CARLOS CABALLERO, PETITIONER, VS. COURT OF APPEALS, GREGORIO S. VASQUEZ, JOSE RABOT AND CARMELITA CALMA, RESPONDENTS.

This has reference to a petition for review of the decision
rendered by the Fifth Division of the Court of Appeals dated December 16, 1981 in CA-G.R. No. 56704-R penned by
Justice B.S. de la Fuente, with whom Justices Coquia and Villaluz concurred,
the decretal portion of which reads as follows:

“Wherefore, we affirm that portion of the appealed judgment
relating to the award of 1/3 of Lot No. 2, Block E99, to appellee Jose Rabot,
including cancellation of TCT No. 66994 so that the awarded portion could be excluded
from said title and the order to appellant PHHC to return to appellee Caballero
his payments corresponding to said 1/3 portion, but the judgment insofar as it
relates to appellees Gregorio Vasquez and Carmelita Calma is reversed and they
are hereby ordered to vacate the portions respectively occupied by them and to
remove their constructions and improvements thereon. No pronouncement as to costs.” (pp. 69-70, Rollo of CA-G.R.
No. 56704-R; p. 84, Rollo.)

The original complaint (Civil Case No. 16171), which was raffled
to Branch 16 of the then Court of First Instance of Rizal stationed at Quezon
City was an action instituted by plaintiffs Gregorio Vasquez, Carmelita Calma,
and Jose Rabot for cancellation of sale made by the defunct People’s Homesite and
Housing Corporation (PHHC for short) to herein petitioner Carlos Caballero
involving a 712-square meter parcel of land designated as Lot No. 2, Block E99
of the Subdivision Plan Psd 68807, Malaya Subdivision, Quezon City.

It appears that plaintiffs below, now private respondents, are
the actual occupants of the lot in question. On October 21, 1957 PHHC sold in bulk about 602 lots, the lot in
question included, to the Central Bank Staff Housing Corporation (CBSHC for
short). Manuel Bienvenida, a Central
Bank employee was awarded the lot subject of this controversy. Bienvenida negotiated with herein petitioner
Carlos Caballero for the sale of the lot awarded to him by the CBSHC. Subsequently, Caballero applied with the
PHHC and requested that the lot be transferred to him. PHHC approved said proposed transfer. Thereafter, Manuel Bienvenida executed a
Deed of Transfer (pp. 49-50, Record on Appeal, found at p. 18, Rollo of CA-G.R.
No. 56704-R) conveying all his rights and interests to purchase Lot 2, Block
E99 to Carlos Caballero. The
controversy arose sometime in 1965 when herein private respondents asserted
their claims as actual occupants of the lot in question. The Board of Directors of PHHC referred the
matter for investigation, study, report, and recommendation to its Committee on
Investigation and Legal Matters. On
June 16, 1966, the Board of Directors of the PHHC passed a resolution approving
the recommendation of the Committee recognizing the transfer made by Bienvenida
to herein petitioner Caballero. On
August 3, 1966, a Conditional Contract of Sale (p. 52, Record on Appeal) was
executed by PHHC with Caballero making the initial deposit. On September 16, 1968, a Deed of Sale (p.
67, Record on Appeal) was executed between the parties after full payment of
the purchase price and consequently, Transfer Certificate of Title No. 66994
was issued in the name of Carlos Caballero by the Register of Deeds of Quezon
City.

Private respondents, as plaintiffs below, argued that they are
the occupants of the lot in question even before the lot was formally
subdivided and that the PHHC acted in a capricious and whimsical manner by
disregarding its policy of giving priority
to occupants. The court of origin, in
its decision on March 18, 1974, ruled in favor of the complainants and,
among other things, ordered: (1) the
PHHC to cancel the awards made in favor of Manuel Bienvenida and defendant
Carlos Caballero covering the lot in question and to award the same to plaintiffs,
at one-third portion for each plaintiff corresponding to the portion occupied
by them; (2) the Register of Deeds of Quezon City to cancel Transfer
Certificate of Title No. 66994 issued in the name of defendant Carlos
Caballero; and (3) the PHHC to return to defendant Carlos Caballero whatever
payments the latter may have paid to the former. Carlos Caballero appealed to the Court of Appeals.

Respondent court decided the appeal on the question of whether or
not plaintiffs were “bona fide” occupants of the lot in question
within the contemplation of the directive in 1957 of then President Magsaysay
granting preferential rights to registered or “bona fide”
squatters. According to the Court of
Appeals, only Jose Rabot is a registered squatter, thus:

“In the case at bar, appellees Vasquez and Calma are not such
‘registered’ squatters, or occupants, prior to the 1957 census. Vasquez was admittedly, renting just a room
in the house of Sgt. Ravarra who bought the same from A. Ferro, the original
squatter-house owner. In 1962, Vasquez
in turn bought said dwelling from Ravarra. (Exh. D). Ferro, the original
occupant who built the shanty later on sold to Ravarra, was listed in the 1957
Census of the PHHC; accordingly, Ferro’s claim of ‘priority’ as a ‘registered’
squatter or bona fide occupant had factual basis. It was only after Vasquez purchased said
house from Sgt. Ravarra, in 1962 that the former could assert in his own
right that he became a squatter with the bona fide intention to
buy a PHHC homelot in the said area. In
1954, it appears that Vasquez while still a tenant of Ferro, had written to the
PHHC requesting accommodation in a ‘low cost housing project’; this would show
that definitely he could not be an applicant in regard to the portion of the
lot in question squatted upon and occupied by Ferro’s house.”

In the case of Carmelita
Calma, the house built on a portion of lot 2 was bought by her father,
Jesus Calma, from Irene Mendoza on June 21, 1962 (Exh. F). Said house was owned by said person and
Antonio Dalupang, original squatters. She has resided or lived in said house since 1959. Upon her father’s death in 1968, she and her
mother continued their occupancy of the
said house. It is plain that, like
Vasquez, Calma was a squatter of quite recent vintage and not one of the
original ‘registered’ squatters listed in the Census of 1957 by the PHHC.”
(pp. 65-66, Rollo of CA-G.R. No. 56704-R pp. 80-81, Rollo.)

It is only the one-third portion claimed by Jose Rabot which was
recognized by the appellate court which noted:

“As regards appellee Rabot, it appears that he has been living
in his house since 1952 (Exh. J), which has occupied a portion of the land in
question … and that the name Rabot was duly noted on the sketch plan or
Census of the squatters in the Central Bank area.” (p. 69, Rollo of CA­-G.R.
No. 56704; p. 84, Rollo.)

Vasquez and Calma whose claims over the lot were rejected have
not appealed. But Caballero, following
the denial by the Court of Appeals of his Motion for Partial Reconsideration,
and dissatisfied with the award of a 1/3-portion of the lot to Rabot, has
instituted the instant petition. Unfortunately, on January 15, 1988, herein petitioner died but he has
been duly substituted by his heirs.

The petition has merit.

The pivotal query that must be resolved is the question of
whether or not Rabot indeed has priority in the purchase of the lot in
question. Should the answer be in the
affirmative, then it may be said that PHHC violated the presidential directive
in 1957 granting bona fide
squatters the preferential right to purchase PHHC lots. However, we are of the opinion and thus
hereby hold that private respondent Jose Rabot has no priority at all.

The statutory power of the PHHC to sell lands is derived from the
charter creating it which is Commonwealth Act No. 648, as amended by Executive
Order No. 399 dated January 5, 1951. Section 11(a), Annex A of the Executive Order grants the PHHC the
authority:

“a) to acquire, develop, improve, subdivide, lease and sell lands and construct,
lease, sell buildings or any interest therein in the cities and populous towns
in the Philippines with the object of providing decent housing for those who
may be unable to provide themselves therewith.”

Under such authority, the PHHC subdivides lots and awards them
either to deserving squatters or to middle income families. In the instant case, when the PHHC sold in
bulk 602 lots to the CBSHC the purpose was for the former to generate funds to
finance its projects (p. 84, Rollo). Clearly then, this act of the PHHC signifies its intention to segregate
the lots sold from the class of lands intended for squatters. Be it noted that the power to dispose of the
lands placed under the administration of the PHHC is lodged in said body as
laid down in the case of Raymundo vs. PHHC (114 SCRA 712
[1982]). Therefore, when the PHHC sold
the big estate which included the lot in dispute, private respondent Rabot lost
whatever priority he had over the lot occupied by him. In the case of Guardiano vs. Encarnacion
(29 SCRA 326 [1969]), this Court upheld the preferential right of a
“registered squatter” over a non-occupant because it was shown that
as per policy of the PHHC the lot involved is situated in an area intended to
be allocated to deserving squatters. However, the situation therein does not obtain in the case at bar.

Even granting for the sake of argument that private respondent
has indeed priority to purchase the land, the PHHC may not be accused of
disregarding his preferential right when it sold the lot to Caballero, a
non-occupant, because priority alone is not sufficient to entitle a
squatter-applicant to purchase a lot. The intention of the presidential directive in 1957 was to award lots to
prior and deserving squatters. As per PHHC regulation, an applicant must have an income of not less than
five times the monthly installments for the lot (Office Order dated September
5, 1958). In the case at bar, private
respondent failed to display the financial capacity required of him. At the time the lot was sold, the
approximate monthly salary of Rabot, a soldier, was only P100. This was admitted by him during the trial
(p. 109, Record on Appeal), while the income required of him was at least
P416.35 a month. The monthly
installment then was P83.27. This court
has recognized the validity of this requirement in the case of Raymundo vs.
PHHC (114 SCRA 712 [1982]) where we said:

“Furthermore, inasmuch as what was executed between petitioner
and respondent PHHC was merely an application to purchase, then it is subject
to revocation in case the applicant (petitioner herein) is found not to possess
the qualifications necessary. Respondent PHHC found that petitioner is not qualified to acquire the
lot because her stated income of P300.00 appearing in the ‘Sworn Application to
Purchase a Lot’, dated December 3, 1964 is below the minimum monthly income
requirement for the lot in question.”

x        x          x

x        x          x

x        x          x

Petitioner, however, by failing to comply
with the specific requirement as required of her, violated such rules and
regulations. And the fact that she
offered to pay in full the purchase price of the lot will not obliterate the
violation committed by her. Respondent
PHHC, therefore, was justified in cancelling the award made in petitioner’s
favor.” (at p. 717)

The allegation of private respondent that the sale was effected
in a capricious and whimsical manner is untenable. PHHC executed the sale only after compliance with its standard
procedures. We are not inclined to
disturb the findings of respondent court as to the propriety of the ‘bulk’ sale
made to the CBSHC. An officer of the
PHHC has testified that the PHHC has likewise sold lots in bulk to the UP
Employees, RFC Veterans, etc. (p. 125, Record on Appeal). There is no evidence that petitioner herein
purchased the lot for any purpose other than to own a homelot. According to him, he has been renting houses
since 1944 when he got married (p. 16, t.s.n., October 3, 1973) and that he has
no land either in Manila, Quezon City, or anywhere else (p. 13,. t.s.n.,
October 3, 1973). In the absence of
factual circumstances that would invite suspicion of fraud or irregularity, we
sustain the validity of the sale.

The status of Rabot as a “registered squatter”,
therefore, merely conferred upon him the preferential right to purchase other
unsold lots allocated by the PHHC to squatters. We quote the Office Order of the PHHC dated
September 5, 1958 (Exh. N) governing the priority of distribution of lots at
the East Avenue and Malaya Subdivisions, to wit:

“Upon completion of the census, the Management Department
shall submit to the General Manager the tentative allocation of those unsold
repossessed lots in favor of the squatters covered by the census,
subject to the following conditions:

1) award shall be
made only to squatters whose family income is not less than five times the
monthly installments of the lots being awarded;

2) all pre-war squatters in the East Avenue be given priority to buy lots in these
two subdivisions, irrespective of whether or not they are actually occupying
the lot being awarded;

3) after taking care of the pre-war
squatters, other unsold lots should be allocated to the squatters occupying the
same, provided that where there are two or more squatters in the same lot,
should be awarded to the squatter whose occupancy is the longest;

4) squatters on road
lots should be considered only after the squatters whose houses are inside road
lots shall have been given allocations.

All other squatters in this East and Malaya Subdivisions who cannot
be allocated pursuant to the preceding arrangement shall be allocated lots to
the Kamaring Subdivision, subject of course to condition No. 1 above.

(Sgd.) Sergio Ortiz Luis

Acting General Manager”

(pp. 64-65, Rollo)

Jose Rabot, therefore, did not acquire any right better than
herein petitioner’s with respect to the lot in question. He is still a squatter, plain and
simple. He admits that the lot was owned by PHHC (p. 95, Record
on Appeal) In the case of EB Marcha Transport Co. vs.
IAC, (147 SCRA 276 [1987]), it was ruled that petitioners being mere
squatters on the land, they did not acquire a vested right to lease or buy the
property. In Florendo vs.
Coloma, (129 SCRA 304 [1984]), this Court said:

“The PHHC was correct when it stated that squatters and
intruders who clandestinely enter into titled government property cannot, by
such act, acquire any legal right to said property. There is no showing in the records that the entry of the private respondents
into the lot was effected legally and properly. An act which was illegal from the start cannot ripen into lawful
ownership simply because the usurper has occupied and possessed the government
lot for more than ten (10) years, cleared it of cogon grass, fenced it and
built a house on the premises. No
vested right should be allowed to arise from the social blights and lawless
acts of squatting and clandestine entrance. True, the government by an act of magnanimity and in the interest of
buying social peace through the quieting of mass unrest may declare usurped
property as a ‘relocation’ area for the squatters. However, the records fail to show that there has been such action
insofar as the disputed lot is concerned or that the private respondents fall
within such policy or that they have
complied with the usual requirements before the benefits of relocation
may be given them. At any rate, this is
for the PHHC, now the NHA, to decide and not the city court.” (at p. 313)

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision of the Court of Appeals, in so
far as it (a) required the PHHC to award one-third of Lot No. 2, Block No. E99
in favor of Jose Rabot; b) ordered cancelled Transfer Certificate of Title No.
66994 in the name of Carlos Caballero; (c) directed the PHHC to return
Caballero’s payments corresponding to said one-third portion, is hereby SET
ASIDE. The judgment appealed from,
concerning Gregorio Vasquez and Carmelita Calma, is hereby AFFIRMED and the
complaint is DISMISSED. No special
pronouncement is made as to costs.

SO ORDERED.

Gutierrez, Jr.,
(Chairman), Bidin, Davide, Jr., and
Romero, JJ., concur.