MATAAS NA LUPA TENANTS ASSOCIATION, INC., NICOLAS AGLABAY, AND THOSE MENTIONED IN ANNEX “A” OF COMPLAINT, PETITIONERS, VS. CARLOS DIMAYUGA AND JULIANA DIEZ VDA. DE GABRIEL, RESP…

Mataas na Lupa Tenants Association versus Dimayuga

The Case

This is a petition for review on certiorari brought by the Mataas na Lupa Tenants Association and its member tenants against the landowner Juliana Diez widow of Gabriel and the buyer Carlos Dimayuga. The tenants sued to enforce their preferential right to buy the land they had long occupied and leased, after the landowner secretly sold it to Dimayuga. The case matters because it settles a single, examinable question: does the tenant's statutory right of first refusal depend on whether the land is expropriable, or does it stand on its own whenever the owner chooses to sell voluntarily? The Supreme Court answered that the preferential right is independent, and that the sale made in disregard of it is void.

Procedural History

The tenants filed a complaint for the exercise of preferential rights before the then Court of First Instance of Manila, Branch Four. The landowner moved to dismiss on the ground that the complaint stated no cause of action, arguing that the land was not a landed estate, hence not expropriable, and hence could carry no preferential right. The buyer answered, raising among his defenses that the tenants had no personality to sue and that the complaint stated no cause of action, and counterclaimed for their ejectment. The trial court granted the motion to dismiss. The tenants moved for reconsideration, which was denied. They then filed a notice of appeal, but the landowner moved to dismiss the appeal, and the trial court dismissed it. The tenants thus resorted to the Supreme Court by petition for review on certiorari.

Facts

For more than ten years prior to 1959, the members of the petitioner association, heads of one hundred ten tenant families, occupied a parcel of land in Manila and built their houses on it. They leased the land from the owner, Juliana Diez widow of Gabriel, and paid her rents.

On May 14, 1968, without notice to the tenants, the landowner sold the parcel to Carlos Dimayuga, who in turn mortgaged it back to her for the balance of the purchase price. The tenants learned of the sale and, eight months later, on January 17, 1969, filed their complaint. They alleged that under the law a parcel of land in Manila and its suburbs, with at least fifty houses of tenants erected on it and actually leased to them for at least ten years prior to June 20, 1959, may not be sold by the landowner to any person other than the tenants, unless the latter renounced their rights in a public instrument. No such renunciation was ever made. The tenants offered to buy at the same price and on the same terms as the sale to Dimayuga, and prayed that the sale be declared void and that the landowner be ordered to sell to them.

Issues

• Whether or not the tenants have a pre-emptive or preferential right to buy the land in question, even though the land is not expropriable.
• Whether or not the sale by the landowner to Dimayuga, made without first offering the land to the tenants, is void.

Applicable Provisions

The third proviso in Section 5 of Republic Act 3516, which further amended Republic Act 1162, provides:

Provided, furthermore, That no lot or portion thereof actually occupied by a tenant or occupant shall be sold by the landowner to any other person than such tenant or occupant, unless the latter renounce in a public instrument his rights under this Act: Provided, finally, That if there shall be tenants who have constructed bona fide improvements on the lots leased by them, the rights of these tenants should be recognized in the sale or in the lease of the lots, the limitation as to area in Section three notwithstanding.

This is the very provision that creates the tenants' right of first refusal and that the sale to Dimayuga violated.

Section 1 of Republic Act 3516, amending Republic Act 1162, provides:

The expropriation of landed estates or haciendas, or lands which formerly formed part thereof, or any piece of land in the City of Manila, Quezon City and suburbs, which have been and are actually being leased to tenants for at least ten years, is hereby authorized: Provided, That such lands shall have at least forty families of tenants thereon.

This provision shows that expropriability turns on the number of tenant families, not on the area, and that the subject land falls within its coverage.

Ruling

On the first issue, the Court ruled for the tenants. The third proviso in Section 5 clearly defines their preferential right to buy the parcel. The landowner sold the land to Dimayuga without informing the tenants and without giving them the first offer, so that they could accept or refuse to buy in a public document. The condition of a prior offer, and of renunciation in a public instrument, was never met. The Court held that the sale was therefore made illegally and is void, and that the tenants still hold the first option to buy.

On the second issue, the Court likewise ruled for the tenants. It rejected the premise that the preferential right depends on expropriability. The test for a valid expropriation of private land for resale to its occupants is the number of families to be benefited, not the area. The Court traced this pattern from the Reyes case, through the Guido and Baylosis cases, back to the Tuason case, and down to the Pulido case. It noted that had the tenants invoked expropriability, they would have had a foolproof case, since the land in Manila was actually leased to one hundred ten tenant families twenty years before the action, well within the coverage of Section 1. The Court also grounded its ruling on the constitutional mandate of social justice and the equitable diffusion of property ownership.

Doctrine

A tenant actually occupying a lot has a preferential right to buy it. The landowner may not sell that lot to any other person unless the tenant first renounces his rights in a public instrument. A sale made in disregard of this right, without the prior offer and without the renunciation, is void, and the tenant retains the first option to buy. This preferential right is distinct from, and does not depend on, the expropriability of the land. The test for expropriability is the number of tenant families to be benefited, not the size of the area.

Disposition

The Court granted the petition, set aside the dismissal, and recognized the tenants' preferential right to buy the land, the sale to Dimayuga being void.

Remember This

Memorize this line: the tenant's preferential right to buy is independent of expropriability, and a sale made without the prior offer and public renunciation is void. Examiners use this case to test the right of first refusal of tenants and the number of beneficiaries test in eminent domain.