Supreme Court E-Library
Information At Your Fingertips

  View printer friendly version

510 Phil. 434


[ G.R. NO. 154027, October 24, 2005 ]




The auction sale of land to satisfy alleged delinquencies in the payment of real estate taxes derogates or impinges on property rights and due process. Thus, the steps prescribed by law for the sale, particularly the notices of delinquency and of sale, must be followed strictly. Failure to observe those steps invalidates the sale.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the September 27, 2001 Decision[2] and the June 18, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 51829. The assailed Decision reads as follows:
"WHEREFORE, finding no reversible error in the judgment appealed from, the same is AFFIRMED, with costs against [petitioners]."[4]
The assailed Resolution denied petitioners' Motion for Reconsideration.

The Facts

The antecedents are related by the CA as follows:
"The subject matter of the controversy is a 232 square-meter lot situated at No. 37-E Calavite St. La Loma, Quezon City, Metro Manila. Said piece of property was registered in the name of [Respondent] Gorgonia Bantegui (Bantegui for brevity), married to Jesus Bayot, under Transfer Certificate of Title [(TCT)] No. 47163 of the Register of Deeds of Quezon City, issued on May 6, 1959, and later reconstituted under [TCT] No. 28458.

"Bantegui acquired the property sometime in 1954 and rented it to spouses Florante B. Caedo and Florencia B. Caedo (Caedos for brevity), who resided therein until 1994. In 1970, she left for the United States of America. She returned to the Philippines in January 1988 and executed her special power of attorney[,] making Guadalupe B. Bautista (Bautista for brevity) her representative, [after which], she went back to the United States.

"Her taxes on the subject property were paid[,] but only until 1977. The real property taxes from the year 1978 to 1983 amounting to P3,034.99[,] inclusive of penalties, however, were not paid.

"For failure of Bantegui to pay said taxes, the [c]ity [t]reasurer of Quezon City sold said property at public auction held on November 21, 1984, to the spouses Edilberto and Josefina Capistrano (Capistranos for brevity), for the sum of P10,000.00. The Certificate of Sale of Delinquent Property was subsequently issued in their favor on November 26, 1984.

"Since the property was not redeemed within the one (1) year redemption period, title to said property was consolidated to the Capistranos and [TCT] No. 361851 was issued in their names on June 4, 1987. The Capistranos, however, did not take possession of the land [or inform] the Caedos about the sale or collected any rent from them. They[,] likewise[,] did not pay real property taxes thereon.

"The property was later sold on June 20, 1988 by the Capistranos to spouses Evelyn and Jesse Pereyra (Pereyras for brevity) for P60,000.00. Their TCT was cancelled and a new [TCT] No. 2059 was issued on January 10, 1989 in the name of the Pereyras, who also did not take possession of the property in question. They, however, mortgaged the same to the Rural Bank of Imus, Cavite, which [mortgage] was annotated on the title of the property.

"These transfers were unknown to Bantegui and the Caedos[,] despite the fact that Evelyn Pereyra is the daughter of the Caedos, as the latter did not inform them about anything concerning these transactions. All this time[,] the actual occupants, the Caedos, considered themselves as tenants of Bantegui, such that they paid rent to her until December 1993, when they handed the water pump as payment of their arrears.

"Bantegui, on her part, applied for administrative reconstitution of her title[,] as it was lost in a fire. Reconstituted Title No. 28458 was subsequently issued in her name. She likewise paid the realty taxes on the subject property for the years 1987 to 1989. The [c]ity [t]reasurer of Quezon City, however, refused to accept her payment for the year 1990.

"Meanwhile, on May 3, 1990, said property was again sold by the Pereyras to the spouses Ramon and Rosita Tan (Tans for brevity) for P350,000.00, with the latter paying the amount of P300,000.00 to the Rural Bank of Imus, Cavite for the release of the mortgage per agreement by the parties. They likewise paid the overdue taxes and other expenses incurred by the Pereyras pertaining to said mortgage.

"The Tans, like their predecessors, did not take immediate possession of the property [or inform] the occupants (Caedos) of their title to the land. Towards the latter part of 1990, however, the Tans, thru their lawyer, informed the Caedos of their ownership over the property and demanded that the Caedos vacate the property. They subsequently filed an action for ejectment against the Caedos before the Municipal Trial Court of Quezon City on January 18, 1991. On October 31, 1991, the Court ruled in favor of the Tans. The Caedos then interposed an appeal on February 2, 1992[,] which was remanded to the same Court for further proceedings, and for failure of the Caedos to appear during the hearing of the case, they were declared in default and were subsequently ejected from the property on February 20, 1994, when the house that they erected thereon was demolished.

"On February 11, 1992, Bantegui, thru her sister Guadalupe Bautista, and joined by the spouses Caedo[,] filed a Complaint for Annulment of Sale, Quieting of Title, Injunction and Damages with the Regional Trial Court of Quezon City. The complaint was later amended on May 14, 1992, impleading the spouses Capistrano and the [c]ity [t]reasurer of Quezon City as co-defendants, and deleting "quieting of title" from the prayer and inserting "reconveyance.'"[5]
After the trial court rendered its Decision[6] in favor of respondents, petitioners appealed to the CA.

Ruling of the Court of Appeals

In declaring that petitioners were not purchasers in good faith and had no better right to the subject property than that of any of their predecessors-in-interest, the appellate court gave the following reasons. First, the auction sale was tainted with irregularities: no notices of delinquency and of sale were sent to the owner. Second, the owner continued to pay realty taxes on the property, even after the date of the sale. She would not have done so had she been aware that it had already been auctioned off. Third, the selling price was grossly inadequate and, when viewed together with the other facts and circumstances, would render the sale itself void. Fourth, the purchasers failed to take possession of the property, pay the real taxes, and inform the lessees of the purchase. As a result, the latter continued to pay rent to the owner. As stated earlier, the CA affirmed the trial court's Decision.

Hence, this Petition.[7]

The Issues

Petitioners raise the following issues for the Court's consideration:

"The Honorable Court of Appeals erred in affirming that the tax sale of Bantegui's property was tainted with irregularities that rendered the same null and void.


"The Honorable Court of Appeals erred in affirming that the Resolution of the Quezon City Regional Trial Court, Branch 85, confirming in favor of the Capistranos the final bill of sale of the auctioned property is not conclusive.


"The Honorable Court of Appeals likewise erred in declaring that the petitioners were not purchasers in good faith and innocent purchasers for value.


"The Honorable Court of Appeals erred in affirming that petitioners should pay respondents nominal damages of P50,000 and attorney's fees of P50,000."[8]
The foregoing may be summed up into only one issue: whether the auction sale was valid.

The Court's Ruling

The Petition has no merit.

Sole Issue:

Whether the Auction Sale Was Valid

The tax sale did not conform to the requirements prescribed under Presidential Decree (PD) No. 464, otherwise known as the Real Property Tax Code.[9]

First, no notice of delinquency or of sale was given to either Gorgonia Bantegui, the delinquent owner; or to her representative.

On the one hand, Section 65 of PD 464 provides:
"SECTION 65. Notice of delinquency in the payment of the real property tax. -

"Upon the real property tax or any installment thereof becoming delinquent, the x x x city treasurer shall immediately cause notice of the fact to be posted at the main entrance of the x x x city hall and in a public and conspicuous place in each barrio of the x x x city as the case may be. The notice of delinquency shall also be published once a week for three consecutive weeks, in a newspaper of general circulation in the x x x city, if any there be, and announced by a crier at the market place for at least three market days.

"Such notice shall specify the date upon which tax became delinquent, and shall state that personal property may be seized to effect payment. It shall also state that, at any time, before the seizure of personal property, payment may be made with penalty in accordance with the next following section, and further, that unless the tax and penalties be paid before the expiration of the year for which the tax is due, or the tax shall have been judicially set aside, the entire delinquent real property will be sold at public auction, and that thereafter the full title to the property will be and remain with the purchaser, subject only to the right of delinquent taxpayer or any other person in his behalf to redeem the sold property within one year from the date of sale."
On the other hand, Section 73 of PD 464 states:
"SECTION 73. Advertisement of sale of real property at public auction. -

"After the expiration of the year for which the tax is due, the x x x city treasurer shall advertise the sale at public auction of the entire delinquent real property, except real property mentioned in subsection (a) of Section forty hereof, to satisfy all the taxes and penalties due and the costs of sale. Such advertisement shall be made by posting a notice for three consecutive weeks at the main entrance of the x x x city or x x x hall in the case of cities, and in a public and conspicuous place in barrio or district wherein the property is situated, in English, Spanish and the local dialect commonly used, and by announcement at least three market days at the market by crier, and, in the discretion of the x x x city treasurer, by publication once a week for three consecutive weeks in a newspaper of general circulation published in the x x x city.

"The notice, publication, and announcement by crier shall state the amount of the taxes, penalties and costs of sale; the date, hour, and place of sale, the name of the taxpayer against whom the tax was assessed; and the kind or nature of property and, if land, its approximate areas, lot number, and location stating the street and block number, district or barrio, municipality and the province or city where the property to be sold is situated. Copy of the notice shall forthwith be sent either by registered mail or by messenger, or through the barrio captain, to the delinquent taxpayer, at his address as shown in the tax rolls or property tax record cards of the x x x city where the property is located, or at his residence, if known to said treasurer or barrio captain: Provided, however, That a return of the proof of service under oath shall be filed by the person making the service with the x x x city treasurer concerned."
The auction sale of real property for the collection of delinquent taxes is in personam, not in rem.[10] Although sufficient in proceedings in rem like land registration, mere notice by publication will not satisfy the requirements of proceedings in personam.[11] "[P]ublication of the notice of delinquency [will] not suffice, considering that the procedure in tax sales is in personam."[12] It is still incumbent upon the city treasurer to send the notice directly to the taxpayer -- the registered owner of the property -- in order to protect the latter's interests. Although preceded by proper advertisement and publication, an auction sale is void absent an actual notice to a delinquent taxpayer.[13]

The sale of land "for tax delinquency is in derogation of property rights and due process[;] the prescribed steps must be followed strictly."[14] In the present case, notices either of delinquency or of sale were not given to the delinquent taxpayer. Those notices are mandatory, and failure to issue them invalidates a sale.[15] Because it was clearly in contravention of the requirements under the law and jurisprudence, the subsequent sale of the real property did not make its purchaser the new owner.

A certificate of title under the Torrens system serves as evidence of an indefeasible title to the property in favor of the person whose name appears on it.[16] While it is true that Transfer Certificates of Title have already been issued in the names of the subsequent purchasers, they should nonetheless be invalidated. Considering the failure to abide by the mandatory requirements of a proceeding in personam, no better title than that of the original owner can be assumed by the transferees.

Besides, the incontrovertible nature of a certificate of title applies only when the issue involved is the validity of the original and not of the transfer. Subsequent titles issued to the prejudice of the rightful owner will produce no legal effects whatsoever.[17] Quod nullum est, nullum producit effectum. That which is a nullity produces no effect.[18]

A gross inadequacy in the price is of no moment either. It is true that the lower the price, the easier it will be for the owner to effect redemption;[19] but the fact remains that without the mandatory notices, the registered owner will never be given the opportunity to redeem the property, despite the lapse of one year from the date the sale is registered.[20]

Moreover, failure to assert ownership over a property is indicative of the doubtful validity of its sale. The immediate purchasers in the present case neither took possession nor informed the occupants (the Caedos) of the former's alleged acquisition of the property. The purchasers did not even demand rent or ask them to vacate, as a result of which the Caedos continued to pay rent to Respondent Bantegui. Indeed, registered owners have the right to enjoy the property that they own,[21] including the jus utendi or the right to receive from it whatever it produces,[22] like civil fruits.[23]

Second, only a copy of the Resolution of Branch 85 of the Regional Trial Court of Quezon City, confirming the final bill of sale to the Capistranos, has been submitted by the city treasurer to show the validity of the sale.[24]

This Resolution is, however, inconclusive. With greater significance is the categorical and unrefuted statement in it that the "[s]ealed envelope containing a copy of the petition addressed to Gorgonia Bantegui x x x was returned to sender unclaimed x x x."[25] That statement definitely confirms the lack of notices, without which the subsequent proceeding to sell the property produces no legal effect. "Notice of sale to the delinquent landowners and to the public[,] in general[,] is an essential and indispensable requirement of law, the non-fulfillment of which vitiates the sale."[26]

Third, Section 80 of PD 464 provides that "any balance of the proceeds of the sale left after deducting the amount of the taxes and penalties due and the costs of sale, shall be returned to the owner or his representative." Again contrary to the mandate of the law, the balance of the proceeds from the tax sale was not even returned to Respondent Bantegui or her representative after the issuance of the final bill of sale. The failure to return the proceeds reinforced the apparent irregularity not only in the conduct of the tax sale, but also in its subsequent disposition.

Fourth, petitioners were not innocent purchasers for value. Despite their awareness of defects in their title, they still failed to investigate or take the necessary precaution.

Good faith is a question of intention.[27] It consists in the possessor's belief that the person from whom a thing has been received is its owner and can convey title.[28] It is determined by outward acts and proven conduct.[29]

"A purchaser of real estate at the tax sale obtains only such title as that held by the taxpayer[;] the principle of caveat emptor applies."[30] Purchasers cannot close their eyes to facts that should have put any reasonable person upon guard, and then claim that they "acted in good faith under the belief that there was no defect in the title."[31] If petitioners do not investigate or take precaution despite knowing certain facts, they cannot be considered in good faith. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the title despite a notice of the flaw in it.[32] From a vendor who does not have any title to begin with, no right is passed to a transferee.

In the present case, the exercise of the right of possession over the property was attempted by none of the purchasers, except petitioners.[33] The latter's predecessors-in-interest did not deny the fact that respondent spouses had continued to stay in and rent the property from Respondent Bantegui, its registered owner. Information about the purchase was not at all relayed by Evelyn Pereyra, a subsequent purchaser and former resident, to the Caedos who were her very own parents.[34] When "the land sold is in the possession of a person other than the vendor, the purchaser is required to go beyond the certificate of title and make inquiries concerning the rights of the actual possessor."[35]

Furthermore, nothing on the record shows that, aside from Respondent Bantegui, the purchasers paid real property taxes, as required of every registered property owner. The tax on real property for any year shall attach to, become due and payable[36] from, and be the personal liability of its "owner at the beginning of the year."[37] Curiously, the city government allowed Respondent Bantegui to continue paying real property taxes even after the redemption period and the confirmation of the final bill of sale. Moreover, the records mention no payment of real property taxes from 1984 to 1986.

Finally, Respondent Bantegui remained in continuous possession of the owner's duplicate copy of the Certificate of Title. She was even allowed to undertake an administrative reconstitution of her file copy after its destruction by fire. Accordingly, the Register of Deeds issued a reconstituted title in her name, in which the property had been registered as early as 1959. For reasons known only to the alleged purchasers, no attempt was even made to have the title immediately cancelled. It is basic that registration does not vest title, which is a mere evidence of title to a property.

More important, the reconstituted title was allowed despite the fact that several TCTs had already been previously issued in favor of petitioners' predecessors-in-interest. Although reconstitution alone neither confirms nor adjudicates ownership,[38] considering the surrounding circumstances of this case, the Court hereby confirms Respondent Bantegui's rightful ownership of the property.

Entitlement to Damages

As the trial and the appellate courts held, respondents indeed failed to offer proof to justify the award of actual or compensatory damages. The actual value of the house on the property at the time of the demolition of the structure was not established. One is entitled to adequate compensation only for pecuniary loss that has been duly proved.[39]

Nominal damages as granted by the lower courts in the amount of P50,000 may be a plausible remedy, however. These damages are justified especially when common sense dictates that a pecuniary loss has indeed been suffered, but is incapable of precise computation. They are adjudicated, not for the purpose of indemnifying respondents for any loss suffered, but for vindicating or recognizing their right to a property that has been violated or invaded.[40]

Lastly, the award by the appellate court of P50,000 in attorney's fees also appears reasonable because, by petitioners' act, respondents were compelled to incur expenses to protect their interest.[41]

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution are AFFIRMED. Costs against petitioners.


Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

[1] Rollo, pp. 9-30.

[2] Id., pp. 32-43. Special Eleventh Division. Penned by Justice Juan Q. Enriquez Jr., with the concurrence of Justices Ruben T. Reyes (Division chair) and Mercedes Gozo-Dadole (member).

[3] Id., pp. 45-46.

[4] CA Decision, p. 12; rollo, p. 43. Uppercase and boldface in the original.

[5] Id., pp. 3-5 & 34-36. Citations omitted.

[6] Rollo, pp. 60-77. The dispositive portion of the Decision reads as follows:
"Wherefore, judgment is hereby rendered:

1. Nullifying the sale at public auction on November 21, 1984 conveying the property of plaintiff GORGONIA BANTEGUI to the SPOUSES EDILBERTO AND JOSEFINA CAPISTRANO as highest bidders;

2. Declaring:

A. The deed of absolute sale dated June 20, 1988 executed by JOSEFINA CAPISTRANO in favor of SPOUSES JESSE AND EVELYN PEREYRA null and void;

B. The deed of absolute sale dated May 3, 1990 executed by SPOUSES JESSE AND EVELYN PEREYRA in favor of SPOUSES RAMON AND ROSITA TAN null and void;

C. Transfer Certificate of Title No. 361851 (2058) in the name of JOSEFINA CAPISTRANO, married to EDILBERTO CAPISTRANO, null and void, and ordering the REGISTER OF DEEDS OF QUEZON CITY to cancel the same from the land records of Quezon City;

D. Transfer Certificate of Title No. 2059 in the name of JESSE PEREYRA AND EVELYN PEREYRA null and void, and ordering the REGISTER OF DEEDS OF QUEZON CITY to cancel the same from the land records of Quezon City;

E. Transfer Certificate of Title No. 14801 in the name of SPOUSES RAMON TAN AND ROSITA TAN null and void, and ordering the REGISTER OF DEEDS OF QUEZON CITY to cancel the same from the land records of Quezon City;

3. Declaring the validity of Transfer Certificate of Title No. RT-28458 (47103) in the name of GORGONIA BANTEGUI, married to JESUS BAYOT;

4. Ordering defendants SPOUSES RAMON AND ROSITA TAN to pay to the plaintiffs nominal damages of P50,000.00 and attorney's fees of P50,000.00; and,

5. Ordering defendants to pay the costs of suit.'"
[7] This case was deemed submitted for decision on October 27, 2003, upon this Court's receipt of respondents' Memorandum, signed by Atty. Jorge Roito N. Hirang Jr. Petitioners' Memorandum, signed by Atty. Danilo Abaya Tiu, was received by this Court on August 21, 2003.

[8] Petitioners' Memorandum, p. 10; rollo, p. 170. Original in uppercase.

[9] Secretary of Finance v. Hon. Ilarde, GR No. 121782, p. 12, May 9, 2005.

[10] Peña, Peña Jr., & Peña, Registration of Land Titles and Deeds (1994 rev. ed.), p. 376. Talusan v. Tayag, 356 SCRA 263, 276, April 4, 2001.

[11] Peña, Peña Jr., & Peña; supra.

[12] Talusan v. Tayag, supra, per Panganiban, J.

[13] Puzon v. Abellera, 169 SCRA 789, 795-796, January 31, 1989.

[14] Ramos v. Villaverde, 88 Phil. 651, 654, April 28, 1951, per Tuason, J.

[15] See Pantaleon v. Santos, 101 Phil. 1001, July 31, 1957.

[16] Noblejas & Noblejas, Registration of Land Titles and Deeds (1992 rev. ed.), p. 215.

[17] Solid State Multi-Products Corp. v. CA, 274 SCRA 30, 44, May 6, 1991.

[18] Ballentine, Law Dictionary with Pronunciations (1948), p. 1077.

[19] See §78 of PD 464.

[20] Salalima v. Guingona, 326 Phil. 847, 914-915, May 22, 1996, per Davide Jr., J. (later CJ); citing §78 of PD 464.

[21] Art. 428 of the Civil Code.

[22] Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines (Vol. II, 1992), p. 45.

[23] Civil fruits here refer to "the price of leases of lands and other property." 3rd paragraph of Art. 442 of the Civil Code.

[24] Rollo, pp. 78-79.

[25] Resolution, p. 1; rollo, p. 78.

[26] Estate of the late Mercedes Jacob v. CA, 347 Phil. 752, 767, December 22, 1997, per Bellosillo, J. (quoting Serfino v. CA, 154 SCRA 19, 27, September 15, 1987, per Paras, J.).

[27] Peña, Peña Jr., & Peña; supra, p. 147.

[28] Arriola v. Gomez de la Serna, 14 Phil. 627, 629, December 17, 1909.

[29] Tolentino; supra, p. 247.

[30] Serfino v. CA, 154 SCRA 19, 27-28, September 15, 1987, per Paras, J.

[31] Leung Yee v. Frank L. Strong Machinery Co., 37 Phil. 644, 651, February 15, 1918, per Carson, J.

[32] Peña, Peña Jr., & Peña; supra, p. 148.

[33] Art. 523 of the Civil Code.

[34] RTC Decision, p. 12; rollo, p. 71.

[35] Santiago v. CA, 317 Phil. 400, 413, August 14, 1995, per Melo, J. (quoting De Guzman, Jr. v. CA, 156 SCRA 701, 710, December 21, 1987, per Fernan, J. [later CJ]).

[36] §56 of PD 464.§

[37] Vitug & Acosta, Tax Law and Jurisprudence (2nd ed., 2000), p. 488 (citing City of Manila v. Mitchel, 52 Phil. 138, 141, October 2, 1928, per Romualdez, J.).

[38] Serra Serra v. CA, 195 SCRA 482, 490, March 22, 1991.

[39] Art. 2199 of the Civil Code.

[40] Arts. 2221 & 2222 of the Civil Code. See Allied Banking Corp. v. CA, 416 SCRA 65, 85, November 18, 2003.

[41] Art. 2208(2) of the Civil Code. See Air Philippines Corp. v. International Business Aviation Services Phils., Inc., 438 SCRA 51, 79, September 9, 2004, per Panganiban, J.

© Supreme Court E-Library 2019
This website was designed and developed, and is maintained, by the E-Library Technical Staff in collaboration with the Management Information Systems Office.