PABLO R. TONGCO, ET AL., PETITIONERS, VS. COURT OF APPEALS, FORTUNATO CRUZ, ET AL., RESPONDENTS.

This is a petition for review of the decision of the Court of Appeals,
which reversed the joint decision of the Court of First Instance of Rizal in the certiorari case, entitled “Fortunato Cruz, et al. vs. Pablo R. Tongco,
et al.” (Civ. Case No. 4942) and the action for
recovery of possession of real property, entitled “Pablo R. Tongco vs. Fortunato Cruz, et
al.” (Civ. Case No. 4991).

The facts of these cases, as found by the Court of Appeals, may
be stated as follows:

Lot No. 26, Block 3 of the Tambobong
Estate, formerly belonging to the Roman Catholic Archbishop of Manila, was
originally leased by one Catalina Guevara who, in 1926, allegedly, donated her
lease­hold right to Pablo R. Tongco.

In 1937, Fortunato Cruz leased from Tongco 175 square meters of the abovementioned lot whereon
the former built his residential house, paying to the latter monthly rentals therefor.  In 1938,
his brother Eugenio Cruz, who also built his house on
the lot, became a lessee of another portion (of Lot No. 26), with an area of
150 square meters.  After the Estate was
acquired by the government in 1947, the
Cruz brothers, “on instruction of the Rural Progress Administration,
continued paying rentals but this time direct to the office of the Rural
Progress Administration.”

Claiming to be bona–fide tenants and occupants, the
Cruz brothers thereafter applied to the Rural Progress Administration for the
purchase of the portions of Lot No. 26 occupied by them, which were then
referred to as Lots Nos. 26-A and 26-D. 
The application was opposed by Pablo Tongco,
who also filed an application, contend­ing that as lessee thereof, he has
preference to purchase the whole of Lot No. 26.

After investigation, the Rural Progress Administration rendered a
decision dated November 20, 1950,
awarding the property to the following:

On Tongco’s motion for reconsideration,
the Director of Lands (who acted on the motion in view of the abolition of the
Rural Progress Administration), on January
30, 1952, set aside the decision of the Ad­ministration and gave
due course to Tongco’s application to purchase the
entire lot.  Copy of this decision was received
by the brothers Cruz on February 19,
1952 (Rec. on App., p. 18). 
Their motion to reconsider was denied on July 24, 1952 (Rec. on App., p. 62).  On Oct­ober
28, 1952, the Director of Lands issued an order of execution of his
ruling.

To restrain enforcement of the decision and order of execution
issued by the Director of Lands, the Cruz brothers instituted on Dec­ember 18, 1952 (Rec. on App.,
pp. 18, 19, 62), a prohibition case in the Court of First Instance of Rizal (Civ. Case No. 1966), but
this petition was dismissed for failure to exhaust administrative remedies.

Fortunato and Eugenio
Cruz then went to the Secretary of Agriculture and Natural Resources praying
for the settlement of their conflict with Tongco.  Said official, however, treating the petition
as an appeal from the ruling of the Director of Lands, of January 30, 1952, denied the same on the ground
that the decision appealed from had already become final and executory.  This
order was affirmed by the President to whom the matter was further appealed, on
Dec­ember 9, 1957.

While the matter was pending consideration of the President, the
Land Tenure Administration, which took over the administration of the Tambobong Estate, executed on February 28, 1955, a deed of sale of Lot No. 26 in favor
of Pablo Tongco, as a result of which, the latter was
able to secure Transfer Certificate of Title No. 57705 in his name.

Upon denial of their
petition by the President, the Cruz brothers filed on April 11, 1958, a
petition for certiorari in the Court of First Instance of Rizal
(Civ. Case No. 4942), charging the respondent
Director of Lands of abuse of discretion in approving the application to
purchase of respondent Pablo Tongco, and praying for
the declaration of nullity of the Director’s order of January 30, 1952; of the
deed of sale covering Lot No. 26
executed by respondent Land
Tenure Ad­ministration in favor of Tongco; and of
Transfer Certificate of Title No. 57705 consequently issued to the
latter.  In turn, Pablo Tongco, as registered owner of Lot No. 26, filed in the
same Court against the Cruz brothers an action for recovery of possession of
the portions of the lot occupied by them.  Answering this complaint, the defendants Fortunato and Eugenio Cruz,
specifically alleging that the issue of the validity of the awarding of
preferential right to purchase the lot to Tongco was
the subject of a pending action between them (in Civ.
Case No. 4942), manifested that they were incorporating the
allega­tions in their petition in said Civil Case No. 4942 as part of their
special and affirmative defenses.

After a joint trial, the lower court rendered a single decision
dated March 21, 1959,
upholding the ruling of the Director of Lands approving Tongco’s
application to purchase the whole Lot No. 26. Consequently, the petition for
certiorari (in Civ. Case No. 4942) was dismissed, and
the defendants Cruz brothers, in Civil Case No. 4991, were ordered to vacate in
90 days the portions of the lot occupied by them, and to pay to plaintiff
monthly rentals at the rate of P2.00 and P1.00, respectively, from February
1952 until they shall have vacated the same.

On appeal by the Cruz brothers, the Court of Appeals revers­ed
the joint decision of the trial court, reasoning that appellants were bona
fide occupants of the disputed portions of Lot No. 26; that Tongco’s having resided in Manila, from 1939 until the
Japanese occupation, indicated that he was not in dire need of the whole lot,
unlike the Cruz brothers who have their residential houses thereon; that when
the appellants-brothers paid their rentals directly to the Rural Progress
Administration, they became lessees of the portions occupied by them; that Tongco’s failure to object to this lessor-lessee
relationship between the Rural Progress Administration and the Cruz brothers,
from 1947 to the awarding of the lot in 1950, constituted a waiver of whatever
right he might have over the portions of the lot in controversy.  In thus ruling, the appellate court also took
into account the fact that Tongco merely acquired the
lease­hold right from the original lessee Catalina Guevara, and therefore his
situation was not superior to those of the appellants.  Further­more, he was found by the Rural
Progress Administration to be the lessee of two other lots in the “Longos Estate”, also managed by that government
entity.  Although those two leases no
longer appeared in the name of Tongco when the
decision was rendered, the Court of Appeals nevertheless considered that fact
because, according to said appellate court, the status of the parties should be
determined at the time of the filing of the application.

His motion for reconsideration having been denied by the Court of
Appeals, Tongco filed the present petition for
review, contending that the appellate court erred in not dismissing the appeal
in CA-G. R. No. 27736-R (Civ. Case No. 4942), for
being out of time; in not finding the decision of the Director of Lands (of
January 30, 1952) final and executory; in not finding
the appellants guilty of laches; and in reversing the
decision of the court a quo.

The issue of the timeliness of the appeal of the certiorari-case
was raised by Tongco in the Court of Appeals, first,
in a motion to dismiss, and then in his brief. 
The matter should have been passed upon in the decision now under consideration.

It appears from the records that the Cruz brothers received copy
of the joint decision of the trial court on June 29, 1959; that a motion for reconsideration
thereof was filed by said defendants on July
6, 1959; that the motion was denied on September 3, 1959, of which de­nial the Cruz
brothers were notified on September
7, 1959.  As the no­tice
of appeal and appeal bond in both cases were filed on September 29, 1959,
herein petitioner now claims that at least, with respect to the certiorari-case
(Civ. Case No. 4942), the appeal was perfect­ed
beyond the reglementary 15-day period prescribed in
Section 17, Rule 41 of the old Rules of Court.

We may agree with herein petitioner that the issues in the two
cases being different, the Joint Judgment was actually severable.  As the periods for appeal in the two cases
are also different, separate notices of appeal and appeal bonds should have
been filed before the respective periods expired.  As it stands, the requisite notice of ap­peal
and appeal bond having been filed on the 29th day from notice of the decision,
the appeal in the certiorari-case was perfected be­yond the reglementary
period.

Be that as it may, the dismissal of the appeal in Civil Case No.
4942 will not render the decision of the Court of Appeals now under review
without basis.  As previously stated, the
issue of the validity of the order of the Director of Lands, giving preference
to Tongco in the purchase of Lot No. 26, was also
directly placed in issue in the action for recovery when the Cruz brothers
contested Tongco’s owner­ship of the disputed
portions of the land.  It may likewise be
pointed out that, unlike the certiorari-case which was submitted for decision
on a question of law, Civil Case No. 4991 was submitted for decision on the
evidence adduced by the parties.  It
results that, when the plaintiff’s prayer was granted in Civil Case No. 4991
and therein defendants were ordered to vacate the premises, the sale of the
whole Lot No. 26 to Tongco was actually affirmed and
defendants’ argument that they have rights over the portions occupied by them,
rejected.  In the appeal, the regularity
and validity of the orders of the Director of Lands, bases of the sale of the
lot to Tongco, were extensively discussed by the
parties.  The Court of Appeals,
therefore, properly acquired jurisdiction to pass upon the question of the
validity of the purchase of the lot by Tongco.

The contention that the decision of the Director of Lands, dated January 30, 1952, was final and executory, because the decision of said official is appealable to the Secretary of Agriculture and Natural
Resources in 60 days, is without merit. 
For it must be borne in mind that a suit instituted to secure judicial
review of administrative ac­tion or orders must necessarily presuppose that the
questioned acts have already become final, or that the remedy of appeal is not
avail­able.  The special civil actions
filed by the Cruz brothers (the pro­hibition case first, and the
certiorari-petition later) were precisely of this nature, and the respondent
public officials were therein charged with abuse of discretion that called for
judicial revision.

And it appearing that there was no let-up in the efforts of the
Cruz brothers, who resorted to both judicial and administrative means to secure
recognition of their rights over the small areas on which their houses stood,
said petitioners cannot be charged either with being guilty of laches.

The basic issue in this case now is who, between the lessee and
the sub-lessees and actual occupants, has the preferential right to purchase
the disputed lots.

In previous cases decided by this Court,^[1]
this question was resolved in favor of the lessee, for the reason that Section
1 of Commonwealth Act 539 established the order of preference in the selling or
awarding of private lots:  to the bona
fide tenant, the occupant, and lastly, the private individual.  It may be observed, however, that in said
cases, the ruling was based on the particular circumstances obtaining
therein.  Thus, in the Cruz case,
there was a finding that the sub-lessees not only assured the lessee that they
will not dis­pute her right to the land, but one of them even executed a deed
re­nouncing whatever right he may have over the same.  In the Lauchang
case, the lessee owned no other property but the inchoate right (lease­hold
right) over the lot subject of the controversy, which has an area of 480
square meters.  On the other hand, in the
case of Gutierrez vs. Santos,
et al., G. R. No. L-12253, March
28, 1960, the question was resolved in favor of the sub-lessees,
because the lessee was found to have already acquired from the government four
other lots, with an aggregate area of 2,559 square meters.  Here, the record shows that Tongco was found by the Rural Progress Administration to be
the les­see of other lots in the Longos Estate, also
managed by the R. P. A.

Moreover, in the present case, Lot No.  26 has 872 square meters; 325 square meters
of which are occupied by the Cruz brothers, and 517 square meters, by
petitioner Tongco and his brother.  As found by the Court of Appeals, although
prior to 1947 the Cruz brothers were sub-lessees of Tongco,
paying monthly rentals to him, when the Ha­cienda Tambobong
was purchased by the government, the latter, through the Rural Progress
Administration, required the occupants Cruz brothers to pay the rentals
directly to that office.  There being no
proof that the lease of the whole lot in favor of Tongco
was recognized by the government, the requirement that the occupants pay the
rentals di­rectly to that office may be considered as a termination of that
lease of the entire lot.  It follows,
therefore, that when the Cruz brothers filed their application, they, as bona
fide occupants, had preferential rights to purchase Lots Nos. 26-A and
27-D occupied by them.

It might be that the order of the Director of Lands, reversing
that of the Rural Progress Administration and holding Tongco
to have preferential right to purchase the whole lot was issued pursuant to the rules and regulations issued by him
in 1951 governing the acquisition and disposition of landed estates (Lands Adm.
Order No. R-3, dated October 19, 1951
– 51 O. G. No. 12, pp. 6075-6078). 
However, as the application of the Cruz brothers had been previously
filed and found to be in order, in accordance with the rules and procedure then
observed by the Rural Progress Administration, more than thirteen months
earlier, the subsequent revocation of that approval by the Director of Lands by
virtue of regulations posteriorly enacted amounted to
an abuse of discretion, since the qualification of the Cruz brothers as
purchase-applicants should be determined as of the time their applications were
submitted.

WHEREFORE, finding no error in the ruling of the Court of
Appeals reversing that of the court a quo (in Civil Case No.
4991), the same is hereby affirmed. 
Herein respondents Cruz brothers are declared entitled to purchase the
portions of Lot No. 26, referred to as Lots 26-A and 26-D in their application,
and petitioner Tongco is ordered to reconvey said lots to the former.  The appeal in G. R. No. L-23176 (Civil Case
No. 4942) is dismissed.

Costs against respondents Cruz brothers in G. R. No. L-23176
(CA-G. R. No. 27736-R), and against petitioner Tongco
in G. R. No. L-23177 (CA-G. R. No. 27737-R),

SO ORDERED.

Makalintal, Bengzon,
Zaldivar, Sanchez, Ruiz Castro, and Fernando, JJ., concur.

Concepcion, C.J., Angeles, and Dizon, JJ., did not
take part.

^[1] Santiago,
et al. vs. Cruz, et al., G. R. Nos. L-8271-72, Dec. 29, 1955; Tiangco
vs. Lauchang, G. R. Nos. L-17598 and L­-17694,
Sept. 30, 1963.