G.R. No. 166115 - McDonald's Corporation vs. Macjoy Fastfood Corporation

Case Summary (G.R. No. 166115)

Procedural History

Petitioner filed a complaint on July 2, 2002 for unlawful occupation, damages and attorney’s fees. The Office of the Regional Adjudicator rendered an initial decision, later affirmed and modified by the Department of Agrarian Reform Adjudication Board (DARAB) in a December 11, 2006 Decision. The Court of Appeals affirmed DARAB’s decision in CA-G.R. SP No. 101384 (Decision dated December 17, 2009; Resolution dated July 15, 2010). Petitioner elevated the matter to the Supreme Court by petition for review.

Core Issues Presented to the Court

(1) Whether respondents are guilty of unlawful occupation and liable for damages and attorney’s fees; (2) Whether petitioner should be ordered to turn over possession of the subject land to respondents and to respect their possession; and (3) Whether the award of production and profit share (and interest) to respondents was proper.

Material Facts

Petitioner previously held Torrens titles covering parcels totaling 109.625 hectares within the larger CARP-covered area and operated the land, producing export-quality bananas (allegedly averaging 11,000 boxes weekly). After the DAR lifted deferment and proceeded with CARP procedures, petitioner’s titles were cancelled and Transfer Certificates of Title (TCTs) in the name of the Republic of the Philippines were issued; CLOAs were subsequently issued collectively in favor of 278 CARP beneficiaries. Petitioner continued to manage and control portions of the land and paid wages to farm workers; respondents maintained they were identified CARP beneficiaries who guarded the land to protect their rights and later demanded production and profit share. Petitioner deposited P2.51 million with the Regional Adjudicator as computation of production and profit share for certain years.

Parties’ Pleadings and Contentions

Petitioner alleged continued lawful possession pending final resolution of appeals and argued it had not yet received just compensation; it sought ejectment, damages, and fees. Respondents admitted petitioner’s prior title and production, asserted their status as CARP beneficiaries (collective CLOAs issued to 278 beneficiaries), claimed entitlement to production/profit share and accrued sums, and contended they acted to protect legitimate possession against petitioner’s attempts to install other workers or third parties.

Decision Below: Regional Adjudicator and DARAB Findings

The Regional Agrarian Reform Adjudicator found that ownership had passed to the beneficiaries upon governmental acquisition and issuance of CLOAs, concluded respondents were not unlawfully occupying the land, and denied petitioner’s complaint while granting respondents’ counterclaims. DARAB denied petitioner’s appeal, modified the Regional Adjudicator’s decision to order petitioner to turn over possession and to pay quantified sums (production and profit shares, lease rentals and interests), and encouraged a potential agribusiness venture. DARAB’s December 11, 2006 dispositive ordered, among other items, payment of specific sums (with adjustments for deposited amounts).

Court of Appeals Ruling

The Court of Appeals affirmed the DARAB decision but deleted DARAB’s award of lease rentals and interests thereon; the CA sustained DARAB’s core rulings that petitioner was no longer owner/possessor entitled to exclude beneficiaries and that production/profit share computations under the approved PPS Scheme were appropriate. The CA treated petitioner’s assertion of nonpayment of just compensation as a collateral attack on the Republic’s TCTs and found no credible evidence of nonpayment of just compensation; it noted petitioner had not sought nullification of the Republic’s TCTs.

Petitioner’s Main Legal Arguments to the Supreme Court

Petitioner maintained that under Section 16(e) of the CARL it remained lawful possessor until actual receipt of just compensation (or deposit constituting full payment), that treatment of its constitutional right to just compensation as a collateral attack on the Republic’s title was erroneous, and that respondents could not be lawful possessors or entitled to production share/lease rentals while petitioner’s compensation claim remained unresolved.

Respondents’ Evidence on Compensation and Title Transfer

Respondents produced Certifications of Deposit (CARP Form No. 17) showing Land Bank deposits (cash and agrarian reform bonds) as compensation for the 109.625 hectares and a DAR memorandum requesting issuance of TCTs in the name of the Republic. Respondents also furnished certified copies of cancellations of petitioner’s TCTs and issuance of Republic TCTs and eventual issuance of TCTs in favor of beneficiaries/cooperatives, together with notations that CLOAs were encumbered in favor of the Land Bank.

Court’s Analysis on Unlawful Occupation and Possession

The Supreme Court agreed that respondents, identified as CARP beneficiaries with CLOAs, were not guilty of unlawful occupation. The Court emphasized (1) the dual roles—petitioner as farm operator/manager and respondents as farm workers—and that both had been in possession and working the land; (2) that respondents’ acts in guarding the land to protect their rights against petitioner’s attempts to install other workers or third parties were reasonable and lawful under Article 429 of the Civil Code (right to repel unlawful invasions of possession); and (3) that respondents subsequently allowed petitioner to resume harvesting and essential farm operations, resulting in a restoration of a precarious peace and normalized operations within days. On these bases the Court denied petitioner’s request for damages and attorney’s fees for unlawful occupation but sustained the order requiring petitioner to turn over possession to qualified beneficiaries and to respect their peaceful possession.

Court’s Analysis on Just Compensation Jurisdiction and Proof

The Court held that determination of just compensation is within the original and exclusive jurisdiction of the Regional Trial Court acting as a Special Agrarian Court (Sections 56 and 57 of RA 6657). The DAR’s valuation and bank deposit are preliminary and not final; landowners may seek judicial determination before the SAC. In this case, however, petitioner had not brought a SAC action or otherwise meaningfully presented the factors for determining just compensation (Section 17 of RA 6657), nor did the petition demonstrate the statutory factors that would warrant judicial redetermination. The Court therefore found no reversible error in the CA’s refusal to entertain petitioner’s collateral assertions regarding nonpayment of just compensation in the context of the pre

Case Syllabus (G.R. No. 166115)

Facts of the Case

Petitioner Diamond Farms, Inc. is a corporation engaged in commercial banana farming and owned a total of 1,023.8574 hectares in Carmen, Davao; a major portion of 958.8574 hectares was initially deferred for acquisition and distribution under the Comprehensive Agrarian Reform Program (CARP).
On November 3, 1992, DAR Secretary Ernesto D. Garilao approved the Production and Profit Sharing (PPS) Scheme proposed by the Philippine Banana Growers and Exporters Association as the mode of compliance with Section 32 of Republic Act No. 6657 (CARL).
The deferment of the 958-hectare parcel was lifted on February 14, 1995, placing it under CARP coverage; subsequently 698.8897 hectares were awarded to Diamond Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO), while petitioner kept management and control of 277.44 hectares, including a specific portion of 109.625 hectares (referred to in the decision as the 109-hectare land).
On November 23, 1999, petitioner’s certificates of title covering the 109-hectare land were cancelled and Transfer Certificates of Title (TCT) Nos. T-154155 to T-154160 were issued in the name of the Republic of the Philippines.
On August 5, 2000, the DAR identified 278 CARP beneficiaries of the 109-hectare land, a majority of whom are members of respondent Diamond Farm Workers Multi-Purpose Cooperative (DFWMPC).
On October 26, 2000, DAR issued six Certificates of Land Ownership Award (CLOAs) collectively in favor of those 278 CARP beneficiaries.
Petitioner asserted long possession and cultivation of two parcels within the 109-hectare land totaling 74.3393 hectares (the 74-hectare land), producing export-quality bananas at an alleged average of 11,000 boxes per week and claimed weekly value of P1.46 million.
Petitioner alleged that respondents (farm workers) forcibly entered and occupied the 74-hectare land beginning June 10, 2002, refused to work, and prevented harvesting or introduction of inputs; petitioner thus filed suit for unlawful occupation, damages and attorney’s fees on July 2, 2002.
Respondents admitted petitioner’s prior title to the 74-hectare land and its productivity but alleged that six TCTs totaling 109.625 hectares had been acquired by the government and that petitioner continued to manage the land and pay respondents wages even after CLOAs were issued; respondents counterclaimed for recognition of their rights as CARP beneficiaries and for production share, profit share, accrued income and interest.
Petitioner deposited P2.51 million before the Office of the Regional Adjudicator as a computation of respondents’ production and profit share for 1995–1999; upon respondents’ submission of a project of distribution, the Office released that deposit to respondents.
During the DAR adjudicatory proceedings, parties were ordered to submit position papers; respondents complied and confirmed their guarding of the land to protect rights and that petitioner later was allowed to resume farm operation, while petitioner failed to timely file its position paper despite requests for extensions.

Procedural History

Regional Agrarian Reform Adjudicator Decision (dated cited in record): Ruled petitioner lost ownership when government acquired the land and CLOAs issued; held respondents were identified CARP beneficiaries and thus not unlawfully occupying; found petitioner unlawfully occupying for lack of contract with beneficiaries; denied petitioner’s complaint and granted respondents’ counterclaims.
Department of Agrarian Reform Adjudication Board (DARAB) Decision dated December 11, 2006: Denied petitioner’s appeal; modified earlier decision to order possession turned over to respondents and awarded detailed monetary sums to respondents (see DARAB dispositive below); motion for reconsideration denied by DARAB.
Court of Appeals (CA) Decision dated December 17, 2009 (CA-G.R. SP No. 101384): Affirmed DARAB decision but deleted the award of lease rentals and interest thereon; denied petitioner’s motion for partial reconsideration (Resolution dated July 15, 2010).
Petitioner filed a petition for review with the Supreme Court contesting CA’s affirmance mainly on due process/just compensation and characterization of petitioner’s claims as collateral attack on Republic’s TCTs; respondents did not appeal the CA decision.

Reliefs Sought by Petitioner and Respondents

Petitioner prayed that respondents be ordered to vacate the subject land; to be allowed to harvest the 74-hectare land; and for payment of lost income (P1.46 million per week from June 10, 2002 until normalization), exemplary damages of P200,000, attorney’s fees of P200,000, incidental expenses of P100,000 and costs.
Respondents sought recognition of their rights as CARP beneficiaries and counterclaimed for production share, profit share, accrued income and interest.

DARAB Dispositive Order (as modified and quoted in record)

DARAB denied petitioner’s complaint and ordered petitioner to turn over possession of the subject land and respect respondents’ peaceful possession.
Monetary awards ordered by DARAB (dispositive portion quoted in record):
- P27,553,703.25 less P2,511,786.00 as Production and Profit Share (PPS) from February 15, 1995 to December 31, 2005;
- P17,796,473.43 as lease rental for use of the land from October 26, 2000 to December 31, 2005;
- P6,205,011.89 as accrued interest on unpaid PPS from March 1, 1996 to March 1, 2006;
- P2,241,930.90 as accrued interest on unpaid lease rental from January 1, 2001 to January 1, 2006;
DARAB encouraged parties to enter an agribusiness venture over the land if feasible.

Court of Appeals Ruling

CA affirmed DARAB’s ruling that petitioner had not credibly shown nonpayment of just compensation and characterized petitioner's nonpayment allegation as a collateral attack on the Republic’s TCTs; CA noted petitioner never sought nullification of the Republic’s TCTs.
CA found issuance of Republic’s TCTs and CLOAs implied deposit in cash or LBP bonds or actual payment of initial compensation; appeals from distribution concerned only manner of distribution and did not justify petitioner’s continued possession.
CA affirmed DARAB’s computation of production share based on the approved PPS Scheme and acknowledged petitioner’s deposit of P2.51 million as recognition of respondents’ right to production share.
CA deleted DARAB’s award of lease rentals and interests thereon; the rest of DARAB’s decision was affirmed in full.
CA denied petitioner’s motion for partial reconsideration.

Issues Presented to the Supreme Court

Whether respondents are guilty of unlawful occupation and liable for damages and attorney’s fees.
Whether petitioner should turn over possession of the subject land to respondents and respect their possession.
Whether the award of production share and interest was proper.
Whether petitioner’s claim of nonreceipt of just compensation prevents DAR from taking possession and issuing TCTs in the name of the Republic or constitutes a justification for petitioner’s continued possession.

Supreme Court’s Findings — Possession, Ownership, and Status of Parties

The Court foun