G.R. No. 165005 September 16, 2005
Spouses Roberto and Natividad Valderama, Petitioners, vs. Salvacion V. Macalde, for herself and her brothers and sisters, substituted by Flordeliza V. Macalde, Respondent.

FACTS

The parents of respondent Salvacion Macalde had been tenants on a property in Tondo, Manila, since before World War II, constructing a house on a two-thirds portion. In 1977, Herminia Albano acquired the lot. Macalde and her siblings continued as tenants, leasing from Albano and paying regular rentals. The remaining one-third was leased to petitioners Spouses Valderama. The property was later proclaimed part of an Urban Land Reform Zone under Presidential Decree No. 1517, granting legitimate tenants of ten years or more a right of first refusal to purchase.
In November 1990, Albano offered to sell the property to the Macaldes, who promptly responded in writing expressing their desire and readiness to buy, requesting a discussion on price and terms. Albano did not reply. Unbeknownst to the Macaldes, Albano had already executed a Deed of Absolute Sale over the entire property in favor of Natividad Valderama on May 28, 1990. Macalde discovered the sale in March 1991 and immediately offered to purchase the two-thirds portion from the Valderamas, which was refused. Macalde then filed a complaint for annulment of sale, cancellation of title, and reconveyance.

ISSUE

Whether the sale of the property by Albano to the Valderamas is valid despite the Macaldes’ statutory right of first refusal under P.D. No. 1517.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision annulling the sale. The legal logic is anchored on the mandatory nature of the right of first refusal under P.D. No. 1517, a social legislation designed for urban land reform. The Macaldes, as legitimate tenants residing on the land for more than ten years, were unequivocally entitled to this preferential right. The law requires landowners to declare any proposal to sell and secure approval, ensuring tenants are given the opportunity to purchase.
The Court found that Albano and the Valderamas acted in bad faith. The sale to the Valderamas was executed months before Albano even offered the property to the Macaldes, constituting a deliberate circumvention of the law. The Valderamas, as adjoining lessees, were presumed aware of the Macaldes’ long-term occupancy and the property’s coverage under the urban land reform program. Their failure to inquire and their participation in the secret sale rendered them purchasers in bad faith. Consequently, the sale was voidable for violating a mandatory legal right. The remedy was to annul the sale as to the two-thirds portion occupied by the Macaldes, who were ordered to pay the corresponding proportionate price to the Valderamas. The Court emphasized that equity cannot be invoked to protect those who do not come to court with clean hands.