G.R. No. L-25786 - Pestanas vs. Dyogi

In 1929, Severo Ungriano took possession of a 30-hectare parcel of land located at Barrio Libo, Panukulan, Quezon.
Ungriano cleared, cultivated, and introduced improvements on the land.
He subsequently filed Homestead Application No. 145134 (E-86406) for a 24-hectare parcel within that 30-hectare holding, which was approved by the Director of Lands.

In 1942 and on several subsequent dates, Ungriano transferred his right to possess the land to the plaintiffs-appellants (Luciano Pestanas, Angel Pestanas, Jose Pestanas, Eliseo Pestanas, Exequiel Pagadora, Luciana Torres, Solomon Tena, and Felix Atentar).
The transferees continued clearing, cultivating, and making improvements on the portions they occupied.
The land, however, was part of a forest land designated as Timberland Block B, LC Project No. 19-C Polillo, Quezon, per BF Map LC 2066.

Plaintiffs-appellants made representations to government authorities to secure the release of the land from the Forest Zone.
They approached influential officials, including then President of the Senate, Eulogio Rodriguez Sr., who wrote to the Director of the Bureau of Forestry, Felipe Amos, requesting the land’s immediate release for title perfection.
The land was eventually released from the Forest Zone in May 1958.

On October 5, 1959, the Director of Lands advised the plaintiffs-appellants to file appropriate public land applications and to have the area surveyed to perfect their claims.
Before the land’s release from the Forest Zone, it was also part of a timber concession held by defendant-appellee Josefa Dyogi, pursuant to an Ordinary Timber License (O.T. Lic. No. 84-'55) granted in 1950.

Defendant-appellee Josefa Dyogi initiated a criminal information against three of the appellants (Exequiel Pagadora, Luciano Pestanas, and Angel Pestanas) on May 29, 1958, alleging unlawful possession and destruction of public forest.
The accused were convicted and sentenced to one (1) month’s imprisonment on November 29, 1958, but their convictions were later dismissed on appeal by the Court of First Instance.
Despite the criminal case’s dismissal, Dyogi pursued her claim over the 24-hectare lot by filing Free Patent Application No. 8-2103 with the Bureau of Lands.
The application was approved by the Director of Lands based on a report by public lands inspector Joaquin Lacorte, which stated that the land was free from claims and occupied solely by Dyogi.
On March 20, 1961, free Patent No. V-166123 was issued to Josefa Dyogi by the Secretary of Agriculture and Natural Resources.

Plaintiffs-appellants filed a petition for the cancellation of free Patent No. V-166123 on September 13, 1961.
Approximately six months later, while the petition was still pending with the Bureau of Lands, they filed a complaint in the Court of First Instance of Quezon seeking a declaration that the free patent be nullified, or alternatively, that they be recognized as having a preferential right to acquire the land.
The complaint also alleged that:

Defendant Josefa Dyogi committed fraud, deceit, and misrepresentations by falsely claiming Filipino citizenship and by asserting that the land was unoccupied.
Defendant Joaquin Lacorte, allegedly in collusion with Dyogi, submitted a false report purporting that there were no conflicting claims on the land.

Defendants (Josefa Dyogi, Joaquin Lacorte, and the government officials) moved to dismiss the complaint on two grounds:

The complaint failed to state a cause of action.
The filing was premature due to non-exhaustion of administrative remedies, as the petition for cancellation of the free patent was still pending before the Director of Lands.

The lower court dismissed the complaint, holding that the plaintiffs-appellants were required to await the resolution of their administrative petition.
On April 30, 1965, a motion for reconsideration was filed by the plaintiffs-appellants, which was subsequently denied on September 9, 1965.
The appellants then raised the following errors through their appeal:

That the court erred in dismissing their complaint.
That it was erroneous to require them to await the outcome of their cancellation petition before filing the case.
That there was no cause of action until administrative remedies were exhausted.

Whether the lower court properly applied the doctrine of exhaustion of administrative remedies by dismissing the plaintiffs-appellants’ complaint for cancellation of the free patent.
Whether a party aggrieved by the decision of the Director of Lands is precluded from filing an action in court for the cancellation of a free patent without first exhausting all available administrative remedies.