G.R. No. L-46612 November 29, 1988
SILVERIO GODOY, ET AL., petitioners, vs. NINO T. RAMIREZ, ET AL. and THE HONORABLE COURT OF APPEALS, respondents.

FACTS

Petitioners Silverio Godoy and others, military personnel, occupied a parcel of land in Quezon City. The People’s Homesite and Housing Corporation (PHHC) had leased the area, including the subject Lot 14, Block S-8, to the Armed Forces of the Philippines (AFP) in 1956. Petitioners occupied the lot as sublessees under this AFP lease. In 1958, private respondent Nino T. Ramirez applied for and was awarded the lot by the PHHC, culminating in a Conditional Contract to Sell executed in 1968. The original AFP lease was renewed in 1960 with an explicit condition that any further renewal after June 30, 1960, would require the consent of the awardee of the lots. Petitioners continued in possession even after the lease expired and their detail with the JUSMAG ended. They filed an action to annul the contract between PHHC and Ramirez, claiming a preferential right to purchase the lot as bona fide occupants.

ISSUE

Whether petitioners, as sublessees under an expired AFP lease, are bona fide occupants entitled to a preferential right to purchase the lot over the PHHC awardee, private respondent Ramirez.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. Petitioners were not bona fide occupants with a preferential right. Their initial possession was lawful but merely by tolerance as sublessees under the AFP’s lease from PHHC. This derivative right terminated upon the expiration of the lease agreement, after which their continued possession became unlawful. The essence of a bona fide occupant, as contemplated under laws like Commonwealth Act No. 539 , requires a belief in one’s good title and ignorance of a superior claim. Petitioners were aware of the lot’s award to Ramirez, as evidenced by the 1960 lease renewal clause requiring the awardee’s consent for further extensions. Their awareness of this superior claim negates good faith. Furthermore, as sublessees, they could not acquire rights greater than their lessor, the AFP. Their physical occupation, after their legal basis for possession ceased, did not confer any preferential right. The Court also rejected the challenge to Ramirez’s qualifications, noting he had no other lot at the time of his 1958 application. Thus, Ramirez was the lawful awardee entitled to possession.