HWI Ref.: 933103 Presidential Instructions on the Protection of Watersheds of the
Canlubang Estates at Barrio Casile, Cabuyao, Laguna) which reads:

"It is the opinion of this office that the area in question must be maintained for watershed
purposes for ecological and environmental considerations, among others. Although the 88
families who are the proposed CARP beneficiaries will be affected, it is important that a larger
view of the situation be taken as one should also consider the adverse effect on thousands of
residents downstream if the watershed will not be protected and maintained for watershed
purposes.
 "The foregoing considered, it is recommended that if possible, an alternate area be allocated for
the affected farmers, and that the Canlubang Estates be mandated to protect and maintain the
area in question as a permanent watershed reserved."31

The definition does not exactly depict the complexities of a watershed. The most important product of a
watershed is water which is one of the most important human necessity. The protection of watersheds
ensures an adequate supply of water for future generations and the control of flashfloods that not only
damage property but cause loss of lives. Protection of watersheds is an "intergenerational responsibility"
that needs to be answered now.

Another factor that needs to be mentioned is the fact that during the DARAB hearing, petitioner presented
proof that the Casile property has slopes of 18% and over, which exempted the land from the coverage of
CARL. R. A. No. 6657, Section 10, provides:

"Section 10. Exemptions and Exclusions. Lands actually, directly and exclusively used and
found to be necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and
breeding grounds, watersheds and mangroves, national defense, school sites and campuses
including experimental farm stations operated by public or private schools for educational
purposes, seeds and seedlings research and pilot production centers, church sites and convents
appurtenent thereto, communal burial grounds and cemeteries, penal colonies and penal farms
actually worked by the inmates, government and private research and quarantine centers, and all
lands with eighteen percent (18%) slope and over, except those already developed shall be
exempt from coverage of this Act."

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land may be
excluded from the compulsory acquisition coverage of CARP because of its very high slopes.

To resolve the issue as to the true nature of the parcels of land involved in the case at bar, the Court
directs the DARAB to conduct a re-evaluation of the issue.

IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G. R. SP No.
27234.

In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and determination of the
nature of the parcels of land involved to resolve the issue of its coverage by the Comprehensive Land
Reform Program.

In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries shall
continue to be stayed by the temporary restraining order issued on December 15, 1993, which shall
remain in effect until final decision on the case.
G.R. No. 162070 October 19, 2005

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE

(OIC), Petitioner
vs.
DELIA T. SUTTON, ELLA T. SUTTON-SOLIMAN and HARRY T. SUTTON, Respondents.

DECISION

PUNO, J.:

This is a petition for review filed by the Department of Agrarian Reform (DAR) of the Decision and
Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, which
declared DAR Administrative Order (A.O.) No. 9, series of 1993, null and void for being violative of the
Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been devoted
exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing agrarian reform
program of the government, respondents made a voluntary offer to sell (VOS) 1 their landholdings to
petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the Comprehensive
Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms used for raising
livestock, poultry and swine.

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this Court
ruled that lands devoted to livestock and poultry-raising are not included in the definition of agricultural
land. Hence, we declared as unconstitutional certain provisions of the CARL insofar as they included
livestock farms in the coverage of agrarian reform.

In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw their
VOS as their landholding was devoted exclusively to cattle-raising and thus exempted from the coverage
of the CARL.3

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected
respondents land and found that it was devoted solely to cattle-raising and breeding. He recommended
to the DAR Secretary that it be exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and requested
the return of the supporting papers they submitted in connection therewith.4 Petitioner ignored their
request.

On December 27, 1993, DAR issued A.O. No. 9, series of 1993,5 which provided that only portions of
private agricultural lands used for the raising of livestock, poultry and swine as of June 15, 1988 shall be
excluded from the coverage of the CARL. In determining the area of land to be excluded, the A.O. fixed
the following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head of animal shall be
retained by the landowner), and a ratio of 1.7815 hectares for livestock infrastructure for every 21 heads
of cattle shall likewise be excluded from the operations of the CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final and
irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire landholding is
exempted from the CARL.6
On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order7 partially granting the
application of respondents for exemption from the coverage of CARL. Applying the retention limits
outlined in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents land for grazing
purposes, and a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of
respondents landholding to be segregated and placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be exempted
as it is devoted exclusively to cattle-raising. Their motion was denied.8 They filed a notice of appeal9 with
the Office of the President assailing: (1) the reasonableness and validity of DAR A.O. No. 9, s. 1993,
which provided for a ratio between land and livestock in determining the land area qualified for exclusion
from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz Farms
case which declared cattle-raising lands excluded from the coverage of agrarian reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR. 10 It ruled
that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O. provided the
guidelines to determine whether a certain parcel of land is being used for cattle-raising. However, the
issue on the constitutionality of the assailed A.O. was left for the determination of the courts as
the sole arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s. 1993,
void for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock farms
from the land reform program of the government. The dispositive portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is
hereby DECLARED null and void. The assailed order of the Office of the President dated 09 October
2001 in so far as it affirmed the Department of Agrarian Reforms ruling that petitioners landholding is
covered by the agrarian reform program of the government is REVERSED and SET ASIDE.

SO ORDERED.11

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which
prescribes a maximum retention limit for owners of lands devoted to livestock raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR A.O.
No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its mandate to
place all public and private agricultural lands under the coverage of agrarian reform. Petitioner also
contends that the A.O. seeks to remedy reports that some unscrupulous landowners have converted their
agricultural farms to livestock farms in order to evade their coverage in the agrarian reform program.

Petitioners arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules and
regulations. They have been granted by Congress with the authority to issue rules to regulate the
implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in
modern governance due to the increasing complexity and variety of public functions. However, while
administrative rules and regulations have the force and effect of law, they are not immune from judicial
review.12 They may be properly challenged before the courts to ensure that they do not violate the
Constitution and no grave abuse of administrative discretion is committed by the administrative body
concerned.
The fundamental rule in administrative law is that, to be valid, administrative rules and
regulations must be issued by authority of a law and must not contravene the provisions of the
Constitution.13 The rule-making power of an administrative agency may not be used to abridge the
authority given to it by Congress or by the Constitution. Nor can it be used to enlarge the power of the
administrative agency beyond the scope intended. Constitutional and statutory provisions control
with respect to what rules and regulations may be promulgated by administrative agencies and
the scope of their regulations.14

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O.
sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing a
maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional
Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock,
swine and poultry- raising. The Court clarified in the Luz Farms case that livestock, swine and poultry-
raising are industrial activities and do not fall within the definition of "agriculture" or "agricultural activity."
The raising of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an
agricultural, activity. A great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with
grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for feeds and
other supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and
concrete ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological
appurtenances.15

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed
A.O.

The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case.
In Natalia Realty, the Court held that industrial, commercial and residential lands are not covered by the
CARL.17 We stressed anew that while Section 4 of R.A. No. 6657 provides that the CARL shall cover
all public and private agricultural lands, the term "agricultural land" does not include lands
classified as mineral, forest, residential, commercial or industrial. Thus, in Natalia Realty, even
portions of the Antipolo Hills Subdivision, which are arable yet still undeveloped, could not be
considered as agricultural lands subject to agrarian reform as these lots were already classified as
residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock,
poultry and swine have been classified as industrial, not agricultural, lands and thus exempt from agrarian
reform. Petitioner DAR argues that, in issuing the impugned A.O., it was seeking to address the reports it
has received that some unscrupulous landowners have been converting their agricultural lands to
livestock farms to avoid their coverage by the agrarian reform. Again, we find neither merit nor logic in this
contention. The undesirable scenario which petitioner seeks to prevent with the issuance of the
A.O. clearly does not apply in this case. Respondents family acquired their landholdings as early as
1948. They have long been in the business of breeding cattle in Masbate which is popularly known as the
cattle-breeding capital of the Philippines.18 Petitioner DAR does not dispute this fact. Indeed, there is no
evidence on record that respondents have just recently engaged in or converted to the business of
breeding cattle after the enactment of the CARL that may lead one to suspect that respondents intended
to evade its coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural
lands for non-agricultural purposes after the effectivity of the CARL. There has been no change of
business interest in the case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by Congress
without substantial change is an implied legislative approval and adoption of the previous law. On the
other hand, by making a new law, Congress seeks to supersede an earlier one. 19 In the case at bar, after
the passage of the 1988 CARL, Congress enacted R.A. No. 788120 which amended certain provisions of
the CARL. Specifically, the new law changed the definition of the terms "agricultural activity" and
"commercial farming" by dropping from its coverage lands that are devoted to commercial
livestock, poultry and swine-raising.21 With this significant modification, Congress clearly sought
to align the provisions of our agrarian laws with the intent of the 1987 Constitutional Commission
to exclude livestock farms from the coverage of agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of the
Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to and be
consistent with the Constitution. In case of conflict between an administrative order and the provisions of
the Constitution, the latter prevails.22 The assailed A.O. of petitioner DAR was properly stricken down as
unconstitutional as it enlarges the coverage of agrarian reform beyond the scope intended by the 1987
Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court of
Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No
pronouncement as to costs.
G.R. No. 86186 May 8, 1992

RAFAEL GELOS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ERNESTO ALZONA, respondents.

Balagtas P. Ilagan for petitioner.

Emil Capulong, Jr., for private respondent.

CRUZ, J.:

The Court is asked to determine the real status of the petitioner, who claims to be a tenant of the private
respondent and entitled to the benefits of tenancy laws. The private respondent objects, contending that
the petitioner is only a hired laborer whose right to occupy the subject land ended with the termination of
their contract of employment.

The subject land is a 25,000 square meter farmland situated in Cabuyao, Laguna, and belonging
originally to private respondent Ernesto Alzona and his parents in equal shares. On July 5, 1970, they
entered into a written contract with petitioner Rafael Gelos employing him as their laborer on the land at
the stipulated daily wage of P5.00. 1 On September 4, 1973, after Alzona had bought his parents' share
and acquired full ownership of the land, he wrote Gelos to inform him of the termination of his services
and to demand that he vacate the property. Gelos refused and continued working on the land.

On October 1, 1973, Gelos went to the Court of Agrarian Relations and asked for the fixing of the
agricultural lease rental on the property. He later withdrew the case and went to the Ministry of Agrarian
Reform, which granted his petition. For his part, Alzona filed a complaint for illegal detainer against Gelos
in the Municipal Court of Cabuyao, but this action was declared "not proper for trial" by the Ministry of
Agrarian Reform because of the existence of a tenancy relationship between the parties. Alzona was
rebuffed for the same reason when he sought the assistance of the Ministry of Labor and later when he
filed a complaint with the Court of Agrarian Relations for a declaration of non-tenancy and damages
against Gelos. On appeal to the Office of the President, however, the complaint was declared proper for
trial and so de-archived and reinstated.

After hearing, the Regional Trial Court of San Pablo City (which had taken over the Court of Agrarian
Relations under PB 129) rendered a decision dated April 21, 1987, dismissing the complaint. 2 It found
Gelos to be a tenant of the subject property and entitled to remain thereon as such. The plaintiff was also
held liable in attorney's fees and costs.

The decision was subsequently reversed by the Court of Appeals. In its judgment promulgated on
November 25, 1988, 3 it held that Gelos was not a tenant of the land in question and ordered him to
surrender it to Alzona. He was also held liable for the payment of P10,000.00 as attorney's fees and the
costs of the suit.

The basic question the petitioner now raises before the Court is essentially factual and therefore not
proper in a petition for review under Rule 45 of the Rules of Court. Only questions of law may be raised in
this kind of proceeding. The settled rule is that the factual findings of the Court of Appeals are conclusive
on even this Court as long as they are supported by substantial evidence. The petitioner has not shown
that his case comes under any of those rare exceptions on such findings may be validly reversed by this
Court.
It is true that in Talavera v. Court of Appeals, 4 we held that a factual conclusion made by the trial court
that a person is a tenant farmer, if it is supported by the minimum evidence demanded by law, is final and
conclusive and cannot be reversed by the appellate tribunals except for compelling reasons. In the case
at bar, however, we find with the respondent court that there was such a compelling reason. A careful
examination of the record reveals that, indeed, the trial court misappreciated the facts when it ruled that
the petitioner was a tenant of the private respondent.

The circumstance that the findings of the respondent court do not concur with those of the trial court does
not, of course, call for automatic reversal of the appellate court. Precisely, the function of the appellate
court is to review and, if warranted, reverse the findings of the trial court. Disagreement between the two
courts merely calls on us to make a specially careful study of their respective decisions to determine
which of them should be preferred as more conformable to the facts at hand.

The Court has made this careful study and will sustain the decision of the respondent court.

The contract of employment dated July 5, 1970, written in Tagalog and entitled "Kasunduan ng Upahang
Araw," reads pertinently as follows:

1. Ang Unang Panig ay siyang may-ari at nagtatangkilik ng isang lagay na lupa,

sinasaka, na tumatayo sa Nayon ng Baclaran, Cabuyao, Laguna, na siyang gagawa at
sasaka sa lupa, samantalang ang Ikalawang Panig ay magiging upahan at katulong sa
paggawa ng lupa.

2. Ang Unang Panig ay gustong ipagpatuloy ang pagbubungkal at paggawa ng bukid na

binabanggit sa itaas at ang Ikalawang Panig ay may ibig na magpaupa sa paggawa sa
halagang P5.00 sa bawat araw, walong oras na trabaho gaya ng mga sumusunod:
Patubigan ng linang; pagpapahalabas ng mga pilapil; pagpapaaldabis sa unang araw ng
pag-aararo; pagpapalinis ng damo sa ibabaw ng pilapil; pagpapakamot (unang
pagpapasuyod), pagpapahalang at pagpapabalasaw (ikalawa't ikatlong pagpapasuyod);
isang tao sa pagsasabog ng abono una sa pagpapantay ng linang; bago magtanim;
isang tao sa pagaalaga ng dapog; upa sa isang tao ng magbobomba ng gamot laban sa
pagkapit ng mga kulisap (mayroon at wala); sa nag-we-weeder; upa sa mga tao na
maggagamas at magpapatubig ng palay; magsasapaw ng mga pilapil at iba pa.

3. Ang Unang Panig at ang Ikalawang Panig ay nagkasundo na ang huli ay gagawa sa
bukid ayon sa nabanggit sa itaas bilang katulong at upahan lamang. Ang Unang Panig
bukod sa sila ang gagawa at magsasaka ay maaaring umupa ng iba pang tao
manggagawa sa upahang umiiral sang-ayon sa batas katulad ng pag-aararo,
pagpapahulip, pagpapagamas, pagbobomba, pagweweeder, pagsasabog ng abono,
pagbobomba ng gamot, pagpapatubig at iba pang mga gawain. Maaaring alisin ang
Ikalawang Panig sa pagpapatrabaho sa ano mang oras ng Unang Panig.

4. Ipinatatanto ng Ikalawang Panig na siya ay hindi kasama sa bukid kundi upahan

lamang na binabayaran sa bawa't araw ng kanyang paggawa sa bukid na nabanggit.

It is noted that the agreement provides that "ang Ikalawang Panig (meaning Gelos) ay may ibig na
magpaupa sa paggawa sa halagang P5.00 sa bawa't araw, walong oras na trabaho" (The Second Party
desires to lease his services at the rate of P5.00 per day, eight hours of work) and that "Ipinatatanto ng
Ikalawang Panig na siya ay hindi kasama sa bukid kundi upahan lamang na binabayaran sa bawa't araw
ng kanyang paggawa sa bukid na nabanggit.'' (The Second Party makes it known that he is not a farm
tenant but only a hired laborer who is paid for every day of work on the said farm.)

These stipulations clearly indicate that the parties did not enter into a tenancy agreement but only a
contract of employment. The agreement is a lease of services, not of the land in dispute. This intention is
quite consistent with the undisputed fact that three days before that agreement was concluded, the former
tenant of the land, Leocadio Punongbayan, had executed an instrument in which he voluntarily
surrendered his tenancy rights to the private respondent. 5 It also clearly demonstrates that, contrary to
the petitioner's contention, Alzona intended to cultivate the land himself instead of placing it again under
tenancy.

The petitioner would now disavow the agreement, but his protestations are less than convincing. His
wife's testimony that he is illiterate is belied by his own testimony to the contrary in another
proceeding. 6 Her claim that they were tricked into signing the agreement does not stand up against the
testimony of Atty. Santos Pampolina, who declared under his oath as a witness (and as an attorney and
officer of the court) that he explained the meaning of the document to Gelos, who even read it himself
before signing it. 7 Atty. Pampolina said the agreement was not notarized because his commission as
notary public was good only for Manila and did not cover Laguna, where the document was
executed. 8 At any rate, the lack of notarization did not adversely affect the veracity and effectiveness of
the agreement, which, significantly, Gelos and his wife do not deny having signed.

Gelos points to the specific tasks mentioned in the agreement and suggests that they are the work of a
tenant and not of a mere hired laborer. Not so. The work specified is not peculiar to tenancy. What a
tenant may do may also be done by a hired laborer working under the direction of the landowner, as in
the case at bar. It is not the nature of the work involved but the intention of the parties that determines the
relationship between them.

As this Court has stressed in a number of cases, 9 "tenancy is not a purely factual relationship dependent
on what the alleged tenant does upon the land. It is also a legal relationship. The intent of the parties, the
understanding when the farmer is installed, and as in this case, their written agreements, provided these
are complied with and are not contrary to law, are even more important."

Gelos presented receipts 10 for fertilizer and pesticides he allegedly bought and applied to the land of the
private respondent, but the latter insists that it was his brother who bought them, being an agriculturist
and in charge of the technical aspect of the farm. Moreover, the receipts do not indicate to which
particular landholding the fertilizers would be applied and, as pointed out by the private respondent, could
refer to the other parcels of land which Gelos was tenanting.

The petitioner's payment of irrigation fees from 1980 to 1985 to the National Irrigation Administration on
the said landholding is explained by the fact that during the pendency of the CAR case, the Agrarian
Reform Office fixed a provisional leasehold rental after a preliminary finding that Gelos was the tenant of
the private respondent. As such, it was he who had to pay the irrigation fees. Incidentally, Section 12,
subpar. (r) of PD 946 provides that the Secretary's determination of the tenancy relationship is only
preliminary and cannot be conclusive on the lower court.

It is noteworthy that, except for the self-serving testimony of the petitioner's wife, the records of this case
are bereft of evidence regarding the sharing of harvest between Gelos and Alzona. No less importantly,
as the Court of Appeals observed, the petitioner has not shown that he paid rentals on the subject
property from 1970 to 1973, before their dispute arose.

A tenant is defined under Section 5(a) of Republic Act No. 1199 as 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 or ascertainable in produce or
in money or both, under the leasehold tenancy system. (Emphasis supplied)

For this relationship to exist, it is necessary that: 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. In the absence of any of
these requisites, an occupant of a parcel of land, or a cultivator thereof, or planter thereon, cannot qualify
as a de jure tenant. 11

On the other hand, the indications of an employer-employee relationship are: 1) the selection and
engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the power to
control the employee's
conduct although the latter is the most important element. 12

According to a well-known authority on the subject, 13 tenancy relationship is distinguished from farm
employer-farm worker relationship in that: "In farm employer-farm worker relationship, the lease is one of
labor with the agricultural laborer as the lessor of his services and the farm employer as the lessee
thereof. In tenancy relationship, it is the landowner who is the lessor, and the tenant the lessee of
agricultural land. The agricultural worker works for the farm employer and for his labor be receives a
salary or wage regardless of whether the employer makes a profit. On the other hand, the tenant derives
his income from the agricultural produce or harvest."

The private respondent, instead of receiving payment of rentals or sharing in the produce of the land, paid
the petitioner lump sums for specific kinds of work on the subject lot or gave him vales, or advance
payment of his wages as laborer thereon. The petitioner's wife claims that Alzona made her husband sign
the invoices all at one time because he allegedly needed them to reduce his income taxes. Even
assuming this to be true, we do not think that made the said payments fictitious, especially so since the
petitioner never denied having received them.

The other issue raised by the petitioner, which is decidedly legal, is easily resolved. There being no
tenancy relationship, the contention that the private respondent's complaint has prescribed under Section
38 of R.A. 3844 must also fail. That section is not applicable. It must be noted that at the very outset,
Alzona rejected the petitioner's claim of agricultural tenancy and immediately instituted his action for
unlawful detainer in accordance with Section 1, Rule 70 of the Rules of Court. As it happened, the said
case was held not proper for trial by the Ministry of Agrarian Reform. He then resorted to other remedies
just so he could recover possession of his land and, finally, in 1979, he yielded to the jurisdiction of the
defunct Court of Agrarian Relations by filing there an action for declaration of non-tenancy. The action,
which was commenced in 1979, was within the ten-year prescriptive period provided under Article 1144 of
the Civil Code for actions based on a written contract. *

The Court quotes with approval the following acute observations made by Justice Alicia Sempio-Diy:

It might not be amiss to state at this juncture that in deciding this case in favor of
defendant, the lower court might have been greatly influenced by the fact that defendant
is a mere farmer who is almost illiterate while plaintiff is an educated landlord, such that it
had felt that it was its duty to be vigilant for the protection of defendant's interests. But the
duty of the court to protect the weak and the underprivileged should not be carried out to
such an extent as to deny justice to the landowner whenever truth and justice happen to
be on his side. Besides, defendant's economic position vis a visthe plaintiff does not
necessarily make him the underprivileged party in this case, for as testified by plaintiff
which defendant never denied, the small land in question was the only landholding of
plaintiff when he and his father bought the same, at which time he was just a lowly
employee who did not even have a house of his own and his father, a mere farmer, while
defendant was the agricultural tenant of another piece of land and also owns his own
house, a sari sari store, and a caritela. Plaintiff also surmised that it was only after
defendant had been taken into its wings by the Federation of Free Farmers that he
started claiming to be plaintiff's agricultural tenant, presumably upon the Federation's
instigation and advice. And we cannot discount this possibility indeed, considering that
during the early stages of the proceedings this case, defendant even counter-proposed to
plaintiff that he would surrender the land in question to the latter if plaintiff would convey
to him another piece of land adjacent to the land in question, almost one ha. in area, that
 plaintiff had also acquired after buying the land in question, showing that defendant was
not as ignorant as he would want the Court to believe and had the advice of people
knowledgeable on agrarian matters.

This Court has stressed more than once that social justice or any justice for that matter is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are called upon to tilt the balance in favor of the poor, to whom the Constitution
fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because
they are poor, or to reject the rich simply because they are rich, for justice must always be served, for
poor and rich alike, according to the mandate of the law.

WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED and the petition is
DENIED, with costs against the petitioner. It is so ordered.
G.R. No. L-27797 August 26, 1974

TRINIDAD GABRIEL, plaintiff-appellee,

vs.
EUSEBIO PANGILINAN, defendant-appellant.

Mariano Manahan, Jr. for plaintiff-appellee.

Virgilio M. Pablo for defendant-appellant.

Armando M. Laki for movant.

ZALDIVAR, J.:p

This appeal from the decision, dated December 26, 1963, of the Court of First Instance of Pampanga in
its Civil Case No. 1823, was certified to this Court by the Court of Appeals for the reason that the
jurisdiction of an inferior court is involved.

During the pendency of this case before this Court, under date of April 29, 1972, Atty. Virgilio M. Pablo,
counsel for the appellant Eusebio Pangilinan, gave notice to this Court that said appellant died on April 3,
1964, and was survived by his children, who are his legal heirs, namely: Salvador Pangilinan, Santos
Pangilinan, Mariano Pangilinan, Carlos Pangilinan and Pilar Pangilinan de Avante. For the purposes of
this case the appellant Eusebio Pangilinan, therefore, is substituted by his heirs herein named.

Under date of November 20, 1973, Atty. Amando M. Laki filed a motion with this Court advising that
appellee Trinidad Gabriel died on June 14, 1967, and was survived by her heirs and successors-in-
interest, namely: Corazon O. Gabriel, married to Lamberto Ignacio; Ernesto O. Gabriel; Ester O. Gabriel,
married to Emmanuel Padua; Generoso O. Gabriel, Marciano O. Gabriel and Pablo O. Gabriel, and
prayed that appellee Trinidad Gabriel be substituted by her heirs herein named. By order of this Court of
December 4, 1973 the prayer for substitution was granted.

In its resolution dated April 19, 1967 certifying the case to this Court, the Court of Appeals made the
following findings, which We adopt:

On June 18, 1960 Trinidad Gabriel filed a complaint in the Court of First Instance of
Pampanga against Eusebio Pangilinan alleging that she is the owner of a fishpond
situated in barrio Sta. Ursula, Betis, Pampanga and measuring about 169,507 square
meters; that sometime during the last war she entered into an oral contract of lease
thereof with the defendant on a year to year basis, i.e., from January 1 to December 31,
at a rental of P1,200, plus the amount of real estate taxes, payable in advance in the
month of January; that desiring to develop and cultivate the fishpond by herself, she
notified the defendant in a letter dated June 26, 1957 that she was terminating the
contract as of December 31, 1957; that upon request of the defendant, she extended the
lease for another year; that on November 19, 1958 she again wrote the defendant that he
should surrender possession of the fishpond on January 1, 1959, which demand he
however ignored. Plaintiff accordingly prayed that the defendant be ordered to restore the
possession of the fishpond to her and to pay her P1,200, plus the amount of real estate
taxes, a year from 1959, attorney's fees and costs.

The defendant moved for the dismissal of the complaint on the ground that the trial court
had no jurisdiction over the case which properly pertains to the Court of Agrarian
Relations, there being an agricultural leasehold tenancy relationship between the parties.
Upon opposition by the plaintiff, the motion was denied. The defendant thereafter filed his
answer with counterclaim alleging, inter alia, that the land in question was originally
leased to him, also verbally, by the plaintiff's father, Potenciano Gabriel in 1923 for as
long as the defendant wanted subject to the condition that he would convert the major
portion into a fishpond and the part which was already a fishpond be improved at his
expense which would be reimbursed by Potenciano Gabriel or his heirs at the termination
of the lease for whatever cause; that when the plaintiff became the owner of the property
through inheritance, she told the defendant that she would honor her father's contract
with the defendant, and likewise assured him that he could continue leasing the property,
whose original rental of P400.00 a year had been progressively increased to P1,200.00,
for as long as he wanted since she was not in a position to attend to it personally. As a
special defense, the defendant reiterated the alleged lack of jurisdiction of the trial court
to take cognizance of the case.

On February 12, 1962 the trial court issued an order herein below quoted in full:

The plaintiff sinks to eject the defendant from the fishpond described in the complaint
which is under lease to the said defendant, who, however, refuses to vacate. Instead, he
has impugned the jurisdiction of this Court contending that the action should have been
filed with the Court of Agrarian Relations, which has original and exclusive jurisdiction, as
their relationship is one of leasehold tenancy.

After the motion to dismiss was denied on the basis of the allegations of the complaint,
the parties were ordered to adduce evidence for the purpose of determining which Court
shall take cognizance of the case.

It appears that the fishpond is presently in the possession of the defendant, who originally
leased it from the father of the plaintiff. Upon the death of the said father, the fishpond
was inherited by the plaintiff. It is now covered by T.C.T. No. 1634 and is registered in her
name. It contains an area of 169,507.00 square meters. The rental is on a yearly basis.

It also appears that the defendant has ceased to work personally with the aid of helpers
the aforecited fishpond since 1956 he became ill and incapacitated. His daughter, Pilar
Pangilinan, took over. She testified that she helps her father in administering the leased
property, conveying his instructions to the workers, Urbano Maninang, Isidro Bernal and
Marciano Maninang. The names of Ire, Juan and Aguedo Viada have been mentioned as
the laborers who were paid for the repair of the dikes. Bernardo Cayanan, a nephew of
the defendant, acts as the watcher. He has lived separately since he got married.
Excepting Pilar Pangilinan. who is residing near the fishpond, the other children of the
defendant are all professions; a lawyer, an engineer, and a priest all residing in Manila.
None of these persons has been seen working on the fishpond.

The above are the material and pertinent facts upon which we enter this order.

After a study of the facts and in the light of the provisions of the Tenancy Law, Republic
Act No. 1199, particularly Sections 4 and 9, as amended. it seems clear that his case
does not fall within the purview of said Act. The lease contract is manifestly a civil lease
governed by the New Civil Code. Considering the area of the fishpond, 16 hectares, more
or less, the fact that neither the defendant, who is physically incapacitated, or his
daughter is Personally cultivating the fishpond or through the employment of mechanical
farm implements, and the further fact that the persons named above are not members of
the immediate farm household of the defendant, the conclusion is that no tenancy
 relationship exists between the plaintiff and the defendant as defined by Republic Act No.
1199, as amended.

We are, therefore, of the opinion and so hold that this Court is vested with jurisdiction to
try and decide this case. After this order has become final, the plaintiff may request for
the setting of the initial trial.

The defendant does not contest the findings of facts therein made by the trial court.

After the parties adduced their respective evidence on the merits, decision was rendered
wherein the trial court Pursuant to Article 1197 of the Civil Code, fixed the period of the
low up to June 30, 1964, the defendant on said date to surrender possession of the
fishpond to the plaintiff and to pay the rentals due the latter. The plaintiff, on her part, was
required upon surrender of on to her, to pay the defendant the sum of P1,000.00 as
reimbursement of the expenses he incurred in improving the fishpond, and upon failure
by either party to pay the amount due the other, the same would bear interest at the legal
rate until full payment is made.

A reconsideration by the defendant having been denied, he appealed to this Court and
assigned the following errors:

1. The lower court erred in considering the relationship of appellee and appellant as that
of a civil lease, in accordance with the Civil Code of the Philippines and not a leasehold
tenancy under Rep. Act No. 1199 as amended.

2. The lower court erred in not holding that the Court of First Instance is without
jurisdiction, the cue being that of an agrarian relation in nature pursuant to Rep Act. NO.
1199 as amended.

3. The lower court erred in appreciating the evidence of the appellant particularly the
basis for the expenditure for the development of the fishpond in question.

4. The lower court erred in rendering judgment in favor of the appellant in them easily
amount of one thousand pesos for reimbursement and for seven hundred pesos for the
cost of the floodgate.

Anent the question of jurisdiction, it is an admitted fact that plaintiff leased the fishpond to the defendant
in 1943 without a fixed term, the annual rental payable at the end of the year (Exhibit C, Deposition of
plaintiff, Dec. 13, 1962, pp. 2 and 3). It is likewise undisputed that the work in the fishpond consisted in
letting out the water so algae (lumut) would grow or if algae would not grow, getting some from the river
and putting them in the fishpond, changing the dirty water with fresh water, repairing leaks in the dikes,
and planting of fingerlings and attending to them; that these were done by defendant, with some help; that
he personally attended to the fishpond until 1956 when he became ill; that thereafter his nephew
Bernardo Cayanan, who was living with him, helped in the work to be done in the fishpond and his
daughter Pilar Pangilinan helped in the management, conveying his instructions to the workers (t.s.n., pp.
4-8, Magat).

Upon the foregoing facts, the defendant insists that the relationship between the parties is an agricultural
leasehold tenancy governed by Republic Act No. 1199, as amended, pursuant to section 35 of Republic
Act No. 3844, and the present case is therefore within the original and exclusive jurisdiction of the Court
of Agrarian Relations. Plaintiff, on the other hand, maintains in effect that since defendant has ceased to
work the fishpond personally or with the aid of the members of his immediate farm household (Section 4,
Republic Act No. 1199) the tenancy relationship between the parties has been extinguished (Section 9,
id.) and become of civil lease and therefore the trial court properly assumed jurisdiction over the case.
It does appear that the controversy on the issue of jurisdiction calls for the interpretation of cultivating or
working the land by the tenant personally or with the aid of the members of his immediate farm
household.1

Those are the findings and conclusions of facts made by the Court of Appeals which, as a general rule,
bind this Court.2

1. Let Us now discuss the issues raised in this appeal. First, was the relationship between the appellee
and appellant a leasehold tenancy or a civil law lease?

There are important differences between a leasehold tenancy and a civil law lease. The subject matter of
leasehold tenancy is limited to agricultural land; that of civil law lease may be either rural or urban
property. As to attention and cultivation, the law requires the leasehold tenant to personally attend to, and
cultivate the agricultural land, whereas the civil law lessee need not personally cultivate or work the thing
leased. As to purpose, the landholding in leasehold tenancy is devoted to agriculture, whereas in civil law
lease, the purpose may be for any other lawful pursuits. As to the law that governs, the civil law lease is
governed by the Civil Code, whereas leasehold tenancy is governed by special laws.3

In order that leasehold tenancy under the Agricultural Tenancy Act may exist, the following requisites
must concur.

1. That the land worked by the tenant is an agricultural land;

2. That the land is susceptible of cultivation by a single person together with members of his immediate
farm household;

3. That the land must be cultivated by the tenant either personally or with the aid of labor available from
members of his immediate farm household;

4. That the land belongs to another; and

5. That the use of the land by the tenant is for a consideration of a fixed amount in money or in produce or
in both.4

Were the foregoing requisites present in the instant case?

There is no doubt that the land in question is agricultural land. It is a fishpond and the Agricultural
Tenancy Act, which refers to "agricultural land", specifically mentions fishponds and prescribes the
consideration for the use thereof. Thus Section 46(c) of said Act provides that "the consideration for the
use of sugar lands, fishponds, salt beds and of lands devoted to the raising of livestock shall be governed
by stipulation between the parties". This Court has already ruled that "land in which fish is produced is
classified as agricultural land."5 The mere fact, however, that a person works an agricultural land does not
necessarily make him a leasehold tenant within the purview of section 4 of Republic Act No. 1199. He
may still be a civil law lessee unless the other requisites as above enumerated are complied with.

Regarding the second requisite, it is to be noted that the land in question has an area of 169,507 square
meters, or roughly 17 hectares of fishpond. The question of whether such a big parcel of land is
susceptible of being worked by the appellant's family or not has not been raised, and We see no need of
tarrying on this point. So, We pass to the third requisite, to wit, whether the tenant himself personally or
with the aid of his immediate family worked the land.

Assuming that appellant had previously entered in 1923 into an agreement of leasehold tenancy with
Potenciano Gabriel, appellee's father, such tenancy agreement was severed in 1956 when he ceased to
work the fishpond personally because he became ill and incapacitated. Not even did the members of
appellant's immediate farm household work the land in question. Only the members of the family of the
tenant and such other persons, whether related to the tenant or not, who are dependent upon him for
support and who usually help him to operate the farm enterprise are included in the term "immediate farm
household"6 The record shows who helped work the land in question, and We quote:

It also appears that the defendant has ceased to work personally with the aid of helpers
the aforecited fishpond since 1956 when he became ill and incapacitated. His daughter,
Pilar Pangilinan took over. She testified that she helps her father in administering the
leased property, conveying his instructions to the workers, Urbano Maninang, Isidro
Bernal and Marciano Maninang. The names of Ire, Juan and Aguedo Viada have been
mentioned as the laborers who were paid for the repair of the dikes. Bernardo Cayanan,
a nephew of the defendant, acts as the watcher. He has lived separately since he got
married. Excepting Pilar Pangilinan, who is residing near the fishpond, the other children
of the defendant are all professionals: a lawyer, an engineer, and a priest all residing
in Manila. None of these persons has been seen working on the fishpond. 7

The law is explicit in requiring the tenant and his immediate family to work the land. Thus Section 5 (a) of
Republic Act No. 1199, as amended, defines a "tenant" as 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. Section 8 of the same Act limits the relation of landholder and
tenant to the person who furnishes the land and to the person who actually works the land himself with
the aid of labor available from within his immediate farm household. Finally, Section 4 of the same Act
requires for the existence of leasehold tenancy that the tenant and his immediate farm household work
the land. It provides that leasehold tenancy exists when a person, who either personally or with the aid of
labor available from members of his immediate farm household, undertakes to cultivate a piece of
agricultural land susceptible of cultivation by a single person together with members of his immediate
farm household, belonging to, or legally possessed by, another in consideration of a fixed amount in
money or in produce or in both.

A person, in order to be considered a tenant, must himself and with the aid available from his immediate
farm household cultivate the land. Persons, therefore, who do not actually work the land cannot be
considered tenants;8and he who hires others whom he pays for doing the cultivation of the land, ceases
to hold, and is considered as having abandoned the land as tenant within the meaning of sections 5 and 8
of Republic Act. No. 1199, and ceases to enjoy the status, rights, and privileges of one.

We are, therefore, constrained to agree with the court a quo that the relationship between the appellee
Trinidad Gabriel and appellant Eusebio Pangilinan was not a leasehold tenancy under Republic Act No.
1199. Hence, this case was not within the original and exclusive jurisdiction of the Court of Agrarian
Relations.9

2. Regarding the second assignment of error, We accordingly rule that the Court of First Instance
correctly assumed jurisdiction over the case at bar, this being a case of civil law lease.

3. We deem it unnecessary to discuss the third and fourth assigned errors as these are issues involving
findings of facts which have been settled by the lower court, and unless there is grave abuse of
discretion, which we do not find in the record of the case, We shall not venture to discuss the merits of the
factual findings of the court a quo.

IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Pampanga in its Civil Case
No. 1823, appealed from, is affirmed, with costs against the appellants.
This decision should apply to the heirs and successors-in-interest of the original parties, as named in this
decision. In consonance with the decision of the lower court, the heirs and successors-in-interest of
appellant Eusebio Pangilinan should deliver the possession of the fishpond in question to the heirs and
successors-in-interest of appellee Trinidad Gabriel; and said heirs and successors-in-interest of appellant
Eusebio Pangilinan should pay the heirs and successors-in-interest of appellee Trinidad Gabriel the
accrued rentals. From January 1, 1960, at the rate of P1,200.00 a year, until the actual delivery of the
possession of the fishpond as herein ordered, with interest at the legal rate until full payment is made.
G.R. No. L-20700 February 27, 1969

FIDEL TEODORO, petitioner,

vs.
FELIX MACARAEG and COURT OF AGRARIAN RELATIONS, Second Regional District, Sala
II, respondents.

Jose A. Buendia and Agustin A. Pelmoka for petitioner.

Jesus A. Garcia for respondent Felix Macaraeg.

CASTRO, J.:

Before us for review, upon a petition for certiorari, are the decision of the respondent Court of Agrarian
Relations of September 7, 1962 in CAR case 558-Gba. 68 (Nueva Ecija), ordering the herein petitioner
Fidel Teodoro to reinstate the herein private respondent Felix Macaraeg (the petitioner in the agrarian
court) to his "former landhoding ... and to keep him as the true and lawful tenant in accordance with law,"
and the resolution of the same court of November 27, 1962 condemning Teodoro to pay or deliver to
Macaraeg as damages "82 cavans of palay or its equivalent value in the amount of P820.00 computed at
the rate of P10.00 per cavan, plus interest at 10% until fully paid."

We turn to the factual milieu.

On June 7, 1961 Macaraeg filed a petition with the Court of Agrarian Relations (Second Regional District,
sala II, Guimba, Nueva Ecija) praying, inter alia, that (1) an interlocutory order be issued to restrain
Teodoro and Jose Niegos (the respondents below), from ejecting him from his landholding pending
resolution of his petition; and (2) after due trial, he be maintained as the lawful tenant in the disputed
landholding.

Macaraeg alleged that he is a leasehold tenant of Teodoro cultivating a farmholding situated in the
municipality of Talugtug, Nueva Ecija, of an area of four (4) hectares devoted to rice culture, and that he
has worked said land "as a tenant for the last seven years"; that on March 2, 1961 he received a letter
from Teodoro and his wife advising him that the aforesaid landholding will be given to another tenant, on
the pretext that he (Macaraeg) "is contracting be a tenant of another in said landholding"; that forthwith,
Teodoro placed a new tenant, Jose Niegos, in the disputed land; that subsequently, Niegos repeatedly
forbade him from working on said riceland; that in order to avoid trouble, he refrained from forcibly
entering the landholding, but with the advent of the planting season, it became imperative that the
agrarian court order his reinstatement and restrain Teodoro and Niegos from committing further acts of
dispossession.

In his answer with counterclaim dated June 19, 1961, Teodoro categorically denied that Macaraeg was
his tenant, claiming that "ever since he became the owner of around 39 hectares of riceland in Kalisitan,
Talugtug, N. Ecija, he had always leased all of it under civil lease and he had never given any portion of it
under tenancy." He further alleged that after the expiration of his lease contract with Macaraeg in
January, 1961, his wife twice notified Macaraeg to renew his contract for the then incoming agricultural
year 1961-62, but the latter "verbally told Mrs. Teodoro that he was no longer interested to work on the
land and he was giving it up as he had left the place already." Teodoro also claims that it was only after
Macaraeg had abandoned the farmland that he decided to lease it to Niegos.

On his part, Niegos seasonably answered, disclaming any knowledge that Macaraeg is the tenant of
Teodoro, and averring that he entered the landholding in good faith clothed with the proper authority from
the other respondent (Teodoro) and with the consent and confirmity of the petitioner (Macaraeg) who
allowed him to work on the same"; and that Macaraeg "has no more interests in the cultivation of the
landholding as could be gleaned from his actuations, like the failure to clean the land during the months of
March and April, and his failure to prepare his seed bed in the month of May which is the period for
broadcasting seedling in the community".

On February 6, 1962, when the hearing of the present controversy was nearing completion in the
respondent agrarian court but before the case was submitted for decision, Macaraeg filed a
"supplemental petition", claiming damages as a a result of his dispossession. Said petition was given due
course by the court commissioner and the requisite hearing was set for March 9, 1962. Both Teodoro and
Niegos interposed their respective answers, identically asserting that the same was filed out of time and
that the failure of Macaraeg to claim earlier his alleged damages amounted to a fatal neglect which could
no longer be cured at that very late stage of the proceedings. Nonetheless, hearing on the said petition
was disclosed that as "a result of his (Macaraeg's) ejectment, he became destitute" since he had no
"income except from those derived from transplanting and reaping wherein he earned the amount of
P30.00". It was further proved that "for the aqricultural year 1961-62, Jose Niegos realized a gross
harvest of 110 cavans out of which he paid his rental to Fidel Teodoro in the amount of 42 cavans and 23
kilos."

On September 7, 1962 the decision under review was rendered, with the following dispositive portion:

IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in favor

of petitioner Felix Macaraeg and against respondents Fidel Teodoro and Jose Niegos in the tenor
and disposition hereinbelow provided, to wit:

1. Jose Niegos is hereby ordered to vacate the landholding in question with an approximate area
of four (4) hectares, situated at Barrio Kalisitan, Talugtug Nueva Ecija, in favor of herein petitioner
and to refrain from molesting or in any manner disturbing his peaceful possession and cultivation
thereof, subject to the condition that said respondent shall have harvested and threshed his crop
which he planted for the current agricultural year;

2. Conformably with the preceding paragraph, Fidel Teodoro is hereby ordered to reinstate said
petitioner to his former landholding aforestated and to keep him as the true and lawful tenant in
accordance with law;

3. Declaring Exhibit A as a leasehold tenancy contract between the parties for the agricultural
year 1960-61 as the term is understood under our tenancy law; as a consequence hereof, Exhibit
4-Teodoro and Exhibit 5-Niegos, i.e. contract of lease between Fidel Teodoro and Jose Niegos is
hereby declared void and of no legal effect; and

4. Dismissing petitioner's claim for damages as embodied in his supplemental petition.

Teodoro and Niegos filed separate motions for reconsideration which were denied by the respondent
agrarian court in its resolution of November 27, 1962. However, in the same resolution, the court a quo
reconsidered, upon motion of Macaraeg, its ruling denying the latter's prayer for damages, thus:

With respect to petitioner's claim for damages as embodied in his supplemental petition, wherein
evidence was adduced in support thereof, we believe that its admission is in accordance with
Section 2, Rule 17 of the Rules of Court of the Philippines, same not being for the purpose of
delaying the proceedings. And, the fact that the Court of Agrarian Relations shall not be bound
strictly by the technical rules of evidence but "shall act according to justice and equity and
substantial merits of the case", we believe that the evidence to support the claim for damages
received during the hearings before the court commissioner is meritorious (Secs. 10 and 11 RA
1267, as amended). Hence, petitioner is entitled to recover damages claimed by him from his
landholder in the amount of 85 cavans of palay which is equal to the two years rental of his
landholding less his earnings during the same period in the amount of P30.00 only or is
equivalent to 3 cavans of palay. In fine, Fidel Teodoro is liable to pay to petitioner the amount of
 82 cavans of palay or its cash value of P820.00, computed at P10.00 per cavan plus interest at
10% until fully paid.

After Teodoro's motion to reconsider the foregoing resolution was denied, he interposed on January 5,
1963 the present petition, imputing to the court the following errors:

1. In holding that Macaraeg became a tenant of Teodoro by virtue of the "Contract of Lease"
which they executed in April, 1960;

2. Assuming that the foregoing contract was in effect a leasehold tenancy agreement making
Macaraeg a tenant of Teodoro in not finding the former guilty of abandonment, an act which
terminated their tenancy relation; and

3. In condemning Teodoro to pay damages to Macaraeg for the alleged dispossession, despite
the fact that the claim for damages embodied in the abovementioned "Supplemental Petition"
below were about to be terminated.

The pertinent provisions of the disputed "Contract of Lease" between Teodoro and Macaraeg read as
follows:

That the LESSOR is the registered owner of a certain parcel of land situated at Talugtug, Nueva
Ecija, containing an area of THIRTY NINE (39) HECTARES, more or less;

That for and in consideration of the rental of Nine (9) cavans of palay per hectare for one
agricultural year, the LESSOR hereby lets and leases and the LESSEE hereby accepts an
undivided portion 4 Hectares of the abovementioned property under the following terms and
conditions:

1. That this contract of lease shall only be for the agricultural year 1960-61;

2. That the LESSEE shall give a guaranty to answer for the payment of the lease consideration of
this contract;

3. That the rental of 38.7 cavans of palay per hectare shall be paid unto the LESSOR not later
than January, 1961;

4. That the corresponding rental must be brought to the Poblacion of Muoz, Nueva Ecija, to be
deposited to any bonded Warehouse at the expense of the LESSEE and in the name of the
LESSOR;

5. That the rental must be of the same variety as that produced by the LESSEE;

6. That the LESSOR shall pay for the real property taxes corresponding to the property leased;

7. That violation of any of the terms of this contract shall be sufficient ground to terminate the
same with damages against the guilty party;

8. That the property leased shall be used or utilized for agricultural enterprise only;

9. That in case of default on the part of the LESSEE to pay the lease consideration when the
same becomes due and payable and the collection for the same reaches the court, the LESSEE
 hereby binds himself to pay the cost of the suit including reasonable attorney's fees. (Emphasis
supplied)

I. Teodoro contends that the language and tenor of the aforesaid contract clearly manifest the intention of
the parties to enter into an ordinary civil lease contract, not a leasehold tenancy agreement as alleged by
Macaraeg and sustained by the agrarian court. To start with, Teodoro stresses, the parties denominated
the said covenant as a "Contract of Lease", which assigned title discloses their mutual intention to
execute an ordinary lease contract, for, otherwise, if they had intended to create a leasehold tenancy
relation, they could have accordingly captioned their agreement "with the word tenancy or some other
word of similar import". Moreover, Teodoro points out that "in the contract of lease in question it is
significant to note that the words landlord and tenant were conspicuous by their complete absence".

The foregoing stance assumed by Teodoro is patently untenable, in the face of the principal features and
stipulations of the contract in controversy and the pertinent provisions of existing law on leasehold
tenancy. It bears emphasis that the title, label or rubric given to a contract cannot be used to camouflage
the real import of an agreement as evinced by its main provisions. Moreover, it is basic that a contract is
what the law defines it to be, and not what it is called by the contracting parties. 1

As correctly expressed by the respondent court, "viewed from the four corners of Exhibit A, we have no
doubt that the leasehold tenancy contract entered into between petitioner (Macaraeg) and Fidel Teodoro
is a pure and simple leasehold tenancy contract as the term is understood under our tenancy laws." This
observation of the agrarian court finds anchor in the pertinent provision of the Agricultural Tenancy Act.
Thus, section 4 of Rep. Act 1199, as amended by Rep. Act 2263, provides that

Leasehold tenancy exists when a person who, either personally or with the aid of labor available
from members of his immediate farm household, undertaken to cultivate a piece of agricultural
land susceptible of cultivation by a single person together with members of his immediate farm
household, belonging to a legally possessed by another in consideration of a fixed amount in
money or in produced or in both.

Furthermore, section 42 of the Agricultural Tenancy Act defines a landlord-lessor as

Any person, natural or judicial, either as owner, lessee, usufructuary or legal possessor of
agricultural land, who lets, leases or rents to another said property for purposes of agricultural
production and for a price certain of ascertainable either in amount of money or produced;

while a tenant-lessee is defined as

any person who, with the consent of the former (landlord-lessor), tills, cultivates or operates said
land, susceptible of cultivation by one individual, personally or with the aid of labor available from
among his own immediate farm household.

Gleaned from the foregoing provisions, the following could be synthesized as the principal elements of a
lease-hold tenancy contract or relation:

1. The object of the contract or the relationship is an agricultural land which is leased or rented for
the purpose of agricultural production;

2. The size of the landholding must be such that it is susceptible of personal cultivation by a
single person with assistance from the members of his immediate farm household;

3. The tenant-lessee must actually and personally till, cultivate or operate said land, solely or with
the aid of labor from his immediate farm household; and
 4. The landlord-lessor, who is either the lawful owner or the legal possessor of the land, leases
the same to the tenant-lessee for a price certain or ascertainable either in a amount of money
or produce.

Reverting to the controverted "Contract of Lease", we are of the consensus that it indubitably contains the
forgoing essential elements of a leasehold tenancy agreement.

The landholding in dispute is unmistakably an agricultural land devoted to agricultural production. More
specifically, the parties stipulated that "the property leased shall be used or utilized for agricultural
enterprise only". (Emphasis supplied). Furthermore, the parties also agreed that the farmland must be
used for rice production as could be inferred from the stipulation that "the rental of nine (9) cavans of
palay per hectare for one agricultural year ... must be of the same variety (of palay) as that produced by
the LESSEE". (Emphasis supplied)

The land is definitely susceptible of cultivation by a single person as it is of an area of only four and A half
(4-) hectares. This Court has held 2 that even a bigger area may be cultivated personally by the tenant,
singly or with the help of the members of his immediate farm household.

From the stipulation that "the rental must be of the same variety as that produced by the LESSEE", it can
reasonably be inferred that the intention of the parties was that Macaraeg personally work the land, which
he did as found by the Agrarian Court, thus: "In the instant case, petitioner (Macaraeg) cultivated the
landholding belonging to said respondent (Teodoro) for the agricultural year 1960-61 in consideration of a
fixed annual rental." (Emphasis supplied) Moreover, there is no evidence that Macaraeg did not
personally cultivate the land in dispute. Neither did Teodoro allege, much less prove, that Macaraeg
availed of outside assistance in the cultivation of the said riceland.

Teodoro is the registered owner of the disputed landholding and he delivered the possession thereof to
Macaraeg in consideration of a rental certain to be paid in produce. Evidently, there was a valid leasehold
tenancy agreement. Moreover, the provision that the rental be accounted in terms of produce 9 cavans
per hectare is an unmistakable earmark, considering the other stipulations, that the parties did actually
enter into a leasehold tenancy relation.

Teodoro further argues, however, that the aforesaid "Contract of Lease" cannot possibly be construed as
establishing a leasehold tenancy relation because the parties themselves ignored and repudiated the very
essence of tenancy security of tenure when they stipulated that "this agreement shall only be for the
agricultural year 1960-61".

This argument is unacceptable. The mere fact that the parties fixed and limited the duration of their lease
contract to only one agricultural year, does not remove the relationship which they created from the
purview of leasehold tenancy, considering the general import of their agreement which irreversibly leads
to and clearly justifies tenancy coverage. It is fundamental that the tenant-lessee's security of tenure
subsists notwithstanding the termination of the contract which initially established the tenancy relation. In
the language of the law, the "expiration of the period of the contract as fixed by the parties ... does not of
itself extinguish the relationship". 3 This is a "practical consequence of the distinction between the tenancy
contract which is fixed by the parties, and the tenancy relationship which is maintained and governed by
law". 4 Furthermore, section 49 of the Agricultural Tenancy Act provides that

Notwithstanding any agreement or provision of law as to the period of future surrender of the
land, in all cases where land devoted to any agricultural purpose is held under any system of
tenancy, the tenant shall not be dispossessed of his holdings by the landholder except for any of
the causes hereinafter enumerated and only after the same has been proved before and the
dispossession is authorized bye the court." (Emphasis supplied)
The abovecited provision does not permit the parties to stipulate at what future time the tenant shall leave
or surrender the land. Thus, this Court has held 5 that an agreement whereby the tenant was required to
return to the landlord his landholding after one crop year cannot justify the tenant's dispossession after
the said period because such agreement is expressly proscribed by law.

Still vehemently contending that he never intended to enter into any tenancy relation with Macaraeg,
Teodoro finally argues that construing the abovementioned "Contract of Lease" as a leasehold tenancy
agreement would amount to a judicial negation of his freedom to contract.

Needless to stress, this Court frowns upon and rejects any attempt to nullify the legitimate exercise of the
right to contract. We agree with Teodoro that as a landholder he has full liberty to enter into a civil lease
contract covering his property. What we want to indelibly impress, however, is that once a landowner
enters into a contract of lease whereby his land is to be devoted to agricultural production and said
landholding is susceptible of personal cultivation by the lessee, solely or with help of labor coming from
his immediate farm household, then such contract is of the very essence of a leasehold agreement, and
perforce comes under the direct coverage of the tenancy laws. Otherwise, it would be easy to subvert,
under the guise of the liberty to contract, the intendment of the law of protecting the underprivileged and
ordinarily credulous farmer from the unscrupulous schemes and pernicious practices of the landed gentry.

II. We now come to the second assignment of error. Teodoro posits that granting the establishment of a
leasehold tenancy relation between him and Macaraeg by virtue of the aforesaid "Contract of Lease", the
agrarian court nevertheless erred in not finding Macaraeg guilty of abandonment, an act which terminates
the tenancy relation and justifies the ejectment of the tenant. In support of his thesis, Teodoro points out
that Macaraeg committed a positive act of abandonment when he offered to vacate his leasehold in favor
of a certain Luciano Claus, and only after "he could not have his own way of placing Luciano Claus as his
successor" did he try to "recover the land holding". Assuming the veracity of the foregoing allegation, a
tenant's offer or intention to surrender his hold on the condition that the person named by him should be
accepted as his successor, does not of itself constitute abandonment of his farmland.

"The word 'abandon', in its ordinary sense, means to forsake entirely; to forsake or renounce utterly. The
dictionaries trace this word to the root idea of 'putting under a ban'. The emphasis is on the finality and the
publicity with which some thing or body is thus put in the control of another, and hence the meaning of
giving up absolutely, with intent never again to resume or claim one's rights or interests." 6 In other words,
the act of abandonment constitutes actual, absolute and irrevocable desertion of one's right or property.
In the case at bar, Macaraeg merely intended to vacate his leasehold possession on the condition that a
certain Claus be taken as his successor. Hence, his act did not constitute desertion of his leasehold as it
was a mere intended surrender of the same. And as correctly espoused by the counsel for the
respondent court, it is "only through the actual surrender of the land that tenancy relation terminates; no
amount of intention to surrender severs the relationship". Furthermore, the said act of Macaraeg was not
an absolute renunciation of his leasehold possession, as it was in fact clearly conditional.

However, Teodoro also claims, with characteristic certitude that Macaraeg did actually abandon work on
the land in dispute and that even the decision under review contains a finding to this effect. We find no
statement in the agrarian court's decision sustaining Teodoro's view. On the contrary, we perceive truth in
the respondent court's counsel's manifestation that

The only times that the tenant herein did not work the land were (1) during the time it was
undergoing its regular dry season fallow, and, ... (2) after he was prohibited from plowing the land
by a certain Niegos, an agent of petitioner. Failure to cultivate during the dry season fallow
definitely does not amount to abandonment (Cf. De la Cruz vs. Asociacion Zangera Casilan et al.,
83 Phil. 214). Likewise, failure to cultivate the land by reason of the forcible prohibition to do so by
a third party cannot also amount to abandonment, for abandonment presupposes free will.
Anent the charge of abandonment, it is also pertinent to note that four days after Macaraeg received a
letter from Teodoro and his wife advising him that the landholding in question will be given to another
tenant, he lost no time in inquiring from the Tenancy Mediation Commission at Cabanatuan City about his
rights as a leasehold tenant. It would appear therefore that Macaraeg's immediate reaction to his
landlord's design to dispossess him negates the act of abandonment imputed to him.

Moreover, Teodoro's pretension that Macaraeg had abandoned the disputed landholding was squarely
rejected by the agrarian court, thus:

In the instant case, while petitioner had intentions to surrender his landholding to respondent after
the harvest for the agricultural (year) 1960-61 which led the latter to advise the former not to give
his landholding to Luciano Claus, yet that surrender did not materialize because said petitioner
had apparently changed his mind. For as early as March 6, 1961, petitioner went to the Office of
the Tenancy Mediation Commission, Cabanatuan City for consultation. As a matter of fact, said
Commission wrote a letter to Fidel Teodoro and his wife advising them to enjoin their overseer,
Benito Ismael, from ejecting petitioner.

During the intervening period, Fidel Teodoro and his wife entered into another lease contract of
tenancy with Jose Niegos. For this reason, Mariano Niegos, son of Jose Niegos, prevented
petitioner from plowing his landholding when he found him in the premises on June 1, 1961.
However, notwithstading this incident, Fidel Teodoro opened the door for negotiations. In fact, as
late as June 23, 1961, when petitioner went to the house of Fidel Teodoro in Manila, a
conference was set for that purpose at the house of Benito Ismael in Muoz, Nueva Ecija which
did not take place because of the absence of petitioner. Under these circumstances, it appears to
our mind that while negotiations for settlement were still pending, yet petitioner has not, in truth
and in fact, surrendered his landholding. (Emphasis supplied)

We are not at liberty to reverse the foregoing finding of fact in the absence of any proof that it is
unfounded or was arbitrarily arrived at or that the Court had failed to consider important evidence to the
contrary. 7 This Court has consistently ruled that the findings of fact of the Court of Agrarian Relations will
not be disturbed on appeal where there is substantial evidence to support them. 8 In the case at bar, the
finding of fact by the by the respondent court anent the issue of abandonment rests on substantial
evidence.

III. Toward the end of the proceedings in the respondent court, Macaraeg interposed a pleading which he
denominated "supplemental petition", wherein he asked for damages as a result of his dispossession.
The said "supplemental petition" was given due course by the hearing commissioner and Macaraeg was
allowed to present evidence in support thereof. On the basis of the evidence thus adduced, the
respondent court awarded damages to Macaraeg as decreed in its abovementioned resolution of
November 27, 1962.

Teodoro maintains that the respondent court erred in admitting the said "supplemental pleading" on the
basis of section 2, Rule 17 (now section 3 of Rule 10 of the Revised Rules of Court) which exclusively
pertains to amendment of pleadings, and has nothing to do with the interposition of supplemental
pleadings which is separately governed by section 5 of Rule 17 (now section 5 of Rule 10). Teodoro
avers, moreover, that since Macaraeg filed his claim for damages only when the hearing below was about
to end, his inaction must be considered as a waiver of such claim or that he should be considered guilty
of fatal negligence.

In resolving this last assignment of error, attentions must be centered on the liberal policy which frees the
Court of Agrarian Relations from the fetters of formalistic procedure. As aptly observed in one case, 9

Social justice would be a meaningless term if in a situation like the present, an element of rigidity
would be affixed to procedure precepts and made to cover the matter. Flexibility should not be
 ruled out. Precisely, what is sought to be accomplished, by such a fundamental principle
expressly so declared by the Constitution (Art. II, sec. 5) is the effectiveness of the community's
effort to assist the economically underprivileged. For under existing conditions, without such
succor and support, they might not, unaided, be able to secure justice for themselves....

Moreover, there is equally the obligation on the part of the State to afford protection to labor. The
responsibility is incumbent then, not only on the legislative and executive branches but also on
the judiciary, to translate this pledge into a living reality. The present case is an appropriate
occasion for the discharge of such a trust. To preclude relief under the circumstances herein
disclosed would be to fail to submit to the dictates of a plain constitutional duty. That we should
not allow to happen.

Since the abovementioned "supplemental pleading" was filed without intent to delay the proceedings, the
agrarian court exercised sound discretion in giving it due course in order that "the real matter in dispute
and all matters in the action in dispute between the parties may, as far as possible, be completely
determined in a single proceeding". Moreover Teodoro has no reason to complain, for he was accorded
every opportunity to controvert Macaraeg's claim for damages, but apparently he did not, as in fact he
does not here traverse the substantiality of the award.lawphi1.nt

Significantly, the Court of Agrarian Relations is not restricted to the specific relief claimed or demanding
made by the parties to the dispute, but may include in the order or decision any matter or determination
which may be deemed necessary and expedient for the purpose of settling the dispute or of preventing
further disputes, provided said matter for determination has been established by competent evidence
during the hearing". 10 In words, the respondent court could have determined Macaraeg's claim for
damages even without his "supplemental petition", provided there was proof to substantiate such claim
(and such requisite evidence was not wanting). Hence if the agrarian court could, have awarded damages
in favor of Macaraeg even in the absence of a specific prayer; then there is no conceivable reason to bar
the respondent court from granting the same with the interposition of the aforesaid "supplemental petition"
which explicitly and unmistakeably prays for damages resulting from Macaraeg's dispossession.

We hasten to modify however, the award of damages in so far as it deducts from the total amount
recoverable by Macaraeg the sum of P30 or its equivalent of 3 cavans of palay, representing his earnings
during the period of his unlawful ejectment. This part of the award contravenes section 27(1) of the
Agricultural Tenancy Act which makes the erring landlord "liable to the tenant for damages to the extent of
the landholder's participation in the harvest in addition to the tenant's right under Section twenty-two of
this Act". And section 22(1) provides that the "tenant shall be free to work elsewhere whenever the nature
of his farm obligations warrants his temporary absence from his holdings". Consequently, Macaraeg's
measly earning of P30 during the period of his dispossession should not be deducted from the total
amount of damages due to him. Interpreting the abovecited section 27(1) in relation to section 22(1), this
Court, speaking through Mr. Justice J.B.L. Reyes held that

The earnings of the tenants during the period of unlawful ejectment are not now deductible from
the award of damages. In the case of Potenciano vs. Estefani L-7690, promulgated on 27 July
1955, this Court, on grounds of equity, ruled to deduct such income but said case was decided
under the prior law, Act 4054. The above-quoted Section 27(1) of Republic Act No. 1199, as
amended, which is the one applicable to the present case, not only provides for a quantum of
damages to the tenant, based on the landlord's share in the harvest, but adds thereto his right
under section 22, which states:

(1) the tenant shall be free to work elsewhere whenever the nature of his farm obligations
warrants his temporary absence from his holdings.
 This right, although already granted under section 20 of Act 4054, was not then a right additional
to the recovery of damages consequent to unlawful dismissal, but under Republic Act 1199, as
amended, it is to be added to the damages recoverable.11

ACCORDINGLY, the decision and resolution under review are hereby affirmed, with the sole modification
that the earnings of the herein respondent during the period of his dispossession shall not be deducted
from the award of damages. Cost against the petitioner.
G.R. No. 85611 April 6, 1990

VICTORIANO ZAMORAS, petitioner,

vs.
ROQUE SU, JR., ANITA SU HORTELLANO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Paulo V. Briones for petitioner.

Pacifico C. Cimafranca for private respondents.

GRIO-AQUINO, J.:

The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant
of the private respondents.

The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of
his coconut land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in
Su's name, and of assigning portions to be worked by tenants, supervising the cleaning, planting, care
and cultivation of the land, the harvesting of coconuts and selling of the copra. As compensation, Su paid
Zamoras a salary of P2,400 per month plus one-third (1/3) of the proceeds of the sales of copra which
normally occurred every two months. Another one-third of the proceeds went to the tenants and the other
third to Su. This system of sharing was regularly observed up to September, 1981. As the coconut
plantation yielded an average harvest of 21,000 nuts worth P18,900, based on the current market price of
P3 per kilo, Zamoras' share amounted to P6,300 every two months.

In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su
Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was
outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that he was being
laid-off temporarily until Su could obtain a loan from the Development Bank of the Philippines with which
to pay Anita. However, Zamoras was not allowed anymore to work as overseer of the plantation. Without
his knowledge and consent, Hortellano harvested the coconuts without giving him his one-third share of
the copra sales.

On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and
Employment in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal
termination and breach of contract with damages of not less than P75,600 as his uncollected share of the
copra sales from September 15, 1981 to August 1983.

The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case
submitted the following findings which were adopted by the Labor Arbiter

The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue
Extension, Lahug, Cebu City and at the same time an employee in the government up to the present,
while the land wherein the complainant herein was employed by the respondent as overseer of the land
since 1957 up to and until his termination from the service sometime in September 1981 without just
cause or causes duly authorized by law and after due process. That to prove that complainant was the
overseer of the land owned by the respondent are the sworn declaration of the three witnesses, namely:
Vicente Amor, Narcisa Arocha, and Wilfredo Bernaldes who are presently working as tenants of the
respondent. That the three witnesses testified that they knew the complainant personally who has been
working as overseer of the land because it was through him, the complainant, that they were allowed to
work and/or occupy the land as tenants ever since up to the present. In fact, they further declared that
they do not know personally the owner of the land and besides, they have not seen personally the said
owner as their dealing were directly done thru the complainant. That they always received their share of
the produce from the complainant for every two months up to 1981.

xxx xxx xxx

It is very clear in the evidence of record that complainant was an employee of the respondent. This fact is
even admitted by the respondent in his answer by way of controverting the claim of the complainant. (pp.
44-45, Rollo.)

On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the
respondent's plantation, was a regular employee whose services were necessary and desirable to the
usual trade or business of his employer. The Labor Arbiter held that the dismissal of Zamoras was without
just cause, hence, illegal. The private respondents were ordered to reinstate him to his former position as
overseer of the plantation and to pay him backwages equivalent to P31,975.83 in the event that he opted
not to be reinstated or that his reinstatement was not feasible.

The private respondents appealed to the National Labor Relations Commission, alleging that the Labor
Arbiter erred:

1. in disregarding respondents' evidence (a financial report showing the yearly copra sales from
1973 to 1977), proving that complainant's one-third share of the copra sales amounted to
P5,985.16 only and not P6,300 per harvest;

2. in not holding that the complainant can no longer be reinstated for he is already dead; and

3. in not finding that no employer-employee relationship existed between the parties.

On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right
to control test used in determining the existence of an employer-employee relationship is unavailing in the
instant case and that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo),
because such functions as introducing permanent improvements on the land, assigning portions to
tenants, supervising the cleaning, planting, care and cultivation of the plants, and deciding where and to
whom to sell the copra are attributes of a landlord-tenant relationship, hence, jurisdiction over the case
rests with the Court of Agrarian Relations.

Zamoras filed this petition, assailing the NLRC's decision.

There is merit in the petition.

The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not
supported by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of
his coconut plantation. As overseer, Zamoras hired the tenants and assigned their respective portions
which they cultivated under Zamoras' supervision. The tenants dealt directly with Zamoras and received
their one-third share of the copra produce from him. The evidence also shows that Zamoras, aside from
doing administrative work for Su, regularly managed the sale of copra processed by the tenants. There is
no evidence that Zamoras cultivated any portion of Su's land personally or with the aid of his immediate
farm household. In fact the respondents never raised the issue of tenancy in their answer.

Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from
within his immediate 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 or for a price certain or
ascertainable in produce or in money or both, under the leasehold tenancy system" (Matienzo vs.
Servidad, 107 SCRA 276). Agricultural tenancy is defined as "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 or ascertainable, whether in
produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag vs. CA, et al., 151
SCRA 44).

The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant;
(2) the subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is
agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of
harvests between landlord and tenant (Antonio Castro vs. CA and De la Cruz, G.R. L-34613, January 26,
1989; Tiongson vs. CA, 130 SCRA 482; Guerrero vs. CA, 142 SCRA 138).

The element of personal cultivation of the land, or with the aid of his farm household, essential in
establishing a landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su
and Zamoras (Co vs. IAC, 162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras did not cultivate
any part of Su's plantation either by himself or with the help of his household.

On the other hand, the following circumstances are indicative of an employer-employee relationship
between them:

1. Zamoras was selected and hired by Su as overseer of the coconut plantation.

2. His duties were specified by Su.

3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras
should sell the copra produced from the plantation.

4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two
months as compensation for managing the plantation.

Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations,
that has jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art. 217, Labor Code;
Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags
Industries, et al. vs. NLRC, et al., 69 SCRA 242).

WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an
employee of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is
entitled to reinstatement with backwages, but because he is dead and may no longer be reinstated, the
private respondents are ordered to pay to his heirs the backwages due him, as well as his share of the
copra sales from the plantation for a period of three (3) years from his illegal dismissal in September,
1981, plus separation pay in lieu of reinstatement. Costs against the private respondents.
G.R. No. 98028 January 27, 1992

GREGORIO CASTILLO, petitioner,

vs.
COURT OF APPEALS and ALBERTO IGNACIO, respondents.

Sumulong Law Offices for petitioner.

Bureau of Agrarian Legal Assistance for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review of the Court of Appeals decision which reversed and set aside the decision of
the Regional Trial Court in Civil Case No. 8302-M and declared respondent Alberto Ignacio as agricultural
tenant of the petitioner.

On July 18, 1985, a complaint for injunction was filed by private respondent Alberto Ignacio against
petitioner Gregorio Castillo with the Regional Trial Court of Malolos, Bulacan.

It is alleged in the complaint that the respondent is the agricultural tenant of the petitioner in the latter's
parcel of land consisting of 9,920 square meters with fruit-bearing trees situated in Cut-cut, Pulilan,
Bulacan; that sometime in April 1985, the petitioner requested the respondent to allow him to construct a
resthouse in said land, and as a token of goodwill, the respondent agreed, which agreement is embodied
in a "Kasunduan" (Exhibit "C") between them; that in violation of said agreement, the petitioner started to
cut fruit-bearing trees on the land in question and filled with adobe stones the area devoted by the private
respondent to the planting of vegetables.

The complaint asked for the issuance of a writ of preliminary injunction to enjoin the petitioner from further
cutting fruit-bearing trees and from committing further acts of dispossession against the private
respondent. The injunction was granted.

The petitioner, on the other hand, contends that the private respondent is not his agricultural tenant; that
respondent Alberto Ignacio is merely a "magsisiga" (smudger) of the landholding in question; that he did
not ask permission from the private respondent to construct a rest house on subject land, since as owner
thereof, he had the right to do so; that he was merely exercising his right of ownership when he cut
certain trees in the subject premises; that when the barangay captain failed to settle the conflict and the
matter was referred to the MAR-BALA (Ministry of Agrarian Reform-Bureau of Agrarian Legal Assistance)
Office in Malolos, Bulacan, Atty. Benjamin Yambao of the MAR (Ministry of Agrarian Reform) prepared
the "Kasunduan" attached to the respondent's complaint, but when he (petitioner) said that he had some
misgivings about some words therein, Atty. Yambao assured him that he need not worry because the
respondent could not be a "kasamang magsasaka" of his mango land because there is nothing to
cultivate or till in said land, but he still corrected the last part of par. 4 of said "Kasunduan" by making it
read "sa kanilang matiwasay na kaugnayan" before signing the same.

On September 28, 1988, the trial court rendered judgment declaring that no tenancy relationship exists
between the petitioner and the private respondent. The dispositive portion of the decision reads as
follows:

WHEREFORE, premises considered, judgment is hereby rendered:

a) dismissing the above-entitled case, with costs against the plaintiff;

 b) lifting the preliminary injunction issued on September 18, 1985 and declaring the same
legally inefficacious henceforth; and

c) directing the plaintiff no pay unto the defendant the amount of P10,000.00 as and for
attorney's fees.

From the above decision, the private respondent appealed to the Court of Appeals which reversed and
set aside the decision of the trial court. The respondent appellate court declared that there exists a
tenancy relationship between Alberto Ignacio and Gregorio Castillo and permanently enjoined the latter
from disturbing the respondent's peaceful possession as tenant of said land.

Hence, the instant petition was filed, with the petitioner assigning the following errors as the issues raised
to us:

The Court of Appeals (Fourth Division) committed clear and patent error in reversing the
decision of the Regional Trial Court which is fully supported not only by substantial
evidence but by overwhelming evidence.

II

The Court of Appeals committed clear and reversible error and grave abuse of discretion
in declaring that "the relationship between plaintiff-appellant and defendant-appellee over
the mango land in question as one of agricultural tenancy" despite the patent judicial
admission of respondent Ignacio that he is merely a "magsisiga" of the mango land under
litigation.

III

The Court of Appeals committed grave abuse of discretion in permanently enjoining

petitioner "from disturbing plaintiff-appellant's peaceful possession as tenant of said
land," although private respondent is not in physical possession of the land, respondent
Ignacio being merely and admittedly a "magsisiga" of the mango land in question.

IV

The Court of Appeals committed clear and patent error in not ordering the termination of
any and all relationships between petitioner and private respondent, the latter having
failed to perform the work of "magsisiga" on the subject parcel of land and instead he
obstructs the driveway by scattering rubbish, dry leaves, dirt and other rubbish,
preventing the petitioner from proceeding to the premises of the land by putting up a barb
wire fence which are acts of harrassment, disturbing the peaceful possession of petitioner
and which acts are inimical to the continuation of any kind of relationship between
Gregorio Castillo and Alberto Ignacio.

The issue to be resolved in the present petition is whether or not a tenancy relationship exists between
the parties.

The Agricultural Tenancy Act defines "agricultural tenancy" as

. . . the physical possession by a person of a 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. (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56).

As held in the case of Qua v. Court of Appeals (198 SCRA 236 [1991]), the essential requisites of
tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is agricultural
land; (3) the purpose is agricultural production; (4) there is consideration which consist of sharing the
harvest; (5) there is consent to the tenant to work on the land and (6) there is personal cultivation by him.

From the foregoing definition, the petitioner insists that for a person to claim tenancy relationship, he must
be an occupant or must be in physical possession of the agricultural land. He alleges that, Alberto
Ignacio, being a mere smudger (magsisiga) of the mango land, no tenancy relationship can exist between
them absent the element of physical possession.

In Gagola v. Court of Agrarian Relations (18 SCRA 992 [1966]), the Court held that a tenant has
possession of the land only through personal cultivation. Thus, in the instant case, the key factor in
ascertaining the existence of a landowner-tenant relationship is whether or not there is personal
cultivation of the land by the private respondent.

The trial court noted that:

Let alone or notwithstanding the use of the phrase "kasamang magsasaka" in the
Kasunduan (Exhibit C) relied upon by the plaintiff, there is no dispute that the actual role
ever played by the plaintiff vis-a-vis the land in litigation was that of a mere "magsisiga"
(smudger). Stated differently, plaintiff has never performed on the property in question
any of the acts of cultivation contemplated by the law as essential to the creation of an
agricultural tenancy relationship. In fine, it is the sense of the Court that absent the
important factor of cultivation, no tenancy relationship has ever existed between the
plaintiff and the defendant over the property involved in the instant case. At most and at
best, the contractual relationship between them was purely civil nature consisting solely
of the seasonal engagement of plaintiff's services as "magsisiga" or "taga-suob."

On this matter, the appellate court disagreed and noted instead that personal cultivation by respondent
Ignacio of petitioner land is clearly spelled out or admitted in the "Kasunduan" (Exhibit "C") in view of the
aforementioned provision therein that nobody except petitioner and the members of his family could enter
said land without said petitioner's written permission.

We agree with the trial court that the element of personal cultivation is absent. The main thrust of the
petitioner's argument is that the respondent Court of Appeals is mandated by law to affirm the decision of
the Regional Trial Court, acting as an Agrarian Court, 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, the private respondent contends that the findings of fact of the Court of
Appeals are final and conclusive on the parties and on the Supreme Court.

After painstakingly going over the records of the petition, we find no strong and cogent reason which
justifies the appellate court's deviation from the findings and conclusions of the trial court. As pointed out
in Hernandez v.Intermediate Appellate Court (189 SCRA 758 [1990]), in agrarian cases, all that is
required is mere substantial evidence. Hence, the agrarian court's findings of fact which went beyond the
minimum evidentiary support demanded by law, that is supported by substantial evidence, are final and
conclusive and cannot be reversed by the appellate tribunal.

Moreover, and as significantly held in Qua v. Court of Appeals (supra), the fact that the source of
livelihood of the private respondents is not derived from the lots they are allegedly tenanting is indicative
of non-agricultural tenancy relationship.
Under the facts obtaining in the case, respondent Ignacio is a businessman by occupation and this is his
principal source of income. He manufacturers hollow blocks. He also has a piggery and poultry farm as
well as a hardware store on the land adjoining the subject land. To add to that, the respondent farms the
riceland of one Dr. Luis Santos. It is thus evident that the working hours of the respondent as a
businessman and his other activities do not permit him to undertake the work and obligations of a real
tenant. This is further supported by the undisputed fact that the respondent cannot even personally
perform the work of a smudger because on October 22, 1986, the respondent hired some 20 people who
are not members of his family to cut and burn the grass in the premises of the subject land.

Anent the element of consent, the petitioner contends that the best evidence and imperishable proof of
the relationship of the parties is that shown in the complaint filed by private respondent with the barangay
captain Tomas Mercado that he is a mere "magsisiga" of the mango trees on the subject parcel of land.
On the other hand, the respondent appellate court said that the best proof of the existence of tenancy
relationship is the "Kasunduan" (Exhibit "C") and that under Section 7, Rule 130 of the Revised Rules of
Court, 'when the subject of inquiry is the contents of a document, no evidence shall be admissible other
than the original document itself,' subject only to certain exceptions. Inasmuch as substantial evidence
does not only require the presence of a mere scintilla of evidence (Berenguer, Jr. v. CA, 164 SCRA 433
[1988] citing Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 [1940]), we rule that there is no
concrete evidence on record sufficient to establish that the element of consent is present. But even
assuming arguendo that the element of consent is present, we declared in De los Reyes v.Espineli (30
SCRA 574 [1969]) that absent the element of personal cultivation, one cannot be a tenant even if he is so
designated in the written agreement of the parties.

With respect to the requisite of sharing the harvests, the respondent appellate court considered the
receipt (Exhibit "E") signed by the petitioner's son Walderado Castillo as its evidence. On this point, the
petitioner has correctly argued that the receipt is inadmissible on the ground that he did not participate in
its execution.

The maxim "res inter alios acta altere nocere non debet," found in Section 28, Rule 130, Rules of Court
applies, for as stated in Gevero v. Intermediate Appellant Court (189 SCRA 201 [1990]) the right of a
party cannot be prejudiced by an act, declaration, or omission of another.

Also in pari materia is Caballes v. Department of Agrarian Reform (168 SCRA 247 [1988]), that the fact of
sharing alone is not sufficient to establish a tenancy relationship. Well-settled is the rule that all the
requisites must concur in order to create a tenancy relationship between the parties and the absence of
one or more requisites do not make the alleged tenant a de facto tenant as contradistinguished 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. (Qua v. Court of Appeals, supra citing Tiongson v. Court of Appeals, 130 SCRA
482 [1984]).

However, with respect to the award of attorney's fees by the trial court, the award of P10,000.00 is
unwarranted since the action appears to have been filed in good faith. There should be no penalty on the
right to litigate. (Ilocos Norte Electric Company v. Court of Appeals, 179 SCRA 5 [1989] citing Espiritu v.
Court of Appeals, 137 SCRA 50 [1985]).

WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals is hereby
REVERSED and SET ASIDE and the decision of the Regional Trial Court is REINSTATED with the
MODIFICATION that the award of attorney's fees is DELETED.
G.R. No. 85041 August 5, 1993

GRACIANO BERNAS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and NATIVIDAD BITO-ON DEITA, respondents.

Rodriguez Dadivas for petitioner.

Orlanda Bigcas-Lumawag for private respondent.

PADILLA, J.:

Petitioner Graciano Bernas is before this Court assailing the decision * of the respondent appellate court
dated 19 August 1988 in CA G.R. SP No. 14359 (CAR), which reversed the decision ** of the Regional
Trial Court of Roxas City, Branch 18, in Civil Case No. V-5146 entitled "Natividad Bito-on Deita, et al. vs,
Graciano Bernas." As disclosed by the records and the evidence of both parties, the facts involved in the
controversy are as follows:

Natividad Bito-on Deita is the owner of Lots Nos. 794, 801, 840 and 848 of the Cadastral Survey of
Panay, Capiz, with a total area of 5,831 square meters. Out of liberality, Natividad entrusted the lots by
way of "dugo" to her brother, Benigno Bito-on, so that he could use the fruits thereof to defray the cost of
financing his children's schooling in Manila. Prior to April 1978, these agricultural lots had been leased by
one Anselmo Billones but following the latter's death and consequent termination of the lease, petitioner
Graciano Bernas took over and worked on the land. Benigno and Bernas worked out a production-sharing
arrangement whereby the first provided for all the expenses and the second worked the land, and after
harvest, the two (2) deducted said expenses and divided the balance of the harvest between the two of
them. The owner, Natividad, played no part in this arrangement as she was not privy to the same.

In 1985, the lots were returned by Benigno to his sister Natividad, as all his children had by then finished
their schooling. When Natividad, and her husband sought to take over possession of the lots, Bernas
refused to relinquish, claiming that he was an agricultural leasehold lessee instituted on the land, by
Benigno and, as such, he is entitled to security of tenure under the law.

Faced with this opposition from Bernas, Natividad filed an action with the Regional Trial Court for
Recovery of Possession, Ownership and Injunction with Damages. After trial, the court a quo held in favor
of the defendant (Bernas) and dismissed the complaint, ruling that from the record and the evidence
presented, notably the testimony of the plaintiff's own brother Benigno, Bernas was indeed a leasehold
tenant under the provisions of Republic Act No. 1199 and an agricultural leasehold lessee under Republic
Act No. 3844, having been so instituted by the usufructuary of the land (Benigno). As such, according to
the trial court, his tenurial rights cannot be disturbed save for causes provided by law.

Aggrieved, the plaintiff (Natividad) appealed to the Court of Appeals, contending that the "dugo"
arrangement between her and her brother Benigno was not in the nature of a usufruct (as held by the
court a quo), but actually a contract of commodatum. This being the case, Benigno, the bailee in
the commodatum, could neither lend nor lease the properties loaned, to a third person, as such
relationship (of bailor-bailee) is one of personal character. This time, her contentions were sustained, with
the respondent appellate court, reversing the trial court's decision, ruling that having only derived his
rights from the usufructuary/bailee, Bernas had no better right to the property than the latter who
admittedly was entrusted with the property only for a limited period. Further, according to the appellate
court, there being no privity of contract between Natividad and Bernas, the former cannot be expected to
be bound by or to honor the relationship or tie between Benigno and the latter (Bernas).
Hence, this petition by Bernas.

The issue for resolution by the Court is concisely stated by the respondent appellate court as follows:
whether the agricultural leasehold established by Benigno Bito-on in favor of Graciano Bernas is binding
upon the owner of the land, Natividad Bito-on, who disclaims any knowledge of, or participation in the
same.

In ruling for the private respondent (Natividad), the respondent appellate court held that:

Indeed, no evidence has been adduced to clarify the nature of the "dugo" transaction
between plaintiff and her brother Benigno Bito-on. What seems apparent is that Benigno
Bito-on was gratuitously allowed to utilize the land to help him in financing the schooling
of his children. Whether the transaction is one of usufruct, which right may be leased or
alienated, or one of commodatum, which is purely personal in character, the beneficiary
has the obligation to return the property upon the expiration of the period stipulated, or
accomplishment of the purpose for, which it was constituted (Art. 612, Art. 1946, Civil
Code). Accordingly, it is believed that one who derives his right from the
usufructuary/bailee, cannot refuse to return the property upon the expiration of the
contract. In this case, Benigno Bito-on returned the property lent to him on May 13, 1985
to the owners, the plaintiff herein. We do not see how the defendant can have a better
right to the property than Benigno Bito-on, who admittedly possessed the land for a
limited period. There is no privity of contract between the owner of the land and the
cultivator.1

At this point, it is appropriate to point out that, contrary to the appreciation of the respondent appellate
court, the general law on property and contracts, embodied in the Civil Code of the Philippines, finds no
principal application on the present conflict. Generalibus specialia derogant. The environmental facts of
the case at bar indicate that this is not a mere case of recovery of ownership or possession of property.
Had this been so, then the Court would have peremptorily dismissed the present petition. The fact,
however, that cultivated agricultural land is involved suffices for the Court to pause and review the
legislation directly relevant and applicable at the time this controversy arose.

In this regard, it would appear that Republic Act No. 1199, invoked by the trial court, had already been
rendered inoperative by the passage of Republic Act No. 3844, as amended, otherwise known as the
Agricultural Land Reform Code (Code, for brevity). The former, also known as the Agricultural Tenancy
Act of the Philippines and approved in August 1954 had sought to establish a system of agricultural
tenancy relations between the tenant and the landholder, defining two (2) systems of agricultural tenancy:
the share and the leasehold tenancy. At this point, however, further discussion of the foregoing would
appear futile, for the Code, enacted in August, 1963, had expressly declared agricultural share tenancy to
be contrary to public policy and abolished the same. As for leasehold tenancy relations entered into prior
to the effectivity of the Code, the rights and obligations arising therefrom were deemed to continue to
exist until modified by the parties thereto in accordance with the provisions of the Code. 2 Thus, for all
intents and purposes, Republic Act No. 3844 is the governing statute in the petition at bar. The pertinent
provisions therefore state as follows:

Sec. 5. Establishment of Agricultural Leasehold

Relations. The agricultural leasehold relation shall be established by operation of law
in accordance with Section four of this Code and, in other, cases, either orally or in
writing, expressly or impliedly.

Sec. 6. Parties to Agricultural Leasehold Relation. The agricultural leasehold relation

shall be limited to the person who furnishes the landholding, either as owner, civil law
lessee, usufructuary, or legal possessor, and the person who personally cultivates the
same. (emphasis supplied).
Sec. 7. Tenure of Agricultural Leasehold Relation. The Agricultural Leasehold Relation
once established shall confer upon the agricultural lessee the right to continue working on
the landholding until such leasehold relationship is extinguished. The agricultural lessee
shall be entitled to security of tenure on his landholding and cannot be ejected therefrom
unless authorized by the Court for causes herein provided. (emphasis supplied)

Sec. 8. Extinguishment of Agricultural Leasehold

Relation. The agricultural leasehold relation established under this Code shall be
extinguished by:

(1) Abandonment of the landholding without the knowledge of the agricultural lessor;

(2) Voluntary surrender of the landholding by the agricultural lessee, written notice of
which shall be served three months in advance; or

(3) Absence of the persons under Section nine to succeed to the lessee in the event of
death of permanent incapacity of the lessee.

xxx xxx xxx

Sec. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc.
The agricultural leasehold relation under this Code shall not be extinguished by mere
expiration of the term or period in a leasehold contract nor by the sale, alienation or
transfer of the legal possession of the landholding. In case the agricultural lessor sells,
alienates or transfers the legal possession of the landholding, the purchaser or transferee
thereof shall be subrogated to the rights and substituted to the obligations of the
agricultural lessor.

xxx xxx xxx

Sec. 36. Possession of Landholding; Exceptions. Notwithstanding any agreement as

to the period or future surrender of the land, an agricultural lessee shall continue in the
enjoyment and possession of his landholding except when his dispossession has been
authorized by the Court in a judgment that is final and executory if after due hearing it is
shown that:

(1) The agricultural lessor-owner or a member of his immediate family will personally
cultivate the landholding or will convert the landholding, if suitably located, into
residential, factory, hospital or school site or other useful non-agricultural
purposes: Provided, That the agricultural lessee shall, be entitled to disturbance
compensation equivalent to five years rental on his landholding in addition to his rights
under Sections twenty-five and thirty-four, except when the land owned and leased by the
agricultural lessor is not more than five hectares, in which case instead of disturbance
compensation the lessee may be entitled to an advanced notice of at least one
agricultural year before ejectment proceedings are filed against him: Provided, further,
That should the landholder not cultivate the land himself for three years or fail to
substantially carry out such conversion within one year after the dispossession of the
tenant, it shall be presumed that he acted in bad faith and the tenant shall have the right
to demand possession of the land and recover damages for any loss incurred by him
because of said dispossession; 3

(2) the agricultural lessee failed to substantially comply with any of the terms and
conditions of the contract or any of the provisions of this Code unless his failure is caused
by fortuitous event or force majeure:
 (3) the agricultural lessee planted crops or used the landholding for a purpose other than
what had been previously agreed upon;

(4) the agricultural lessee failed to adopt proven farm practices as determined under
paragraph 3 of Section twenty-nine;

(5) the land or other substantial permanent improvement thereon is substantially

damaged or destroyed or has unreasonably deteriorated through the fault or negligence
of the agricultural lessee;

(6) the agricultural lessee does not pay the lease rental when it falls due: Provided, That
if the nonpayment of the rental shall be due to crop failure to the extent of seventy-
five per centum as a result of a fortuitous event, the non-payment shall not be a rental
due that particular crop year, is not thereby extinguished; or

(7) the lessee employed a sub-lessee on his landholding in violation of the terms of
paragraph 2 of Section twenty seven.

Sec. 37. Burden of Proof. The burden of proof to show the existence of a lawful cause
for the ejectment of an agricultural lessee shall rest upon the agricultural lessor.

There is no dispute, as it is admitted by the parties in this case, that Benigno Bito-on was granted
possession of the property in question by reason of the liberality of his sister, Natividad (the private
respondent). In short, he (Benigno) was the LEGAL POSSESSOR of the property and, as such, he had
the authority and capacity to enter into an agricultural leasehold relation with Bernas. Consequently, there
is no need to dwell on the contentions of the private respondent that, her brother Benigno was not a
usufructuary of the property but actually a bailee in commodatum. Whatever was the true nature of his
designation, he (Benigno) was the LEGAL POSSESSOR of the property and the law expressly grants
him, as legal possessor, authority and capacity to institute an agricultural leasehold lessee on the
property he legally possessed.

In turn, having been instituted by Benigno as an agricultural leasehold lessee, Bernas is vested by law
with the rights accruing thereto, including the right to continue working the landholding until such lease is
legally extinguished, and the right to be protected in his tenure i. e., not to be ejected from the land, save
for the causes provided by law, and as appropriately determined by the courts. In this connection, there is
no clear indication in the record that the circumstances or conditions envisioned in Section 36 of Republic
Act. No. 3844, as amended, for termination of the agricultural lease relation, have supervened, and
therefore Bernas' right to the possession of the property remains indisputable. This conclusion is
buttressed by Sec. 37 of the Code which provides that:

Sec. 37. Burden of Proof. The burden of proof to show the existence of a lawful cause
for the ejectment of an agricultural lessee shall rest upon the agricultural lessor.

As to any suggestion that the agricultural lease of Bernas may have terminated because the landowner
(Natividad) has decided to cultivate the land herself, we submit that this Court is not in a position to settle
this issue in this case, not only because of insufficient evidence to determine whether or not, the grounds
provided by law for termination of the agricultural leasehold relation are present but, more importantly,
because the issue of termination of the agricultural leasehold relationship by reason of the landowner's
alleged decision to till the land herself, was not squarely raised nor adequately litigated in the trial
court.4 It will be noted that while Natividad in her complaint with the court a quo alleged, among others,
that "on 20 May 1985, the plaintiffs spouses were already in the process of taking over the land by
employing a tractor operator to commence plowing the land," this allegation was denied by Bernas in his
answer. But the main thrust of Natividad's complaint was that she had no privity with Bernas and that the
latter should vacate the land because Benigno (from whom Bernas had received his right to possess) had
himself ceased to have any rights to the land. Faced with these allegations, the court a quo in its pre-trial
order dated 9 September 1985 formulated the issues in this case, without objection from the parties, as
follows:

ISSUES

1. Is defendant an agricultural leasehold lessee of the parcels of land described in the

Complaint?

2. Whether the parties are entitled to damages claims by them in their respective
pleadings.

In short, the parties went to trial on the merits on the basis of the foregoing issues. Private respondent did
not object to the above issues as formulated; neither can it be plausibly contended now that the first issue
(i.e. whether Bernas is an agricultural leasehold lessee) embraces the issue of whether Natividad has
validly terminated the agricultural leasehold because of a decision to cultivate the land herself, since
under sec. 36(1) of the Code (before its amendment by Section 7 of Rep. Act No. 6389), the landowner's
right to take over possession of his land for personal cultivation ASSUMES that it is under a valid and
subsisting agricultural leasehold and he must obtain an order from the court to dispossess the agricultural
leasehold lessee who otherwise is entitled to continued use and possession of the landholding. In other
words, if Natividad had really intended to raise as an issue that she had validly terminated Bernas'
agricultural leasehold, she or her counsel could have expressly included among the issues for
determination the question of whether or not she had complied with the requirements of the law for
dispossessing the agricultural leasehold lessee because she, as landowner, had decided to personally
cultivate the landholding. But she did not.

The trial court in its decision dated 20 October 1987 (latter appealed to the Court of Appeals) held
(consistent with the formulated issues in the case) that

xxx xxx xxx

As to issues, parties presented only two (2) issues and which are:

1. Whether or not defendant is an agricultural leasehold lessee of the parcels of land

described in the complaint;

2. Whether the parties are entitled to damages claimed by them in their respective
pleadings.

(Pre-Trial Order dated September 9, 1985, p. 41 records)

and finally disposed as follows:

From the above discussions, this Court opines that defendant was a share tenant on the
parcels of land subject of the complaint, and an agricultural leasehold lessee under the
provisions of the Agricultural Land Reform Code as amended by Presidential Decrees on
the matter.

No damages as damages were proved or established by evidence by the defendant.

WHEREFORE, and in view of the above considerations, a decision is rendered

dismissing plaintiffs complaint, and declaring defendant as the agricultural leasehold
lessee on Lot Nos. 794, 801, 840 and 848 of the Cadastral Survey of Panay, Capiz, with
 an area of 5,831 square meters, situated at Calitan, Panay, Capiz, with security of tenure
as an Agricultural Leasehold Lessee thereof; and plaintiffs to pay the costs of the suit.

In the Court of Appeals, the litigated issue was

xxx xxx xxx

The legal issue that presents itself is whether the agricultural leasehold established by
Benigno Bito-on was binding upon the owner of the land, plaintiff Natividad Bito-on, who
disclaims knowledge of any arrangement with defendant Bernas. The lower court held
that the "dugo" arrangement was in the nature of usufruct, and that the act of the
usufructuary as legal possessor was sufficient to establish tenancy relations.

xxx xxx xxx 5

The long settled rule in this jurisdiction is that a party is not allowed to change his theory of the case or his
cause of action on appeal.6 We have previously held that "courts of justice have no jurisdiction or power
to decide question not in issue"7 and that a judgment going outside the issues and purporting to
adjudicate something upon which the parties were not heard is not merely irregular, but extrajudicial and
invalid.8 The rule is based on the fundamental tenets of fair play and, in the present case, the Court is
properly compelled not to go beyond the issue litigated in the court a quo and in the Court of Appeals of
whether or not the petitioner, Graciano Bernas, is an agricultural leasehold lessee by virtue of his
installation as such by Benigno Bito-on, the legal possessor of the landholding at the time Bernas was so
installed and, consequently entitled to security of tenure on the land. Should grounds for the
dispossession of Bernas, as an agricultural leasehold lessee, subsequently arise, then and only then can
the private respondent (land owner) initiate a separate action to dispossess the lessee, and in that
separate action, she must allege and prove compliance with Sec. 36(1) of the Code which consist of,
among others, a one year advance notice to the agricultural leasehold lessee (the land involved being
less than 5 hectares) and readiness to pay him the damages required also by the Code.

The issue of whether or not Bernas planted crops or used the land in a manner contrary to what was
agreed upon between Natividad and Benigno, and thereby constituting a ground for terminating the
leasehold relationship under Sec. 36, par. 3 of Rep. Act No. 3844 likewise cannot be passed upon by this
Court since the issue was never raised before the courts below. Furthermore, there is no showing that
Natividad and Benigno agreed that only certain types of crops could be planted on the land. What is clear
is, that the "dugo" arrangement was made so that Benigno could use the produce of the land to provide
for the schooling of his children. The alleged conversion by Bernas of the land to riceland was made
necessary for the land to produce more and thus meet the needs of Benigno. It was consistent with the
purpose of making the land more productive that Benigno installed an agricultural lessee. It may be
recalled that when Natividad called on Benigno to testify as a witness, he stated that the produce of the
land was given to him by Bernas to defray the expenses of his children (p. 3, trial court decision). The
inevitable conclusion is therefore not that there was use of the land different from the purpose for which it
was allegedly intended by Natividad and Benigno but rather that the installation of the agricultural lessee
was made necessary so that the land could produce more to better serve the needs of the beneficiary
(Benigno).

Additionally, it can be stated that the agricultural leasehold relationship in this case was created between
Benigno as agricultural lessor-legal possessor, on the one hand, and Bernas as agricultural leasehold
lessee, on the other. The agricultural leasehold relationship was not between Natividad and Bernas. As
Sec. 6 of the Code states:

Sec. 6. Parties to Agricultural Leasehold Relations. The agricultural leasehold relations

shall be limited to the person who furnishes the landholding, either as owner, civil law
 lessee, usufructuary, or legal possessor, and the person who personally cultivates the
same. (emphasis supplied)

There was, as admitted by all, no privity or tie between Natividad and Bernas. Therefore, even if Bernas
had improperly used the lots as ricelands, it was Benigno who could have objected thereto since it was
his (the legal possessor's) landholding that was being "improperly" used. But he (Benigno) did not. It is
not for Natividad (as landowner) to now complain that Bernas used the land "for a purpose other than
what had been previously agreed upon." Bernas had no agreement with her as to the purpose for which
the land was to be used. That they were converted into ricelands (also for agricultural production) can
only mean that the same (conversion) was approved by Benigno (the undisputed agricultural lessor-legal
possessor). It is thus clear that sec. 36, par 3 of the Code cannot be used to eject Bernas.

The Court, must, in our view, keep in mind the policy of the State embodied in the fundamental law and in
several special statutes, of promoting economic and social stability in the countryside by vesting
the actual tillers and cultivators of the soil, with rights to the continued use and enjoyment of their
landholdings until they are validly dispossessed in accordance with law. At this stage in the country's land
reform program, the agricultural lessee's right to security of tenure must be "firmed-up" and not negated
by inferences from facts not clearly established in the record nor litigated in the courts below. Hand in
hand with diffusion of ownership over agricultural lands, it is sound public policy to encourage and
endorse a diffusion of agricultural land use in favor of the actual tillers and cultivatorsof the soil. It is one
effective way in the development of a strong and independent middle-class in society.

In confirmation we believe of the foregoing views, Section 36 of Rep. Act No. 3844 (the Code) was
expressly amended by Section 7 of Rep. Act No. 6389 which replaced paragraph 1, Section 36 of the
Code providing for personal cultivation by the landowner as a ground for ejectment or dispossession of
the agricultural leasehold lessee with the following provision:

Sec. 7. Section 36 (1) of the same Code is hereby amended to read as follows:

(1) The landholding is declared by the department head upon recommendation of the
National Planning Commission to be suited for residential, commercial, industrial or some
other urban purposes: Provided, That the agricultural lessee shall be entitled to
disturbance compensation equivalent to five times the average of the gross harvest of his
landholding during the last five preceding calendar years;

While it is true that in the case of Ancheta vs. Court of Appeals, 200 SCRA 407, the Court, stated that:

It is well settled that RA 6389, which removed personal cultivation as a ground for
ejectment of tenant/lessee, cannot be given retroactive effect in the absence of statutory
provision for retroactivity or a clear implication of the law to that effect.

however, Rep. Act No. 6389 was approved on 10 September 1971.9 The complaint in this case was filed
on 21 June 1985 or long after the approval of Rep. Act No. 6389. By reason of the provision
therein eliminating personal cultivation by the landowner as a ground for ejectment or dispossession of
the agricultural leasehold lessee, any issue of whether or not the Court of Appeals decision should
nonetheless be affirmed because the landowner had shown her intention or decided to personally
cultivate the land (assuming without admitting that the issue was properly raised before the trial court),
had in fact become moot and academic (even before it was hypothetically raised). The issued had been
resolved by legislation unmistakably against the landowner.

It may of course he argued that "she (Natividad) did not authorize her brother (Benigno) to install a tenant
thereon." (TSN, 13 February 1986, p. 6).
Even if there was a lack of authorization (from Natividad) for Benigno to install a tenant, it still follows, in
our view, that Benigno as legal possessor of the landholding, could install an agricultural lessee on the
landholding. For, as defined in Section 166 (3) of the Code, an agricultural lessor is a natural or juridical
person who, either as owner, civil law lessee, usufructuary or legal possessor lets or grants to another the
cultivation and use of his land for a price certain. Nothing in said section, it will be noted, requires that the
civil law lessee, usufructuary or legal possessor should have the prior authorization of the landowner in
order to let or grant to another the cultivation or use of the landholding.

Another question comes up; did Natividad expressly prohibit Benigno from installing a tenant on the land?
Nothing in the evidence shows that Benigno was expressly prohibited by Natividad from installing a
tenant on the landholding. And even if there was an express prohibition on the part of Natividad
(landowner) for Benigno not to install an agricultural leasehold lessee, it is to be noted that any such
arrangement (prohibition) was solely between Natividad and Benigno. There is no evidence to show that
Bernas was aware or informed of any such arrangement between Natividad and Benigno. Neither was
such arrangement (prohibition), if any, recorded in the registry of deeds to serve as notice to third persons
(as Bernas) and to the whole world for that matter. Consequently, if there was indeed such a prohibition
(which is not borne out by the records) imposed by Natividad on Benigno, a violation thereof may give
rise to a cause of action for Natividad against Benigno but Bernas is no less an agricultural leasehold
lessee, for the law (Section 166 (2) of the Code) defines an agricultural lessee as a person who by
himself and with the help available from within his immediate farm household cultivates the land
belonging to or possessed by another (in this case Benigno) with the latter's consent for purposes of
production for a price certain in money or in produce or both.

Ponce vs. Guevarra, L-19629 and L-19672-92, 31 March 1954 (10 SCRA 649) provides dramatic support
to the security of tenure of Bernas in the case at bar. In the Ponce case, the owner (Ponce) had leased
his agricultural land to Donato (the lessee) for a stipulated period with a provision in the lease
contract prohibiting Donato from sub-leasing the land without the written consent of the owner (Ponce).
Notwithstanding these "express prohibition", Donato sub-leased the land without the consent of Ponce
(the owner). When the lease contract expired, Donato returned the land to Ponce but the sub-lessees
(tenants) refused to vacate, claiming security of' tenure under the tenancy laws then enforced. One of the
contentions of Ponce (the owner) in seeking to dispossess the sub-lessees (tenants) was that these
tenants entered into possession of the land under a violation of the lease contract by Donato (the lessee).

Over-ruling the above contention, this Court held:

It is true that the subleasing of said land to respondents herein (tenants) without the
written consent of the petitioner (owner), constituted a violation of the original contract of
lease. The breach of contract was committed, however, by Donato (the lessee), . . . .

Of course, in the same Ponce case, the Court observed that Ponce renewed his lease contract
for another year with Donato, knowing at the time of such renewal that the land had been sub-
leased to the tenants, thereby injecting the principle of estoppel against Ponce vis-a-vis the
tenants. But, as we view it, the ratio decidendi in the Court's decision is to the effect that the sub-
lessees (tenants) were entitled to security of tenure on the land they were cultivating,
notwithstanding the undisputed fact that they became sub-lessees (tenants) of the land as a
result of a violation by the lessee (Donato) of an express provision in the lease contract
prohibiting him from sub-leasing the land.

What more in the case of Bernas whose right to security of tenure as an agricultural leasehold lessee is
conferred and protected categorically, positively and clearly by the provisions of the Code (Republic Act.
3844)?

It is of course possible to construe Sec. 6 of the Code which provides:

 SEC 6. Parties to Agricultural Leasehold Relations. The agricultural leasehold relation
shall be limited to the person who furnishes the landholding, either as owner, civil law
lessee, usufructuary, or legal possessor, and the person who personally cultivates the
same. (emphasis supplied).

in the following manner:

. . . it assumes that there is already an existing agricultural leasehold relation, i.e. a

tenant or agricultural lessee already works the land. As may be gleaned from the
epigraph of Sec. 6, it merely states who are "Parties to Agricultural Leasehold Relations,"
which means that there is already a leasehold tenant on the land. But this is precisely
what We are still asked to determine in these proceedings. (dissenting opinion, p. 11.)

It would appear from the above interpretation of Sec. 6 of the Code that in the absence of a judicial
determination or declaration of an agricultural leasehold relation, such relation does not or cannot even
exist. We view this posture as incorrect for an agricultural leasehold relationship exists by operation of
law when there is a concurrence of an agricultural lessor and an agricultural lessee. As clearly stated in
Section 5 of the code.

Sec. 5. Establishment of Agricultural Leasehold Relations. The agricultural leasehold

relation shall be established by operation of law in accordance with Section four of this
Code and, in other cases, either orally or in writing, expressly or impliedly.

In other words, in the case at bar, from the moment Benigno, as legal possessor (and, therefore, an
agricultural lessor) granted this cultivation and use of the landholding to Bernas in exchange or
consideration for a sharing in the harvest, an agricultural leasehold relationship emerged between them
"by operation of law".

The fact that the transfer from Natividad to Benigno was gratuitous, we believe, is of no consequence as
far as the nature and status of Benigno's possession of the landholding is concerned. He became the
legal possessor thereof from the viewpoint of the Code. And as legal possessor, he had the right and
authority, also under the Code, to install or institute an agricultural leasehold lessee on his landholding,
which was exactly what he did, i.e. install Bernas as an agricultural leasehold lessee.

The argument that Benigno's (and consequently, Bernas') possession was meant to last for a limited
period only, may appeal to logic, but it finds no support in the Code which has its own underlying public
policy to promote. For Section 7 of the Code provides:

Sec. 7. Tenure of Agricultural Leasehold Relation. The Agricultural Leasehold Relation

once established shall confer upon the agricultural lessee the right to continue working on
the landholding until such leasehold relationship is extinguished. The agricultural lessee
shall be entitled to security of tenure on his landholding and cannot be ejected therefrom
unless authorized herein-provided. (emphasis supplied)

while Section 10 of the Code provides:

Sec. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc.
The agricultural leasehold relation under this Code shall not be extinguished by mere
expiration of the term or period in a leasehold contract nor by the sale, alienation or
transfer of the legal possession of the landholding. In case the agricultural lessor. sells,
alienates or transfers the legal possession of the landholding, the purchaser or transferee
thereof shall be subrogated to the rights and substituted to the obligations of the
agricultural lessor. (emphasis supplied).
 and Section 36 of the Code provides:

Possession of Landholding; Exceptions. Notwithstanding any agreement as to the

period or future surrender of the land, an agricultural lessee shall continue in the
enjoyment and possession of his landholding
. . . . (emphasis supplied)

Clearly the return of legal possession from Benigno to Natividad cannot prejudice the rights of Bernas as
an agricultural leasehold lessee. The grounds for ejectment of an agricultural leasehold lessee are
provided for by law. The enumeration is exclusive and no other grounds can justify termination of the
lease. The policy and letter of the law are clear on this point. The relatively small area of the agricultural
landholding involved (a little over half a hectare) would appear, in our view, to be of no consequence in
this case. Here, the issue is not how much area may be retained in ownership by the land
owner Natividad but the issue is whether Bernas is a duly constituted agricultural leasehold lessee of the
agricultural landholding (regardless of its area) and entitled to security of tenure therein. And, as
abundantly shown, the Code is definitely and clearly on his side of this issue.

It should be pointed out that the report and recommendation of the investigating officer of the Ministry of
Agrarian Reform (MAR) finding that Bernas is not an agricultural leasehold should deserve little
consideration. It should be stressed, in this connection, that said report and recommendation
is congenitally defective because

a. it was based solely on the evidence presented by Natividad, Bernas did not participate in said
investigation.

b. the findings in the report are not supported by law or jurisprudence but are merely the opinion and
conclusions of the investigator whose knowledge of the Code and the case Law appears to be sadly
inadequate.

c. whether or not an agricultural leasehold relation exists in any case is basically a question of law and
cannot be left to the determination or opinion of a MAR-investigator on the basis of one-sided evidence.

This Court has ruled in Qua v. Court of Appeals, 198 SCRA 236 that

. . . as regards relations between litigants in land cases, the findings and conclusions of
the Secretary of Agrarian Reform, being preliminary in nature, are not in any way binding
on the trial courts which must endeavor to arrive at their own independent conclusions.

The ruling finds support in the case of Graza v. CA (163 SCRA 39) citing Section 12 of PD No.
946 expressly stating that "the preliminary determination of the relationship between the
contending parties by the Secretary of Agrarian Reform or his authorized representative, is not
binding upon the court, judge or hearing officer to whom the case is certified as a proper case for
trial. Said court, judge or hearing officer, after hearing, may confirm, reverse or modify said
preliminary determination as the evidence and substantial merits of the case may warrant." The
court a quo in the case at bar tried the case on the merits, receiving the evidence of both
parties and arrived at a conclusion different from that of the MAR investigator. It is to be noted
that even the Court of Appeals (which decided for Natividad) found no use for the MAR
investigator's report and recommendation, for obvious reasons. It is clear that the question of the
existence of an agricultural leasehold relationship is a question of law which is properly within the
province of the courts.

The certification of the President of the Agrarian Reform Beneficiaries Association, Panay chapter "issued
upon the request of Mrs. Deita" (meaning Natividad) that Bernas is not in the masterlist of tenants, should
likewise be disregarded. Since when, it may be noted, was the legal question of agricultural leasehold
relationship made to depend on a certification of such an association's president?

The argument, that Bernas is not a lawful tenant of Natividad based on the doctrine in the case
of Lastimoza v.Blanco (1 SCRA 231) is also not correct. The cited case does not support the desired
conclusion. In the Lastimoza case, a certain Nestor Panada had an oral contract of tenancy with a certain
Gallego who was then in possession of the parcel of land. The latter however was ejected after the Court
of First Instance ruled in a land registration proceeding that it was Lastimoza who was the true owner of
the land. The Court in effect ruled that Gallego was an unlawful possessor and thus Panada cannot be a
lawful tenant. The factual background of the Lastimoza case and the present Bernas case are totally
different; the first case cannot be applied to the second. When Bernas was instituted by Benigno as an
agricultural lessee, Benigno was a legal possessor of the landholding in question. No one can dispute
this.

The dissenting opinion states that ". . . it is not correct to say that every legal possessor, be he a
usufructuary, or a bailee, is authorized as a matter of right to employ a tenant. His possession can be
limited by agreement of the parties or by operation of law." (p. 13) Even assuming arguendo that this is a
correct legal statement, there is absolutely no showing that the possession of Benigno was limited by his
agreement with Natividad (as to prohibit him from instituting a tenant) or by operation of law; and because
there is a total failure to disprove and even dispute that Benigno was a legal possessor at the time Bernas
was installed by him as an agricultural lessee, then Bernas validly became an agricultural leasehold
lessee of the land and is protected by the law from ejectment except for causes specified therein.

Finally, in relation to the dissenting opinion, it may be wise to repeat the statement of the Court in Jose
D. Lina, Jr.vs. Isidro Cario (G.R. No. 100127, 23 April 1993) thus

The Court believes that petitioner's argument cogent though it may be as a social and
economic comment is most appropriately addressed, not to a court which must take
the law as it is actually written, but rather to the legislative authority which can, if it
wishes, change the language and content of the law. (emphasis supplied)

In the case at bar, the language, policy and intent of the law are clear; this Court cannot interpose its own
views as to alter them. That would be judicial legislation.

WHEREFORE the petition is GRANTED. The decision of the respondent appellate court, is REVERSED
and SET ASIDE and that of the Regional Trial Court. REINSTATED. Costs against the private
respondent.

SO ORDERED.

Cruz, Bidin, Grio-Aquino, Regalado, Romero, Nocon and Quiason, JJ., concur.

Puno and Vitug, JJ. took no part.

Separate Opinions
BELLOSILLO, J., dissenting:

This may be a faint echo in the wilderness but it is the quaint voice of a woman yearning for justice from
this court of last resort. The majority opinion would leave her alone where she is, to wallow in her own
misery, and despite her long and winding travails all for the love of a brother in need there is no light
at the end of the tunnel. There is no relief in sight for her plight. Her only fault was to lend her four (4)
small parcels of land to her brother so that the latter could use the fruits thereof for the education of his
children in Manila. Now, she cannot get them back because her brother allowed his brother-in-law, who
now claims security of tenure as tenant, to work the lands.

Worse, the brother-in-law continues to cultivate the landholdings, even converting the orchards into
ricelands as though they were his own and constructing a house of a strong materials thereon, without
paying any rent!

Before seeking judicial relief, private respondent went to the Ministry of Agrarian Reform (MAR) as
required by law,1and obtained a favorable finding that there was no tenancy relationship between her and
her brother's brother-in-law. But the courts below disregarded this important piece of evidence which
speaks eloquently of the merit of her cause. MAR certified that petitioner was not a tenant of private
respondent, hence, the case was proper for trial.

The finding of MAR was confirmed by the Agrarian Reform Beneficiaries Association (ARBA) when its
President certified after an investigation that petitioner did not appear in the Master List of tenant
beneficiaries of the barangay. Even his older brother, the barangay captain, after conducting his own
investigation, refused to certify that petitioner was a tenant of the holdings of private respondent.

Is private respondent indeed bereft of any remedy in law to recover possession of her landholdings
she who did not employ petitioner nor authorize anyone to employ him as tenant on her land; she who is
not even paid any rent by petitioner for the use of her landholdings; she whose landholdings have been
converted by petitioner from orchards to ricelands and on which he constructed a house of strong
materials, both without first securing authority from her? Under the circumstances, we can only hope that
posterity will not condemn us for the fate of private respondent and the many others who may be similarly
situated.

My conscience prompts me to dissent from the majority opinion and to vote for the affirmance of the
decision of the Court of Appeals, not necessarily on the basis of its rationale, but mainly because I do not
subscribe to the view that a usufructuary or legal possessor under Sec. 6, R.A. 3844, as amended, is
automatically authorized to employ a tenant without the consent of the landowner. For, the right to hire a
tenant is basically a personal right of a landowner, except as may be provided by law. But, certainly
nowhere in Sec. 6 of R.A. 3844 does it say that a legal possessor of a landholding is automatically
authorized to install a tenant thereon.

Natividad Bito-on Deita owns Lots 794, 801, 840 and 848 of the Cadastral Survey of Panay, Capiz. Lots
794 and 801, with areas of 943 square meters (Exh. "C") and 855 square meters (Exh. "B"'), respectively,
are coconut Lands; Lot 840, with an area of 1,000 square meters (Exh. "D"), is planted to bananas, while
Lot 848, with an area of 1,146 square meters (Exh. "A"), is riceland. Lot 840 was the owner's homelot on
which stood before the family home. Although the trial court found that the total area of the four (4) lots,
which are not contiguous, was 5,831 square meters, a closer examination of their tax declarations (Exhs.
"A" to "D") reveals that their total productive area is only 3,844 square meters, which can be smaller than
a residential lot in a plush village in Metro Manila.

After Natividad recovered these lots from a former tenant in April 1978, she entrusted them to her brother,
Benigno Bito-on, so that the latter may be able to support the education of his children in Manila. 2 She
did not authorize her brother to install a tenant thereon. 3 After successfully retrieving a landholding from a
tenant at that time, no landowner in his right mind would give his land in tenancy again to avoid the
operation of P.D. 27, then at its peak and dreaded by landowners as an unjust deprivation of property
rights.

Thereafter, without the knowledge, much less consent, of Natividad, Benigno entered into some
arrangement with his brother-in-law, Graciano Bernas, to work the lands. But Natividad was unaware of
this arrangement as she was staying in Manila where her husband was then employed. It was not until
the latter's retirement and the return of the family to Panay, Capiz, that she learned that Graciano was
already working the lands, converting Lots 794, 801 and 840 into ricelands, and constructing on Lot 840 a
house of concrete hollow blocks.

It bears emphasizing that, the transfer of possession between Natividad and Benigno was not coupled
with any consideration; rather, it was pure magnanimity on the part of Natividad on account of her "dugo"
or blood relation with Benigno, which Atty. Herminio R. Pelobello, Trial Attorney II and MAR Investigating
Officer, explains

A "DUGO" system is a personal grant of privilege and a privilege personally granted

cannot be delegated or extended to someone else but (is) personal (in) nature. Once the
"DUGO" grantee or trustee returns the subject matter of "DUGO", the relationship is
terminated . . . . In this instance, Exh. "E" is an expressive documentary evidence of
return of "DUGO" property by constructive mode of returning of possession, use and
enjoyment of property; same therefore deserves credence to the exclusion of any
interested person in tillage therein.

On 13 May 1985, his children having finished schooling in Manila, Benigno returned possession of the
property to Natividad, in faithful compliance with their agreement. However, Graciano refused to vacate
the premises claiming at first that he was installed thereon by Benigno, although after Benigno denied this
allegation, petitioner changed his theory by presenting Monica Bernales Bito-on, wife of Benigno, to
testify that she was the civil law lessee who installed Graciano on the lands. This, despite the crux of the
evidence spread on record that it was Benigno Bito-on who was given the physical possession of the
lands by his sister Natividad, and not Monica who is only her sister-in-law. Incidentally, Monica is the
sister of the wife of Graciano Bernas.

On 17 May 1985, fazed by the refusal of Graciano to vacate, Natividad filed a letter-petition4 with the
Ministry of Agrarian Reform (MAR) seeking clarification of the actual status of Graciano vis-a-vis her
landholdings. Accordingly, Graciano was summoned at least three (3) times but the latter refused to
attend the scheduled hearings. Consequently, Atty. Herminio R. Pelobello, who was assigned to the case,
conducted his investigation and thereafter issued a resolution5 sustaining the complaint of Natividad Bito-
on Dieta and concluding, among others that

. . . out of petitioner's benevolence, generosity and pity of his elder brother's financial
hardship, she had the aforesaid lots entrusted to her brother in the nature of DUGO so
that (the) latter then possessed the land and enjoy(ed) the . . . fruits thereon for the above
purpose beginning the year 1978 up to the 2nd crop of 1985; that upon the surrender or
giving back in her favor of the land subject of 'DUGO' there now appears the respondent
claiming to be the tenant-tiller on the land who would not relinquish the land in her favor
alleging and contending to have been instituted by Monica Bernales who is her sister-in-
law.

xxx xxx xxx

It is observed in this letter-petition (that) Filipino family adhered solidarity, sympathy and
pity by extending financial help of (to) a close relative by consanguinity. Apparently under
the circumstance, the "DUGO" trustee for the benefit of his school children in Manila is
Benigno Bito-on
 . . . . Petitioner feeling morally bound . . . made the institution of "DUGO" relationship
among them in order to contributes a solution thereof. But ultimately after the 2nd
cropping of 1985 and after the school children of Benigno Bito-on had graduated in
college, he returned the property to petitioner as evidenced by Exh. "E".

Now comes to the surprise of petitioner, the respondent spring(s) out and assert(s) his
alleged right to tillage so as to prevent landowner to repossess the land subject of
"DUGO" upon return which is co-terminous with the period thereof.

On such core, no law or jurisprudence recognizes the right of respondent. Be that as it

may, as now happens, with Benigno Bito-on nor his wife Natividad (Monica) Bernas was
legally authorized to institute somebody to be tenant-tiller under the circumstance of
"DUGO" . . . so as to be entitled to invoke any right or privilege under our Agrarian Laws.

xxx xxx xxx

IN VIEW OF THE FOREGOING CONSIDERATIONS, it is now the honest opinion of the

undersigned to recommend as it is hereby recommended that the petitioner, Natividad
Bito-on Deita, be entitled to the possession, use and enjoyment of the lots subject of
'DUGO' and further, that the respondent constructively and actually delivers to her the
same lots indicated in this resolution, upon receipt of copy hereof.

The foregoing resolution of the MAR Investigating Officer may not be well crafted, but it is expressive of
his finding that Graciano Bernas was not a tenant-tiller and, consequently, it recommend that "the
petitioner, Natividad Bito-on Deita, be entitled to the possession, use and enjoyment of the lots subject of
'DUGO', and further, that the respondent (Graciano Bernas) constructively and actually delivers to her the
same lots indicated in this resolution . . . ." concluding that "no law or jurisprudence recognizes the right of
respondent."

While Natividad went through the normal legal procedure to obtain relief, Graciano refused to attend the
formal investigation and hearing conducted by the MAR, much less heed its recommendation. If Graciano
was a law-abiding citizen and believed that the law was on his side, he should have submitted to the fact-
finding investigation by an administrative agency pursuant to law.

On 24 May 1985, a mediation conference between Natividad and Graciano was held at the residence of
Brgy. Captain Felipe Bernas, older brother of Graciano, but it also proved fruitless as Graciano continued
to refuse to vacate subject landholdings. To top it all, Brgy. Captain Bernas sided with Graciano and
refused to issue a certification as required under P.D. 1508. If Graciano was indeed a tenant of the
landholdings, his older brother could have easily issued the required certification.

Consequently, the certification had to be issued by Sulpicio Bering, ARBA President, Panay
Chapter,6 dated 27 May 1985, at Barangay Calitan, Panay, Capiz, which confirmed the factual findings of
the MAR Investigating Officer

This is to certify that undersigned in his capacity as President of Agrarian Reform

Beneficiaries Association (ARBA), Panay Chapter, had attended last May 24, 1985 the
mediation confrontation among Mrs. Natividad Bito-on-Dieta and Mr. Graciano Bernas
accompanied by his wife Adela Bernales that took place right at the residence of Brgy.
Captain Felipe Bernas. That the outcome of the conference was fruitless as the Barangay
Captain was siding with his younger brother Graciano Bernas, and he (Brgy. Captain)
vehemently refused to issue any certification as required under P.D. 1508.

Hence undersigned as President of ARBA Panay Chapter hereby manifest and

certify that Graciano Bernas is not among those whose names are entered in our
 masterlist of tenants so as to suffice as a bona fide member of Agrarian Reform
Beneficiaries Association in Panay, Capiz. It is further stated that Mr. Graciano Bernas is
not a leasehold tenant of landowner Mrs. natividad Bito-on Dieta in Barangay Calitan,
Panay, Capiz (emphasis supplied).

This certification is being issued to Mrs. Dieta in lieu of the refusal on the part(s) of Brgy.
Captain to issue such under the provision of P.D. 1508.

On 21 June 1985, after all her efforts to recover through administrative means failed, Natividad finally
instituted an action in the Regional Trial Court of Capiz. But, in deciding the case, the trial court
completely disregarded the result of the administrative investigation conducted by Atty. Herminio R.
Pelobello of the MAR (Exh. "6") and the Certification of the President of ARBA (Exh. "E") and ruled in
favor of Graciano, holding that the transaction between Natividad and Benigno was in the nature of a
usufruct so that the latter was legally capacitated to install Graciano as an agricultural lessee whose
tenurial right could not be disturbed except for causes enumerated under Sec. 36 of R.A. 3844, as
amended, 7 and that Natividad failed to establish any of the causes for his termination.

Natividad elevated her cause to the Court of Appeals contending that the transaction between her and
her brother Benigno was not in the nature of usufruct but rather one of commodatum. As such, Benigno,
as bailee in commodatum, could neither lend nor lease the property loaned to him to a third person since
the relationship between the bailor and bailee is personal in character. She also established with her
evidence that Graciano converted without her authority three (3) of her parcels of land, particularly those
planted to coconut and banana, to ricelands, which is a ground to terminate a tenant, assuming that
Graciano was.

The contention of Natividad was sustained by the Court of Appeals, which ordered the ejectment of
Graciano. The Court of Appeals ruled that having merely derived his right over the property from the
bailee, Graciano could have no better right than bailee Benigno who possessed the landholdings only for
a special purpose and for a limited period of time. The spring cannot rise higher than its source

Hence, this petition for review on certiorari filed by Graciano seeking reversal of the decision8 of the Court
of Appeals on the issue of whether he is an agricultural lessee of the landholdings entitled to security of
tenure.

The resolution of this issue hinges on the proper interpretation of Sec. 6 of R.A. 3844, as amended,
otherwise known as "The Agricultural Land Reform Code," which provides:

Sec. 6 Parties to Agricultural Leasehold Relations. The agricultural leasehold relations

shall be limited to the person who furnishes the landholding, either as owner, civil law
lessee, usufructuary, or legal possessor, and the person who personally cultivates the
same.
(emphasis ours).

Those who hold that Graciano is a leasehold tenant anchor their proposition on the above provision of
Sec. 6 as they find Benigno a "legal possessor" of the lands and so could legally install a tenant thereon.

I strongly disagree. When Sec. 6 provides that the agricultural leasehold relations shall be limited to the
person who furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal possessor,
and the person who personally cultivates the same, it assumes that there is an existing agricultural
leasehold relation, i. e., a tenant or agricultural lessee already works the land. As may be gleaned from
the epigraph of Section 6, it merely states who are "Parties to Agricultural Leasehold Relations," which
means that there is already a leasehold tenant on the land. But this is precisely what we are still asked to
determine in these proceedings.
To better understand Sec. 6, R.A. 3844, let us refer to its precursor, Sec. 8, R.A. 1199, as amended,
which provides:

Sec. 8. Limitation of Relation. The relation of landholder and tenant shall be limited to
the person who furnishes land, either as owner, lessee, usufructuary, or legal possessor,
and to the person who actually works the land himself with the aid of labor available from
within his immediate farm household.

Again, Sec. 8 of R.A. 1199 assumes the existence of a tenancy relation. But, as its epigraph states, it is a
"Limitation of Relation," and the purpose is merely to limit the tenancy "to the person who furnishes land,
either as owner, lessee, usufructuary, or legal possessor, and to the person who actually works the land
himself with the aid of labor available from within his immediate farm household." Otherwise stated, once
the tenancy relation is established, the parties to that relation are limited to the persons therein stated.
But, obviously, inherent in their right to install a tenant is their authority to do so; otherwise, without such
authority, they cannot install a tenant on the landholding. But, definitely, neither Sec. 6 of R.A. 3844 nor
Sec. 8 of R.A. 1199 automatically authorizes the persons named therein to employ a tenant on the
landholding.

According to Santos and Macalino, considered authorities on the land reform, the reasons Sec. 6, R.A.
3844, and 8, R.A. 1199, in limiting the relationship to the lessee and the lessor is "to discourage
absenteeism on the part of the lessor and the custom, of co-tenancy" under which "the tenant (lessee)
employs another to do the farm work for him, although it is he with whom the landholder (lessor) deals
directly. Thus, under this custom, the one who actually works the land gets the short end of the bargain,
for the nominal or 'capitalist' lessee hugs for himself a major portion of the harvest." 9 This custom has
bred exploitation, discontent and confusion . . . . The 'kasugpong,' 'kasapi,' or 'katulong' also works at the
pleasure of the nominal tenant."10 When the new law, therefore, limited tenancy relation to the landholder
and the person who actually works the land himself with the aid of labor available from within his
immediate farm household, it eliminated the nominal tenant or middle man from the picture. 11

Another noted authority on land reform, Dean Jeremias U.

Montemayor, 12 explains the reason for Sec. 8, R.A. 1199, the precursor of Sec. 6, R.A. 3844:

Since the law establishes a special relationship in tenancy with important consequences,
it properly pinpoints the persons to whom said relationship shall apply. The spirit of the
law is to prevent both landholder absenteeism and tenant absenteeism. Thus, it would
seem that the discretionary powers and important duties of the landholder, like the choice
of crop or seed, cannot be left to the will or capacity of an agent or overseer, just as the
cultivation of the land cannot be entrusted by the tenant to some other people. Tenancy
relationship has been held to be of a personal character (see Secs. 37 and 44, R.A.
1199, as amended; emphasis supplied).

To argue that simply because Benigno is considered a usufructuary or legal possessor, or a bailee
in commodatumfor that matter, he is automatically authorized to employ a tenant on the landholding is to
beg the question. For, it is not correct to say that every legal possessor, be he a usufructuary or a bailee,
is authorized as a matter of right to employ a tenant. His possession can be limited by agreement of the
parties or by operation of law. In the case before Us, it is obvious that the tenure of the legal possessor
was understood to be only during the limited period when the children of Benigno were still schooling in
Manila.

As already stated, Sec. 6 simply enumerates who are the parties to an existing contract of agricultural
tenancy, which presupposes that a tenancy already exists. It does not state that those who furnish the
landholding, i.e., either as owner, civil law lessee, usufructuary, or legal possessor, are authomatically
authorized to employ a tenant on the landholding. The reason is obvious. The legal possession, may be
restrictive. Even the owner himself may not be free to install a tenant, as when his ownership or
possession is encumbered or is subject to a lien or condition that he should not employ a tenant thereon.
This contemplates a situation where the property may be intended for some other specific purpose
allowable by law, such as, its conversion into a subdivision.

In the case at bar, the transfer of possession was purely gratuitous. It was not made for any consideration
except for the "dugo" or blood relationship between Natividad and Benigno. Consequently, the generation
of rights arising therefrom should be strictly construed in favor of Natividad. In fact, for lack of
consideration, she may take back the land at any time unless she allows a reasonable time for Benigno to
harvest the produce of what he may have planted thereon as a possessor in good faith. There is not even
any valid obligation on her part to keep Benigno in possession, except as herein adverted to, much less
should she be deprived of such possession just because another person was employed by her brother to
work the land.

Under the doctrine laid down in Lastimoza v. Blanco, 13 Graciano cannot be a lawful tenant of Natividad
for the reason that Benigno, after failing to return the landholding to Natividad, already became a
deforciant, and a deforciant cannot install a lawful tenant who is entitled to security of tenure. Incidentally,
Benigno and Graciano being brothers-in-law, their wives being sisters, and living in a small barangay,
Graciano cannot profess ignorance of the very nature of the possession of Benigno as well as the
restrictions to his possession.

It may be relevant to consider, for a better appreciation of the facts, the actual condition of the
landholdings. As already adverted to, Lots 794 and 801 are coconut lands with an area of 943 square
meters (Exh. "C") and 855 square meters (Exh. "B"), respectively, or a total area of 1,798 square meters.
With this meager area for the two (2) coconut lands, there is indeed no reason to have them tenanted.
The coconut lands need not be cultivated when the coconut trees are already fruit-bearing. Benigno only
had to ensure that the fruits thereof were not stolen.

Lot 840 has an area of 1,000 square meters (Exh. "D") and is planted to bananas. Like the coconut lands,
no tenant is needed to cultivate it and Benigno only has to keep watch over it against stray animals and
protect his harvests. If we take away from this area of 1,000 square meters the homelot reserved for the
owner, the remaining portion for production cannot be more than 800 square meters. It can be less,
depending on the size of the homelot.

Before Graciano converted Lots 714, 801 and 840 into ricelands, the only riceland then was Lot 848, with
an area of 1,146 square meters (Exh. "A"). This is too small for an economic family-size farm to sustain
Benigno and his family even if he works it himself.

Considering the size of the landholdings, which have a total productive area of only 3,844 square meters
per their tax declarations, there may not be enough produce to pay for the educational expenses of his
children if Benigno to hire another person to cultivate the land and share the produce thereof. As a matter
of fact, to minimize expenses, the children of Benigno and Monica stayed with Natividad while schooling
in Manila.

Since lots 714, 801 and 840 are planted to coconut and banana trees, they are classified as lands planted
to permanent crops. Consequently, in order for a person to be considered a tenant of these lands, he
must have planted the crops himself before they became fruit-bearing. But, in the case before us, the
coconut and banana trees were already fruit-bearing at the time Graciano commenced to work on the
lands, hence, he cannot be considered a tenant of these lands.

Consequently, the transfer of possession of the landholding from Natividad to Benigno should be strictly
viewed as one for the cultivation alone of Benigno, himself a farm worker, who was not authorized by
Natividad to employ a tenant. Benigno's possession was limited only to the enjoyment of the fruits thereof,
subject to the will of landowner Natividad. Benigno was not empowered to install a tenant. 14
Benigno therefore possessed the land as a mere possessor-cultivator. As such, he was required to
personally till or cultivate the land and use the produce thereof to defray the cost of education of his
children. Natividad, who entrusted her landholdings to Benigno, was still the agricultural owner-cultivator,
who is "any person who, providing capital and management, personally cultivates his own land with the
aid of his immediate family and household." 15 It must then be held that the cultivation of Benigno was
also the cultivation of Natividad. Indeed, the fact that the lands were free of tenants when Natividad
entrusted them to Benigno was indicative of her intention to maintain that condition of the landholdings
and have them tended personally by Benigno himself.

Accordingly, neither Benigno nor Graciano can be a lessee-tenant who enjoys security of tenure. Benigno
could only be an encargado of his sister Natividad, merely enjoying the produce thereof for the intended
beneficiaries, his children studying in Manila.

Our attention may be invited to settled jurisprudence that the existence of an agricultural leasehold
relationship is not terminated by changes of ownership in case of sale, or transfer of legal possession as
in lease. 16 But, again, this assumes that a tenancy has already been established. In the instant case, no
such relationship was ever created between Natividad and Graciano, the former having simply given her
land to Benigno without any authority to install a tenant thereon, 17 and only for a limited duration as it was
coterminous with the schooling of Benigno's children in Manila.

In a number of cases, this Court has sustained the preservation of an agricultural leasehold relationship
between landholder and tenant despite the change of ownership or transfer of legal possession from one
person to another. But in all these cases, the facts legally justified the preservation of such relationship.
For example, in Endaya v.Court of Appeals, 18 Salen v. Dinglasan, 19 Catorce v. Court of
Appeals, 20 and Co. v Court of Appeals, 21 the tenants were found to have been instituted by the previous
landowners or owners in fee simple. Consequently, the change of ownership of the land did not terminate
the tenancy relationship already existing. In Novesteras v. Court of Appeals, 22 it was the present
landowner himself who instituted the agricultural leasehold relation. In Ponce v.Guevarra, 23 although the
civil law lessee was barred from installing a tenant under the terms of the original contract of lease, the
landowner nonetheless extended the lifetime of the lease. Finally, in Joya v. Pareja, 24 the lessor-
landowner negotiated for the better terms with the tenant of the civil law lessee upon expiration of the
lease.

As may be gleaned from all these seven (7) cases, the landowner himself had a hand in either installing
the tenant, or confirming the tenancy relation by extending it, or negotiating directly with the tenant for the
better terms upon expiration of the civil lease. For, indeed, the right to install a tenant is a personal right
that belongs to the landowner, 25 except perhaps in civil lease when the lessee is authorized to sublease
the leased premises unless expressly prohibited by agreement of the parties. 26

Thus, the agricultural leasehold relations were preserved in these cases because the "legal possessors:
therein were clearly clothed with legal authority or capacity to install tenants. But even assuming that they
were not so authorized as in the Ponce case where the civil law lessee was expressly barred from
installing a tenant under their contract of lease, the subsequent actions of the landowners in extending
the lifetime of the lease, or in negotiating for better terms with the tenants, placed the landowners in
estoppel from contesting the agricultural leasehold relations. Consequently, the tenants in those cases
may be categorized as tenants de jure enjoying tenurial security guaranteed by the Agricultural tenancy
Law, 27 now by the Agricultural Land Reform Code, as amended. This is not the case before us.

In an attempt to bolster his theory that he was tenant of the landholding, Graciano presented no less than
the wife of Benigno, Monica Bernales-Bito-on, who testified that she was the civil law lessee who installed
Graciano as tenant. Interestingly, Monica is the sister of Adela Bernales, wife of Graciano. But why
should Monica be the civil law lessee and not her husband Benigno who is the brother of landowner
Natividad? It is highly improbable that instead of Natividad constituting her brother Benigno as the
possessor of the lands, it was Monica who was entrusted with them. That is contrary to common practice
an experience. Even The trial court itself found the version of Graciano incredible when it held that
Benigno was the legal possessor in the concept of usufructuary. Yet, it ignored this discrepancy which
could have destroyed the credibility of Graciano when in fact it could have totally negated or
disregarded Graciano's assertion of tenancy derived from Monica as civil law lessee. The conclusion is
not farfetched that Benigno and Monica were just entrusted with the four (4) lots, three (3) of which were
orchards until their unauthorized conversion to ricelands by Graciano, so that the former could avail of the
produce thereof for the purpose already stated.

Moreover, the claim of Graciano that he was the duly appointed tenant is belied by a certification issued
by the President of the Agrarian Reform Beneficiaries Association (ARBA), Panay Chapter, stating that,
as of 27 May 1985, Graciano Bernas was neither enrolled in the Master List of tenant beneficiaries nor
registered as a leasehold tenant of Natividad in Barangay Calitan. 28 If he was truly a tenant, he should
been vigilant enough to protect his rights and thus have his name registered. After all, at that time, his
older brother was the barangay captain of Calitan where the property is situated.

When Natividad invoked Sec. 2, P.D. 316, by referring her ejectment case to the Ministry of Agrarian
Reform for preliminary determination, MAR accordingly certified that it was proper for trial, an indication
that there was no tenancy relationship between the parties. Such factual finding, unless found to be
baseless, binds the court because the law gives exclusive authority to MAR to determine preliminary the
issue of tenancy relationship between the contending parties before the court may assume jurisdiction
over an agrarian dispute or controversy. 29

Indeed, the Investigating Officer of MAR correctly found that no tenancy relation existed between
Natividad and Graciano.30 Such factual finding by an administrative agency as the MAR is entitled to the
greatest respect and is binding and conclusive upon this court, except when it is patently arbitrary or
capricious, or is not supported by substantial evidence. 31 Regrettably, these vital informations
established in the trial court were simply ignored, to the great prejudice of respondent Natividad who,
under the majority opinion, will find herself helplessly without a remedy and all because she upheld the
true Filipino tradition of family solidarity by providing succor to a blood brother who needed assistance for
the educational advancement of his children.

It may be worth to emphasize that neither the decision of the Court of Appeals nor the discussions in this
case mention the unauthorized conversion by Graciano of Lots 794, 801 and 840 into ricelands, thereby
impairing the original nature and value of the lands. If for this reason alone, assuming that he was lawfully
installed as tenant, Graciano's tenancy should be terminated under Sec. 36, par. (3), for planting crops or
using the landholdings for a purpose other than for which they were dedicated.

While this may not have been expressly raised as an issue, it is nevertheless related or incidental to the
issues presented by the parties for which evidence was adduced in the trial court by private respondent
without objection from petitioner. We should not disregard the evidence if only to arrive at a fair and just
conclusion.

Some may have apprehensions that should Sec. 6 of R.A. 3844 be construed as not to vest the legal
possessor with automatic authority to install tenants, it would in effect open the floodgates to their
ejectment on the mere pretext that the legal possessor was not so authorized by the landowner. This is a
more imagined than real. The landowner has the burden of proving that the legal possessor was not
authorized to install tenants and, more often than not, the legal possessor is so empowered. In civil law,
lease, for the instance, where there is consideration, the general rule is that the lessee can sublease the
leased holding unless there is an express prohibition against subletting in the contract itself. 32 Thus, in
order for the lessee to be barred from subletting, the contract of lease must expressly stipulate to that
effect." In this case, the transaction between brother and sister was not for any material consideration nor
was it intended to defeat any purpose of law. There is not even any insinuation that Benigno was only
being used by Natividad to oust Graciano from the lands.
In any event, should the majority still hold that Sec. 6 of R.A. 3844 authorizes the persons therein
enumerated to institute a tenant automatically, although I strongly disagree, it should at most be made to
apply only to transfers of legal possession where there is material consideration, and not where such
transfers are absolutely gratuitous or purely out of benevolence because of personal or blood
relationship. Unfortunately for Natividad, her benevolence does not seem to evoke reciprocal
benevolence from this Court.

FOR ALL THE FOREGOING CONSIDERATIONS, I have to dissent from the majority opinion and
reiterate my vote to AFFIRM the judgment under review.

Meanwhile, I can only hope that, in the end, the real meaning of justice in this case is attained.

Feliciano, Davide, Jr. and Melo, JJ., concur.

# Separate Opinions

BELLOSILLO, J., dissenting:

This may be a faint echo in the wilderness but it is the quaint voice of a woman yearning for justice from
this court of last resort. The majority opinion would leave her alone where she is, to wallow in her own
misery, and despite her long and winding travails all for the love of a brother in need there is no light
at the end of the tunnel. There is no relief in sight for her plight. Her only fault was to lend her four (4)
small parcels of land to her brother so that the latter could use the fruits thereof for the education of his
children in Manila. Now, she cannot get them back because her brother allowed his brother-in-law, who
now claims security of tenure as tenant, to work the lands.

Worse, the brother-in-law continues to cultivate the landholdings, even converting the orchards into
ricelands as though they were his own and constructing a house of a strong materials thereon, without
paying any rent!

Before seeking judicial relief, private respondent went to the Ministry of Agrarian Reform (MAR) as
required by law,1and obtained a favorable finding that there was no tenancy relationship between her and
her brother's brother-in-law. But the courts below disregarded this important piece of evidence which
speaks eloquently of the merit of her cause. MAR certified that petitioner was not a tenant of private
respondent, hence, the case was proper for trial.

The finding of MAR was confirmed by the Agrarian Reform Beneficiaries Association (ARBA) when its
President certified after an investigation that petitioner did not appear in the Master List of tenant
beneficiaries of the barangay. Even his older brother, the barangay captain, after conducting his own
investigation, refused to certify that petitioner was a tenant of the holdings of private respondent.

Is private respondent indeed bereft of any remedy in law to recover possession of her landholdings
she who did not employ petitioner nor authorize anyone to employ him as tenant on her land; she who is
not even paid any rent by petitioner for the use of her landholdings; she whose landholdings have been
converted by petitioner from orchards to ricelands and on which he constructed a house of strong
materials, both without first securing authority from her? Under the circumstances, we can only hope that
posterity will not condemn us for the fate of private respondent and the many others who may be similarly
situated.
My conscience prompts me to dissent from the majority opinion and to vote for the affirmance of the
decision of the Court of Appeals, not necessarily on the basis of its rationale, but mainly because I do not
subscribe to the view that a usufructuary or legal possessor under Sec. 6, R.A. 3844, as amended, is
automatically authorized to employ a tenant without the consent of the landowner. For, the right to hire a
tenant is basically a personal right of a landowner, except as may be provided by law. But, certainly
nowhere in Sec. 6 of R.A. 3844 does it say that a legal possessor of a landholding is automatically
authorized to install a tenant thereon.

Natividad Bito-on Deita owns Lots 794, 801, 840 and 848 of the Cadastral Survey of Panay, Capiz. Lots
794 and 801, with areas of 943 square meters (Exh. "C") and 855 square meters (Exh. "B"'), respectively,
are coconut Lands; Lot 840, with an area of 1,000 square meters (Exh. "D"), is planted to bananas, while
Lot 848, with an area of 1,146 square meters (Exh. "A"), is riceland. Lot 840 was the owner's homelot on
which stood before the family home. Although the trial court found that the total area of the four (4) lots,
which are not contiguous, was 5,831 square meters, a closer examination of their tax declarations (Exhs.
"A" to "D") reveals that their total productive area is only 3,844 square meters, which can be smaller than
a residential lot in a plush village in Metro Manila.

After Natividad recovered these lots from a former tenant in April 1978, she entrusted them to her brother,
Benigno Bito-on, so that the latter may be able to support the education of his children in Manila. 2 She
did not authorize her brother to install a tenant thereon. 3 After successfully retrieving a landholding from a
tenant at that time, no landowner in his right mind would give his land in tenancy again to avoid the
operation of P.D. 27, then at its peak and dreaded by landowners as an unjust deprivation of property
rights.

Thereafter, without the knowledge, much less consent, of Natividad, Benigno entered into some
arrangement with his brother-in-law, Graciano Bernas, to work the lands. But Natividad was unaware of
this arrangement as she was staying in Manila where her husband was then employed. It was not until
the latter's retirement and the return of the family to Panay, Capiz, that she learned that Graciano was
already working the lands, converting Lots 794, 801 and 840 into ricelands, and constructing on Lot 840 a
house of concrete hollow blocks.

It bears emphasizing that, the transfer of possession between Natividad and Benigno was not coupled
with any consideration; rather, it was pure magnanimity on the part of Natividad on account of her "dugo"
or blood relation with Benigno, which Atty. Herminio R. Pelobello, Trial Attorney II and MAR Investigating
Officer, explains

A "DUGO" system is a personal grant of privilege and a privilege personally granted

cannot be delegated or extended to someone else but (is) personal (in) nature. Once the
"DUGO" grantee or trustee returns the subject matter of "DUGO", the relationship is
terminated . . . . In this instance, Exh. "E" is an expressive documentary evidence of
return of "DUGO" property by constructive mode of returning of possession, use and
enjoyment of property; same therefore deserves credence to the exclusion of any
interested person in tillage therein.

On 13 May 1985, his children having finished schooling in Manila, Benigno returned possession of the
property to Natividad, in faithful compliance with their agreement. However, Graciano refused to vacate
the premises claiming at first that he was installed thereon by Benigno, although after Benigno denied this
allegation, petitioner changed his theory by presenting Monica Bernales Bito-on, wife of Benigno, to
testify that she was the civil law lessee who installed Graciano on the lands. This, despite the crux of the
evidence spread on record that it was Benigno Bito-on who was given the physical possession of the
lands by his sister Natividad, and not Monica who is only her sister-in-law. Incidentally, Monica is the
sister of the wife of Graciano Bernas.
On 17 May 1985, fazed by the refusal of Graciano to vacate, Natividad filed a letter-petition4 with the
Ministry of Agrarian Reform (MAR) seeking clarification of the actual status of Graciano vis-a-vis her
landholdings. Accordingly, Graciano was summoned at least three (3) times but the latter refused to
attend the scheduled hearings. Consequently, Atty. Herminio R. Pelobello, who was assigned to the case,
conducted his investigation and thereafter issued a resolution5 sustaining the complaint of Natividad Bito-
on Dieta and concluding, among others that

. . . out of petitioner's benevolence, generosity and pity of his elder brother's financial
hardship, she had the aforesaid lots entrusted to her brother in the nature of DUGO so
that (the) latter then possessed the land and enjoy(ed) the . . . fruits thereon for the above
purpose beginning the year 1978 up to the 2nd crop of 1985; that upon the surrender or
giving back in her favor of the land subject of 'DUGO' there now appears the respondent
claiming to be the tenant-tiller on the land who would not relinquish the land in her favor
alleging and contending to have been instituted by Monica Bernales who is her sister-in-
law.

xxx xxx xxx

It is observed in this letter-petition (that) Filipino family adhered solidarity, sympathy and
pity by extending financial help of (to) a close relative by consanguinity. Apparently under
the circumstance, the "DUGO" trustee for the benefit of his school children in Manila is
Benigno Bito-on
. . . . Petitioner feeling morally bound . . . made the institution of "DUGO" relationship
among them in order to contributes a solution thereof. But ultimately after the 2nd
cropping of 1985 and after the school children of Benigno Bito-on had graduated in
college, he returned the property to petitioner as evidenced by Exh. "E".

Now comes to the surprise of petitioner, the respondent spring(s) out and assert(s) his
alleged right to tillage so as to prevent landowner to repossess the land subject of
"DUGO" upon return which is co-terminous with the period thereof.

On such core, no law or jurisprudence recognizes the right of respondent. Be that as it

may, as now happens, with Benigno Bito-on nor his wife Natividad (Monica) Bernas was
legally authorized to institute somebody to be tenant-tiller under the circumstance of
"DUGO" . . . so as to be entitled to invoke any right or privilege under our Agrarian Laws.

xxx xxx xxx

IN VIEW OF THE FOREGOING CONSIDERATIONS, it is now the honest opinion of the

undersigned to recommend as it is hereby recommended that the petitioner, Natividad
Bito-on Deita, be entitled to the possession, use and enjoyment of the lots subject of
'DUGO' and further, that the respondent constructively and actually delivers to her the
same lots indicated in this resolution, upon receipt of copy hereof.

The foregoing resolution of the MAR Investigating Officer may not be well crafted, but it is expressive of
his finding that Graciano Bernas was not a tenant-tiller and, consequently, it recommend that "the
petitioner, Natividad Bito-on Deita, be entitled to the possession, use and enjoyment of the lots subject of
'DUGO', and further, that the respondent (Graciano Bernas) constructively and actually delivers to her the
same lots indicated in this resolution . . . ." concluding that "no law or jurisprudence recognizes the right of
respondent."

While Natividad went through the normal legal procedure to obtain relief, Graciano refused to attend the
formal investigation and hearing conducted by the MAR, much less heed its recommendation. If Graciano
was a law-abiding citizen and believed that the law was on his side, he should have submitted to the fact-
finding investigation by an administrative agency pursuant to law.

On 24 May 1985, a mediation conference between Natividad and Graciano was held at the residence of
Brgy. Captain Felipe Bernas, older brother of Graciano, but it also proved fruitless as Graciano continued
to refuse to vacate subject landholdings. To top it all, Brgy. Captain Bernas sided with Graciano and
refused to issue a certification as required under P.D. 1508. If Graciano was indeed a tenant of the
landholdings, his older brother could have easily issued the required certification.

Consequently, the certification had to be issued by Sulpicio Bering, ARBA President, Panay
Chapter,6 dated 27 May 1985, at Barangay Calitan, Panay, Capiz, which confirmed the factual findings of
the MAR Investigating Officer

This is to certify that undersigned in his capacity as President of Agrarian Reform

Beneficiaries Association (ARBA), Panay Chapter, had attended last May 24, 1985 the
mediation confrontation among Mrs. Natividad Bito-on-Dieta and Mr. Graciano Bernas
accompanied by his wife Adela Bernales that took place right at the residence of Brgy.
Captain Felipe Bernas. That the outcome of the conference was fruitless as the Barangay
Captain was siding with his younger brother Graciano Bernas, and he (Brgy. Captain)
vehemently refused to issue any certification as required under P.D. 1508.

Hence undersigned as President of ARBA Panay Chapter hereby manifest and

certify that Graciano Bernas is not among those whose names are entered in our
masterlist of tenants so as to suffice as a bona fide member of Agrarian Reform
Beneficiaries Association in Panay, Capiz. It is further stated that Mr. Graciano Bernas is
not a leasehold tenant of landowner Mrs. natividad Bito-on Dieta in Barangay Calitan,
Panay, Capiz (emphasis supplied).

This certification is being issued to Mrs. Dieta in lieu of the refusal on the part(s) of Brgy.
Captain to issue such under the provision of P.D. 1508.

On 21 June 1985, after all her efforts to recover through administrative means failed, Natividad finally
instituted an action in the Regional Trial Court of Capiz. But, in deciding the case, the trial court
completely disregarded the result of the administrative investigation conducted by Atty. Herminio R.
Pelobello of the MAR (Exh. "6") and the Certification of the President of ARBA (Exh. "E") and ruled in
favor of Graciano, holding that the transaction between Natividad and Benigno was in the nature of a
usufruct so that the latter was legally capacitated to install Graciano as an agricultural lessee whose
tenurial right could not be disturbed except for causes enumerated under Sec. 36 of R.A. 3844, as
amended, 7 and that Natividad failed to establish any of the causes for his termination.

Natividad elevated her cause to the Court of Appeals contending that the transaction between her and
her brother Benigno was not in the nature of usufruct but rather one of commodatum. As such, Benigno,
as bailee in commodatum, could neither lend nor lease the property loaned to him to a third person since
the relationship between the bailor and bailee is personal in character. She also established with her
evidence that Graciano converted without her authority three (3) of her parcels of land, particularly those
planted to coconut and banana, to ricelands, which is a ground to terminate a tenant, assuming that
Graciano was.

The contention of Natividad was sustained by the Court of Appeals, which ordered the ejectment of
Graciano. The Court of Appeals ruled that having merely derived his right over the property from the
bailee, Graciano could have no better right than bailee Benigno who possessed the landholdings only for
a special purpose and for a limited period of time. The spring cannot rise higher than its source
Hence, this petition for review on certiorari filed by Graciano seeking reversal of the decision8 of the Court
of Appeals on the issue of whether he is an agricultural lessee of the landholdings entitled to security of
tenure.

The resolution of this issue hinges on the proper interpretation of Sec. 6 of R.A. 3844, as amended,
otherwise known as "The Agricultural Land Reform Code," which provides:

Sec. 6 Parties to Agricultural Leasehold Relations. The agricultural leasehold relations

shall be limited to the person who furnishes the landholding, either as owner, civil law
lessee, usufructuary, or legal possessor, and the person who personally cultivates the
same.
(emphasis ours).

Those who hold that Graciano is a leasehold tenant anchor their proposition on the above provision of
Sec. 6 as they find Benigno a "legal possessor" of the lands and so could legally install a tenant thereon.

I strongly disagree. When Sec. 6 provides that the agricultural leasehold relations shall be limited to the
person who furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal possessor,
and the person who personally cultivates the same, it assumes that there is an existing agricultural
leasehold relation, i. e., a tenant or agricultural lessee already works the land. As may be gleaned from
the epigraph of Section 6, it merely states who are "Parties to Agricultural Leasehold Relations," which
means that there is already a leasehold tenant on the land. But this is precisely what we are still asked to
determine in these proceedings.

To better understand Sec. 6, R.A. 3844, let us refer to its precursor, Sec. 8, R.A. 1199, as amended,
which provides:

Sec. 8. Limitation of Relation. The relation of landholder and tenant shall be limited to
the person who furnishes land, either as owner, lessee, usufructuary, or legal possessor,
and to the person who actually works the land himself with the aid of labor available from
within his immediate farm household.

Again, Sec. 8 of R.A. 1199 assumes the existence of a tenancy relation. But, as its epigraph states, it is a
"Limitation of Relation," and the purpose is merely to limit the tenancy "to the person who furnishes land,
either as owner, lessee, usufructuary, or legal possessor, and to the person who actually works the land
himself with the aid of labor available from within his immediate farm household." Otherwise stated, once
the tenancy relation is established, the parties to that relation are limited to the persons therein stated.
But, obviously, inherent in their right to install a tenant is their authority to do so; otherwise, without such
authority, they cannot install a tenant on the landholding. But, definitely, neither Sec. 6 of R.A. 3844 nor
Sec. 8 of R.A. 1199 automatically authorizes the persons named therein to employ a tenant on the
landholding.

According to Santos and Macalino, considered authorities on the land reform, the reasons Sec. 6, R.A.
3844, and 8, R.A. 1199, in limiting the relationship to the lessee and the lessor is "to discourage
absenteeism on the part of the lessor and the custom, of co-tenancy" under which "the tenant (lessee)
employs another to do the farm work for him, although it is he with whom the landholder (lessor) deals
directly. Thus, under this custom, the one who actually works the land gets the short end of the bargain,
for the nominal or 'capitalist' lessee hugs for himself a major portion of the harvest." 9 This custom has
bred exploitation, discontent and confusion . . . . The 'kasugpong,' 'kasapi,' or 'katulong' also works at the
pleasure of the nominal tenant." 10 When the new law, therefore, limited tenancy relation to the landholder
and the person who actually works the land himself with the aid of labor available from within his
immediate farm household, it eliminated the nominal tenant or middle man from the picture. 11
Another noted authority on land reform, Dean Jeremias U.
Montemayor, 12 explains the reason for Sec. 8, R.A. 1199, the precursor of Sec. 6, R.A. 3844:

Since the law establishes a special relationship in tenancy with important consequences,
it properly pinpoints the persons to whom said relationship shall apply. The spirit of the
law is to prevent both landholder absenteeism and tenant absenteeism. Thus, it would
seem that the discretionary powers and important duties of the landholder, like the choice
of crop or seed, cannot be left to the will or capacity of an agent or overseer, just as the
cultivation of the land cannot be entrusted by the tenant to some other people. Tenancy
relationship has been held to be of a personal character (see Secs. 37 and 44, R.A.
1199, as amended; emphasis supplied).

To argue that simply because Benigno is considered a usufructuary or legal possessor, or a bailee
in commodatumfor that matter, he is automatically authorized to employ a tenant on the landholding is to
beg the question. For, it is not correct to say that every legal possessor, be he a usufructuary or a bailee,
is authorized as a matter of right to employ a tenant. His possession can be limited by agreement of the
parties or by operation of law. In the case before Us, it is obvious that the tenure of the legal possessor
was understood to be only during the limited period when the children of Benigno were still schooling in
Manila.

As already stated, Sec. 6 simply enumerates who are the parties to an existing contract of agricultural
tenancy, which presupposes that a tenancy already exists. It does not state that those who furnish the
landholding, i.e., either as owner, civil law lessee, usufructuary, or legal possessor, are authomatically
authorized to employ a tenant on the landholding. The reason is obvious. The legal possession, may be
restrictive. Even the owner himself may not be free to install a tenant, as when his ownership or
possession is encumbered or is subject to a lien or condition that he should not employ a tenant thereon.
This contemplates a situation where the property may be intended for some other specific purpose
allowable by law, such as, its conversion into a subdivision.

In the case at bar, the transfer of possession was purely gratuitous. It was not made for any consideration
except for the "dugo" or blood relationship between Natividad and Benigno. Consequently, the generation
of rights arising therefrom should be strictly construed in favor of Natividad. In fact, for lack of
consideration, she may take back the land at any time unless she allows a reasonable time for Benigno to
harvest the produce of what he may have planted thereon as a possessor in good faith. There is not even
any valid obligation on her part to keep Benigno in possession, except as herein adverted to, much less
should she be deprived of such possession just because another person was employed by her brother to
work the land.

Under the doctrine laid down in Lastimoza v. Blanco, 13 Graciano cannot be a lawful tenant of Natividad
for the reason that Benigno, after failing to return the landholding to Natividad, already became a
deforciant, and a deforciant cannot install a lawful tenant who is entitled to security of tenure. Incidentally,
Benigno and Graciano being brothers-in-law, their wives being sisters, and living in a small barangay,
Graciano cannot profess ignorance of the very nature of the possession of Benigno as well as the
restrictions to his possession.

It may be relevant to consider, for a better appreciation of the facts, the actual condition of the
landholdings. As already adverted to, Lots 794 and 801 are coconut lands with an area of 943 square
meters (Exh. "C") and 855 square meters (Exh. "B"), respectively, or a total area of 1,798 square meters.
With this meager area for the two (2) coconut lands, there is indeed no reason to have them tenanted.
The coconut lands need not be cultivated when the coconut trees are already fruit-bearing. Benigno only
had to ensure that the fruits thereof were not stolen.

Lot 840 has an area of 1,000 square meters (Exh. "D") and is planted to bananas. Like the coconut lands,
no tenant is needed to cultivate it and Benigno only has to keep watch over it against stray animals and
protect his harvests. If we take away from this area of 1,000 square meters the homelot reserved for the
owner, the remaining portion for production cannot be more than 800 square meters. It can be less,
depending on the size of the homelot.

Before Graciano converted Lots 714, 801 and 840 into ricelands, the only riceland then was Lot 848, with
an area of 1,146 square meters (Exh. "A"). This is too small for an economic family-size farm to sustain
Benigno and his family even if he works it himself.

Considering the size of the landholdings, which have a total productive area of only 3,844 square meters
per their tax declarations, there may not be enough produce to pay for the educational expenses of his
children if Benigno to hire another person to cultivate the land and share the produce thereof. As a matter
of fact, to minimize expenses, the children of Benigno and Monica stayed with Natividad while schooling
in Manila.

Since lots 714, 801 and 840 are planted to coconut and banana trees, they are classified as lands planted
to permanent crops. Consequently, in order for a person to be considered a tenant of these lands, he
must have planted the crops himself before they became fruit-bearing. But, in the case before us, the
coconut and banana trees were already fruit-bearing at the time Graciano commenced to work on the
lands, hence, he cannot be considered a tenant of these lands.

Consequently, the transfer of possession of the landholding from Natividad to Benigno should be strictly
viewed as one for the cultivation alone of Benigno, himself a farm worker, who was not authorized by
Natividad to employ a tenant. Benigno's possession was limited only to the enjoyment of the fruits thereof,
subject to the will of landowner Natividad. Benigno was not empowered to install a tenant. 14

Benigno therefore possessed the land as a mere possessor-cultivator. As such, he was required to
personally till or cultivate the land and use the produce thereof to defray the cost of education of his
children. Natividad, who entrusted her landholdings to Benigno, was still the agricultural owner-cultivator,
who is "any person who, providing capital and management, personally cultivates his own land with the
aid of his immediate family and household." 15 It must then be held that the cultivation of Benigno was
also the cultivation of Natividad. Indeed, the fact that the lands were free of tenants when Natividad
entrusted them to Benigno was indicative of her intention to maintain that condition of the landholdings
and have them tended personally by Benigno himself.

Accordingly, neither Benigno nor Graciano can be a lessee-tenant who enjoys security of tenure. Benigno
could only be an encargado of his sister Natividad, merely enjoying the produce thereof for the intended
beneficiaries, his children studying in Manila.

Our attention may be invited to settled jurisprudence that the existence of an agricultural leasehold
relationship is not terminated by changes of ownership in case of sale, or transfer of legal possession as
in lease. 16 But, again, this assumes that a tenancy has already been established. In the instant case, no
such relationship was ever created between Natividad and Graciano, the former having simply given her
land to Benigno without any authority to install a tenant thereon, 17 and only for a limited duration as it was
coterminous with the schooling of Benigno's children in Manila.

In a number of cases, this Court has sustained the preservation of an agricultural leasehold relationship
between landholder and tenant despite the change of ownership or transfer of legal possession from one
person to another. But in all these cases, the facts legally justified the preservation of such relationship.
For example, in Endaya v.Court of Appeals, 18 Salen v. Dinglasan, 19 Catorce v. Court of
Appeals, 20 and Co. v Court of Appeals, 21 the tenants were found to have been instituted by the previous
landowners or owners in fee simple. Consequently, the change of ownership of the land did not terminate
the tenancy relationship already existing. In Novesteras v. Court of Appeals, 22 it was the present
landowner himself who instituted the agricultural leasehold relation. In Ponce v.Guevarra, 23 although the
civil law lessee was barred from installing a tenant under the terms of the original contract of lease, the
landowner nonetheless extended the lifetime of the lease. Finally, in Joya v. Pareja, 24 the lessor-
landowner negotiated for the better terms with the tenant of the civil law lessee upon expiration of the
lease.

As may be gleaned from all these seven (7) cases, the landowner himself had a hand in either installing
the tenant, or confirming the tenancy relation by extending it, or negotiating directly with the tenant for the
better terms upon expiration of the civil lease. For, indeed, the right to install a tenant is a personal right
that belongs to the landowner, 25 except perhaps in civil lease when the lessee is authorized to sublease
the leased premises unless expressly prohibited by agreement of the parties. 26

Thus, the agricultural leasehold relations were preserved in these cases because the "legal possessors:
therein were clearly clothed with legal authority or capacity to install tenants. But even assuming that they
were not so authorized as in the Ponce case where the civil law lessee was expressly barred from
installing a tenant under their contract of lease, the subsequent actions of the landowners in extending
the lifetime of the lease, or in negotiating for better terms with the tenants, placed the landowners in
estoppel from contesting the agricultural leasehold relations. Consequently, the tenants in those cases
may be categorized as tenants de jure enjoying tenurial security guaranteed by the Agricultural tenancy
Law, 27 now by the Agricultural Land Reform Code, as amended. This is not the case before us.

In an attempt to bolster his theory that he was tenant of the landholding, Graciano presented no less than
the wife of Benigno, Monica Bernales-Bito-on, who testified that she was the civil law lessee who installed
Graciano as tenant. Interestingly, Monica is the sister of Adela Bernales, wife of Graciano. But why
should Monica be the civil law lessee and not her husband Benigno who is the brother of landowner
Natividad? It is highly improbable that instead of Natividad constituting her brother Benigno as the
possessor of the lands, it was Monica who was entrusted with them. That is contrary to common practice
an experience. Even The trial court itself found the version of Graciano incredible when it held that
Benigno was the legal possessor in the concept of usufructuary. Yet, it ignored this discrepancy which
could have destroyed the credibility of Graciano when in fact it could have totally negated or
disregarded Graciano's assertion of tenancy derived from Monica as civil law lessee. The conclusion is
not farfetched that Benigno and Monica were just entrusted with the four (4) lots, three (3) of which were
orchards until their unauthorized conversion to ricelands by Graciano, so that the former could avail of the
produce thereof for the purpose already stated.

Moreover, the claim of Graciano that he was the duly appointed tenant is belied by a certification issued
by the President of the Agrarian Reform Beneficiaries Association (ARBA), Panay Chapter, stating that,
as of 27 May 1985, Graciano Bernas was neither enrolled in the Master List of tenant beneficiaries nor
registered as a leasehold tenant of Natividad in Barangay Calitan. 28 If he was truly a tenant, he should
been vigilant enough to protect his rights and thus have his name registered. After all, at that time, his
older brother was the barangay captain of Calitan where the property is situated.

When Natividad invoked Sec. 2, P.D. 316, by referring her ejectment case to the Ministry of Agrarian
Reform for preliminary determination, MAR accordingly certified that it was proper for trial, an indication
that there was no tenancy relationship between the parties. Such factual finding, unless found to be
baseless, binds the court because the law gives exclusive authority to MAR to determine preliminary the
issue of tenancy relationship between the contending parties before the court may assume jurisdiction
over an agrarian dispute or controversy. 29

Indeed, the Investigating Officer of MAR correctly found that no tenancy relation existed between
Natividad and Graciano.30 Such factual finding by an administrative agency as the MAR is entitled to the
greatest respect and is binding and conclusive upon this court, except when it is patently arbitrary or
capricious, or is not supported by substantial evidence. 31 Regrettably, these vital informations
established in the trial court were simply ignored, to the great prejudice of respondent Natividad who,
under the majority opinion, will find herself helplessly without a remedy and all because she upheld the
true Filipino tradition of family solidarity by providing succor to a blood brother who needed assistance for
the educational advancement of his children.
It may be worth to emphasize that neither the decision of the Court of Appeals nor the discussions in this
case mention the unauthorized conversion by Graciano of Lots 794, 801 and 840 into ricelands, thereby
impairing the original nature and value of the lands. If for this reason alone, assuming that he was lawfully
installed as tenant, Graciano's tenancy should be terminated under Sec. 36, par. (3), for planting crops or
using the landholdings for a purpose other than for which they were dedicated.

While this may not have been expressly raised as an issue, it is nevertheless related or incidental to the
issues presented by the parties for which evidence was adduced in the trial court by private respondent
without objection from petitioner. We should not disregard the evidence if only to arrive at a fair and just
conclusion.

Some may have apprehensions that should Sec. 6 of R.A. 3844 be construed as not to vest the legal
possessor with automatic authority to install tenants, it would in effect open the floodgates to their
ejectment on the mere pretext that the legal possessor was not so authorized by the landowner. This is a
more imagined than real. The landowner has the burden of proving that the legal possessor was not
authorized to install tenants and, more often than not, the legal possessor is so empowered. In civil law,
lease, for the instance, where there is consideration, the general rule is that the lessee can sublease the
leased holding unless there is an express prohibition against subletting in the contract itself. 32 Thus, in
order for the lessee to be barred from subletting, the contract of lease must expressly stipulate to that
effect." In this case, the transaction between brother and sister was not for any material consideration nor
was it intended to defeat any purpose of law. There is not even any insinuation that Benigno was only
being used by Natividad to oust Graciano from the lands.

In any event, should the majority still hold that Sec. 6 of R.A. 3844 authorizes the persons therein
enumerated to institute a tenant automatically, although I strongly disagree, it should at most be made to
apply only to transfers of legal possession where there is material consideration, and not where such
transfers are absolutely gratuitous or purely out of benevolence because of personal or blood
relationship. Unfortunately for Natividad, her benevolence does not seem to evoke reciprocal
benevolence from this Court.

FOR ALL THE FOREGOING CONSIDERATIONS, I have to dissent from the majority opinion and
reiterate my vote to AFFIRM the judgment under review.
G.R. No. 70736 March 16, 1987

BONIFACIO L. HILARIO and EDUARDA M. BUENCAMINO HILARIO, petitioners,

vs.
HONORABLE INTERMEDIATE APPELLATE COURT AND SALVADOR BALTAZAR, respondents.

Bonifacio L. Hilario for petitioners.

Alberto Mala, Jr. for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari of the Court of Appeals' decision declaring Salvador Baltazar a
leasehold tenant entitled to security of tenure on a parcel of land consisting of 1,740 square meters.

On January 13, 1981, Salvador Baltazar filed a verified complaint with the Court of Agrarian Relations,
Branch VI at Baliuag, Bulacan alleging that since January, 1955 he had been in continuous possession
as a share tenant of a parcel of land with an area of about 2 hectares situated in San Miguel, Bulacan,
which was previously owned by one Socorro Vda. de Balagtas; that on or about December 27, 1980, and
thereafter, the spouses Hilario began to threaten him to desist from entering and cultivating a portion of
the aforesaid land with an area of 4,000 square meters and otherwise committed acts in violation of his
security of tenure; that the Hilarios were contemplating the putting up of a fence around the said portion of
4,000 square meters and that unless restrained by the court, they would continue to do so to his great
irreparable injury.

Baltazar claims that he became a tenant of Socorro P. Vda. de Balagtas on the latter's two-hectare
landholding located at San Juan, San Miguel, Bulacan by virtue of a "Kasunduan" executed between
them on January 8, 1979, He states that he erected his house and planted "halaman," the produce of
which was divided at 70-30 and 50-50 (sic) in his favor. After the death of Socorro P. Vda. de Balagtas,
he allegedly gave the share pertaining to the landowner to her daughter Corazon Pengzon. It was only in
December, 1980 that he came to know that a portion of the 2 hectares or 4,000 square meters is already
owned by the Hilarios.

On the other hand, the petitioners aver that they acquired the landholding of 4,000 square meters from
the Philippine National Bank (PNB) after it had been foreclosed by virtue of a deed of sale executed
between Bonifacio Hilario and the PNB. The former owner Corazon Pengzon testified that she owned
only two lots-Lot 427-B with an area of 841 square meters and Lot 427-C with an area of 899 square
meters with a total area of 1,740 square meters. The other 2 lots were owned by Ruben Ocampo and
Juan Mendoza. She further testified that in 1964 at the time of the partition of the property, she declared
the property for classification purposes as "bakuran" located in the Poblacion and had no knowledge that
there were other things planted in it except bananas and pomelos.

On November 27, 1981, the Court of Agrarian Relations (CAR) in determining whether or not respondent
Baltazar is the tenant of the petitioners ruled that the land in question is not an agricultural landholding but
plain "bakuran," hence, Baltazar is not a tenant on the land.

On January 30, 1982, the Court of Appeals, however, remanded the case to the lower court for further
proceedings on the ground that the findings of the Court of Agrarian Relations (CAR) were not supported
by substantial evidence.

In compliance with the order of the Court of Appeals, the CAR admitted additional evidence.
On December 19, 1983, the CAR admitted the petitioners' third party complaint filed with leave against
the Philippine National Bank (PNB) which states that in the event that judgment would be rendered
against them under the original complaint, the PNB must contribute, indemnify, and reimburse the
spouses the full amount of the judgment.

On the basis of the parties' and their witnesses' affidavits containing detailed narrations of facts and
documentary exhibits which served as their direct testimonies pursuant to PD 946, the CAR found that
there was no tenancy relationship existing between Baltazar and the former owner, Corazon Pengzon.
The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered declaring plaintiff not to be a tenant on the

landholding described in the complaint and ordering his ejectment therefrom.

The third-party complaint is hereby dismissed for lack of merit. (pp. 25- 26, Rollo)

Again, respondent Salvador Baltazar appealed to the then Intermediate Appellate Court (IAC).

The IAC, however, reversed the decision of the CAR and held that:

... [T]he decision appealed from is hereby SET ASIDE, and another one entered
declaring plaintiff-appellant ii leasehold tenant entitled to security of tenure on the land in
question consisting of 1,740 square meters. Costs against defendants-appellees. (p. 31,
Rollo)

Consequently, the spouses Hilarios filed this petition for review making the following assignments of
errors:

I. THE INTERMEDIATE APPELLATE COURT ERRED IN DISTURBING THE FINDINGS OF FACTS

AND DECISION OF THE COURT OF AGRARIAN RELATIONS (CAR) WHICH IS SUPPORTED BY
SUBSTANTIAL EVIDENCE.

II. THE INTERMEDIATE APPELLATE COURT ERRED IN SUBSTITUTION (SIC) THE FINDINGS OF
FACTS OF CAR, OF ITS OWN FINDINGS.

III. THE INTERMEDIATE APPELLATE COURT ERRED IN NOT AFFIRMING THE DECISION OF CAR,
FINDING THE LOTS IN QUESTION WITH AN AREA OF 1,740 SQUARE METERS AS RESIDENTIAL
LOT AND PRIVATE RESPONDENT NOT TO BE A TENANT.

We agree with the respondent court when it stated that it can affirm on appeal the findings of the CAR
only if there is substantial evidence to support them. However, after a careful consideration of the records
of the case, we find no valid reason to deviate from the findings of the CAR. The evidence presented by
the petitioners is more than sufficient to justify the conclusion that private respondent Salvador Baltazar is
not a tenant of the landholding in question.

Salvador Baltazar claims: that he is working on the land in question pursuant to a "kasunduan" executed
between him and Socorro Balagtas. The contract covers a two-hectare parcel of land. The disputed
landholding is only 4,000 square meters more or less, although Baltazar claims that this area is a portion
of the two hectares in the contract. He testified that sometime in 1965, he relinquished 1.5 hectares of the
two hectares subject of the "kasunduan" to Nemesio Ocampo, Juan Mendoza, Miguel Ocampo and
Miguel Viola and what remained under his cultivation was 1/2 hectare owned by Corazon Pengson. He
stated that when Socorro Balagtas died, no new contract was executed. However, he insists that the old
contract was continued between Corazon Pengson and himself. (Rollo, p. 23).
This claim is controverted by the testimony of Corazon Pengson herself which we quote as follows:

Q After the death of your mother in 1965, what step, if any, have you
taken, regarding this subject landholding or after the death of your
mother how did you

Q ... administer this landholding in 1963, 1964, 1965, 1966, etc?

A What I did is to fix the title of ownership, sir.

COURT:

Q What else?

A None other, Your Honor.

Q After the death of your mother in 1962, have you seen Mr. Salvador
Baltazar in this landholding in question?

A Yes, Your Honor.

Q What was he doing?

WITNESS:

A We are neighbors, Your Honor, sometimes he visits and goes to our

place and we used to meet there, Your Honor.

Q What was the purpose of his visit and your meeting in this
landholding?

A Sometimes when he visits our place he tens us that there are some
bananas to be harvested and sometimes there are other fruits, your
Honor.

Q You mean to say he stays in this subject landholding consisting of

7,000 square meters?

A After the survey it turned out-

A . . . that he is occupying another lot which I learned that property does

not belong to us, Your Honor.

Q what was your arrangement regarding his stay in that landholding

which you don't own?

A He said that he had a contract with my late mother which I don't know;
in order not to cause any trouble because I will be bothered in my
business, I told him to continue, Your Honor.

Q What do you mean when you-

 COURT:

(continuing)

. . .told him to continue?

A What I mean to say is that he can stay there although I don't

understand the contract with my mother, Your Honor.

Q Was he paying rentals for his stay in that lot?

A No, Your Honor (T.S.N., pp. 15-19, hearing of August 5, 1981).

Corazon Pengson further explained that she did not receive any share from the produce of the land from
1964 up to the filing of the case and she would not have accepted any share from the produce of the land
because she knew pretty well that she was no longer the owner of the lot since 1974 when it was
foreclosed by the bank and later on purchased by the spouses Hilarios.

We note the CAR's finding:

Tenancy relationship is indivisible. The two-hectare land subject of plaintiff's alleged

contract with Socorro Balagtas having been parcelled into seven (7) and possession
thereof relinquished/surrendered in 1965 results in the termination of plaintiff's tenancy
relationship with the previous owner/landholder. Such being the case, he cannot now
claim that the landholding in question consisting of 4,000 square meters, more or less, is
being cultivated by him under the old contract. The owner thereof Corazon Pengson has
no tenancy relationship with him (plaintiff). (p. 25, Rollo)

From the foregoing, it is clear that Corazn Pengson did not give her consent to Baltazar to work on her
land consisting of only 1,740 square meters. We agree with the CAR when it said:

The law accords the landholder the right to initially choose his tenant to work on his land.
For this reason, tenancy relationship can only be created with the consent of the true and
lawful landholder through lawful means and not by imposition or usurpation. So the mere
cultivation of the land by usurper cannot confer upon him any legal right to work the land
as tenant and enjoy the protection of security of tenure of the law (Spouses Tiongson v.
Court of Appeals, 130 SCRA 482) (Ibid)

And in the case of Tuazon v. Court of Appeals (118 SCRA 484), this Court had the occasion to explain:

xxx xxx xxx

... Tenancy is not a purely factual relationship dependent on what the alleged tenant does
upon the land. It is also a legal relationship. The intent of the parties, the understanding
when the farmer is installed, and, as in this case, their written agreements, provided
these are complied with and are not contrary to law, are even more important."

The respondent court ruled that the fact that the land in question is located in the poblacion does not
necessarily make it residential.

The conclusion is purely speculative and conjectural, We note that the evidence presented by the
petitioners sufficiently establishes that the land in question is residential and not agricultural.
As we stated in Tiongson v. Court of Appeals (supra) "the key factor in ascertaining whether or not there
is a landowner-tenant relationship in this case is the nature of the disputed property."

The records show that the disputed property, only 1,740 square meters in area, is actually located in the
poblacion of San Miguel, Bulacan not far from the municipal building and the church. It is divided into two
lots-Lot 427-B with an area of 841 square meters and Lot 427-C with an area of 899 square meters. Two
other lots which the respondent claims to cultivate as "tenant" were originally owned by Ruben Ocampo
and Juan Mendoza, not Corazon Pengson, through whom the respondent traces his alleged tenancy
rights.

Respondent Baltazar is a full-time government employee working in the Bureau of Plant Industry.

The disputed lots were acquired at a foreclosure sale from the Philippine National Bank. They were
purchased as residential lots and the deed of sale describes them as "residential." The inspection and
appraisal report of the PNB classified the land as residential. The declaration of real property on the basis
of which taxes are paid and approved by the Acting Provincial Assessor of Bulacan classifies the land as
residential. The tax declarations show that the 841 square meter lot is assessed for tax purposes at
P25,236.00 while the 899 square meter lot is assessed at P26,920.00. The owner states that the land has
only bananas and pomelos on it. But even if the claim of the private respondent that some corn was
planted on the lots is true, this does not convert residential land into agricultural land.

The presumption assumed by the appellate court, that a parcel of land which is located in a poblacion is
not necessary devoted to residential purposes, is wrong. It should be the other way around. A lot inside
the poblacion should be presumed residential or commercial or non-agricultural unless there is clearly
preponderant evidence to show that it is agricultural.

The respondent court also failed to note that the alleged tenant pays no rental or share to the landowners.
Baltazar made a vague allegation that he shared 70-30 and 50-50 of the produce in his favor. The former
owner flatly denied that she ever received anything from him,

The requirements set by law for the existence of a tenancy relationship, to wit: (1) The parties are the
landholder and tenant; (2) The subject is agricultural land; (3) The purpose is agricultural production; and
(4) There is consideration; have not been met by the private respondent.

We held in Tiongson v. Court of Appeals, cited above that:

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 dejure 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 ... (emphasis supplied).

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. 88113 October 23, 1992

SPOUSES TITUS L. ENDAYA and GLENDA TRINIDAD; SPOUSES RICO L. ENDAYA and NANETTE
AQUINO; and SPOUSES JOSEPHINE L. ENDAYA and LEANDRO BANTUG, petitioners,
vs.
COURT OF APPEALS and PEDRO FIDELI, respondents.

ROMERO, J.:

Assailed in this petition for review on certiorari is the decision of the Court of Appeals in CA-.G.R. No.
15724 dated April 26, 19891 reversing the judgment of the Regional Trial Court of Tanauan, Batangas
(Branch 6) in Civil Case No. T-4302 and holding that private respondent is an agricultural lessee in the
land of petitioner whose security of tenure must be respected by the latter.

The antecedent facts are as follows:

The Spouses Natividad Trinidad and Cesar San Diego owned a piece of agricultural land consisting of
20,200 square meters situated at San Pioquinto, Malvar, Batangas, devoted to rice and corn. As far back
as 1934, private respondent Fideli has been cultivating this land as a tenant of the Spouses respondent
Fideli has been cultivating this land as a tenant of the Spouses San Diego under a fifty-fifty (50-50)
sharing agreement. This fact, petitioners do not dispute.

On May 2, 1974, a lease contract was executed between the Spouses San Diego and one Regino
Cassanova for a period of four years from May 1974 up to May 1978. 3 The lease contract obliged
Cassanova to pay P400.00 per hectare per annum and gave him the authority to oversee the planting of
crops on the land. 4 Private respondent signed this lease contract as one of two witnesses. 5

The lease contract was subsequently renewed to last until May 1980 but the rental was raised to
P600.00. Again, private respondent signed the contract as witness. 6

During the entire duration of the lease contract between the Spouses San Diego and Cassanova, private
respondent continuously cultivated the land, sharing equally with Cassanova the net produce of the
harvests.

On January 6, 1980, the Spouses San Diego sold the land to petitioners for the sum of P26,000.00. The
sale was registered with the Register of Deeds of Batangas and a Transfer Certificate of Title was duly
issued on January 7, 1981. 7 Private respondent continued to farm the land although petitioners claim that
private respondent was told immediately after the sale to vacate the land. 8 In any case, it is undisputed
that private respondent deposited with the Luzon Development Bank an amount of about P8,000.00 as
partial payment of the landowner's share in the harvest for the years 1980 until 1985. 9

Due to petitioners persistent demand for private respondent to vacate the land, private respondent filed in
April 1985 a complaint 10 with the Regional Trial Court of Tanauan, Batangas praying that he be declared
the agricultural tenant of petitioners.

After trial, the trial court decided in favor of petitioners by holding that private respondent is not an
agricultural lessee of the land now owned by petitioners. The dispositive portion of the RTC decision
reads:

WHEREFORE, judgment is hereby rendered dismissing plaintiff's complaint to be

declared a tenant of the landholding consisting of 20,200 square meters, located at San
 Pioquinto, Malvar, Batangas, and owned by the defendants; ordering Pedro Fideli to
vacate the landholding deliver possession thereof to the defendants; and ordering the
amount of P8,000.00 deposited under Account No. 2940029826 Civil Case No. T-430 to
be withdrawn and delivered to the defendants, No. pronouncement as to costs.

On appeal, the Court of Appeals reversed the RTC decision and declared private respondent to be the
agricultural lessee of the subject landholding. Hence, this petition wherein private respondent's status as
an agricultural lessee and his security of tenure as such are being disputed by petitioners.

Petitioners impugn the Court of Appeals' declaration that private respondent is an agricultural lessee of
the subject landholding contending that when the original landowners, the Spouses San Diego, entered
into a lease contract with Regino Cassanova, the agricultural leasehold relationship between the Spouses
San Diego and private respondent, the existence of which petitioners do not dispute, was thereby
terminated. Petitioners argue that a landowner cannot have a civil law lease contract with one person and
at the same time have an agricultural leasehold agreement with another over the same land. It is further
argued that because private respondent consented to the lease contract between the Spouses San Diego
and Cassanova, signing as he did the lease agreement and the renewal contract as witness thereof,
private respondent has waived his rights as an agricultural lessee.

These contentions are without merit.

R.A. No. 3844 (1963), as amended By R.A. No. 6839 (1971), which is the relevant law governing the
events at hand, abolished share tenancy throughout the Philippines from 1971 and established the
agricultural leasehold system by operation of law. 11 Section 7 of the said law gave agricultural lessees
security of tenure by providing the following: "The agricultural leasehold relation once established shall
confer upon the agricultural lessee the right to continue working on the landholding until such leasehold
relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding
and cannot be ejected therefrom unless authorized by the Court for causes herein provided." 12 The fact
that the landowner entered into a civil lease contract over the subject landholding and gave the lessee the
authority to oversee the farming of the land, as was done in this case, is not among the causes provided
by law for the extinguishment of the agricultural leasehold relation. 13 On the contrary, Section 10 of the
law provides:

Sec. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc.
The agricultural leasehold relation under this code shall not be extinguished by mere
expiration of the term or period in a leasehold contract nor by the sale, alienation or
transfer of the legal possession of the landholding. In case the agricultural lessor sells,
alienates or transfers the legal possession of the landholding, the purchaser or transferee
thereof shall be subrogated to the rights and substituted to the obligations of the
agricultural lessor.

Hence, transactions involving the agricultural land over which an agricultural leasehold subsists resulting
in change of ownership, e.g., sale, or transfer of legal possession, such as lease, will not terminate the
right of the agricultural lessee who is given protection by the law by making such rights enforceable
against the transferee or the landowner's successor in interest. 14

Illustrative of the legal principles outlined above is Catorce v. Court of Appeals 15 where the person
holding a mortgage over the farm land subject of an agricultural leasehold took possession thereof
pursuant to the mortgage and ousted the agricultural lessee. Upon complaint for reinstatement filed by
the agricultural lessee, the then Court of Agrarian Relations ordered the mortgagee to deliver possession
over the land to the agricultural lessee but his decision was reversed by the Court of Appeals. In
reversing the Court of Appeals' judgment and reinstating the Agrarian Court's decision, the Court, through
Justice Melencio-Herrera, noted, among other considerations, that "tenants are guaranteed security of
tenure, meaning, the continued enjoyment and possession of their landholding except when their
dispossession had been authorized by virtue of a final and executory judgment, which is not so in the
case at bar." 16 Implicit in the decision is the recognition that the transfer of possession to the mortgage
did not terminate the agricultural leasehold nor prejudice the security of tenure of the agricultural lessee.

Closer, to although not identical with the factual setting of the case at bar is Novesteras v. Court of
Appeals. 17Petitioner in said case was a share tenant of the respondent over two parcels of land.
Respondent entered into a contract of civil lease with Rosenda Porculas for a term of three years.
Porculas did not farm the land himself but left it to petitioner to till the land. After the expiration of the
lease between respondent and Porculas, petitioner entered into an agreement denominated as a contract
of civil lease with respondent. On expiration of this lease contract, respondent denied petitioner
possession over the land. Resolving the rights and obligations of the parties, the Court, through Justice
Paras, held that the petitioner therein became an agricultural tenant of respondent by virtue of R.A. No.
3844 (1963), as amended by R.A. No 6839 (1971). The lease contract between the respondent and
Porculas did not terminate the agricultural leasehold relationship between petitioner and respondent. If at
all, the said lease agreement, coupled by the fact that Porculas allowed petitioner to continue cultivating
in his capacity as tenant of the subject landholding, served to strengthen petitioner's security of tenure as
an agricultural tenant of the farmland in question. Accordingly, the subsequent contract between
petitioner and respondent denominated as a contract of civil lease was held by the Court to be in fact an
agricultural leasehold agreement.

Again, in Coconut Cooperative Marketing Association, Inc. (COCOMA) v. Court of Appeals, 18 it was held
that the agricultural leasehold is preserved, notwithstanding the transfer of the legal possession of the
subject landholding, with the transferee, COCOMA in that case, being accountable to the agricultural
lessees for their rights. The Court, through Justice Padilla, summarized the rule as follows:

There is also no question that, in this case, there was a transfer of the legal possession
of the land from one landholder to another (Fule to petitioner COCOMA). In connection
therewith, Republic Act 3844, Sec. 10 states:

Sec. 10. Agricultural Leasehold Relation Not Extinguished by Expiration

of Period, etc. The agricultural leasehold relation under this Code
shall not be extinguished by mere expiration of the term or period in a
leasehold contract nor by the sale, alienation or transfer of the legal
possession of the landholding. In case the agricultural lessor sells,
alienates or transfers the legal possession of the landholding, purchaser
or transferee thereof shall be subrogated to the rights and substituted to
the obligations of the agricultural lessor.

Further, in several cases, this Court sustained the preservation of the landholder-tenant
relationship, in cases of transfer of legal possession:

. . . in case of transfer or in case of lease, as in the instant case, the

tenancy relationship between the landowner and his tenant should be
preserved in order to insure the well-being of the tenant or protect him
from being unjustly dispossessed by the transferee or purchaser of the
land; in other words, the purpose of the law in question is to maintain the
tenants in the peaceful possession and cultivation of the land or afford
them protection against unjustified dismissal from their holdings.
(Primero v. CAR, 101 Phil. 675);

It is our considered judgment, since the return by the lessee of the

leased property to the lessor upon the expiration of the contract involves
also a transfer of legal possession, and taking into account the manifest
intent of the lawmaking body in amending the law, i.e., to provide the
 tenant with security of tenure in all cases of transfer of legal possession,
that the instant case falls within and is governed by the provisions of
Section 9 of Republic Act 1199, as amended by Republic Act 2263.
(Joya v. Pareja, 106 Phil, 645).

. . . that the tenant may proceed against the transferee of the land to
enforce obligation incurred by the former landholder such obligation . . .
falls upon the assignee or transferee of the land pursuant to Sec. 9
abovementioned. Since respondent are in turn free to proceed against
the former landholder for reimbursement, it is not iniquitous to hold them
responsible to the tenant for said obligations. Moreover, it is the purpose
of Republic Act 1199, particularly Sec. 9 thereof, to insure that the right
of the tenant to receive his lawful share of the produce to receive this
lawful share of the produce of the land is unhampered by the transfer of
said land from one landholder to another. (Almarinez v. Potenciano, 120
Phil.
1154.). 19

In the instant case, private respondent has been cultivating the subject farm landholding with a fifty-fifty
(50-50) sharing arrangement with the Spouses San Diego, petitioners' predecessors-in-interest. The
passage of R.A. 6839 in 1971, amending R.A. 3844 (1963), secured to private respondent all the rights
pertaining to an agricultural lessee. The execution of a lease agreement between the Spouses San Diego
and Regino Cassanova in 1974 did not terminate private respondent's status as an agricultural lessee.
The fact that private respondent knew of, and consented to, the said lease contract by signing as witness
to the agreement may not be construed as a waiver of his rights as an agricultural lessee. On the
contrary, it was his right to know about the lease contract since, as a result of the agreement, he had to
deal with a new person instead of with the owners directly as he used to. No provision may be found in
the lease contract and the renewal contract even intimating that private respondent has waived his rights
as an agricultural lessee. Militating against petitioners' theory that the agricultural leasehold was
terminated or waived upon the execution of the lease agreement between the San Diegos and
Cassanova is the fact the latter desisted from personally cultivating the land but left it to private
respondent to undertake the farming, the produce of the land being shared between Cassanova and
private respondent, while the former paid P400.00 and later P600.00 per hectare per annum to the San
Diegos, as agreed upon in the lease contract.

Petitioners, however, insist that private respondent can no longer be considered the agricultural lessee of
their farm land because after they purchased the land from the Spouses San Diego in 1980, private
respondent did not secure their permission to cultivate the land as agricultural lessee.

It is true that the Court has ruled that agricultural tenancy is not created where the consent the true and
lawful owners is absent. 20 But this doctrine contemplates a situation where an untenanted farm land is
cultivated without the landowner's knowledge or against her will or although permission to work on the
farm was given, there was no intention to constitute the worker as the agricultural lessee of the farm
land. 21 The rule finds no application in the case at bar where the petitioners are successors-in-interest to
a tenanted land over which an agricultural leasehold has long been established. The consent given by the
original owners to constitute private respondent as the agricultural lessee of the subject landholding binds
private respondents whom as successors-in-interest of the Spouses San Diego, step into the latter's
shows, acquiring not only their rights but also their obligations. 22

Contradicting their position that no agricultural leasehold exists over the land they acquired from the
Spouses San Diego, petitioners also pray for the termination of the tenancy of private respondent
allegedly due to: (a) non-payment of the agricultural lease rental; and (b) animosity between the
landowners and the agricultural lessee. The Court, however, observes that nowhere in the petitioners'
Answer to private respondent's Complaint or in the other pleadings filed before the trial court did
petitioners allege grounds for the termination of the agricultural leasehold. Well-settled is the rule that
issues not raised in the trial court cannot be raised for the first time on appeal. 23

In fine, the Court, after a painstaking examination of the entire records of the case and taking into account
the applicable law, as well as the relevant jurisprudence, rules that private respondent is the agricultural
lessee over the land owned by petitioners. As such, private respondent's security of tenure must be
respected by petitioners.

The Court, however, notes from the records of the case that private respondent has unilaterally decided
to pay only 25% of the net harvests to petitioners. 24 Since the agreement of private respondent with the
Spouses San Diego, the original owners, was for a fifty-fifty (50-50) sharing of the net produce of the land,
the same sharing agreement should be maintained between petitioners and private respondents, without
prejudice to a renegotiation of the terms of the leasehold agreement.

WHEREFORE, premises considered, the Petition is DISMISSED and the decision of the Court of Appeals
AFFIRMED. Private respondent is hereby ordered to pay the back rentals from 1980 until 1992 plus
interest at the legal rate. An accounting of the production of the subject landholding is to be made by
private respondent to the Regional Trial Court of Tanauan, Batangas which shall determine the amount
due to petitioners based on the rate ordered above.
G.R. No. 78214 December 5, 1988

YOLANDA CABALLES, petitioner,

vs.
DEPARTMENT OF AGRARIAN REFORM, HON. HEHERSON T. ALVAREZ and BIENVENIDO
ABAJON, respondents.

SARMIENTO, J.:

Before us is a petition for certiorari seeking the annulment of an Order issued by the public respondent
Ministry of Agrarian Reform , now the Department of Agrarian Reform (DAR), through its then Minister,
the Hon. Heherson Alvarez, finding the existence of a tenancy relationship between the herein petitioner
and the private respondent and certifying the criminal case for malicious mischief filed by the petitioner
against the private respondent as not proper for trial.

The facts as gathered by the MAR are as follows:

The landholding subject of the controversy, which consists of only sixty (60) square meters (20 meters x 3
meters) was acquired by the spouses Arturo and Yolanda Caballes, the latter being the petitioner herein,
by virtue of a Deed of Absolute Sale dated July 24, 1978 executed by Andrea Alicaba Millenes This
landholding is part of Lot No. 3109-C, which has a total area of about 500 square meters, situated at
Lawaan Talisay, Cebu. The remainder of Lot No. 3109-C was subseconsequently sold to the said
spouses by Macario Alicaba and the other members of the Millenes family, thus consolidating ownership
over the entire (500-square meter) property in favor of the petitioner.

In 1975, before the sale in favor of the Caballes spouses, private respondent Bienvenido Abajon
constructed his house on a portion of the said landholding, paying a monthly rental of P2.00 to the owner,
Andrea Millenes. The landowner likewise allowed Abajon to plant on a portion of the land, agreeing that
the produce thereof would be shared by both on a fitfy-fifty basis. From 1975-1977, Abajon planted corn
and bananas on the landholding. In 1978, he stopped planting corn but continued to plant bananas and
camote. During those four years, he paid the P2.00 rental for the lot occupied by his house, and delivered
50% of the produce to Andrea Millenes.

Sometime in March 1979, after the property was sold, the new owners, Arturo and Yolanda Caballes, told
Abajon that the poultry they intended to build would be close to his house and pursuaded him to transfer
his dwelling to the opposite or southern portion of the landholding. Abajon offered to pay the new owners
rental on the land occupied by his house, but his offer was not accepted. Later, the new owners asked
Abajon to vacate the premises, saying that they needed the property. But Abajon refused to leave. The
parties had a confrontation before the Barangay Captain of Lawaan in Talisay, Cebu but failed to reach
an agreement. All the efforts exerted by the landowners to oust Abajon from the landholding were in vain
as the latter simply refused to budge.

On April 1, 1982, the landowner, Yolanda Caballes, executed an Affidavit stating that immediately after
she reprimanded Abajon for harvesting bananas and jackfruit from the property without her knowledge,
the latter, with malicious and ill intent, cut down the banana plants on the property worth about P50.00. A
criminal case for malicious mischief was filed against Abajon and which was docketed as Criminal Case
No. 4003. Obviously, all the planting on the property, including that of the banana plants, had been done
by Abajon. On September 30, 1982, upon motion of the defense in open court pursuant to PD 1038, the
trial court ordered the referral of the case to the Regional Office No. VII of the then MAR for a preliminary
determination of the relationship between the parties. As a result, the Regional Director of MAR Regional
VII, issued a certification 1 dated January 24, 1 983, stating that said Criminal Case No. 4003 was not
proper for hearing on the bases of the following findings:
 That herein accused is a bona-fide tenant of the land owned by the complaining witness,
which is devoted to bananas;

That thin case is filed patently to harass and/or eject the tenant from his farmholding,
which act is prohibited by law; and

That this arose out of or is connected with agrarian relations.

From the said certification, the petitioner appealed to the then MAR, now the respondent DAR. Acting on
said appeal, the respondent DAR, through its then Minister Conrado Estrella, reversed the previous
certification in its Order 2 of February 3, 1986, declaring Criminal Case No. 4003 as proper for trial as "the
land involved is a residential lot consisting of only 60 square meters whereon the house of the accused is
constructed and within the industrial zone of the town as evinced from the Certification issued by the
Zoning Administrator of Talisay, Cebu."

Upon motion for reconsideration filed by Abajon, the respondent DAR, through its new Minister, herein
respondent Heherson Alvarez, issued an Orders dated November 15, 1986, setting aside the previous
Order 3 dated February 3, 1986, and certifying said criminal case as not proper for trial, finding the
existence of a tenancy relationship between the parties, and that the case was designed to harass the
accused into vacating his tillage.

In the summary investigation conducted by the DAR, the former landowner, Andrea Millenes, testified that
Bienvenido Abajon dutifully gave her 50% share of the produce of the land under his cultivation. The
grandson of Andrea Millenes, Roger Millenes, corroborated the testimony of the former, stating that he
received said share from Abajon. Roger Millenes further testified that the present owners received in his
presence a bunch of bananas from the accused representing or 50% of the two bunches of bananas
gathered after Caballes had acquired the property. 4

From these factual findings, the DAR concluded that Abajon was a tenant of Andrea Millenes, the former
owner, who had testified that she shared the produce of the land with Abajon as truer thereof. 5 Thus,
invoking Sec. 10 of RA 3844, as amended, which provides that "[T]he agricultural leasehold relation
under this Code shall not be extinguished by mere expiration of the term or period in a leasehold contract
nor by the sale, alienation or transfer of the legal possession of the landholding"; and that "(I)n case the
agricultural lessor sells, alienates or transfers the legal possession of the landholding, the purchaser or
transferee thereof shall be subrogated to the rights and substituted to the obligations of the agricultural
lessor," the MAR ruled that 'the new owners are legally bound to respect the tenancy, notwithstanding
their claim that the portion tilled by Abajon was small, consisting merely of three (3) meters wide and
twenty (20) meters long, or a total of sixty (60) square meters."6

Hence, this petition for certiorari alleging that:

I. Respondents DAR and Hon. Heherson T. Alvarez committed "grave abuse of power and discretion
amounting to lack of jurisdiction" in holding that private respondent Abajon is an agricultural tenant even if
he is cultivating only a 60-square meter (3 x 20 meters) portion of a commercial lot of the petitioner.

II. Public respondents gravely erred in holding that Criminal Case No. 4003 is not proper for trial and
hearing by the court. 7

We hold that the private respondent cannot avail of the benefits afforded by RA 3844, as amended. To
invest him with the status of a tenant is preposterous.

Section 2 of said law provides:

 It is the policy of the State:

(1) To establish cooperative-cultivatorship among those who live and work on the land as
tillers, owner-cultivatorship and the economic family-size farm as the basis of Philippine
agriculture and, as a consequence, divert landlord capital in agriculture to industrial
development;

xxx xxx xxx

RA 3844, as amended, defines an economic family-size farm as "an area of farm land that permits
efficient use of labor and capital resources of the farm family and will produce an income sufficient to
provide a modest standard of living to meet a farm family's needs for food, clothing, shelter, and
education with possible allowance for payment of yearly installments on the land, and reasonable
reserves to absorb yearly fluctuations in income." 8

The private respondent only occupied a miniscule portion (60 square meters) of the 500-square meter lot.
Sixty square meters of land planted to bananas, camote, and corn cannot by any stretch of the
imagination be considered as an economic family-size farm. Surely, planting camote, bananas, and corn
on a sixty-square meter piece of land can not produce an income sufficient to provide a modest standard
of living to meet the farm family's basic needs. The private respondent himself admitted that he did not
depend on the products of the land because it was too small, and that he took on carpentry jobs on the
side. 9 Thus, the order sought to be reviewed is patently contrary to the declared policy of the law stated
above.

The DAR found that the private respondent shared the produce of the land with the former owner, Andrea
Millenes. This led or misled, the public respondents to conclude that a tenancy relationship existed
between the petitioner and the private respondent because, the public respondents continue, by
operation of Sec. 10 of R.A. 3844, as amended, the petitioner new owner is subrogated to the rights and
substituted to the obligations of the supposed agricultural lessor (the former owner).

We disagree.

The essential requisites of a tenancy relationship are:

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 harvests.

All these requisites must concur in order to create a tenancy relationship between the parties. The
absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter
thereon, 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.10

Therefore, the fact of sharing alone is not sufficient to establish a tenancy relationship. Certainly, it is not
unusual for a landowner to accept some of the produce of his land from someone who plants certain
crops thereon. This is a typical and laudable provinciano trait of sharing or patikim, a native way of
expressing gratitude for favor received. This, however, does not automatically make the tiller-sharer a
tenant thereof specially when the area tilled is only 60, or even 500, square meters and located in an
urban area and in. the heart of an industrial or commercial zone at that. Tenancy status arises only if an
occupant of a parcel of land has been given its possession for the primary purpose of agricultural
production. The circumstances of this case indicate that the private respondent's status is more of a
caretaker who was allowed by the owner out of benevolence or compassion to live in the premises and to
have a garden of some sort at its southwestern side rather than a tenant of the said portion.

Agricultural production as the primary purpose being absent in the arrangement, it is clear that the private
respondent was never a tenant of the former owner, Andrea Millenes. Consequently, Sec. 10 of RA of
3844, as amended, does not apply. Simply stated, the private respondent is not a tenant of the herein
petitioner.

Anent the second assignment of error, the petitioner argues that since Abajon, is not an agricultural
tenant, the criminal case for malicious mischief filed against him should be declared as proper for trial so
that proceedings in the lower court can resume.

Notwithstanding our ruling that the private respondent is not a tenant of the petitioner, we hold that the
remand of the case to the lower court for the resumption of the criminal proceedings is not in the interest
of justice. Remand to the Municipal Court of Talisay, Cebu, would not serve the ends of justice at all, nor
is it necessary, because this High Tribunal is in a position to resolve with finality the dispute before it. This
Court, in the public interest, and towards the expeditious administration of justice, has decided to act on
the merits and dispose of the case with finality. 11

The criminal case for malicious mischief filed by the petitioner against the private respondent for allegedly
cutting down banana trees worth a measly P50.00 will take up much of the time and attention of the
municipal court to the prejudice of other more pressing cases pending therein. Furthermore, the private
respondent will have to incur unnecessary expenses to finance his legal battle against the petitioner if
proceedings in the court below were to resume. Court litigants have decried the long and unnecessary
delay in the resolution of their cases and the consequent costs of such litigations. The poor, particularly,
are victims of this unjust judicial dawdle, Impoverished that they are they must deal with unjust legal
procrastination which they can only interpret as harassment or intimidation brought about by their poverty,
deprivation, and despair. It must be the mission of the Court to remove the misperceptions aggrieved
people have of the nature of the dispensation of justice. If justice can be meted out now, why wait for it to
drop gently from heaven? Thus, considering that this case involves a mere bagatelle the Court finds it
proper and compelling to decide it here and now, instead of further deferring its final termination.

As found by the DAR, the case for malicious mischief stemmed from the petitioner's affidavit stating that
after she reprimanded private respondent Abajon for harvesting bananas and jackfruit from the property
without her knowledge, the latter, with ill intent, cut the banana trees on the property worth about P50.00.

This was corroborated by a certain Anita Duaban, a friend of the petitioner, who likewise executed an
affidavit to the effect that she saw the private respondent indiscriminately cutting the banana trees. 12

The Revised Penal Code, as amended, provides that "any person who shall deliberately cause to the
property of another any damage not falling within the terms of the next preceding chapter shall be guilty of
malicious mischief."13

The elements of the crime of malicious mischief are:

1. The offender deliberately caused damage to the property of another;

2. The damage caused did not constitute arson or crimes involving destruction;
3. The damage was caused maliciously by the offender.

After a review of the facts and circumstances of this case, we rule that the aforesaid criminal case against
the private respondent be dismissed.
The private respondent can not be held criminally liable for malicious mischief in cutting the banana trees
because, as an authorized occupant or possessor of the land, and as planter of the banana trees, he
owns said crops including the fruits thereof The private respondent's possession of the land is not illegal
or in bad faith because he was snowed by the previous owners to enter and occupy the premises. In
other words, the private respondent worked the land in dispute with the consent of the previous and
present owners. Consequently, whatever the private respondent planted and cultivated on that piece of
property belonged to him and not to the landowner. Thus, an essential element of the crime of malicious
mischief, which is "damage deliberately caused to the property of another," is absent because the private
respondent merely cut down his own plantings.

WHEREFORE, the Order of public respondents dated November 15, 1986 is SET ASIDE and Criminal
Case No. 4003, is hereby DISMISSED. Let a copy of this decision be sent to the Municipal Trial Court of
Talisay, Cebu for appropriate action. This Decision is IMMEDIATELY EXECUTORY.
G.R. No. 76225 March 31, 1992

ESPIRIDION TANPINGCO, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, and BENEDICTO HORCA, SR., respondents.

GUTIERREZ, JR., J.:

May a tenanted parcel of land be donated by the landowner so that it can be the site of a public high
school without securing the consent of the tenant-lessee? Who bears the responsibility of paying
disturbance compensation? These are the issues raised in this case.

On May 10, 1985, a complaint for payment of disturbance compensation with damages was filed by
petitioner Espiridion Tanpingco against respondent Benedicto Horca, Sr. with the Regional Trial Court of
Palo, Leyte.

It is alleged in the complaint that the petitioner is the tenant-lessee in the respondent's parcel of
agricultural riceland situated at Brgy. Buenavista, Jaro, Leyte under a leasehold contract entered into
sometime in April, 1976; that in a letter dated April 9, 1985, the respondent through his representative
informed him to desist from working on the subject land, having already donated the same on February 3,
1985; that the respondent openly ordered the petitioner to vacate the landholding and is determined to
oust him from the premises in violation of the law; that the petitioner is willing to accept payment of
disturbance compensation in an amount computed in accordance with law and in the alternative to remain
as tenant-lessee of the subject riceland.

On July 5, 1985, the case was called for pre-trial following which the trial court gave the respondent until
July 9, 1985 to file his answer. The respondent filed instead a Motion to Dismiss alleging principally that
the complaint states no cause of action because the respondent is not the real party-in-interest having
already donated the subject land to the Ministry of Education, Culture, and Sports, Region VIII, as a
school site of the Buenavista Barangay High School; and that the donation not having in anyway
benefited the respondent, no disturbance compensation is due the petitioner since under Section 36 (1) of
the Agrarian Reform Code as amended, disturbance compensation holds true only in cases wherein the
lessor-owner derives financial benefits from the conversion of the agricultural land into non-agricultural
purposes.

The trial court granted the respondent's Motion to Dismiss and denied the petitioner's Motion for
Reconsideration.

On June 20, 1986, the Intermediate Appellate Court rendered the decision now assailed, the dispositive
portion of which reads as follows:

WHEREFORE, finding no merit in the instant appeal, the same is hereby DISMISSED
with costs taxed against the appellant.

From the aforesaid decision, petitioner Esperidion Tanpingco interposed the present petition under the
following assignment of errors.

Was it proper for the trial court to grant the Motion to Dismis filed by the defendant inspite
of explicit mandate against such action as contained in Section 17 of P.D. No. 946?
 II

Was respondent Court correct in sustaining the validity of the conversion of the subject
tenanted riceland into a school site?

III

Was it correct in ruling that a tenant is not entitled to payment of disturbance

compensation in case his tenanted landholding is donated and converted into a school
site?

Anent the first assignment of error, the petitioner anchors his contention mainly on Section 17 of
Presidential Decree No. 946 which provides:

Sec. 17. Pleading, Hearing, Limitation on Postponements. The defendant shall file
answer to the complaint (not a motion to dismiss), within a non-extendible period of ten
(10) days from service of
summons . . .

In Sucaldito and De Guzman v. Hon. Montejo (193 SCRA 556 [1991]), the Court declared that where the
law speaks in clear and categorical language, there is no room for interpretation. However, technicalities
may be disregarded in order to resolve the case on its merits. (Ruiz v. Court of Appeals, G.R. No. 93454,
September 13, 1991 citing Tesoro v. Mathay, 185 SCRA 124 [1990]).

On this point, the respondent appellate court noted that:

The rationale of the rule requiring a defendant in an agrarian case to file an answer and
not a motion to dismiss is to expedite the proceedings. The filing of the motion to dismiss
and the granting thereof by the lower court based upon indubitable grounds precisely
expedited the proceedings and conforms with the spirit and intention of P.D. 946 which
requires courts trying agrarian cases to employ every reasonable means to ascertain the
facts of every case in accordance with justice and equity without regard to technicalities
of law and procedure and empowering the Court to adopt any appropriate measure or
procedure in any situation or matter not provided for or covered by the Decree (Section
16, 3rd and 4th sentences, P.D. 946).

We, therefore, take exception to the literal application of Section 17 of P.D. No. 946 for as stated
in Salonga v. Warner Barnes and Co., Ltd. (88 Phil. 125 [1951], an action is brought for a practical
purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party, any
decision that may be rendered against him would be futile, for it cannot be enforced or executed. The
effort that may be employed will be wasted.

Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted in the name of the
real party-in-interest. A corollary proposition to this rule is that an action must be brought against the real
party-in-interest, or against a party which may be bound by the judgment to be rendered therein (Salonga
v. Warner Barnes and Co., Ltd. supra citing Salmon and Pacific Commercial Co., v. Tan Cuenco, 36 Phil.
556 [1917]). The real party-in-interest is one who stands to be benefited or be injured by the judgment, or
the party entitled to the avails of the suit (Rebollido v. Court of Appeals, 170 SCRA 800 [1989] citing
Samahan ng mga Nangungupahan sa Azcarraga Textile Market, Inc., et al. v. Court of Appeals, 165
SCRA 598 [1988]). If the suit is not brought against the real party-in-interest, a motion to dismiss may be
filed on the ground that the complaint states no cause of action (Section 1(g), Rule 16, Rules of Court).
Hence, the resolution of the dispute hinges upon the determination of whether or not the private
respondent is the real party-in-interest against whom the suit should be brought.

The private respondent bolsters his claim that he is not the real party-in-interest on Section 10 of Republic
Act No. 3844 (Code of Agrarian Reforms of the Philippines) which provides that:

. . . In the case the agricultural lessor sells, alienates or transfers the legal possession of
the landholding, the purchaser or transferee thereof shall be subrogated to the rights and
substituted to the obligation of the agricultural lessor.

In effect, the private respondent is of the view that the Ministry of Education, Culture and Sports, as
donee, became the new lessor of the agricultural lessee by operation of law and is therefore the real
party-in-interest against whom the claim for disturbance compensation should be directed.

We agree with the contentions of the private respondent. The petitioner should have impleaded the
Ministry of Education, Culture and Sports as the party-defendant for as stated in Roman Catholic
Archbishop of Manila v. Court of Appeals (198 SCRA 300 [1991]), a donation, as a mode of acquiring
ownership, results in an effective transfer of title over the property from the donor to the donee and once
a donation is accepted, the donee becomes the absolute owner of the property donated.

Under Article 428 of the New Civil Code, the owner has the right to dispose of a thing without other
limitations than those established by law. As an incident of ownership therefore, there is nothing to
prevent a landowner from donating his naked title to the land. However, the new owner must respect the
rights of the tenant. Section 7 of R.A. No. 3844, as amended (Code of Agrarian Reforms of the
Philippines) gives the agricultural lessee the right to work on the landholding once the leasehold
relationship is established. It also entitles him to security of tenure on his landholding. He can only be
ejected by the court for cause. Time and again, this Court has guaranteed the continuity and security of
tenure of a tenant even in cases of a mere transfer of legal possession. As elucidated in the case
of Bernardo v. Court of Appeals (168 SCRA 439 [1988]), security of tenure is a legal concession to
agricultural lessees which they value as life itself and deprivation of their landholdings is tantamount to
deprivation of their only means of livelihood. Also, under Section 10 of the same Act, the law explicitly
provides that the leasehold relation is not extinguished by the alienation or transfer of the legal
possession of the landholding. The only instances when the agricultural leasehold relationship is
extinguished are found in Section 8, 28 and 36 of the Code of Agrarian Reforms of the Philippines. The
donation of the land did not terminate the tenancy relationship. However, the donation itself is valid.

Considering that the tenant in the case at bar is willing to accept payment of disturbance compensation in
exchange for his right to cultivate the landholding in question, the real issue is who should pay the
compensation. We rule that the Ministry of Education, Culture and Sports as the new owner cannot oust
the petitioner from the subject riceland and build a public high school thereon until after there is payment
of the disturbance compensation in accordance with Section 36 (1) of R.A. No. 3844, as amended.

In view of the foregoing, we are of the opinion and so hold that the trial court correctly dismissed the
complaint for payment of disturbance compensation because the private respondent is not the real party-
in-interest. And having arrived at this conclusion, we do not deem it necessary to pass upon the other
errors assigned by the petitioner for as stated in Filamer Christian Institute v. Court of Appeals (190
SCRA 485 [1990]), a person who was not impleaded in the complaint could not be bound by the decision
rendered therein, for no man shall be affected by a proceeding to which he is a stranger. The remedy
then of the petitioner is to claim his disturbance compensation from the new owner or whatever agency,
local or national, is in a position to pay for it.

WHEREFORE, the petition is hereby DENIED. The decision dated 20 June 1986 of the
Intermediate Appellate Court is AFFIRMED. No pronouncement as to costs.
G.R. No. 126425 August 12, 1998

POLICARPIO NISNISAN AND ERLINDA NISNISAN, petitioners,

vs.
COURT OF APPEALS, PACITA MANCERA, WENCESLAO MANCERA and SILVESTRE
POLANCOS, respondents.

MARTINEZ, J.:

This petition for review on certiorari filed under Rule 45 of the Revised Rules of Court assails the
decision 1 of the Court of Appeals in CA-G.R. CV No. 39416 affirming en toto the decision 2 of the
Regional Trial Court (Branch 21) of Bansalan, Davao del Sur, in Civil Case No. XXI-5 (86), which
dismissed petitioners' complaint for reinstatement of tenancy holding filed against private respondents
spouses Pacita Mancera and Wenceslao Mancera.

The facts as culled from the record are as follows:

Spouses Gavino and Florencia Nisnisan are the owners of a parcel of land denominated as Lot No. 2510,
Cad 275 located at Dolo, Bansalan, Davao del Sur, with an area of 4,9774 hectares, covered by Original
Certificate of Title No. (P-11676)-2151. Petitioner Policarpio Nisnisan, son of Gavino Nisnisan, has been
cultivating one hectare of the aforesaid land since 1961.

On April 1, 1976, Gavino Nisnisan and petitioner Policarpio Nisnisan entered into a leasehold tenancy
contract 3which stipulates a sharing arrangement of 1/3:2/3 of the harvest, the bigger share being given to
the latter.

On December 28, 1978, Gavino Nisnisan sold two hectares of their land, including the land tenanted by
petitioners-spouses Policarpio and Erlinda Nisnisan, to private respondents-spouses Wenceslao Mancera
and Pacita H. Mancera.

As a result of the sale, petitioners-spouses were ousted from their landholding. Hence, on November 24,
1982, petitioners-spouses instituted an action 4 for reinstatement of tenancy holding against private
respondent spouses Wenceslao and Pacita Mancera before the Court of Agrarian Relations (CAR) in
Davao City. The case was later transferred to the Regional Trial Court when the CAR was abolished. The
said complaint was dismissed without prejudice on December 16, 1985.

Sometime in 1983, Gavino Nisnisan demanded from the Mancera spouses to repurchase the said land
but the latter refused. Hence, on November 3, 1986, spouses Gavino and Florencia Nisnisan, together
with the petitioners-spouses Policarpio and Erlinda Nisnisan, filed a complaint with the Regional Trial
Court for: (a) repurchase of the subject land under the Public Land Act, (b) declaration of nullity of the
instrument of sale and Transfer Certificate of Title No. T-15954, (c) reinstatement of tenancy holding and
(d) damages. 5 The complaint alleged among others,

xxx xxx xxx

FOURTH CAUSE OF ACTION

1. Plaintiffs herein are agricultural tenants-lessees under the Provisions of PD No. 27 on

a portion of one (1) hectare of that parcel of land sold by plaintiffs to the defendants by
virtue of the conveyance dated March 31, 1982; said tenanted portion is devoted and
 cultivated by tenants plaintiffs to lowland rice culture as shown by an accomplished
OTAC FORM No. 56-B with the land owner prior to the aforementioned sale;

2. That, despite the verbal agreement between defendants vendee and plaintiffs tenants
for plaintiffs herein to continue and cultivate their tenancy holdings in pursuant to PD No.
27 availing security of tenancy tenure on any land sold if devoted to rice and corn culture,
defendants ejected the plaintiffs without court order, and therefore plaintiffs were
deprived of their only livelihood;

3. That, in disregard of and to subvert PD No. 27, defendants induced plaintiff Policarpio
Nisnisan to sign a prepared affidavit which he did not know nor understood the correct
import purporting that he has surrendered his tenancy holdings; that the execution of said
affidavit was without the knowledge, consent, and participation of his tenant spouse,
Erlinda Nisnisan;

4. That, despite that plaintiffs and defendants agreed that in case of sale or transfer of
ownership of the tenanted portion the security of tenure of the plaintiffs follows the land
as established under PD. No. 27, but that after the sale, the defendants persisted in
ejecting the plaintiffs from said tenancy holdings; that despite plaintiffs availing of the
provisions of PD No. 1508, no settlement and/or conciliation was reached in the Office of
the Lupon Tagapayapa, as a result in case No. 70 a certification to file action has been
issued;

5. That, plaintiffs have been deprived of their income from said land holdings as tenant
thereof under PD No. 27; defendants therefore are liable for damages:

Traversing the allegation in the complaint with regard to the prayer for reinstatement of tenancy holding of
petitioners Nisnisan spouses, which is the sole subject matter in this petition, the private respondents
Mancera spouses countered that the Nisnisan spouses have no cause of action, the latter having
voluntarily surrendered their landholding. 6

On June 25, 1992, the trial court rendered a decision dismissing the complaint ruling that the petitioners-
spouses' allegation of tenancy is repudiated by the affidavit executed by Gavino Nisnisan to the effect that
the subject land is not tenanted. The trial court ratiocinated in this wise:

As to the claim of reinstatement by Policarpio Nisnisan, it appears from the affidavit

(Exhibit X for the Court) of Gavino Nisnisan which was executed and filed with the Office
of the Register of Deeds of Davao del Sur, and recorded as Entry No. 117718, per
memorandum of encumbrances of Original Certificate of Title No. (P-11676)-2151
(Exhibit A/5-C) that the said land is not tenanted. This claim therefore by no less than
plaintiff Gavino Nisnisan, has totally shattered the claim of tenancy of Policarpio Nisnisan.
A fortiori therefore the claim for reinstatement has to fail. 7

The above-quoted ruling of the trial court was affirmed by the respondent Court of Appeals in its Decision
dated November 20, 1995 which substantially adopted the trial court's findings, thus:

The Memorandum of Encumbrances of appellant Gavino's OCT No. (P-11676)-2151

(Exhibits A to A-3) contain two entries of affidavit of non-tenancy. The first is Entry No.
72086 for Affidavit of Non-Tenancy under Justice Circular No. 31. The second Entry No.
117718 for Affidavit of Non-Tenancy executed by Gavino Nisnisan, vendor. Also
appellants-spouses Gavino and Florencia Nisnisan executed a Joint Affidavit dated
January 28, 1985 wherein they averred the following:
 9. That it is not true that our son and his wife were our tenants in the said
land as they did not give any share to us nor did we ask for it and any
semblance of tenancy they did have was only a ploy that did enable
them to borrow under the Masagana 99 programs of the government
which they did ultimately failed to pay but which we paid as parents if
only to save our son from being prosecuted and jailed for estafa. 8

Aggrieved by the Court of Appeals' decision, petitioners-spouses now come to this Court on the sole
issue of: "Whether or not petitioners Spouses Policarpio and Erlinda Nisnisan voluntarily surrendered
their tenancy holding."

We find merit in the petition.

The finding of the Court of Appeals that the petitioners-spouses are not tenants of the subject land
holding is erroneous. While there are annotations in Gavino Nisnisan's certificate of title (Entry No. 72086
for Affidavit of Non-Tenancy under Justice Circular No. 31 and Entry No. 117718 for Affidavit of Non-
Tenancy executed by Gavino Nisnisan) that the subject land is not tenanted, said annotations are not
conclusive proof of the real relationship between Gavino Nisnisan and petitioner Policarpio Nisnisan and
are not binding upon the court. As we have ruled in Cuao vs. Court of Appeals, 9

We believe and so hold that such annotation cannot be regarded as conclusive upon the
courts of justice as to the legal nature and incidents of the relationship between the
landowner(s) in this case and private respondents. Firstly, the annotation serves basically
as notice to all persons of the existence of the Certification issued by Mr. Eugenio
Bernardo, but neither adds to the validity or correctness of that certification nor converts a
defective and invalid instrument into a valid one as between the parties. Secondly, the
certification issued by Mr. Eugenio Bernardo of the MAR (Ministry of Agrarian Reform) is
very much like the certifications issued by the Secretary of Agrarian Reform and other
officials of the Ministry and later the Department of Agrarian Reform concerning the
existence of tenancy relationships in respect of agricultural lands from which persons,
who claim to be tenants, are sought to be ejected. It is well-settled that the findings of or
certifications issued by the Secretary of Agrarian Reform, or his authorized
representative, in a given locality concerning the presence or absence of a tenancy
relationship between the contending parties are merely preliminary or provisional and not
binding upon the courts. (Emphasis Ours)

Moreover, petitioners-spouses have sufficiently shown that they are the tenants of the spouses Gavino
and Florencia Nisnisan as evidenced by a document entitled "Panagsabutan Sa Abang Sa Yuta" (Exhibit
"D"), executed by Gavino Nisnisan and Policarpio Nisnisan on April 1, 1976, acknowledged before the
Municipal Trial Court Judge Mariano C. Tupas of Bansalan, Davao del Sur, and registered before the
Municipal Treasurer's Office, portions of which read:

xxx xxx xxx

2 Nga ang yuta nga giasoy sa itaas pagatamnan sa NAGA-ABANG SA YUTA ug humay .
. . sa panahon sa ting-ulan ug humay . . . sa panahon sa ting-init sulod sa termino niining
kasabutan, ubos sa mga kondisyones nga mao;

xxx xxx xxx

4. Nga ang naasoy nga yuta pagaabangan ug . . . 15 ka bakid nga . . . humay sa tag 50
kilos kada bakid para sa panuig, ug 15 ka bakid nga . . . humay sa tag 50 kilos kada
bakid para sa pangulilang . . .;
 5. Nga ang abang para sa tuig tingtanum adto ibayad sa NAGAPAABANG o sa iyang
piniyalan sa sulod sa 3 ka adlaw sukad sa petsa sa ting-ani . . . ihatud sa balay sa
nagpa-abang o kon kagustuhan sa NAGAPAABANG SA YUTA, mahimo iyang kuha-on
ang abang sa petsa sa tinggiok . . . .

6. Nga kon pananglitan, ang maong tanum madaut nga balor ug 75% tungod sa mga
hinungdan nga dill tinuyo (fortuituos event or force majeure) ang NAGA-ABANG SA
YUTA DILI mapugos sa pagbayad sa gikasabutan abang alang nianang tuiga, apan
kinahangalan pagbayaran niya kanang maong abang pinaagi sa data-data sa sukad sa
50% (kuarta o humay sa kada ting-ani mag sugod sa sunod nga ting tanum hangtud nga
maimpas ang bayranan;

xxx xxx xxx

The above-quoted document evidences the leasehold tenancy relationship between Gavino Nisnisan and
petitioner Policarpio Nisnisan. It clearly shows that the subject land is agricultural; that petitioner
Policarpio Nisnisan is obligated to cultivate the same by planting rice thereon; and, that there is sharing of
the harvests between the said parties. It is clear that essential elements of tenancy relationship 10 are
present in this case, namely:

1. the parties are the landowner and the tenant

2. the subject matter is agricultural land

3. there is consent

4. the purpose is agricultural production

5. there is personal cultivation by the tenants

6. there is sharing of harvests between parties

Significantly, this documentary evidence of leasehold tenancy relationship was never rebutted by the
private respondents-spouses. Furthermore, this leasehold tenancy contract cannot be defeated by the
aforementioned affidavit of non-tenancy executed by Gavino Nisnisan, which is obviously self-serving.

Private respondents likewise impliedly admitted in their answer to the complaint that petitioners-spouses
are tenants when they alleged that petitioners-spouses have voluntarily surrendered the subject
landholding. 11 This brings us to the issue of whether or not petitioners-spouses have indeed voluntarily
surrendered the subject landholding. Upon perusal of the record of the case, we find private respondents'
contention baseless. Other than their bare allegations, private respondents failed to present any evidence
to show that petitioners-spouses surrendered their landholding voluntarily after the private respondents
purchased the subject property. Moreover, the filing of the complaint for reinstatement of leasehold
tenancy by petitioners-spouses against private respondents before the CAR militates against the private
respondents' claim that petitioners-spouses voluntarily surrendered their landholding to them.

Under Section 8 of Republic Act No. 3844, 12 voluntary surrender, as a mode of extinguishing agricultural
leasehold tenancy relations, must be convincingly and sufficiently proved by competent evidence. The
tenant's intention to surrender the landholding cannot be presumed, much less determined by mere
implication. 13

Based on the foregoing disquisition, it is clear that petitioners-spouses are agricultural lessees and are
therefore entitled to security of tenure as mandated by Section 10 of Republic Act 3844:
 Sec. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc.
The agricultural leasehold relation under this Code shall not be extinguished by mere
expiration of the term or period in a leasehold contract nor by the sale, alienation or
transfer of the legal possession of the landholding. In case the agricultural lessor sells,
alienates or transfers the legal possession of the landholdings, the purchaser or
transferee thereof shall be subrogated to the rights and substituted to the obligations of
the agricultural lessor. (Emphasis Ours)

Thus, the agricultural leasehold relation cannot be extinguished by the mere expiration of the term or
period in an agricultural leasehold contract nor by the sale, alienation or transfer of the legal possession
of the landholding. He can only be ejected for cause 14, which, however, is absent in the case at bar.

WHEREFORE, the Decision of the Court of Appeals dated November 20, 1995 is hereby MODIFIED in
that, petitioners-spouses Policarpio and Erlinda Nisnisan are declared tenants and AFFIRMED in all other
respects.