Buada vs. Cement Center, Inc.

A tenant-farmer’s alleged voluntary surrender of tenancy rights is not valid where it is not convincingly and sufficiently proved by competent evidence, is not shown to be due to circumstances more advantageous to the tenant and his family, and the disturbance compensation is not shown to comply with the required administrative standard; tenancy relations cannot be bargained away except for strong reasons provided by law.

Petitioners were tenant-farmers cultivating three parcels of agricultural land owned by respondent Cement Center, Inc. The State policy under Republic Act No. 3844 promotes the security of tenure of farmers over their leasehold, while voluntary surrender is an exception to that security. Administrative Order No. 12 requires disturbance compensation not less than five times the average annual gross value of the harvest on the tenants’ actual landholdings during the last five preceding calendar years, and also requires efforts to provide free homelots and assured employment for displaced beneficiaries.

Petitioners were tenant-farmers cultivating three parcels of agricultural land owned by respondent Cement Center, Inc., covered by Transfer Certificate of Title Nos. 127892, 123800, and 83276. On June 28, 1995, petitioners entered into a Compromise Agreement with respondent whereby the former, for and in consideration of ₱3,000.00 each, allegedly voluntarily surrendered their respective landholdings. Paragraph 4 of the Compromise Agreement provided that the income derived from the properties and the financial assistance of ₱3,000.00 shall be considered as the disturbance compensation package in favor of the second party by reason of their vacating the premises in accordance with Administrative Order No. 1, Series of 1990 of the Department of Agrarian Reform. Respondent claimed that despite repeated demands, petitioners refused to vacate the subject landholdings.

Petitioners alleged that their consent to the Compromise Agreement was obtained through fraud, deceit, and misrepresentation. They claimed that sometime in 1995, respondent induced them to sign the Compromise Agreement by representing that the subject landholdings were no longer viable for agricultural purposes. Respondent allegedly assured them that they would only apply for the conversion of the land and that they would have to surrender the land only upon approval of said application, and that thereafter they would be paid a disturbance compensation of ₱3,000.00 each. Respondent also promised to hire them to work on the project planned for the converted land. If the application for conversion were denied, petitioners would continue to be tenants and could later become beneficiaries under the Comprehensive Agrarian Reform Law. Petitioners asserted that they were not aware that these conditions were not incorporated in the Compromise Agreement because they were not literate in the English language used, were not represented by counsel, and were not informed of the agreement’s contents. They invoked Articles 1370 and 1371 of the Civil Code and claimed that, as they were illiterate in English, they could not have given valid consent. They also averred that the disturbance fee of ₱3,000.00 for each tenant violated Administrative Order No. 12, Series of 2004, which requires disturbance compensation not less than five times the average of the annual gross value of the harvest on their actual landholdings during the last five preceding calendar years, and requires free homelots and assured employment for displaced beneficiaries.

Respondent countered that the Compromise Agreement did not reflect the conditions alleged by petitioners, and that parol evidence should not be allowed to prove such conditions. It argued that petitioners could not claim illiteracy in English and lack of explanation because every contracting party must learn and know the contents of an instrument before signing it. It also maintained that assistance of counsel was not necessary because the execution of the agreement was not akin to a custodial investigation or criminal proceeding. As to the disturbance fee, respondent believed that ₱3,000.00 for each tenant was fair and sufficient because, apart from that amount, petitioners were allowed to cultivate the lands for a single cropping without any obligation to pay lease rental in the form of palay or cotton harvest or any other mode of payment.

The Regional Adjudicator found that the Compromise Agreement was not enforceable because it violated Administrative Order No. 12, Series of 1994, since the disturbance compensation offered was grossly inadequate and no homelots were offered. It also noted that the denial of respondent’s application for conversion rendered the purpose of the Compromise Agreement nugatory, and that the landholdings should be placed under the Comprehensive Agrarian Reform Program compulsory coverage. The DARAB found that respondent failed to prove that petitioners voluntarily surrendered their tenancy rights and that, since the conversion application was denied, the Compromise Agreement was not a perfected obligation, as if the voluntary surrender never existed. The Court of Appeals found the Compromise Agreement valid, held that its enforceability was not subject to DARAB approval of the conversion application, ruled that deficiency in consideration was not a ground to annul an otherwise valid agreement, and found petitioners literate because they were able to affix their signatures to the agreement.

• Interpretation of the Compromise Agreement: Petitioners argued that the Court of Appeals gravely erred in inferring that the Compromise Agreement is not subject to interpretation. They maintained that the agreement was subject to suspensive conditions — approval of respondent’s application for conversion of the land to non-agricultural use, their absorption as laborers in the business respondent would put up, or, if the application were denied, their continuation as tenants and eventual qualification as beneficiaries under the Comprehensive Agrarian Reform Program. They claimed these conditions were not incorporated because they were not literate in the English language used, were not represented by counsel, and were not informed of the contents, and that the agreement should be interpreted according to the real intention of the parties under Articles 1370 and 1371 of the Civil Code.
• Literacy and Consent: Petitioners maintained that the Court of Appeals gravely erred in inferring that they, as tenants, were literate and thus understood the import of the contract they signed. They claimed they were illiterate in the English language and could not have given valid consent to the Compromise Agreement.
• Deficiency of Consideration: Petitioners argued that the Court of Appeals gravely erred in inferring that the deficiency of consideration, which was not in accordance with Administrative Order No. 12, does not nullify the contract. They averred that the disturbance fee of ₱3,000.00 for each tenant violated Administrative Order No. 12, Series of 2004, which requires disturbance compensation not less than five times the average annual gross value of the harvest during the last five preceding calendar years, plus free homelots and assured employment.

• Parol Evidence: Respondent countered that the Compromise Agreement does not reflect the conditions alleged by petitioners, and that parol evidence should not be allowed to prove such conditions.
• Literacy and Contract Knowledge: Respondent argued that petitioners cannot claim illiteracy in the English language and that the contents of the agreement were not explained to them, because it is incumbent upon every contracting party to learn and know the contents of an instrument before signing and agreeing to it.
• No Right to Counsel: Respondent maintained that it was not necessary for petitioners to be assisted by counsel in signing the agreement, as the execution thereof is not akin to a custodial investigation or criminal proceedings wherein the right to be represented by counsel is indispensable.
• Sufficiency of Disturbance Fee: Respondent argued that the sum of ₱3,000.00 for each tenant is fair and sufficient because, apart from said amount, petitioners were allowed to cultivate the lands for a single cropping without any obligation to pay lease rental in the form of palay or cotton harvest or any other mode of payment.

• Voluntary Surrender: Whether the Compromise Agreement constituted the “voluntary surrender” of tenancy rights contemplated by law.
• Interpretation of the Compromise Agreement: Whether the Court of Appeals gravely erred in making an inference that the Compromise Agreement is not subject to interpretation.
• Literacy and Consent: Whether the Court of Appeals gravely erred in making an inference that petitioners, who are tenants, are literate and thus understood the import of the contract they signed.
• Deficiency of Consideration: Whether the Court of Appeals gravely erred in making an inference that the deficiency of consideration, which is not in accordance with Administrative Order No. 12, does not nullify the contract.

• Voluntary Surrender: No. The Compromise Agreement did not constitute the voluntary surrender contemplated by law because voluntary surrender must be convincingly and sufficiently proved by competent evidence and must be due to circumstances more advantageous to the tenant and his family.
• Interpretation of the Compromise Agreement: Yes, the Court of Appeals erred in treating the agreement as not subject to interpretation. The controlling inquiry was whether the tenants intended an absolute and voluntary surrender, which the evidence failed to establish.
• Literacy and Consent: Yes, the Court of Appeals erred in relying on the signatures to establish voluntary surrender. The case was resolved on the insufficiency of evidence of voluntary surrender, not on a definitive finding that petitioners were literate.
• Deficiency of Consideration: Yes, the Court of Appeals erred. The disturbance compensation package was not shown to comply with Administrative Order No. 12, and no evidence showed it was advantageous to petitioners’ families.

• Voluntary Surrender: Republic Act No. 3844, Section 7 guarantees the agricultural lessee the right to continue working on the landholding until the leasehold relation is extinguished. Section 8 allows extinguishment by voluntary surrender of the landholding by the agricultural lessee, with written notice served three months in advance. Voluntary surrender does not require court authorization because it involves the tenant’s own volition, but to protect the tenant’s right to security of tenure, it must be convincingly and sufficiently proved by competent evidence; the tenant’s intention to surrender cannot be presumed or determined by mere implication. Section 28(5) further requires that voluntary surrender be due to circumstances more advantageous to the tenant and his family. Here, petitioners denied absolute surrender and claimed that the agreement was subject to suspensive conditions: approval of the conversion application, absorption as laborers, or, if the application were denied, continuation as tenants and eventual qualification as CARP beneficiaries. Respondent failed to prove voluntary surrender. There was no showing why petitioners, as tenant-farmers, would voluntarily give up their sole source of livelihood, and no showing that the ₱3,000.00 payment was advantageous to their families. Tenancy relations cannot be bargained away except for strong reasons provided by law, which must be convincingly shown by evidence. Thus, the alleged surrender for ₱3,000.00 each did not constitute voluntary surrender. Because the Court of Appeals’ findings conflicted with those of the DARAB, the Court reviewed the factual milieu under a recognized exception to the rule that the Court is not a trier of facts.
• Interpretation of the Compromise Agreement: The Court did not enforce the literal terms of the Compromise Agreement in a manner that would defeat the tenants’ security of tenure. It examined the surrounding circumstances and the parties’ intent, including the alleged suspensive conditions, to determine whether there was voluntary surrender. The Court of Appeals’ ruling that the agreement was not subject to interpretation could not stand because the central issue was whether the tenants intended absolutely and voluntarily to surrender their tenancy rights, which the evidence did not convincingly show.
• Literacy and Consent: The Court noted petitioners’ claims that they were not literate in the English language, were not represented by counsel, and had the contents of the agreement not explained to them. The disposition did not rest on a definitive finding of illiteracy or on the parol evidence rule; it rested on respondent’s failure to prove voluntary surrender under agrarian law. The Court of Appeals’ inference from the mere fact of signatures was insufficient to establish the voluntary surrender required by law.
• Deficiency of Consideration: Paragraph 4 of the Compromise Agreement treated the income from a single cropping and the ₱3,000.00 financial assistance as the disturbance compensation package under Administrative Order No. 1, Series of 1990. Petitioners assailed this as contrary to Administrative Order No. 12, Series of 2004, which requires disturbance compensation not less than five times the average annual gross value of the harvest during the last five preceding calendar years, plus free homelots and assured employment. Respondent failed to present evidence that the package complied with this standard. There was no showing that the amount was not less than the required five-times average, and no showing that the money was advantageous to petitioners’ families. The insufficiency supported the conclusion that no voluntary surrender occurred.

• Security of Tenure in Agricultural Leasehold — Republic Act No. 3844 declares the State policy to make small farmers more independent, self-reliant, and responsible citizens, and a source of genuine strength in a democratic society. Section 7 guarantees the agricultural lessee the right to continue working on the landholding until the leasehold relation is extinguished. The Court applied this policy to protect petitioners’ tenancy rights against an alleged surrender not convincingly proved.
• Voluntary Surrender as an Exception — Under Republic Act No. 3844, Section 8(2), voluntary surrender by the agricultural lessee, with written notice served three months in advance, extinguishes the leasehold relation; no court authorization is required because it involves the tenant’s own volition. However, to protect the right to security of tenure, voluntary surrender must be convincingly and sufficiently proved by competent evidence; the tenant’s intention to surrender cannot be presumed or determined by mere implication. The Court found this standard unmet.
• Advantageous Circumstances Requirement — Republic Act No. 3844, Section 28(5) permits termination by the lessee for voluntary surrender due to circumstances more advantageous to him and his family. The Court found no showing that ₱3,000.00 each, plus single-cropping income, was advantageous or that it justified giving up the tenants’ sole source of livelihood.
• Disturbance Compensation Standard — Administrative Order No. 12 requires disturbance compensation not less than five times the average annual gross value of the harvest on the actual landholdings during the last five preceding calendar years, and requires efforts to provide free homelots and assured employment for displaced beneficiaries. The Court found respondent failed to show compliance, which negated the claim of valid voluntary surrender.
• Tenancy Relations Cannot Be Bargained Away — Tenancy relations cannot be bargained away except for strong reasons provided by law, which must be convincingly shown by evidence in line with the State’s policy of achieving a dignified existence for small farmers free from pernicious institutional restraints and practices. The Court applied this principle to reject the alleged surrender for ₱3,000.00 each.
• Exception to Conclusiveness of CA Factual Findings — Although the Court is not a trier of facts and the Court of Appeals’ findings supported by substantial evidence are conclusive, an exception lies when the Court of Appeals’ findings are contrary to those of the trial court or quasi-judicial agency. Because the Court of Appeals and DARAB findings conflicted, the Court reviewed the factual milieu.

• "Voluntary surrender, as a mode of extinguishment of tenancy relations, does not require any court authorization considering that it involves the tenant's own volition." — States the exception to security of tenure and explains why voluntary surrender does not require prior court approval.
• "To protect the tenant's right to security of tenure, voluntary surrender, as contemplated by law, 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. Otherwise, the right of a tenant farmer to security of tenure becomes an illusory one." — Sets out the ratio decidendi on the evidentiary standard for voluntary surrender.
• "The Compromise Agreement did not constitute the 'voluntary surrender' contemplated by law." — States the core holding that the agreement did not validly extinguish the tenancy relations.
• "To stress, tenancy relations cannot be bargained away except for the strong reasons provided by law which must be convincingly shown by evidence in line with the State's policy of achieving a dignified existence for the small farmers free from pernicious institutional restraints and practices." — Articulates the protective principle governing tenancy relations and the burden of proof.

• Talavera vs. Court of Appeals, G.R. No. 77830, February 27, 1990, 182 SCRA 778 — The Court found this case closer to the factual setting. In Talavera, the Kasunduan was prepared by the landowners, the tenant continued working for more than 10 years after its execution, and no showing explained why he would voluntarily give up his sole source of livelihood. The Court held the Kasunduan did not constitute voluntary surrender and reinstated the tenant. Here, the Court similarly found the evidence insufficient to prove voluntary surrender.
• Levardo vs. Yatco, G.R. No. 165494, March 20, 2009 — Cited as a contrast. There, the Court upheld the waiver of tenancy rights because respondents paid substantial disturbance compensation, the Pinanumpaang Salaysay showed the tenants gave up their rights to seek a better livelihood, the money was advantageous to their families, and the waivers were notarized. Here, no such advantageous circumstances or substantial compensation were shown.
• Jacinto vs. Court of Appeals, 176 Phil. 580, 588 (1978) — Cited for the rule that voluntary surrender as a mode of extinguishing tenancy relations does not require court authorization because it involves the tenant’s own volition.
• Ludo & Luym Development Corporation vs. Barretto, G.R. No. 147266, September 30, 2005, 471 SCRA 390, 405 — Cited with Talavera for the rule that voluntary surrender must be convincingly proved by competent evidence and the tenant’s intention to surrender cannot be presumed or determined by mere implication.
• The Consolidated Bank and Trust Corp. vs. Court of Appeals, 316 Phil. 246, 252 (1995) — Cited for the exception to the rule that the Court of Appeals’ factual findings are conclusive: the Court may review facts when the Court of Appeals’ findings are contrary to those of the trial court or quasi-judicial agency. The Court applied this exception because the Court of Appeals and DARAB findings conflicted.

• Republic Act No. 3844, Section 2(6) — Declares the State policy to make small farmers more independent, self-reliant, and responsible citizens, and a source of genuine strength in a democratic society. The Court used this policy as backdrop for protecting petitioners’ security of tenure.
• Republic Act No. 3844, Section 7 — Provides that the agricultural leasehold relation, once established, confers upon the agricultural lessee the right to continue working on the landholding until the leasehold relation is extinguished. The Court applied this to affirm petitioners’ right to continue as tenants absent a valid extinguishment.
• Republic Act No. 3844, Section 8 — Enumerates the grounds for extinguishment of the agricultural leasehold relation, including voluntary surrender by the agricultural lessee with written notice served three months in advance. The Court held that the alleged surrender did not fall within this provision because it was not convincingly proved.
• Republic Act No. 3844, Section 28(5) — Allows the agricultural lessee to terminate the leasehold during the agricultural year for voluntary surrender due to circumstances more advantageous to him and his family. The Court found no showing that the ₱3,000.00 payment and single-cropping income were advantageous to petitioners and their families.
• Administrative Order No. 12, Series of 1994 (cited by the Regional Adjudicator) and Administrative Order No. 12, Series of 2004 (invoked by petitioners) — Requires disturbance compensation not less than five times the average annual gross value of the harvest on the actual landholdings during the last five preceding calendar years, and requires efforts to provide free homelots and assured employment for displaced beneficiaries. The Court found respondent failed to show compliance with this standard.
• Administrative Order No. 1, Series of 1990 — Referenced in paragraph 4 of the Compromise Agreement as the basis for treating the income from the properties and the ₱3,000.00 financial assistance as the disturbance compensation package. The Court examined this package and found it insufficiently supported.
• Civil Code, Articles 1370 and 1371 — Invoked by petitioners to argue that the Compromise Agreement should be interpreted according to the parties’ real intention, with contemporaneous and subsequent acts considered. The Court resolved the case on the insufficiency of evidence of voluntary surrender rather than on a separate interpretation ruling.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Roberto A. Abad, and Jose P. Perez concurred. The decision also carries an attestation by Justice Carpio as Chairperson of the Second Division and a certification by Chief Justice Reynato S. Puno pursuant to Section 13, Article VIII of the Constitution.