The preferential right to purchase a lot under Commonwealth Act No. 539, which gives preference first to "bona fide tenants" and second to "occupants," is not absolute and must be interpreted in line with the constitutional principle of social justice. Where the parties are not on an equal footing, as when the lessee is a non-occupant and already a landowner while the sublessee is the actual occupant and landless, equity and justice demand that the preferential right be granted to the actual occupant to fulfill the law's purpose of giving land to the landless.

The case arose from the government's acquisition of the Tambobong Estate in Malabon, Rizal, from the Roman Catholic Church on December 31, 1947, under Commonwealth Act No. 539. This law authorized the President to acquire private lands and subdivide them for resale to bona fide tenants, occupants, or other qualified individuals. The lot in question, Lot 18-B, Block 23, was part of this estate. Amada Aquino was the original lessee, who then sublet the property to Matias Gongon in 1934. When the government began reselling the lots, both Aquino (as lessee) and Gongon (as occupant) filed applications to purchase the same lot, leading to a legal conflict over who had the preferential right.

• The subject of the dispute is Lot 18-B, Block 23 of the Tambobong Estate in Malabon, Rizal, with an area of 274 square meters.
• The lot was originally leased by the Roman Catholic Church to respondent Amada Aquino.
• In 1934, Amada Aquino sublet the lot to petitioner Matias Gongon for a 15-year term at a monthly rental of P6.00.
• Gongon constructed his residential house on the lot and has lived there with his family since 1934.
• The Philippine Government purchased the Tambobong Estate on December 31, 1947, for resale to tenants and occupants under Commonwealth Act No. 539.
• Both Gongon, as the bona fide occupant, and Aquino, as the bona fide tenant/lessee, filed applications to purchase the lot.
• It is undisputed that respondent spouses Aquino and Rivera have their house on another lot (Lot No. 34, Block No. 7) within the same estate.
• Additionally, respondent Rufino Rivera is the registered bona fide tenant of another lot in Tambobong measuring 2,761 square meters.

• Matias Gongon argued that as the sublessee-tenant and actual occupant of the lot since 1934, he has the preferential right to purchase it over the non-occupant lessee.
• He contended that the sale of the lot to Amada Aquino and the registration in her name should be cancelled.
• He asserted that any alleged waiver of his right to purchase the lot is null and void because such a waiver is contrary to public policy as embodied in Commonwealth Act No. 539.

• Amada Aquino claimed she had the preferential right to purchase the lot as the original bona fide tenant or lessee, which is the first preference mentioned in Commonwealth Act No. 539.
• The Court of Appeals, affirming the lower court in favor of respondents, reasoned that Gongon's possession as a sublessee was, in legal effect, possession by the lessee (Aquino) under the Civil Code.
• It was also argued that the administrative finding that Gongon had waived his right to the lot was a factual determination that could not be reviewed by the courts.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Whether the petitioner, as the sublessee and actual occupant, has the preferential right to purchase the lot over the respondent, who is the lessee but not the occupant and already owns other properties.
  • Whether the alleged waiver of the petitioner's right to purchase the lot is valid.

• Procedural:
  • N/A
• Substantive:
  • Yes, the petitioner has the preferential right to purchase the lot. The Court ruled that the order of preference in Commonwealth Act No. 539 (tenants, then occupants) should not be rigidly applied where the parties do not stand on equal footing. Given that the respondent-lessee already owned other lots and did not reside on the property, while the petitioner-sublessee was the actual occupant and landless, the social justice purpose of the law—to give land to the landless—mandates that the petitioner be given preference.
  • No, the alleged waiver is not valid. The Court held that Commonwealth Act No. 539 establishes a public policy to provide land to the landless. Under Article 6 of the Civil Code, rights cannot be waived if such a waiver is contrary to public policy. Therefore, the petitioner's alleged waiver of his preferential right to purchase the lot is considered null and void.

• Social Justice — The Court invoked the principle of social justice, enshrined in the Constitution, as the guiding policy behind Commonwealth Act No. 539. This doctrine was applied to prioritize the right of the landless actual occupant (Gongon) over the non-occupant lessee (Aquino) who already owned other properties, thereby ensuring the law's objective of distributing land to those who have none.
• Statutory Construction (Spirit of the Law) — The Court interpreted Commonwealth Act No. 539 not by its literal text (which lists "tenants" before "occupants") but according to its spirit and intent. This approach allowed the Court to avoid an unjust outcome and instead promote the law's core purpose of providing land to the landless.
• Invalidity of Waiver Contrary to Public Policy — The Court applied Article 6 of the Civil Code, which prohibits the waiver of rights if it is contrary to public policy. It declared that the preferential right under C.A. 539 is a matter of public policy aimed at social amelioration, and thus, any waiver of this right by a qualified beneficiary is null and void.

• "Now, we say that the above order of preference should be observed if the parties affected stand on an equal footing or under equal circumstances, for only in that way can the provision of the law be implemented with equity, justice and fairness to all... But the order need not be rigidly followed when a party, say a bon fide tenant, has already in his name other lots more than what he needs for his family, for certainly to give him the preference would work injustice to the occupants."
• "...the avowed policy behind the adoption of such measure, is, as aptly observed by the Court of Appeals, 'to provide the landless elements of our population with lots upon which to build their homes and small farms which they can cultivate and from which they can derive their livelihood without being beholden to any man'... such measure having been adopted in line with the policy of social justice enshrined in our Constitution..."

• Gutierrez vs. Santos, et al. — This case was the controlling precedent. It clarified that the order of preference in C.A. 539 is not absolute and should not be rigidly followed if the parties are not on equal footing, thereby allowing the court to prioritize an occupant over a tenant when equity demands it.
• Juat vs. Land Tenure Administration — Cited to establish that C.A. 539 lays down a public policy rooted in social justice, which is to provide land to the landless. This supported the ruling that a waiver of rights under this law is void.
• Marukot et al. vs. Jacinto — Referenced as a case where the Court awarded lots to sublessees over the claim of a non-occupant lessee, which aligned with and supported the present decision.
• Grande vs. Santos — Distinguished from the present case. In Grande, the lessee was preferred, but the Court noted that the lot was very small and the lessee was also an actual occupant of a portion of it.
• Santiago et al. vs. Cruz et al. — Mentioned as a case that applied a literal interpretation of C.A. 539, but its ruling was subsequently clarified and restricted by the Gutierrez case.

• Commonwealth Act No. 539, Section 1 — This is the enabling law that authorized the government to acquire the Tambobong Estate and resell its lots to "bona fide tenants or occupants," forming the statutory basis of the dispute.
• Civil Code, Article 6 — This article, which states that "rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs," was the legal basis for declaring the petitioner's alleged waiver of his right to purchase the lot null and void.
• Civil Code, Article 524 — This article was cited by the Court of Appeals in its erroneous reasoning that a sublessee's possession is legally the possession of the lessee. The Supreme Court implicitly rejected the application of this civil law concept in interpreting the specific social legislation at issue.