G.R. No. 59888 January 29, 1993
CARLOS CABALLERO, petitioner, vs. COURT OF APPEALS, GREGORIO S. VASQUEZ, JOSE RABOT and CARMELITA CALMA, respondents.

FACTS

The case originated from an action for cancellation of sale filed by respondents Gregorio Vasquez, Carmelita Calma, and Jose Rabot against petitioner Carlos Caballero and the People’s Homesite and Housing Corporation (PHHC). The subject property is Lot No. 2, Block E99, Malaya Subdivision, Quezon City. Respondents were actual occupants of portions of the lot. On October 21, 1957, PHHC sold 602 lots in bulk, including the subject lot, to the Central Bank Staff Housing Corporation (CBSHC). Manuel Bienvenida, a Central Bank employee, was awarded the lot by CBSHC. Bienvenida negotiated its sale to petitioner Carlos Caballero. Caballero applied with PHHC for the transfer, which was approved. Bienvenida executed a Deed of Transfer conveying his rights to Caballero. PHHC’s Board of Directors passed a resolution recognizing this transfer. A Conditional Contract of Sale was executed between PHHC and Caballero on August 3, 1966, followed by a Deed of Sale on September 16, 1968, after full payment. Transfer Certificate of Title No. 66994 was subsequently issued in Caballero’s name. Respondents asserted their claims as occupants in 1965, arguing they had priority under a 1957 presidential directive granting preferential rights to bona fide squatters. The trial court ruled in favor of respondents, ordering PHHC to cancel the awards to Bienvenida and Caballero, award the lot to respondents (one-third each), cancel Caballero’s title, and return his payments. Caballero appealed to the Court of Appeals. The appellate court affirmed the award only to Jose Rabot, finding him a “registered squatter” from the 1957 census, but reversed the award to Vasquez and Calma, finding they were not original registered occupants. Vasquez and Calma did not appeal. Caballero, dissatisfied with the award of a one-third portion to Rabot, filed the instant petition.

ISSUE

Whether or not private respondent Jose Rabot has a priority right to purchase the subject lot, such that the PHHC violated any preferential right by selling the lot to petitioner Carlos Caballero.

RULING

No. The Supreme Court held that private respondent Jose Rabot has no priority right to purchase the lot. The petition was partially granted. The Court set aside the Court of Appeals’ decision insofar as it: (a) required PHHC to award one-third of the lot to Jose Rabot; (b) ordered the cancellation of TCT No. 66994; and (c) directed PHHC to return Caballero’s payments for that portion. The judgment concerning Gregorio Vasquez and Carmelita Calma was affirmed, and the complaint was dismissed.
The Court reasoned that:
1. PHHC’s statutory power to sell lands is derived from its charter. When PHHC sold the bulk estate, including the subject lot, to CBSHC, it signified the intention to segregate those lots from the class intended for squatters. Consequently, Rabot lost any priority he might have had.
2. Even assuming Rabot had priority, such priority alone is insufficient. PHHC regulations required an applicant to have a monthly income of not less than five times the monthly installment. Rabot, a soldier with a monthly salary of only P100, did not meet the required financial capacity (the required income was at least P416.35, as the monthly installment was P83.27).
3. The sale to Caballero was not capricious; PHHC followed its standard procedures. Rabot, as a mere squatter on government property, did not acquire any vested right to lease or buy the property. Illegal acts of squatting cannot ripen into lawful ownership or a vested right.