G.R. No. L-17598 and L-17694. September 30, 1963.
JACINTO TIANGCO and JOSE LAZARO, petitioners, vs. FAUSTINA LAUCHANG, respondent. ASUNCION HIZON, petitioner, vs. FAUSTINA LAUCHANG, respondent.

FACTS

The case involves Lot No. 10, Block 2 of the Tambobong Estate in Malabon, Rizal, with an area of 480 square meters. The lot was originally leased by the Archbishop of Manila to Matea Suarez, who sold her leasehold rights in 1906 to Anacleto Lauchang. Upon his death in 1923, his daughter, respondent Faustina Lauchang, succeeded to the leasehold and occupied the property, paying rents until 1927 when the Archbishop sold the estate to the Commonwealth Government. Petitioners Asuncion Hizon, Jacinto Tiangco, and Jose Lazaro are occupying portions of the lot (82, 91, and 113 square meters, respectively) as sublessees of Lauchang, with Lauchang herself occupying the remaining 194 square meters. All parties have constructed houses on their respective portions.
After the Government acquired the estate under Commonwealth Act No. 539 for resale to occupants, a dispute arose regarding who had the preferential right to purchase the entire lot. The Court of Appeals, in its amended judgment, ruled in favor of Lauchang, granting her the preferential right to buy the whole lot. The petitioners sought a review, arguing that they should have a preferential right to purchase the specific portions they respectively occupy, contending that the order of preference under the law is not mandatory and that compelling reasons exist to depart from the established rule.

ISSUE

Whether the Court of Appeals erred in rigidly applying the statutory order of preference under Commonwealth Act No. 539 , thereby granting Faustina Lauchang the exclusive right to purchase the entire Lot No. 10, instead of allowing the petitioners to purchase the specific portions they occupy.

RULING

The Supreme Court affirmed the amended decision of the Court of Appeals. The Court held that the order of preference established in Santiago vs. Cruz (G.R. Nos. L-8271-72), which interprets Commonwealth Act No. 539 , is mandatory and must be strictly applied to the facts of this case. The law provides a clear sequence: the right to purchase is first granted to the lessee (Lauchang, as the successor to the original leasehold), then to the sublessee, and finally to other occupants. Since Lauchang is the legitimate lessee, she holds the primary preferential right to acquire the entire lot.
The Court rejected the petitioners’ argument for a departure from this order, finding no compelling reasons analogous to the exception recognized in Gutierrez vs. Santos. In Gutierrez, the lessee already owned other sufficient properties, justifying a deviation. Here, Lauchang owns no other realty besides her inchoate right to the lot, and the 480-square-meter lot is deemed inadequate for her large family of seven adult children and seven grandchildren. In contrast, evidence showed that petitioners Tiangco and Lazaro had acquired other lots in Malabon. Furthermore, the Court found no merit in the procedural claim of failure to exhaust administrative remedies, ruling that as the lot is private property acquired by the Government for resale, an aggrieved party may directly seek judicial relief. Therefore, Lauchang validly possesses the exclusive preferential right to purchase the whole property.