G.R. No. L-8271-72 December 29, 1955
Fernando Santiago, et al., plaintiff-appellees, vs. Realeza Cruz, et al., defendants-appellants.

FACTS

Fernando Santiago and Francisco Samonte filed separate actions in the Court of First Instance of Rizal against Realeza Cruz and the Director of Lands. Santiago sought to annul the Director of Lands’ adjudication of Lot No. 1, Block No. 19, Tambobong Estate, in favor of Cruz and to compel the Director to sell to him the portion he occupied. Samonte sought to nullify the agreement to sell executed by the Director of Lands in favor of Cruz covering Lot No. 19, Block No. 16, in so far as Lot No. 19-a was concerned, and to be declared entitled to purchase it. The cases were tried jointly. The lots were portions of the Tambobong Estate, originally leased to Mrs. Elisa E. Cayco, who sold her leasehold rights to Realeza Cruz in 1944. Prior to this, Santiago and Samonte had their houses erected on portions of the lots and were sublessees of Cayco. After the transfer, they paid rentals to Cruz, except Santiago who stopped when the Government acquired the Estate. Both Santiago (through his wife) and Samonte executed documents acknowledging the transfer of leasehold rights to Cruz and agreeing to vacate when required. Samonte also executed an affidavit waiving his rights. Cruz applied to purchase the lots. Santiago contested her application for Lot 1, Block 19, but the Director of Lands dismissed his protest and awarded the lot to Cruz. Santiago did not appeal this administrative decision to the Secretary of Agriculture and Natural Resources before going to court. Cruz’s application for Lot 19, Block 16 was unopposed, and an agreement to sell was executed. Samonte, informed of this, refused to pay rent and vacate, leading Cruz to file an ejectment case. Samonte then filed his court action.

ISSUE

1. Whether the court cases should be dismissed for plaintiffs’ failure to exhaust administrative remedies by appealing the Director of Lands’ decision to the Secretary of Agriculture and Natural Resources.
2. What is the order of preference under Commonwealth Act No. 539 for the allocation of the Tambobong Estate lots among claimants?

RULING

1. No, the cases should not be dismissed for failure to exhaust administrative remedies. The requirement to exhaust administrative remedies applies to matters concerning public lands. The Tambobong Estate consists of lands of private ownership acquired by the Government under Commonwealth Act No. 539 for resale. There is no law expressly requiring exhaustion of administrative remedies for such lands. The policy vests in the Director of Lands the power to settle conflicting claims, but the absence of a legal requirement justifies a speedy court adjudication on the merits.
2. Under Commonwealth Act No. 539 , the order of preference for the resale of home lots is: first, to bona fide tenants; second, to occupants; and third, to private individuals who will work the lands themselves and are qualified to own land. Realeza Cruz, as a bona fide tenant (having acquired the leasehold rights from the original lessee), holds a preferential right over the appellees, who were merely sublessees or occupants. This order is indicated by the enumeration in the law and is supported by the equities of the case, as the appellees had previously acknowledged Cruz’s rights and agreed to vacate. The Director of Lands correctly followed this order in awarding the lots to Cruz.