G.R. No. 32243




Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 32243 September 3, 1930 GREGORIO TORRES, ET AL., plaintiffs-appellees, vs. CRISTINA GONZALEZ, INC., JORGE B. VARGAS, Acting Director of Lands, and SILVERIO APOSTOL, Acting Secretary of Agriculture and Natural Resources, defendants-appellants. Camus and Delgado for appellant Cristina Gonzalez, Inc. Mabanag, Primicias and Abad and Harvey and O'Brien for appellees. STATEMENT This is a suit in equity in which the ninety-three plaintiffs claim and allege that they are all citizens of the Philippine Islands and are entitled to have a lease from the Government for a period of twenty-five years of a certain tract of land in the Provinces of Pangasinan and Tarlac, containing an area of 491 and a fraction hectares of the appraised value of 51,157.23 pesos. That the land formerly belonged to Cristina Gonzalez by whom a mortgage was executed to the Agricultural Bank of the Philippine Islands, which was later foreclosed, and the property sold and bid in by the Government, and for want of redemption the sale became final and the title to the land vested in the Government. Pending the period of redemption Cristina Gonzalez applied for and was granted a provisional permit to occupy and cultivate the land from January 1, 1924, to December 31, 1924. October 8, 1923, she applied for a lease of the land for a period of twenty-five years which was entered upon the records of the land office as Insular Government Lease Application No. 31. November 27, 1923, she was advised by the Director of Lands that, inasmuch as she had become a Swiss citizen by marriage with E. A. Schenkel, she was not entitled to the lease, under the provisions of Acts Nos. 2874 and 3038, unless she could show that a citizen of the Philippine Islands could acquire public land in Switzerland under the laws of that country, in which even she might be able to obtain the lease, with express authority of the Philippine Legislature. That on December 29, 1923, after the period of redemption expired Cristina Gonzalez, Inc. filed its application with the Director of Lands for the lease of the same land which was covered by the application of Cristina Gonzalez of October 8, 1923. June 9, 1924, Cristina Gonzalez wrote a letter to the Director of Lands stating that she had assigned all of her rights of priority to the lease to Cristina Gonzalez, Inc., based upon which the Director of Lands issued an order on June 28, 1924, rejecting lease application No. 31, and ordering that lease application No. 36 be given due course. That after the publication in the Official Gazette of the notice of the filing of lease application No. 36, the plaintiffs filed in the Bureau of Lands a formal protest alleging that, if the lease was granted, it would prejudice their prior rights, possession, and occupation. That in truth and in fact Cristina Gonzalez, Inc. was a dummy corporation whose stockholders were citizens of Switzerland, and that it did not have the legal right to obtain land on lease from the Government of the Philippine Islands. That the defendant Jorge B. Vargas, Director of Lands, in abuse of his authority and discretion, overruled plaintiffs' protest without any investigation of the facts therein alleged. That the plaintiffs appealed from such ruling to the Acting Secretary of Agriculture and Natural Resources who illegally and erroneously sustained the decision of the Director of Lands. As a second cause of action, plaintiffs allege that the Director of Lands having published in the Official Gazette that sealed bids would be received for the lease of the land described in the application No. 36 filed by the defendant Cristina Gonzalez, Inc. up to 11 a. m. on August 31, 1925, the plaintiffs filed a sealed proposal with a joint and collective bid for the lease of the land, and on August 28, 1925, they filed a protest against the leasing of the land to the defendant Cristina Gonzalez, Inc. That notwithstanding the protest, the sealed bid of Cristina Gonzalez, Inc., and six others were received in the Bureau of Lands. That among the bidders were the plaintiffs, who submitted their joint and collective bid of P8,040, enclosing therewith P2,010 in cash to cover the rentals for the first three months. That Cristina Gonzalez, Inc. submitted a bid of P4,000 for the annual rental of the land, enclosing a bid of P1,000 in the form of a personal check signed by Cristina Gonzales de Schenkel, as rentals for the first three months. That its bid was the lowest of all other bids. That plaintiffs demanded of the Director of Lands that he submit the leading of the land to public auction, so that the plaintiffs and other bidders might have an opportunity to submit a bid at public auction, but that the Director of Lands refused to do so, and asked Schenkel whether he would raise the bid of Cristina Gonzalez, Inc. to the sum of P8,040 pesos, which was the amount plaintiffs bid, and that Schenkel agreed to raise the bid of the company to P8,040, and at the same time submitted an uncertified personal check for the additional sum of P1,010, in order to make up the amount of P2,010. That on September 2, 1925, the plaintiffs filed with the Director of Lands a protest in writing against the acceptance of the bid of Cristina Gonzalez, Inc., which protest was overruled and later affirmed by the Secretary of Agriculture and Natural Resources. It is then alleged that such land officials are attempting and threatening to execute their respective decisions and to deliver to the defendant Cristina Gonzalez, Inc. a contract of lease of the land. That the issuance of such lease will cause irreparable damage to the plaintiffs, who are without plain, speedy, and adequate remedy at law, and plaintiffs pray for a writ of preliminary injunction against the defendants, as Director of Lands and Acting Secretary of Agriculture and Natural Resources, from executing their decisions for the lease of Government land known as application No. 36, or from executing any lease in favor of Cristina Gonzalez. That plaintiffs' legal right of preference to acquire the land by homestead, purchase, or lease as actual occupants be recognized and declared. That the defendant, Cristina Gonzalez, Inc., be declared incompetent and disqualified under the law to lease the land from the Government. That the decisions of the Director of Lands and the Secretary of Agriculture and Natural Resources, overruling plaintiffs' protest and adjudicating the land to Cristina Gonzalez, Inc. under the lease be declared illegal, null and void, for having failed to comply with the requirements of law, by holding a public auction before awarding the lease, and that the lease of the land to any person should not be made without a public auction as the law requires. That the plaintiffs be declared to have the legal rights as the highest bidders, and that as such the land officials be ordered to execute a lease to them. For answer the defendants made a general and specific denial, and as a first special defense allege that the land in question was acquired by the Insular Government of the Philippine Islands from Cristina Gonzalez, its former owner on November 28, 1922, as a result of the foreclosure of the mortgage executed by her to the Agricultural Bank of the Philippine Islands on August 31, 1914. That on March 24, 1923, and during the period of redemption, she filed an application for a lease of the land, and applied for a provisional permit to occupy and cultivate it, which was granted on April 24, 1923, and renewed to December 31, 1924. That on December 29, 1923, Cristina Gonzalez, Inc., a domestic corporation, with 61 per cent of its capital stock owned and held by Filipino citizens, filed an application for a lease of the land known as No. 36. That on June 20, 1924, Cristina Gonzalez assigned all of her rights to that corporation. That on June 28, 1924, the Director of Lands issued an order to the effect that application No. 36 of the corporation be given due course, which permit has been renewed and extended annually up to the present time. As a second special defense, it is alleged that the permanent lease of the land was duly advertised for bids, and that the corporation was present at the opening of the bids, and represented by its treasurer, E. A. Schenkel, who was authorized to make a contract of lease, and that its original bid was raised from P4,000 to P8,040, of which P2,010 was then paid. That the corporation was declared entitled to the award by decision of the Director of Lands on April 13, 1926, which was later affirmed by the Secretary of Agriculture. As a third special defense, it is alleged that the plaintiffs are not qualified to file a single lease application and to submit a joint bid for the lease of the land. As a fourth special defense, it is alleged that the plaintiffs have never been in legal possession of the land as owners before the same became the property of the Insular Government, and that their alleged occupation was that as tenants of Cristina Gonzalez. As a fifth special defense, it is alleged that in civil case No. 4644, Cristina Gonzalez, Inc., vs. Gregorio Torres et al., the plaintiff in that case obtained an injunction against the leaders of the plaintiffs in this case, to-wit, Gregorio Torres, Blas Bajo, and Isidro Dingle, and that on November 21, 1927, upon the filing of its amended complaint, so as to include all of the plaintiffs, the corporation secured an order of injunction against all of the plaintiffs. The plaintiffs filed a reply to all of the new matter alleged in the answer, and upon such issues the lower court in a 42-page opinion decreed that the adjudication and award in favor of the corporation for the lease of the land was null and void, and that the plaintiffs are entitled to have the lease of the land as the highest bidders, and directed the land officials to execute the lease to them. From this decision the defendants appeal and assign the following errors: I. The lower court erred in holding that the provisional permits to occupy and cultivate the land in question issued by the Bureau of Lands to Cristina Gonzalez, Inc. were null and void. II. The lower court erred in holding that the consent of the plaintiffs, prior occupants of the land, was necessary before the government could legally lease the land to Cristina Gonzalez, Inc. III. The lower court erred in declaring the application of Cristina Gonzalez, for the lease of the land in dispute as null and void. IV. The lower court erred in holding that the appellant corporation, Cristina Gonzalez, Inc. "was a mere dummy, a corporation in name and form only." V. The lower court erred in finding that the appellant corporation was managed and controlled by E. A. Schenkel without authority from the board of directors. VI. The lower court erred in holding that the sealed bid submitted by Cristina Gonzalez, Inc. was void because it did not comply with the law requiring a deposit to accompany said bid. VIII. The lower court erred in finding that the representative of the Bureau of Lands abused his authority and discretion in making the award in favor of Cristina Gonzalez, Inc. without first giving the appellees and other bidders an opportunity to bid at public auction. VIII. Finally, the lower court erred in adjudging and decreeing the adjudication and award made in favor of the defendant-appellant Cristina Gonzalez, Inc. for the lease of the land in question is null and void and in declaring that the plaintiffs-appellees are the ones entitled to the lease of said land. JOHNS, J.: There is no dispute about any material fact. The land in question formerly belonged to Cristina Gonzalez, for which she held a Torrens title, and upon which she executed a mortgage to the Agricultural Bank of the Philippine Islands which was later foreclosed, and the property sold and bid in by the Government, and for want of redemption the title again became vested in the Government. During the time that she was such owner, she had numerous tenants working on the land, among whom were the plaintiffs. The important question in this case is whether or not the land officials have any legal right to execute the lease of the land to Cristina Gonzalez, Inc. The proceedings were had under section 35 of Act No. 3219 under which the required notices for the leasing of the land were published and posted calling for sealed bids, as a result of which seven different sealed bids were submitted, one of which was informal, and for such reason was rejected. The bid of the plaintiffs was P8,040; Ramon Pons, P6,500; Cristina Gonzalez, Inc., P4,000; Mercedes Tombo Lopez, P8,000; Bernardino Estrella, P7,200; and Feliciano Nable, P5,520. It will thus be seen that the bid of Cristina Gonzalez, Inc. was the lowest of all of the bids, and that plaintiffs' the highest. Section 35 provides: xxx xxx xxx Upon the opening of the bids the land shall be awarded to the highest bidder. If there are two or more bids which are higher than the others and equal, and one of such higher and equal bids is the bid of the applicant, his bid shall be accepted. If, however, the bid of the applicant is not one of such equal and higher bids, the Director of Lands shall at once submit the land for public bidding, and to the person making the highest bid on such public auction the land shall be awarded. In any case the application, if any, shall always have the option of raising his bid to equal that of the highest bidder, and in this case the land shall be awarded to him. No bid received at such public auction shall be accepted until the bidder shall have deposited the rental for the first three months of the lease. Construing that section the Director of Lands, treating Cristina Gonzalez, Inc. as the applicant, submitted to it the question as to whether or not it wanted to lease the land on the terms and conditions specified in plaintiffs' bid, and it declaring itself ready and willing to accept such terms, the Director of Lands awarded the lease to Cristina Gonzalez, Inc. upon the theory that it was his duty to do so under the provisions of section 35 above quoted. There is no claim or pretense that its bid was one of two or more bids which "are higher than the others and equal." Neither is there any claim that one of such equal and higher bids was that of Cristina Gonzalez, Inc. It will be noted that this section specifically provides that "if, however, the bid of the applicant is not one of such equal and higher bids, the Director of Lands shall at once submit the land for public bidding, and to the person making the highest bid on such public auction the land shall be awarded." That provision is clear, definite, and certain, and upon the admitted facts, after the bids were opened, it was the duty of the Director of Lands to take the necessary steps to "submit the land for public bidding." Upon that point the appellees have submitted a strong, well-written brief, which was their real contention in the lower court. In some respects the language of the Act is awkward and cloudy, but in that particular it is clear, definite, and certain. It follows that the judgment of the lower court, declaring the proposed lease to Cristina Gonzalez, Inc. null and void, must be sustained. After quoting the provisions of that section, the appellees say: These provisions are mandatory and leave no room for discretion or arbitrary will in the Director of Lands in carrying them out when he holds the raised bid to be legal and valid. But if, as held by the trial court, the bid made by Mr. Schenkel in raising the sealed bid of the applicant to equal that of the plaintiffs had been held by the Director of Lands to be null and void, then there would have been no one entitled to raise his bid to equal that of the plaintiffs, and the plaintiffs would have been entitled to the award of the lease, and the trial court held that the Director of Lands abused his authority and discretion in not awarding the lease to plaintiffs. We respectfully submit that the sealed bid and the raised bid in behalf of the defendant corporation were both illegal, null and void, as held by the trial court, and that they should have been held null and void by the Director of Lands, and that the award of the lease should have been made by the Director of Lands to plaintiffs, as was done by the trial court. As we construe section 35, it is not only mandatory as to the defendants, but it is also mandatory as to the plaintiffs, for the simple reason that the law specifically provides that "if the bid of the applicant is not one of such equal and higher bids, the Director of Lands shall at once submit the land for public bidding," and there is no claim or pretense that the bid of the applicant was one of such equal and higher bids. In fact it is alleged in plaintiffs' complaint that Cristina Gonzalez, Inc. was the lowest bidder. In that situation how and upon what theory can the lease be awarded to the plaintiffs. The reason that the proposed lease to Cristina Gonzalez, Inc. is null and void applies with equal force to the plaintiffs. Appellees contend that by reason of the fact that the contract of lease to Cristina Gonzalez, Inc. is null and void, it follows that the lease should be awarded to them. In this class of cases, the proceedings are initiated by the filing of the application for a lease of the land which in the instant case was filed by Cristina Gonzalez, Inc., and in all of the proceedings it was deemed and treated by both the plaintiffs and the land officials as the applicant. That is to say, its application was the basis of all subsequent proceedings. How then and upon what theory can the fact that the land office did not "at once submit the land for public bidding," and that it illegally and erroneously awarded the lease to Cristina Gonzalez, Inc. would the plaintiffs be entitled to have the lease awarded to them, and upon what legal principle should it be awarded to them without first having submitted the land "for public bidding?" As we construe the law, the making of any lease by the Government of this land is more or less at its option, but when the Government proposes to lease land, it must follow and conform to the provisions of Act No. 3219, which in this particular are mandatory. In this case, we have had the benefit of the able and well-written briefs of opposing counsel in which a number of other legal questions are presented, which from our point of view are unnecessary to this opinion. The judgment of the lower court, declaring the proposed lease to Cristina Gonzalez, Inc. null and void is affirmed, and its judgment awarding the lease of the land to the plaintiffs is reversed, and the case remanded to the land officials for such further proceedings as are not inconsistent with this opinion. Neither party to recover costs on this appeal. Nothing said in this opinion should be construed as passing upon or deciding the question as to whether or not Cristina Gonzalez, Inc. is or is not a qualified bidder. So ordered. Avanceña, C.J., Street, Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur. The Lawphil Project - Arellano Law Foundation