SECOND DIVISION
 
EFREN AQUINO and
ANGELICA AQUINO,
Petitioners,
 
-         versus -
QUEZON CITY, represented by G.R. No. 137534
its OIC, BRIGIDO SIMON,
ANSELMO O. REGIS, VICENTE
N. COLOYAN, as the Acting
Register of Deeds of Quezon City,
and AIDA LINAO, accompanied by
her husband PETE LINAO,
Respondents.
 
x --------------------------------------------- x
 
SOLOMON TORRADO, represented
herein by his heirs, namely: VICTOR
SILVANO TORRADO, MONALISA
TORRADO CARLET, CELIA G.R. No. 138624
TORRADO APTER, ROBERTO
SILVANO TORRADO, SOLOMON Present:
SILVANO TORRADO, TITA
SILVANO TORRADO, HILARIO PUNO, J., Chairperson,
SILVANO TORRADO, EMMANUEL SANDOVAL-GUTIERREZ,
SILVANO TORRADO, and CORONA,
AUGUSTUS CAESAR SILVANO AZCUNA, and
TORRADO, GARCIA, JJ.
Petitioners,
 
- versus - Promulgated:
 
 
VERONICA BALUYOT and August 3, 2006
RUPERTO BALUYOT,
CORAZON and MAXIMO UY,
DNX DEVELOPMENT CORP.,
CITY TREASURER OF QUEZON
CITY, REGISTER OF DEEDS OF
QUEZON CITY, AND THE
HONORABLE COURT OF APPEALS,
Respondents.
 
X -------------------------------------------------------------------------------------------- X
 
 
DECISION
 
AZCUNA, J.:
 
In an order issued by this Court dated October 18, 2000, two petitions
for review on certiorari involving the decisions of the Court of Appeals in
CA-G.R. CV Nos. 37487 and 49241, declaring valid the auction sales of two
real properties by the Quezon City local government for failure to pay real
property taxes, were consolidated for the Courts consideration.
 
G.R. No. 137534
 
The first case, docketed as G.R. No. 137534, deals with a 612-square
meter lot in East Avenue Subdivision, Diliman, Quezon City. The lot was
formerly owned by petitioner spouses Efren and
Angelica Aquino (Petitioners Aquino) under Transfer Certificate of Title
(TCT) No. 260878. By their own admission, Petitioners Aquino withheld
payment of the real property taxes thereto from 1975 to 1982 as a form of
protest against the government of then President Marcos. As a result of the
nonpayment, the property was sold by the Quezon City local government,
through the Treasurers Office, at public auction on February 29, 1984 to
private respondent Aida Linao, the highest bidder. Aida Linao eventually
consolidated her ownership under a petition granted by the Regional Trial
Court (RTC) of Quezon City on September 25, 1985.[1] Accordingly, TCT
No. 260878 was cancelled and a new one was issued under TCT No. 339476
in the name of Aida Linao.[2]
 
Petitioners Aquino claimed that they learned of the sale only in April
1987 after they were informed by people squatting on the property that
Aida Linao was taking steps to eject them. They then filed an action for
annulment of title, reconveyance and damages against
respondents Quezon City local government, its Treasurer, the Register of
Deeds of Quezon City and Aida Linao[3] before the RTC of Quezon City.
[4]
 They charged that the Quezon City local government sold their property
without informing them of their tax default, in derogation of the notice
requirements of the law. They also impute bad faith upon Aida Linao in
buying their property despite knowledge of the infirmities leading to the
auction sale.
 
 On February 25, 1995, after the parties presented their case, the RTC
of Quezon City rendered a decision dismissing the complaint. The dismissal
was later affirmed by the Court of Appeals on February 3, 1999.
 
In this petition, Petitioners Aquino raise two issues:
 
1.                 Whether there was failure on the part of the Quezon City
local government to satisfy the notice requirements
before selling the property for tax delinquency; and
 
2.                 Whether there was failure on the part of
the Quezon City local government to give actual notice
of the impending sale despite knowing that the mailed
notices were returned unclaimed.
 
3.                 Whether or not Petitioners Aquino were estopped to
question the absence of notice given their admission that
they deliberately did not pay their taxes.
 
G.R. No. 138624
 
The second case, docketed as G.R. No. 138624, deals with a 407-
square meter property located at No. 20 North
Road, Cubao, Quezon City under TCT No. 21996 in the name of
Solomon Torrado.[5] TCT No. 21996 covers two lots, Lots 7 & 8, but only
the latter is the subject of the controversy. According to the Heirs of
Solomon Torrado(Petitioner Heirs),[6] Solomon Torrado paid taxes on the
improvements on Lot 8 for 1976, 1977, 1978, 1979, 1981 and 1982 but not
on the lot itself because the Treasurers Office could not locate the index card
for that property. For failure to pay real property taxes on Lot 8 from 1976 to
1982, the City Treasurer sent a Notice of Intent to Sell dated October 6,
1982 to Solomon Torrado to his address indicated in the tax register, which
simply states as Butuan City. The notice was returned by reason of
Insufficient Address. Next sent was a Notice of Sale of Delinquent Property
dated December 10, 1982. This was sent to the same address and similarly
returned unclaimed.[7] Thereafter, a public auction for Lot 8 was held
on February 23, 1983 and the lot was sold to Veronica Baluyot, the winning
bidder. A Notice of Sold Property was subsequently sent to
Solomon Torrado to Butuan City, which was returned unclaimed.
 
On May 29, 1985, a Final Bill of Sale was executed by the City
Treasurer. On that basis, TCT No. 21996 was cancelled in part and TCT No.
355133, covering Lot 8, was issued in the name of Veronica Baluyot.
Veronica Baluyot later mortgaged the property to spouses Corazon
and Maximino Uy. For failure to pay the mortgage debt, Lot 8 was
foreclosed and TCT No. 355133 was cancelled and substituted with TCT
No. 45536 in the name of spouses Uy. Spouses Uy then sold the lot to DNX
Corporation and TCT No. 45536 was cancelled and substituted with TCT
No. N-162170, in the name of DNX Corporation.
 
Meanwhile, on January 13, 1989, Solomon Torrado commenced an
action with the RTC of Quezon City against the spouses Baluyot,
the Quezon City local government, the City Treasurer and Register of
Deeds.[8] On March 12, 1992, the RTC of Quezon City dismissed the action.
Recourse to the Court of Appeals was made but on March 24, 1998, the
appeal was dismissed.
 
Before this Court, Petitioner Heirs raise the following questions:
 
1.                 In the auction sale of tax delinquent property, is
constructive notice sufficient?
 
2.                 Was the City Treasurer negligent in continuing to send
notices to an insufficient address notwithstanding a tax
declaration in the tax records pertaining to another
property bearing Solomon Torrados complete address?
 
3.                 Was the auction sale conducted in accordance with P.D.
464?
 
4.                 Was the title of Veronica Baluyot, the purchaser of the
property, void as well as those of the subsequent
transferees?
 
5.                  Is DNX Corporation, the subsequent purchaser of the
property, a buyer in good faith?
 
Issues common to both petitions
 
The Court will first discuss the issues that were raised in common by
petitioners.
 
The first issue in common relates to the interpretation of the notice
requirements under Sections 65 and 73 of Presidential Decree (P.D.) No.
464 (the Real Property Tax Code then in force):[9]
 
x x x
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 provincial or city treasurer shall immediately
cause notice of the fact to be posted at the main entrance of the provincial
 building and of all municipal buildings or municipal or city hall and in a
public and conspicuous place in each barrio of the municipality of the
province or 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 province or 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.
 
x x x
SECTION 73. Advertisement of sale of real property at public
auction. After the expiration of the year for which the tax is due, the
provincial or 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 provincial
building and of all municipal buildings in the province, or at the main
entrance of the city or municipal hall in the case of cities, and in a public
and conspicuous place in the 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 provincial or city treasurer, by publication once a week
for three consecutive weeks in a newspaper of general circulation
published in the province or 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 municipality or 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 provincial or city treasurer concerned.
 
 
Both petitioners construe the above-quoted provisions to mean that
two sets of notices, one under Section 65 and the other under Section 73, are
required before a delinquent property could be sold for failure to pay real
property taxes. With respect to the first notice under Section 65, the owner
of the real property subject to tax is supposed to be given a Notice of Tax
Delinquency stating that if the property tax is not paid, the local government
would sell the real property to satisfy the tax in arrears. This consists of four
separate measures: 1) posting of the notice of tax delinquency at the main
entrance of the city hall; 2) posting of the notice of tax delinquency in a
public and conspicuous place in each barangay of the city; 3) publication of
the notice of tax delinquency once a week for three consecutive weeks in a
newspaper of general circulation in the city; and 4) verbal announcement of
the existence of the notice of tax delinquency by a crier at the market place
for at least three market days.
 
The second notice under Section 73 pertains to a Notice of Sale at
Public Auction notifying the owner of the real property that since there was
failure to heed the first notice, the local government would now be selling
his delinquent property at public auction on a specified date to satisfy the tax
in arrears.
 
For Petitioners Aquino, while it seems the Quezon City local
government complied with the second set of requirements in selling their lot,
it failed to do the same with the first.[10] The only compliance by
the Quezon City local government was the sending of a Notice of Intent to
Sell by registered mail to the last known address of Petitioners Aquino. No
posting or publication of any kind was done.
 
Petitioner Heirs, on the other hand, push for the same construction and
claim that there was failure on the part of the City Treasurer to send
Solomon Torrado a Notice of Delinquency at all.
 
Respondents, on the other hand, counter with their own interpretation
of P.D. No. 464. Instead of a two-step notice requirement, respondents put
forward the view that there are three methods of enforcement on tax
delinquent real property provided under P.D. No. 464. The first method is
by distraint of personal property under Sections 65, 68, 70, 71 and 72. The
second method is by sale of the delinquent real property itself under Sections
73 to 81. The third method is by filing a case in court under Section 82.
Respondents submit that the real property in issue was sold under the second
method. That being the case, while they admit that there was only partial
compliance with the provisions of Section 65[11] this would be relevant had
the local government chosen the method of distraint of personal property. In
this case, the Quezon City local government chose the second method of
sale and there was full compliance with the provisions of Section 73. Hence,
the auction sale was valid.
 
 A simple application of the elementary rules of statutory construction
provides a straightforward resolution to this conflict. Section 65 basically
provides that upon delinquency of a real property tax, a notice of
delinquency shall be given. This is followed by Section 66, penalty for
delinquency, and Section 67, application of the remedies. The latter reads in
its entirety as follows:
SECTION 67. Remedies cumulative, simultaneous and unconditional.
Collection of the real property tax may be enforced through any or all of
the remedies provided under this Code, and the use or non-use of one
remedy shall not be a bar against the institution of the others. Formal
demand for the payment of the delinquent taxes and penalties due need not
be made before any of such remedies may be resorted to; notice of
delinquency as required in Section sixty-five hereof shall be sufficient for
the purpose.
 
 
Following Section 67 are provisions on distraint of personal property
(Sections 68, 69, 70, 71 and 72), provisions concerning the sale of real
property (Sections 73 to 81) and the provision on collection of real property
tax through the courts (Section 82).
 
A rule of statutory construction is that a statute must be construed as a
whole. The meaning of the law is not to be extracted from a single part,
portion or section or from isolated words and phrases, clauses or sentences,
but from a general consideration or view of the act as a whole. Every part of
the statute must be interpreted with reference to the context.[12] In line with
this rule, the Court finds that Section 65s notice of delinquency should be
read in line with the Section 67s statement that the different tax remedies do
not require a formal demand for the payment but may be substituted by the
notice of delinquency. Reference to the notice of delinquency in relation to
tax remedies, in general, illustrates the formers function as a prerequisite to
all the individual tax remedies subsequently detailed. Also, the phrase notice
of delinquency as required in Section sixty-five found on the last part of
Section 67 further underscores its mandatory nature and interrelation to the
three remedies.
 
It is incorrect for the respondents to claim that notice of delinquency
has limited application only to distraint of personal property. They
mistakenly lumped Section 65 exclusively with Sections 68 to 72 and, in so
doing, restricted its application from the other tax remedies. Section 65 is to
be construed together with Sections 66 and 78 and all three operate in
reference to tax methods in general. Definitely, there is no more logical way
to construe the whole chapter on Collection of Real Property Tax (Sections
56 to 85) than to stress that while three methods are provided to enforce
collection on real property taxes, a notice of delinquency is a requirement
regardless of the method or methods chosen.
  
Thus, while the Court agrees with the respondents interpretation that
there are three methods by which taxes may be enforced, petitioners are
correct in insisting that two notices must be sent to the taxpayer
concerned. Nevertheless, respondents still prevail because the Court is
satisfied that the two-notice requirement has been complied with by the
Treasurers Office.
 
Contrary to the stand taken by Petitioners Aquino, despite the
provisions of Section 65, the local government concerned need not post and
publish the notice of delinquency, it being sufficient that personal service
was done. In Talusan v. Tayag,[13] one of the issues raised was the lack of
publication of the notice of delinquency. As to this issue the Court said,
speaking through now Chief Justice Panganiban:
 
Petitioners assert that the tax sale should be annulled because of
noncompliance with the requirement of publication prescribed in Section
65 of PD 464.
 
In this regard, we note that unlike land registration proceedings
which are in rem, cases involving an auction sale of land for
the collection of delinquent taxes are in personam. Thus,
notice by publication, though sufficient in proceedings in rem, does not as
a rule satisfy the requirement of proceedings in personam. As such, mere
publication of the notice of delinquency would not suffice, considering
that the procedure in tax sales is in personam. It was, therefore, still
incumbent upon the city treasurer to send the notice of tax delinquency
directly to the taxpayer in order to protect the interests of the latter.
 
In the present case, the notice of delinquency was sent by
registered mail to the permanent address of the registered owner
in Manila. In that notice, the city treasurer of Baguio Citydirected him to
settle the charges immediately and to protect his interest in the property.
Under the circumstances, we hold that the notice sent by registered mail
adequately protected the rights of the taxpayer, who was the registered
owner of the condominium unit.
 
 
Petitioners Aquino admit that notice of delinquency was mailed,
hence, they cannot complain that their rights were not adequately protected.
Publication and posting not being indispensable, there was proper
compliance with Section 65.
 
Petitioner Heirs, on the other hand, made no such admission but, on
the contrary, argued that no notice of delinquency was prepared by the City
Treasurer much less sent to Solomon Torrado. The Court holds, for one, that
this is a question of fact that will generally not be resolved on a petition for
review.[14] Second, records bear out that a Notice of Intent to Sell
dated October 6, 1982 was sent by the Treasurers Office to
Solomon Torrado. While this was not captioned as a Notice of Delinquency,
its contents sufficiently inform the recipient of the deficiency in real
property taxes, and this notice is apart from the subsequent Notice of Sale
sent immediately prior to the auction sale.
 
Hence, on the common issue concerning compliance with P.D. No.
464, the Court rules in favor of respondents.
 
The Court proceeds to the common issue of actual versus constructive
notice of sale.
 
Petitioners Aquino argue that actual notice is required and, therefore,
the mailing of the Notice of Sale to their last known address, which they had
abandoned, did not constitute valid notice under the law. Petitioner Heirs
likewise argue that constructive notice to the delinquent owner of the real
property by mailing is not sufficient, especially when the local government
concerned is aware that the mailed notices have not reached the owner.
 
The applicable provision in regard to this issue is found in the last
paragraph of Section 73, quoted above. Under said provision, notices of the
sale at public auction may be sent to the delinquent taxpayer, either (i) at the
address as shown in the tax rolls or property tax record cards of the
municipality or city where the property is located or (ii) at his residence, if
known to such treasurer or barrio captain. Plainly, Section 73 gives the
treasurer the option of where to send the notice of sale. In giving the
treasurer the option, nowhere in the wordings is there an indication of a
requirement that notice must actually be received by the intended recipient.
Compliance by the treasurer is limited to strictly following the provisions of
the statute: he may send it at the address of the delinquent taxpayer as shown
in the tax rolls or tax records or to the residence if known by him or the
barrio captain.
 
In both petitions, the City Treasurer opted to comply with the first
option. Petitioners Aquino and Petitioner Heirs do not deny that notices were
sent to their or their predecessors address, as shown in the tax records. The
named persons in the notices sent by City Treasurer were the correct
delinquent taxpayers and were the registered owners of the property subject
to tax, albeit the mailing addresses were not to their actual residences.
Therefore, the prescribed procedure in auction sales of property for tax
delinquency was followed punctiliously. Had the City Treasurer sent the
notices to an address other than the one indicated in the tax records, and such
address is not the residence known to the treasurer or barangay captain, or if
sent to a person who is not the registered owner of the property, then the
Court would be able to declare non-compliance with the law. But the fact
that petitioners were not able to read their notices is of no consequence to
the annulment of the auction sale.
Additionally, Petitioner Heirs maintain that the Treasurers Office was
already aware that Solomon Torrados address stated in the tax records
as Butuan City was insufficient so that the notices could not possibly be
sufficient for the notices to reach the recipient. There was however a more
complete address indicated in the tax records for the improvements to Lot 8,
which was No. 20 North Road, Cubao, Quezon City. Petitioner Heirs argue
that the City Treasurer could have used this address instead of repeatedly
sending notice to an insufficient address which for certain would be returned
unclaimed.
 
The fault herein lies with Solomon Torrado and not with the City
Treasurer. Solomon Torrados use in his tax declarations for Lot 8, as well as
in TCT No. 21996, the minimal address of Butuan City, is further
compounded by the fact that he can no longer be found in Butuan City as he
had moved to Quezon City since 1959.[15] He, therefore, had more than 25
years, or 25 opportunities, to amend his address and provide the City
Treasurer of a more complete and reliable one. By neglecting to do so, he
was aware of the chances he was taking should notices be sent to him by the
Treasurers Office. Instead, he maintained the terse address of Butuan City.
 
In contrast, the Treasurers Office cannot be faulted for not sending the
notices to Solomon Torrados address at No. 20 North
Road, Cubao, Quezon City, which was indicated in his tax declarations to
his other properties. As discussed, the last paragraph of Section 73 instructs
the treasurer on where to send the notice of sale: either at the address as
shown in the tax rolls or property tax record cards of the municipality or city
where the property is located or at his residence, if known to such treasurer
or barrio captain. Petitioner Heirs have not shown that the City Treasurer or 

barrio captain actually knew that Solomon Torrados residence was No. 20

North Road, Cubao, Quezon City. Therefore, the City Treasurer could not be
blamed for having mailed the notices to the address shown in the tax
records, which was in conformity with Section 73.
In disposing of these two issues, there is no further need to discuss the
issues of estoppel and good faith.
 
WHEREFORE, both petitions are DENIED and the decisions of the
Court of Appeals in CA-G.R. CV Nos. 37487 and 49241
are AFFIRMED. No costs.
 
 SO ORDERED.
 
 
ADOLFO S. AZCUNA
Associate Justice
 
 
 
WE CONCUR:
 
 
 
 
REYNATO S. PUNO
Chairperson
Associate Justice
 

 
 
 
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice Associate Justice
 
 
 
 
CANCIO C. GARCIA
Associate Justice
 
 
ATTESTATION
 
I attest that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.
 
 
REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
 
 
 
CERTIFICATION
 
 Pursuant to Section 13, Article VIII of the Constitution and the Division
Acting Chairpersons Attestation, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
 
 
 
 
ARTEMIO V. PANGANIBAN
Chief Justice

[1]
 LRC Case No. 3160 (85).
[2]
 Married to Pete Linao.
[3]
 Accompanied by her husband, Pete Linao.
[4]
 Civil Case No. Q-51130.
[5]
 Solomon Torrado is now deceased and is represented in this petition by his heirs, petitioners in
G.R. No. 138624.
[6]
 Taken from the decision of the Court of Appeals in CA-G.R. CV No. 37487.
[7]
 In addition to the mailing, the notices of sale were posted, published in a newspaper of general
circulation and announced by criers in the marketplace. Likewise, the Barangay Captain
of the barangay where the property was located was informed of the auction sale.
[8]
 Civil Case No. Q-89-1563.
[9]
 Now Sections 197 to 283 of the Local Government Code of 1991.
[10]
 Petitioners Memorandum, Rollo, p. 205.
[11]
 Respondents Memorandum in G.R. No. 137534, Rollo, p. 240.
[12]
 Aisporna v. Court of Appeals, No. L-39419, April 12, 1982, 113 SCRA 459.
[13]
 G.R. No. 133698, April 4, 2001, 356 SCRA 263, 276-277.
[14]
 Id. at 275.
[15]
 G.R. No. 138624, Rollo, p. 18.

Today is Friday, July 27, 2018

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 82782 August 5, 1992

JOSE B. TIONGCO, representing the Minors JOSEPHINE, ALEXANDRIA, JONATHAN, CARMELA, BERNARDINE and
MELLANAY, all surnamed TIONGCO, petitioner, 
vs.
PHILIPPINE VETERANS BANK, Bacolod City Branch, and the HON. COURT OF APPEALS, respondents.

Ramon U. Contawi for private respondent.

DAVIDE, JR., J.:

May a public sale of real property held for the collection and satisfaction of a tax delinquency be attacked collaterally and may it
be subsequently nullified in a proceeding where the taxing authority is not a party?

These are the core issues in this case.

From the decision of the respondent Court (Thirteenth Division) in C.A.-G.R. CV No. 12463 promulgated on 22 March 1988   and 1

the pleadings of the parties, this Court finds the following factual and procedural antecedents sufficiently established:

As security for a loan of P290,000.00, Alicia Arnaldo, married to Fernando Arnaldo, mortgaged to the respondent Philippine
Veterans Bank (PVB) three (3) lots, one of which is located along Lopez Jaena St., Jaro, Iloilo City, and is more particularly
described in Transfer Certificate of Title (TCT) No.
T-42479 in the Office of the Register of Deeds of Iloilo City.

Arnaldo was delinquent in the payment of the real estate taxes on these lots. On 15 December 1982, the City Treasurer of Iloilo
City sold the said lots at a public auction for the satisfaction of the delinquent real estate taxes thereon. Herein petitioner, in
representation of his children, was the highest bidder and was issued the corresponding Certificate of Sale of Delinquent
Property To Purchaser. In respect of the lot covered by TCT No. T-42979, he registered the aforementioned Certificate the
following day in the Office of the Register of Deeds of Iloilo; the appropriate annotation was forthwith made at the back of the
original copy of TCT No. T-42479. Since there was no redemption made by the taxpayer Alicia Arnaldo, the Treasurer of Iloilo
City executed on 4 January 1984 a Final Bill of Sale in favor of petitioner's wards, which was registered in the Office of the
Register of Deeds on 5 March 1984; an annotation was then made at the back of the original copy of TCT No. T-42479. His letter
of 10 April 1984 to PVB demanding delivery of the owner's duplicate copy of TCT No. T-42479 having been unheeded, petitioner
filed with the Regional Trial Court of Iloilo, Branch 30 (hereinafter, RTC) a petition, docketed as Cadastral Case No. 6, to require
PVB to surrender said certificate of title to him. In its Answer, PVB denied the allegations in the petition, averred that it was not
served with a notice of the auction sale and a copy of the final bill of sale and that petitioner, who was aware of the mortgage,
may be likened to a buyer in bad faith; it then set up the defenses that the sale of the property was irregular and that the right of
petitioner over the property as a purchaser may be respected only upon the release of the mortgage. PVB did not appear,
despite notice, at the hearing of the petition on 12 March 1985. Petitioner was allowed to present his evidence ex-parte.

On 27 March 1985, the RTC, through Judge Jesus V. Ramos, handed down a Decision granting the petition, the dispositive
portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Ordering the respondent, Philippine Veterans Bank to surrender TCT No. T-42979,
covering Lot No. 665-C-4 situated at Lopez Jaena St., Jaro, Iloilo City, to the herein
petitioner without prejudice, however, to the right of the respondent bank to pursue all his
(sic) lawful remedies to impeach or annul the proceedings under the tax sale in a separate
appropriate action; and

2. Ordering the Register of Deeds of Iloilo City to cancel the said Certificate of Title and to
issue a new Certificate of Title over Lot No. 665-C-4 located at Lopez Jaena St., Jaro,
Iloilo City in the name of the herein named minors petitioners (sic).

A copy of this Decision was received by PVB on 8 April 1985.

Also, on 8 October 1984, petitioner filed with the said RTC, in the same Cadastral Case No. 6, a petition to require the spouses
Ricardo Arnaldo and Henrietta Arnaldo, successors-in-interest of Alicia Arnaldo and Fernando Arnaldo, to surrender Certificates
of Title Nos. T-42481 and T-42482 covering the following lots sold at the tax sale: Cadastral Lot No. 4, Pcs 5577 of 3811 and
3813, and Assessor's Lot No. 4, Pcs 5577, Block No. 182 of 3811, respectively. Petitioner claimed that said spouses were in
possession of the certificates. The RTC granted the petition in its Order of 17 January 1985. Upon its finality, petitioner filed a
motion for execution, which the RTC granted in its Order of 9 April 1985; the dispositive portion reads:

WHEREFORE, premises considered, finding the motion meritorious, in view of the failure of the
respondents to comply with the Order of this Court to surrender or deliver the aforementioned owner's
duplicate copies of title, the court hereby decrees as null and void the aforementioned duplicate copies of
TCT No. T-42481 and T-42482 at present in possession of the respondents Arnaldo and hereby orders
the Register of Deeds of Iloilo City to cancel the aforesaid Certificates of Title and issue new Certificates
of Title in the name (sic) of the minors-petitioners, Josephine, Alexandria, Jonathan, Carmela, Bernardino
 and Mellanay, all surnamed Tiongco. Such new certificates and/or duplicates thereof shall contain a
memoranda (sic) of the annulment of the outstanding duplicates.

It is not quite clear from the records why the petition was filed against Ricardo and Henrietta Arnaldo when the lots, as petitioner
himself admits in his Reply to the Comment,   were also mortgaged to PVB, which was, therefore, presumed to be in possession
2

of the owner's duplicate copies of the certificates of title.

On 30 April 1985, petitioner filed an ex-parte motion for a supplemental order directing that the new certificates of title to be
issued to him be free from all liens and encumbrances; said motion was denied in the Order of 17 May 1985. In the meantime,
three (3) new certificates of title for the three (3) lots were issued to the petitioner. On 30 June 1985, petitioner filed a motion to
reconsider the Order of 17 May 1985, which the RTC granted in the Order of 19 July 1985, the dispositive portion of which
provides:

WHEREFORE, finding merit in the motion, the Court hereby directs the Register of Deeds of Iloilo City to
cancel Transfer Certificate of Title Nos. T-69045, T-69046 and T-69047 issued to petitioner Tiongco and
in lieu thereof to issue to him new Transfer Certificates of Title without the annotation of the
encumbrances in favor of the Philippine Veterans Bank and solely retain as encumbrances thereof the
right of way which appears at the back of Transfer Certificates of Title Nos. T-69045 and T-69046, upon
payment of all corresponding fees therefor.

On 9 August 1985, PVB filed a motion for the reconsideration of the aforesaid Order, to which petitioner filed an Opposition.

On 24 July 1986, the RTC issued an Order granting the motion for reconsideration and setting aside the Order of 19 July 1985
"to afford the respondent bank full opportunity to ventilate their (sic) opposition to the motion for reconsideration of the petitioner
dated April 30, 1986, and set the same for hearing on August 8, 1986 at 8:30 in the morning."

Thereafter, on 9 September 1986, the RTC issued the following order:

WHEREFORE, premises considered, the Court hereby orders the Register of Deeds of Iloilo City to
cancel Transfer Certificates of Title Nos. T-6945, T-6946 and T-6947 [should be T-69045, T-69046 and T-
69047] issued to petitioner Tiongco and in lieu thereof to issue to him new certificates of title without the
annotation of encumbrances in favor of the Philippine Veterans Bank which are hereby cancelled, and
solely retain as encumbrance thereof the right of way which appears at the back of the aforementioned
three (3) certificates of title upon payment of the corresponding legal fees thereto.

Respondent PVB immediately appealed from the said Order to the respondent Court of Appeals imputing to the RTC the
commission of the following errors:

1. . . . in holding that the encumbrance in favor of the appellant annotated prior to the tax sale can now be
cancelled after the expiration of the redemption period because of the superiority of the tax lien.

2. . . . in not considering the failure of the government to cancel the encumbrance or lien annotated on the
certificate of title as provided under P.D. 464 an act which the appellee could now seek to exercise, the
same being an exclusive or absolute right of the government and . . . .

3. . . . in not considering the fact that the amount sought to be collected by the city government for tax
delinquency against the property was grossly inadequate or unconscionable compared to the amount of
the appellant's lien over the subject property based on mortgage contract, so as to be deprived of its right
thereto.

The appeal was docketed as C.A.-G.R. CV No. 12463. In its Decision promulgated on 22 March 1988, respondent Court
resolved the appeal in favor of PVB. The dispositive portion thereof reads:

WHEREFORE, the judgment of March 27, 1985, Order of July 19, 1985, and that of September 9, 1986
are hereby set aside; the auction sale of subject property on December 15, 1982 and all the proceedings,
papers and titles resulting therefrom and/or by reason thereof, are all annulled and declared of no legal
force and effect; and the petition of petitioner in Cadastral Case No. 6 is hereby DISMISSED for want of
merit. Costs against petitioner-appellee.

This disposition proceeds from the respondent Court's findings and conclusion that: (a) for want of the requisite personal notice
to the mortgagee, the PVB, the auction sale of the property in question conducted on 15 December 1982 was a "complete
nullity"; the notice by publication of the auction sale did not suffice to invest it with validity because the sale of land for collection
and payment of delinquent taxes and penalties due the government is one in personam, not in rem, as held in Lopez vs. Director
of Lands,   Valencia vs. Jimenez   and Camo vs. Riosa Boyco;  (b) The property was sold for a scandalously low amount; it is
3 4 5

shocking to the conscience that the lot was sold to petitioner for the measly sum of P2,871.00 which corresponds to the
delinquent taxes to be recovered; considering that there is a subsisting mortgage obligation of P290,000.00 plus interest,
annotated on the title, the auction sale was the product of an illicit machination and actionable collusion between city officials of
Iloilo City who had a hand in the irregular, nay, criminal transaction, and the purchaser of the subject property; (c) As regards the
issue of whether the mortgage lien is inferior to the tax lien, the rule on the matter does not justify the cancellation of any lien duly
annotated on the certificate of title of the subject property upon the disposition thereof in a tax sale; the purchaser at a tax sale
gets no better title under his deed than that held by the person assessed. The respondent Court then concluded: ENDING

Here, to repeat; not (sic) only was respondent appellant [PVB] not duly served with the required personal
notice of the tax delinquency involved and the public auction sale of subject property; it was completely
ignored thereafter and, therefore, was not afforded a chance to attack and challenge such detestable
happening nor (sic) an opportunity to pay the tax liability at stake or to redeem the property, in order to
save and protect its monetary exposure thereon of a tremendous amount. Verily, absent a criminal intent
to defraud respondent appellant, if given a chance it would have readily paid the tax delinquencies of
P2,871.00, instead of losing its investment of perhaps more than half a million pesos in subject property.
No further discussion is needed to sustain this thesis. It is too obvious and logical to necessitate any
elaboration. In fact, the principle of Res ipsa loquitor (the thing speaks for itself) is applicable under the
premises. And why not? when (sic) an investment of a government operated bank amounting to hundreds
of thousands of pesos in a city property worth around the aforestated amount of the mortgage debt
thereon was given away in a highly irregular and ill-managed auction sale for the shockingly low price of
P2,871.00. Can (sic) such proceeding be explained and justified? Impossible.

Hence, this petition for certiorari under Rule 45 of the Rules of Court, which urges this Court to set aside the aforesaid decision
because respondent Court erred:

1. In setting aside the judgment of the trial court dated March 27, 1985 . . . which had already become
final and executory since May 4, 1985, without any appeal or motion for reconsideration having been
taken therefrom;

2. In setting aside the order of the trial court dated July 19, 1985, when this very same order was also set
aside by no other than the trial court itself in its order of July 24, 1986 . . .;

3. In setting aside (in toto) the order of the lower court dated September 9, 1986, which includes two other
lots which are not subject of the petition against the Philippine Veterans Bank which deals only with Lot
No. 665-C-4 located at Lopez Jaena St., Jaro, Iloilo City with an area of 220 square meters;

4. In ordering the annulment of the tax sale of December 15, 1982 which was approved by the trial court
in its final judgment of March 27, 1985, and where no action for its impeachment or annulment has been
commenced by the Philippine Veterans Bank; . . .;

5. In dismissing the petition in Cadastral Case No. 6 "for want of merit", . . .;

6. In unjustly accusing your petitioner of "criminal intent to defraud" . . . and "illicit, machination and
actionable collusion between your petitioner or his representatives and the city officials of Iloilo . . . as
though it were a trial court or had any evidence before it." . . .

After private respondent PVB filed its Comment on the petition as required in the Resolution of 9 May 1988, and the petitioner,
his Reply thereto as required in the Resolution of 31 August 1988, this Court, in its Resolution of 7 December 1988, gave due
course to the petition and required the parties to submit their respective Memoranda, which they subsequently complied with.

The petition is meritorious.

1. Respondent Court cannot nullify the sale of the property in question made during the public auction. The instant case
originated in the Regional Trial Court as a mere petition to require PVB, the mortgagee, to surrender the owner's duplicate copy
of TCT No. T-42479 to petitioner on behalf of his children who were the purchasers of the lot covered by said certificate of title at
the tax sale, after the registered owner failed to redeem the property and the PVB refused to deliver said TCT to petitioner, and
to request for the issuance of a new one in the name of said purchasers. This is authorized under Section 75 of the Property
Registration Decree   which reads:
6

Sec. 75. Application for a new certificate upon expiration of redemption period. — Upon the expiration of
 the time, if any, allowed by law for redemption after registered land has been sold on execution, or taken
or sold for the enforcement of a lien of any description, except a mortgage lien, the purchaser at such sale
or anyone claiming under him may petition the court for the entry of a new certificate of title to him.

Before the entry of a new certificate of title, the registered owner may pursue all legal and equitable
remedies to impeach or annul such proceedings.

In relation thereto, Section 107 thereof provides:

Sec. 107. Surrender of withheld duplicate certificates. — Where it is necessary to issue a new certificate
of title pursuant to any involuntary instrument which divests the title of the registered owner against his
consent or where a voluntary instrument cannot be registered by reason of the refusal or failure of the
holder to surrender the owner's duplicate certificate of title, the party in interest may file a petition in court
to compel surrender of the same to the Register of Deeds. The court, after hearing, may order the
registered owner or any person withholding the duplicate certificate to surrender the same, and direct the
entry of a new certificate or memorandum upon such surrender. If the person withholding the duplicate
certificate is not amenable to the process of the court, or if for any reason the outstanding owner's
duplicate certificate cannot be delivered, the court may order the annulment of the same as well as the
issuance of a new certificate of title in lieu thereof. Such new certificate and all duplicates thereof shall
contain a memorandum of the annulment of the outstanding duplicate.

It is, of course, understood that any lien annotated on the previous certificate of title, which subsists despite the execution sale or
a sale for the enforcement of other liens, must be incorporated into or carried over to the new transfer certificate of title. This is
specially true in the case of a real estate mortgage because pursuant to Article 2126 of the Civil Code, it "directly and
immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted." It is inseparable from the property mortgaged, as it is a right in 
rem — a lien on the property whoever its owner may be. It subsists notwithstanding a change in ownership; in short, the
personality of the owner is disregarded. Thus, all subsequent purchasers must respect the mortgage, whether the transfer to
them be with or without the consent of the mortgagee, for such mortgage, until discharged, follows the property.  7

After a new title is issued in the name of the wards of petitioner or the petitioner himself in representation of such wards, the
subsisting mortgage in favor of the PVB must be annotated at the back thereof. Section 59 of the Property Registration Decree
provides:

Sec. 59. Carry over of encumbrances. — If, at the time of any transfer, subsisting encumbrances or
annotations appear in the registration book, they shall be carried over and stated in the new certificate or
certificates, except so far as they may be simultaneously released or discharged.

Consequently, since the so-called Decision of 27 March 1985 did not contain, and correctly so, a specific directive that the
mortgage encumbrance in favor of PVB be cancelled or that it not be carried over to the new title to be issued to petitioner's
wards, it was not necessary for the PVB to move for its reconsideration or appeal therefrom because it was the duty of the
Register of Deeds to carry it over to the new title. At that stage of the proceedings, PVB's right as mortgagee suffered no injury or
impairment. The injury or impairment became indubitable only when the RTC issued the Order of 19 July 1985 — which was,
however set aside in the Order of 24 July 1986 — and the Order of 9 September 1986, wherein for no justifiable reason
whatsoever, and acting with palpable arbitrariness and clearly in obvious disregard of the above principles concerning real estate
mortgages and the aforequoted Section 59, it directed the issuance of new certificates of title for the three (3) lots in favor of the
petitioner's wards "without the annotation of the encumbrances in favor of the Philippine Veterans Bank, which are hereby
cancelled."

No party disputes the fact that the mortgage debt in favor of PVB was neither paid nor satisfied and that the mortgage in its favor
has not been released, discharged or extinguished. It is from this Order that PVB properly interposed an appeal. Doubtless, the
appeal was seasonably filed; moreover, petitioner's insistence that the Order of 27 March 1985 had long become firm, final and
unappealable, and the private respondent's postulation to the contrary on the sole ground that it never became so because on 30
April 1985, petitioner filed an ex-parte motion for a supplemental order directing that the new titles to be issued must be without
the mortgage encumbrance, are groundless, if not totally misplaced.

The proceedings before the RTC in the petition for the surrender of TCT Nos. T-42479 and T-42482 were conducted in
accordance with Section 75 and 107 of the Property Registration Decree and were filed in the original case in which the decrees
of registration were entered pursuant to the last paragraph of Section 108 thereof which reads:

All petitions or motions filed under this section as well as under any other provision of this Decree after
original registration shall be filed and entitled in the original case in which the decree of registration was
 entered.

This being the case, such proceedings were summary in nature and did not confer upon the RTC, sitting as a
land registration court, the power to decide upon the validity of the tax sale.

In Bareng vs. Shintoist Shrine and Japanese Charity Bureau, 8 which involves Section 111 and 112 of the Land Registration Act, substantially similar to
Sections 107 and 108, respectively, of the Property Registration Decree, this Court ruled:

Anyway, proceedings undertaken pursuant to Section 111, as those under Section 112, are summary in
nature. They are inadequate for the litigation of issues properly pertaining to civil actions. (Tomada vs.
Tomada, G.R. No. L-21887, July 30, 1969, 28 SCRA 1028; Santos vs. Cruz, 52 SCRA 330.) In other
words, controversial questions, such as questions concerning the ownership of registered property
(Tomada vs. Tomada, supra), questions of lapse of period to register of deeds (sic) (Mendoza vs. Abrera,
105 Phil. 611), or any question where the issues involved have become controversial (Register of Deeds
of Iloilo vs. C.N. Hodges, G.R. No. L-18178, January 31, 1963, 7 SCRA 149) cannot be threshed out in
such proceedings. Where therefore, controversial issues are raised in proceedings brought under Section
111 or Section 112, it is the duty of the court sitting as a cadastral court or land registration court to
dismiss the petition and the proper recourse open of the parties would be to bring up the said questions in
an ordinary civil action, or in the proceeding where the incident properly belongs (Hu, Chon Sunpongco
vs. Heirs of Nicolas Ronquillo, G.R. No. L-27040, December 19, 1970, 36 SCRA 395) albeit, in Ruiz vs.
Paquio, it was held that if the oppositor does not question the jurisdiction of the court and allows these
substantive issues to be tried and decided by it, its decision can no longer be attacked in any subsequent
proceeding.

It was precisely for this reason that the RTC, in its Order of 27 March 1985, reserved to PVB the right "to pursue all his (sic)
lawful remedies to impeach or annul the proceedings under the tax sale in a separate appropriate action." At least, up to that
point, the RTC was aware of the limitations of its power in the proceedings.

Since the RTC did not even have the jurisdiction to decide the issue of the validity of the sale which, by the way, could only be
properly raised by the registered owner-mortgagor and not by the PVB, and which such registered owner-mortgagor did not raise
at all, respondent Court committed grave abuse of discretion amounting to lack of jurisdiction in setting aside the auction sale
conducted by the Treasurer of Iloilo City on 15 December 1982 and annulling all the proceedings, papers and titles resulting
therefrom or by reason thereof.

Worse, respondent court entirely forgot that the City of Iloilo and the City Treasurer were not parties to the petition for the
surrender of TCT No. T-42479 and the other petition for the surrender of TCT Nos. T-42481 and T-42482. Both the City of Iloilo,
as the taxing authority which exercised its right to collect a tax delinquency and satisfy the same through a public sale of the
taxpayer's property, and the City Treasurer who conducted the sale and executed the Certificate of Sale and the Final Bill of Sale
are indispensable parties in any action involving the validity of the sale. Thus, in annulling the sale in question, respondent Court
denied both the City of Iloilo and the City Treasurer due process of law, even as it also denied petitioner's wards their right to be
reimbursed for what they, through the petitioner, paid the City of Iloilo. This grave abuse of discretion was unnecessarily
compounded when the respondent Court condemned them, without hearing, for alleged irregularities and criminal culpability.
Indeed, the respondent Court went a bit too far. In all probability, it was imply overwhelmed and shocked by the "scandalously
low" purchase price. Here again, the respondent Court chose to disregard two (2) crucial facts: (a) the owner-mortgagor, Alicia
Arnaldo, or her successors-in-interest, did not even question the sale, and (b) the lots were mortgaged to PVB for P290,000.00.
Only the owner-mortgagor may question the alleged scandalously low amount paid by the purchaser at the tax sale. Clearly,
neither she nor her successor-in-interest had voiced out, even faintly, any complaint. At any rate, the rule is well-settled that
"while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when
such inadequacy shocks one's conscience as to justify the courts to interfere, such does not follow when the law gives to the
owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for
the owner to effect redemption."  9

Then too, petitioner purchased the property fully cognizant of the risk that he could eventually lose it in a foreclosure sale
conducted to satisfy the mortgage, unless he was prepared to pay P290,000.00 more, with interests due them, as well as the
other charges and penalties which the contract of mortgage or the promissory note secured by it has stipulated, without any hope
of seeking reimbursement from the mortgagor.

2. Besides, even granting for the sake of argument that the validity of the tax sale may be properly inquired into by the
respondent Court, it nevertheless erred in holding that PVB was entitled, as a matter of right, to a personal service of notice of
the auction sale, considering that per Lopez vs. Director of Lands,   such a proceeding is inpersonam and not in rem. There is no
10

quarrel with this doctrine; respondent Court just applied it erroneously in this case.

Whether personal notice to the mortgagee is required for the auction sale of the mortgaged land for the collection and
satisfaction of the real estate taxes due thereon depends upon the applicable law. In this case, it is the charter of the City of Iloilo
C.A. No. 158 as amended, which must be looked into. Under Section 48 thereof, notice of the public auction shall be posted at
the main entrance of the City Hall and at the municipal buildings of the province and published in a newspaper of general
circulation in the city. A copy of the notice shall also be sent immediately by registered mail to the delinquent taxpayer at the
latter's home address, if the treasurer should know such address. Nowhere does it provide for personal notice to a registered
lienholder such as a mortgagee. The reason why no personal notice is required is too obvious. The sale does not operate to
cancel or extinguish the pre-existing lien.

A careful reading of Lopez vs. Director of Lands   would have easily disclosed that what was nullified in said case, for lack of
11

notice to the mortgagee, the Director of the Bureau of Lands, was the order of the court, issued on the basis of a petition for the
cancellation of the mortgage lien, directing the issuance of a new certificate of title in favor of the purchaser at the tax sale "free
from all liens of any kind whatsoever" pursuant to Section 2500 of Act No. 2711, thereby cancelling the mortgage encumbrance
in favor of the mortgagee annotated in the previous certificate of title.

Section 2500 of Act No. 2711   had been reproduced, with very slight modifications which do not affect the substance, in Section
12

51 of the Charter of Iloilo City:

Sec. 51. Execution of final sale. — In case the taxpayer shall not redeem the property sold as herein
provided within one year from the date of sale, and the purchaser shall then have paid the total purchase
price, the city treasurer, as grantor, shall execute a deed in form and effect sufficient to convey to the
purchaser so much of the real estate against which the taxes have been assessed as has been sold, free
from all liens of any kind whatsoever. . . .

Because of the lack of notice to the mortgagee in the said petition for the issuance of a new certificate of title, free from all liens
of any kind whatsoever, this Court set aside the challenged order. Said this Court therein:

While it is true that Section 2500 of Act No. 2711 provides that, in case the taxpayer shall not redeem the
realty sold for the payment of delinquent taxes within one year form the date of the sale, the city assessor
and collector shall execute a deed, in form and effect sufficient to convey to the purchaser so much of the
real estate, against which the taxes have been assessed, as has been sold, free from all liens of any kind
whatsoever, the Legislature certainly did not intend that persons who hold a lien against such land should
be deprived thereof without a notice and an opportunity to be heard before their lien could be nullified. No
rule is better established, under the due-process-of-law provision of the organic law of the land, than the
one which requires notice and an opportunity to be heard before any citizen of the state can be deprived
of his rights. That is the rule, whether the action is in personam or in rem, with the exception that in an
action in rem substituted service may be had. (Pennoyer vs. Neff. 95 U.S. 714; Kilbourn vs. Thompson,
103 U.S. 168.)

It ordered, however, that the new certificate of title be issued to the purchaser "with an annotation of the mortgage lien held by
the appellant" Director of the Bureau of Lands.

Clearly then, said case is not an authority for the nullification of the tax sale in question, but for the restoration of the mortgage
annotation, or its being carried over to the new certificates of title.

It would have been entirely different if it was the owner of the land who was not notified of the sale. Lack of notice
to him would vitiate the sale. Thus, interpreting Section 35 of C.A. No. 470, the Assessment Law, this Court
in Cabrera vs. Provincial Treasurer of Tayabas, 13 held that lack of notice to the delinquent taxpayer vitiates the
auction sale. Also, in Serfino vs. Court of Appeals, 14 this Court gave its "stamp of approval on the . . . ruling o
the respondent court" that in auction sales of property for tax delinquency, notice 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 same.

3. Petitioner is correct in stating that respondent Court erred in annulling the Order of the trial court of 19 July 1985 because it
had been, in fact, set aside and reconsidered by the said court in the Order of 24 July 1986.

4. There is no need to dismiss the petitions in Cadastral Case No. 6. For, indeed, in the light of the foregoing disquisitions that
the mortgage in favor of PVB was not affected by the tax sale and that the validity of such sale was not properly raised therein,
new certificates of titles in favor of petitioner's children may be validly issued under Sections 75 and 107 of the Property
Registration Decree, subject of course to the mortgage in favor of PVB.

WHEREFORE, the petition is GRANTED. The decision of the respondent Court in C.A.-G.R. CV No. 12463, promulgated on 22
March 1988, and the Orders of Branch 30 of the Regional Trial Court of Iloilo of 9 September 1986 are hereby SET ASIDE.

The mortgage in favor of the Philippine Veterans Bank shall be annotated on the corresponding new certificates of title issued to
petitioner's children pursuant to the Decision of 27 March 1985 and the Order of 9 April 1985 of the said Regional Trial Court in
Cadastral Case No. 6 in lieu of the previous ones where such mortgage was annotated. For this purpose, the petitioner is
directed to surrender such new certificates of title to the Register of Deeds of Iloilo City who is hereby directed to make such
annotations upon payment by the Philippine Veterans Bank of the required fees.

No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Romero, JJ., concur.

Footnotes

1 Annex "A" of Petition; per Associate Justice Fidel P. Purisima, concurred in by Associate Justices
Segundino C. Chua and Nicolas P. Lapeña, Jr.

2 Rollo, 51.

3 47 Phil. 23 [1924].

4 11 Phil. 492 [1908].

5 29 Phil. 437 [1915].

6 P.D. No. 1529.

7 Philippine National Bank vs. Mallorca, 21 SCRA 694 [1967], citing ALTAVAS, The Law of Mortgages in
the Philippine Islands, 1924 ed., 2; PEÑA, Registration of Land Titles and Deeds, 1961 ed., 225; and
TOLENTINO, A., Civil Code of the Philippines Annotated, vol. V, 1962 ed., 477. See also Ganzon vs.
Hon. Inserto, 123 SCRA 713 [1983], and DBP vs. NLRC, 183 SCRA 328 [1990].

8 83 SCRA 418 [1978].

9 Velasquez vs. Coronel, 5 SCRA 985 [1962]; see also Barrozo vs. Macaraeg, 83 Phil. 378 [1949]; Vda.
de Gordon vs. Court of Appeals, 109 SCRA 388 [1981]; Francia vs. Intermediate Appellate Court, 162
SCRA 753 [1988]; Gomez vs. Gealone, G.R. No. 58281, 13 November 1991.

10 47 Phil. 23 [1924].

11 Supra.

12 The Revised Administrative Code of 1917.

13 75 Phil. 780 [1946].

14 154 SCRA 19 [1987].

The Lawphil Project - Arellano Law Foundation

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 502             January 29, 1946

BASILIA CABRERA, plaintiff-appellee, 
vs.
THE PROVINCIAL TREASURER OF TAYABAS and PEDRO J. CATIGBAC, defendants-
appellants.

Lorenzo Sumulong for appellant.

Jose W. Diokno for appellee.

PARAS, J.:

On October 30, 1940, the provincial treasurer of Tayabas issued a notice for the sale at
public auction of numerous, real properties forfeited for tax delinquency, including a certain
parcel of land located in the barrio of Buenavista, municipality of Candelaria, Province of
Tayabas, and assessed in the name of Nemesio Cabrera, said sale to be held "on December
15, 1940 at 8 a.m. and every day thereafter at the same place and hour until all the
properties shall have been sold to the highest bidder." Copy of the notice was sent by
registered mail to Nemesio Cabrera, but the envelope containing the same was
returned with the remark "Unclaimed," undoubtedly because Nemesio Cabrera
had already died in 1935. The land was actually sold on May 12, 1941, for the sum of
P74.34 to the appellant Pedro J. Catigbac, in whose favor the final bill of sale was executed
on September 23, 1942. Thereafter the appellee, Basilia Cabrera, filed a complaint in the
Court of First Instance of Tayabas against the provincial treasurer and the appellant,
attacking the validity of the tax sale on the grounds that she was not notified therefore and
that although the land had remained in the assessment book in the name of Nemesio
Cabrera, a former owner, she has become its registered owner, since 1934 when a Torrens
title (No. 8167) was issued to her by the register of deeds of Tayabas. From a judgment
favorable to the appellee, the present appeal was taken by Pedro J. Catigbac.

Under the law (Commonwealth Act No. 470, section 35), the provincial treasurer is
enjoined to set forth in the notice, among other particulars, the date of the tax sale. We
are of the opinion that this mandatory requirement was not satisfied in the present case,
because the announcement that the sale would take place on December 15, 1940 and
every day thereafter, is as general and indefinite as a notice for the sale "within this or
next year" or "some time within the month of December ." In order to enable a
taxpayer to protect his rights, he should at least appraised of the exact date
of the proceeding by which he is to lose his property . When we consider the
fact that the sale in favor of the appellant was executed on May 12, 1941, or nearly five
months after December 15, 1940, the violation of the mandatory requirement becomes
more obvious. Indeed, in his motion for reconsideration (see Record on Appeal, pp. 33-
41), the appellant had admitted, unknowingly perhaps, that when he went to the office of
the municipal treasurer after reading the notice of sale in December, 1940, to inquire
about the advertised land, he was told to return on May 12, 1941. The implication that
follows is that the tax officials had really adopted the view that they could sell any of the
numerous forfeited lots on any date subsequent to December 15, 1940, without new
notice, thereby making the resulting sale more private than public, likewise in violation of
the law. It may be observed that as regards tax sales, unlike ordinary execution sales,
the statute does not expressly authorize adjournment from day to day. The reminder
may, however, be given that the tax officials will greatly be inconvenienced by following
the law strictly, especially when numerous properties are, as in the present case (132
parcels), to be disposed of for tax delinquency. We will not venture to disagree, but it is
believed that the officials who are ever solicitous in protecting private proprietary rights,
shall have helped, to the same extent, in maintaining the solid foundation of the
Government which they seek to serve and of which they themselves are a part.

What has been said is sufficient to decide this appeal, although it will not altogether be amiss
to refer to details that further support the judgment of the lower court. The appellee was
admittedly not notified of the auction sale, and this also vitiates the proceeding. She is the
registered owner of the land and, since 1934, has become liable for the taxes thereon. For
all purposes, she is the delinquent taxpayer "against whom the taxes were assessed,"
referred to in section 34 of Commonwealth Act No. 470. It cannot be Nemesio Cabrera for
the latter's obligation to pay taxes ended where the appellee's liability began. Neither the
alleged receipt by the appellee of a copy of certificate of sale dated May 12, 1941, nor her
failure to redeem thereafter, had the effect of validating the prior tax proceeding. The sale in
favor of the appellant cannot bind the appellee, since the land purportedly conveyed was
owned by Nemesio Cabrera, not by the appellee; and, at the time of the sale, Nemesio
Cabrera had no interest whatsoever in the land in question that could have passed to the
appellant.

The appellee may be criticized for her failure to have the land transferred to her name in the
assessment record. The circumstance, nevertheless, cannot supplant the absence of notice.
Of course, it is the duty of any person acquiring at the time real property to prepare and
submit a tax declaration within sixty days (Commonwealth Act No. 470, section 12), but it is
no less true that when the owner refuses or fails to make the required declaration, the
provincial assessor should himself declare the property in the name of the defaulting owner
(Commonwealth Act No. 470, section 14). In this case there is absolutely no showing that the
appellee had deliberately failed to make the declaration to defraud the tax officials; and it
may be remarked that there can be no reason why her Torrens title, which binds the whole
world, cannot at least charge the Government which had issued it, with notice thereof. A little
synchronization between the offices of the register of deeds and of the provincial assessor,
with perhaps very negligible additional clerical work on the part of both, will surely result in a
more efficient enforcement of the tax laws.

Not having appealed, the appellee cannot now pretend that the judgement of the lower court
is erroneous in so far as it failed to award damages in her favor for the sum of P500. While
an appellee can on appeal make a counter-assignment of error, it must be with a view
merely to sustaining the judgement, not to obtaining other affirmative relief.

The appealed judgment is affirmed, with costs of both instances against the appellant. So
ordered.

Moran, C.J., Jaranilla, and Pablo, JJ., concur.

Separate Opinions

FERIA, J., concurring and dissenting:

I concur except in the conclusion of the majority that the appellee may make a counter-
assignment of error even in the sense therein stated, for it is misleading and erroneous. In
no case may a counter-assignment of error be properly allowed. A counter-assignment of
error means, as the prefix "counter" indicates, a proposition that the court committed an error
opposite or contrary to that assigned by the adverse party. Appellee should not or need not
make such counter-assignment in order to refute or disprove plaintiff's assignment of error.

Even if by counter-assignment is meant an assignment of error, it is improper and of no avail

for an appellee to make it in ordinary civil cases. It is not incumbent on appellee, who
occupies a purely defensive position, to make assignments of error. (Garcia
Valdez vs. Soteraña Tuason, 40 Phil., 943.) He cannot, as appellee, obtain from the
appellate court more or greater relief than that granted him by the trial court though the
latter's decision be erroneous in that respect. When the trial judge decides a case in favor of
a party on certain ground, the appellate court may base its decision upon some other point,
ignored or erroneously decided in favor of the appellant by the trial court (do, do). Without
any assignment of errors, appellee may point out in his brief any error committed by the
lower court in not admitting certain evidence, or not taking into consideration certain points of
law or fact, in support of the decision appealed from.

In election cases, however, the appellee may make an assignment of error although not
required to do so, because as said cases are tried de novo on appeal, Mendoza vs.
Mendiola (53 Phil., 267), appellee may seek affirmative relief and the appellate court grant or
decide that appellee has received more votes than those adjudicated to him by the lower
court.

BRIONES, M., concurrente:

Estoy conforme con la parte dispositivia de la sentencia por el unico fundamento de que
cuando se verifico la venta por morosidad en el impuesto territorial, Basilia Cabrera, la
demandante-apelada, era la dueña del terreno en cuestion con certificado de titulo Torrens
registrado a su nombre. El articulo 35 de la Ley del Commonwealth No. 470 prescribe que
una copia del anuncio de la venta debera enviarse al contribuyente moroso en su residencia
si esta fuese conocida por el tesorero. Como acertadamente si dice en la ponecia, el titulo
Torrens es obligatorio para todo el mundo; por tanto — añado — debe serlo mas para los
agentes del fisco. En el presente caso era deber del tesorero enviar una copia del anuncio
de venta a la damandante y apelada como dueña registrada del torreno, en vez de mandarla
al dueño anterior que por cierto ya habia fallecido. Si esto hace imperativo que se de cuenta
a las tesorerias de todos los traspasos inscritos y registrados en el Registro de la Propiedad,
estimo que ello debe hacerse el implementando la maquinaria official al efecto. Razones de
equidad y eficiencia administrativa demandan la rigida adopcion de semejante practica.

G.R. No. L-40858 September 15, 1987

SPOUSES FEDERICO SERFINO and LORNA BACHAR, petitioners, 

vs.
THE COURT OF APPEALS and LOPEZ SUGAR CENTRAL MILL CO., INC., respondents.

No. L-40751 September 15, 1987

PHILIPPINE NATIONAL BANK, petitioner, 

vs.
THE HONORABLE COURT OF APPEALS, LOPEZ SUGAR CENTRAL MILL COMPANY,
INC., SPOUSES FEDERICO SERFINO and LORNA BACHAR, respondents.

PARAS, J.:

Before Us are two (2) Petitions for certiorari to review the decision 1 of the Court of Appeals als in CA-
G.R. No. 37748-R, consolidated for Our disposition since they arose from the same factual background.

The records of the case show that on August 25, 1937, a parcel of land consisting of
21.1676 hectares situated in the Municipality of Sagay, Province of Negros Occidental, was
patented in the name of Pacifico Casamayor, under Homestead Patent No. 44139. Upon
registration of said patent in the office of the Register of Deeds of Negros Occidental, OCT
No. 1839 was issued by said office in the name of Pacifico Casamayor. On December 14,
1945, the latter sold said land in favor of Nemesia D. Baltazar.

Apparently, OCT No. 1839 was lost during the war and upon petition of Nemesia Baltazar,
the Court of First Instance of Negros Occidental ordered   the reconstitution thereof.
2

Pursuant thereto, OCT No. 14-R (1839) was issued on January 18, 1946 in the name of
Pacifico Casamayor. On that same day, TCT No. 57-N was issued in the name of Nemesia
Baltazar but after the cancellation of OCT No. 14-R (1839).

On August 25, 1951, Nemesia Baltazar, sold said property to Lopez Sugar Central Mill Co.,
Inc. (Lopez Sugar Central, for brevity). The latter, however did not present the documents for
registration until December 17, 1964 to the Office of the Registry of Deeds. Said office
refused registration upon its discovery that the same property was covered by another
certificate of title, TCT No. 38985, in the name of Federico Serfino.

An inquiry into this discrepancy reveals that the Provincial Treasurer of Negros Occidental on
October 30, 1956 had conducted a public auction sale of this property for tax delinquency for
the period starting the year 1950. Notice of this public auction sale was sent to Pacifico
Casamayor but none to Nemesia Baltazar and Lopez Sugar Million There being no public
bidders on the scheduled date of sale, the Provincial Treasurer of Negros Occidental issued
a Certification of Sale of Delinquent Real Property over the disputed land to the Province of
Negros Occidental. On May 14, 1964, upon payment of the amount of P1,838.49 by
Federico Serfino, a Certificate of Repurchase of Real Property was issued and executed by
the Provincial Treasurer in favor of Federico Serfino, for and in behalf of Pacifico
Casamayor.

On May 28, 1964, Serfino filed a petition with the Court of First Instance of Negros
Occidental for the Reconstitution of OCT No. 1839 in the name of Pacifico Casamayor, upon
the allegation that said title was lost. After due publication and hearing, said OCT was
ordered reconstituted and thus OCT No. RP-1304 (1839) was issued by the Registry of
Deeds in the name of Casamayor.

On October 30, 1964, Serfino petitioned the court for confirmation of his title to the land as
purchaser in the auction sale. On October 31, 1964, court granted the petition and on
November 2, 1964, OCT No. RP-1304 (1839) was cancelled and TCT No. 38985 was issued
in the name of Federico Serfino, married to Lorna Bachar.

On November 19, 1964, the spouses Serfinos mortgaged the land to the Philippine National
Bank (PNB) to secure a loan in the amount of P5,000.00. Said mortgage in favor of PNB was
inscribed in TCT No. 38985. Hence, this was the situation of the land when the Office of the
Register of Deeds refused registration of the property in question requested by the Lopez
Sugar Central.

The lower court in its Order, dated January 16, 1965 in the Petition of the Office of the
Register of Deeds seeking the cancellation of either TCT No. 57-N (in the name of Nemesia
Baltazar) or TCT No. 38985 (in the name of Lopez Sugar Central), ordered Lopez Sugar
Central and spouses Serfino to take the necessary steps towards the clearing of their
respective titles before a court of general jurisdiction. Pursuant thereto, Lopez Sugar Central,
on May 5, 1965, instituted an action for 1) annulment of OCT No. RP-1304 (1839), of TCT
No. 38985 and of the mortgage executed by the Serfinos in favor of PNB, 2) for the
registration of the Deed of Sale, 3) for the issuance of a TCT in its name and 4) for recovery
of possession of the disputed land from the Serfinos.

On February 4, 1966, the lower court rendered its decision,   the dispositive portion reading
3

as follows:

WHEREFORE, and considering the conclusions and opinion set forth above,
judgment is hereby rendered as follows:

1. The Register of Deeds of Negros Occidental is hereby ordered to cancel

Transfer Certificate of Title No. 38985;
 2. The same Register of Deeds is ordered to register the deed of sale
executed by Nemesia D. Baltazar on August 25, 1951, and after cancelling
Transfer Certificate of Title No. 57-N and other titles issued prior thereto, to
issue a new transfer certificate of title in the name of Lopez Sugar Central
Mill Co., Inc., upon previous payments of the legal fees;

3. The Lopez Sugar Central Mill Co., Inc., shall pay the Philippine National
Bank, Bacolod Branch, the sum of P5,261.11 secured by a real estate
mortgaged registered and annotated on Transfer Certificate of Title 38985
which shall be carried over in the new transfer certificate of title to be issued
to the Lopez Sugar Central Mill Co., Inc. with the right of recourse to the
Assurance Fund; and

4. The defendant, Federico Serfino, is hereby ordered to vacate the land in

question and to deliver the possession thereof to the plaintiff;

5. The plaintiff is exempt from reimbursing the defendant, Federico Serfino,

for the sum of P602.94 which the latter paid for the repurchase of the land in
question for the reason that the former is already burdened with the payment
of the mortgage indebtedness with the Philippine National Bank in the
amount of P5,261.11; and

6. The Court makes no award for damages and costs.

SO ORDERED. (Rollo L-40751, pp. 117 & 118, Joint Record on Appeal,
Annex "D", p. 50)

Both parties appealed from this decision of the trial court. Ruling on the assignment of errors,
the appellate court affirmed the judgment of the trial court with modification in its decision,
the pertinent portion reading as follows:

Plaintiff contends that the mortgage executed by the Serfinos in favor of PNB
is null and void, because the property conveyed in mortgage did not belong
to them. The contention is meritorious. That the mortgagor should be the
absolute owner of the property mortgaged is an essential requisite for the
validity of a contract of mortgage (Art. 2085, Civil Code); and a mortgage
constituted by one not the owner of the property mortgaged is null and void,
the registration of the mortgage notwithstanding (Parqui vs. PNB, 96 Phil.
157). Thus, the mortgage lien of PNB in the contract executed in its favor by
the Serfinos did not attach to the property in question.

The argument advanced by appellee PNB that it is a mortgagee in good faith

deserves scant consideration. Note that when the mortgage was constituted,
the disputed land was covered by a valid and existing title, TCT No. 57-N, in
the name of Nemesis D. Baltazar. Indeed, the whole world, including
appellee PNB, is charged with notice thereof. Consequently, that portion of
the trial court's decision declaring plaintiff liable to the PNB for payment of the
sum of P5,261.11 should beset aside.

As to the plaintiff's claim for damages against the Serfinos, We find the same
devoid of merit. Whatever injury plaintiff may have suffered was occasioned
by the faulty and defective indexing and filing system in the office of the
Register of Deeds of Negros Occidental, and not by any intentional Act on
the part of the Serfino Spouses. Anyway, the evidence fails to show that they
deliberately intended to cause damage to plaintiff.

However, equity dictates that plaintiff should reimburse the Serfino spouses
of the sum of P1,839.49, representing the unpaid taxes and penalties paid by
the latter when they repurchased the property from the province of Negros
Occidental.

WHEREFORE, with the modifications above indicated, the judgment

appealed from is hereby affirmed. No costs.
 SO ORDERED. (Decision, Annex "A", pp. 40-42, Rollo-L40751)

From the aforesaid ruling, the spouses Serfino and the Philippine National Bank appealed to
Us by way of certiorari. Petitioners, spouses Serfinos   assign the following errors:
4

I. The Purchase by plaintiff-appellant corporation (Lopez Sugar Central) of

the lot in question was null and void from the beginning.

II. Petitioners are proper parties to challenge the legality of the sale of the
land in question to private respondent.

III. Notice to Nemesia Baltazar of the Tax Sale of the land in question was
not essential to the validity of the sale.

IV. The legality of the auction sale of the property in question was not in issue
before the court a quo.

Petitioner Philippine National Bank   submits the following.

5

ASSIGNMENT OF ERRORS

I. The Court of Appeals erred in holding that the auction sale of the disputed
property was null and void.

II. The Court of Appeals erred in not holding that petitioner is a mortgagee in
good faith.

Petitioners spouses Serfinos maintain that sale of a land covered by homestead to be valid
must have the following requisites: 1) consent of the grantee 2) approval of the Secretary of
Agriculture and Natural Resources 3) sale is solely for educational, religious, or charitable
purposes or for a right of way (Sec. 121, CA No. 141 ).

Petitioner spouses Serfinos in support of their first assignment of error cited Sec. 121, CA
No. 141 reading as follows:

SEC. 121. Except with the consent of the grantee and the approval of the
Secretary of Agriculture and Commerce, and solely for commercial,
industrial, educational, religious or charitable purposes or for a right of way,
no corporation, association, or partnership may acquire or have any right,
title, interest, or property right whatsoever to any land granted under the free
patent, homestead or individual sale provisions of this Act or to any
permanent improvement on such land.

They argue that since private respondent is a corporation, it is barred from owning land
granted under the free patent if the aforementioned requisites are not present. Such Pacifico
Casamayor who obtained a Homestead Patent and later an original certificate of title in his
name. Later it was this original grantee who sold the land in question to Nemesia Baltazar on
December 14, 1945 or more than eight (8) years after he obtained his homestead patent on
August 25, 1937. On these facts, We now apply Sec. 118 of Commonwealth Act No. 141
which prohibits the alienation of homestead lots to private individual within five (5) years from
the date of the issuance of the patent and not Sec. 121 which governs sale to corporation.
Since the grant was more than five (5) years before, the transfer to Nemesia Baltazar was
valid and legal. Nemesia Baltazar who became the titled or registered owner as evidenced
by TCT No. 57-N, could exercise acts of ownership over the land such as disposing of it to
private respondent by a deed of sale.

The assailed decision of the appellate court declares that the prescribed procedure in
auction sales of property for tax delinquency being in derogation of property rights should be
followed punctiliously. Strict adherence to the statutes governing tax sales is imperative not
only for the protection of the tax payers, but also to allay any possible suspicion of collusion
between the buyer and the public officials called upon to enforce such laws. Notice of sale to
the delinquent land owners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which initiates the sale.
We give our stamp of approval on the aforementioned ruling of the respondent court. In the
case at bar, there is no evidence that Nemesia Baltazar, who had obtained a transfer
certificate of title in her name on January 18, 1946, was notified of the auction sale which
was scheduled on October 30, 1956. Neither was she furnished as the owner of the
delinquent real property with the certificate of sale as prescribed by Sec. 37 of
Commonwealth Act No. 470. These infirmities are fatal. Worth mentioning also is the fact
that Lopez Sugar Central was not entirely negligent in its payment of land taxes. The record
shows that taxes were paid for the years 1950 to 1953 and a receipt therefor was obtained in
its name. The sale therefore by the Province of Negros Occidental of the land in dispute to
the spouses Serfinos was void since the Province of Negros Occidental was not the real
owner of the property thus sold. In turn, the spouses Serfinos title which has been derived
from that of the Province of Negros Occidental is likewise void. 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. Where land is sold for delinquency taxes under the provisions of the
Provincial Assessment Law, rights of registered but undeclared owners of the land are not
affected by the proceedings and the sale conveys only such interest as the person who has
declared the property for taxation has therein.

We now come to the arguments of petitioner Philippine National Bank. The appellate court in
modifying the trial court's decision nullified the mortgage in favor of Philippine National Bank
and exempted Lopez Sugar Central from the payment to PNB of the amount of the mortgage
loan. Petitioner Philippine National Bank now questions this maintaining that it is a
mortgagee in good faith and as such is entitled to the protection of the law.

We find merit in petitioner's contention. The findings of fact by the trial court which were
undisputed by the contending parties show that after TCT No. 38985 had been issued in the
name of Federico Serfino, he declared the property in his name for the year 1965 under T.D.
No. 9382, continuously paid the taxes and introduced improvements thereon in the nature of
feeder roads and sugar cane plants. It was under these circumstances that PNB extended a
loan to Serfino, secured by the land in question on the strength of TCT No. 38985 in the
name of the Serfinos and after a spot investigation by one of the bank inspectors who made
a report of his investigation. After the execution of a real estate mortgage in favor of the
Philippine National Bank duly annotated on the title of the Serfinos TCT No. 38985, the bank
actually loaned Serfino the amount of P5,000.00 which amounted to P5,261.11 as of August
17, 1965. Petitioner Philippine National Bank relied on TCT No. 38985, the genuineness of
which is not in issue as it was really issued by the Register of Deeds of Negros Occidental.
Philippine National Bank had every right to rely on TCT No. 38985 as it was a sufficient
evidence of ownership of the mortgagor. The Philippine National Bank at that time had no
way of knowing of the existence of another genuine title covering the same land in question.

The fact that the public auction sale of the disputed property was not valid (for lack of notice
of the auction sale to the actual owner) can not in any way be attributed to the mortgagee's
(PNB's) fault. The fact remains that in spite of the lack of notice to the actual registered
owner at that time (who was Nemesia Baltazar) the Register of Deeds issued a TCT in the
name of Federico Serfino married to Lorna Bachar which title was relied upon by petitioner
Philippine National Bank. The Register of Deeds disowned liability and negligence or
connivance claiming that existence of TCT No. 57-N in the name of Nemesia Baltazar was
not found in the records of the Register of Deeds for the reason that it did not exist in the
index card as the land was not designated by cadastral lot number. Thus the discrepancy
was due to the faulty system of indexing the parcels of land. Be it noted that the inability of
the Register of Deeds to notify the actual owner or Lopez Sugar Central of the scheduled
public auction sale was partly due to the failure of Lopez Sugar Central to declare the land in
its name for a number of years and to pay the complete taxes thereon. Petitioner Philippine
National Bank is therefore entitled to the payment of the mortgage loan as ruled by the trial
court and exempted from the payment of costs.

WHEREFORE, premises considered, with the slight modification that the PNB mortgage
credit must be paid by Lopez Sugar Central, the assailed decision is hereby AFFIRMED.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

 
Footnotes

1 Penned by Justice Venicio Escolin concurred in by Justices Ramon C.

Fernandez and Efren I. Planas.

2 The order was penned by Judge Lope Consing.

3 Penned by Judge Jose C. Divinagracia.

4 Petitioner in L-40858.

5 Petitioner in L-40751.

SECOND DIVISION

SPOUSES AMANCIO and LUISA SARMIENTO   G.R. No. 152627

and PEDRO OGSINER,
   
P e t i t i o n e r s,
   
 
   
- versus -
  Present:
 
   
THE HON. COURT OF APPEALS (Special
  PUNO,
Former Fifth Division), RODEANNA REALTY
CORPORATION, THE HEIRS OF CARLOS   Chairman,
MORAN SISON, PROVINCIAL SHERIFF OF
PASIG, M.M., MUNICIPAL (CITY) TREASURER   AUSTRIA-MARTINEZ,
OF MARIKINA, JOSE F. PUZON, THE HON.   CALLEJO, SR.,
EFICIO ACOSTA, REGIONAL TRIAL COURT OF
PASIG CITY, BRANCH 155 and REGISTER OF   TINGA and
DEEDS OF MARIKINA (CITY), RIZAL,   CHICO-NAZARIO, JJ.
R e s p o n d e n t s.    

Promulgated:

September 16, 2005

x--------------------------------------------------x
 

DECISION
 
CHICO-NAZARIO, J.:
In a case for recovery of possession based on ownership (accion
reivindicatoria), is the defendants third-party complaint for cancellation of
plaintiffs title a collateral attack on such title?
This is the primary issue that requires resolution in this petition for review
on certiorari  of the Decision[1] of the Court of Appeals dated 27 November
2001 and its Resolution[2] dated 08 March 2002 affirming the Decision of
the Regional Trial Court (RTC) of Pasig, Branch 162, in Civil Case No. 54151,
finding for then plaintiff (private respondent herein) Rodeanna Realty
Corporation (RRC).
 
The relevant antecedents of this case have been summarized by the Court
of Appeals as follows:
 
The subject of the present controversy is a parcel of land situated
in Marikina covered by Transfer Certificate of Title No. N-119631 and
registered in the name of the plaintiff-appellee RODEANNA REALTY
CORPORATION.
 
The aforementioned land was previously owned by the Sarmiento spouses
by virtue of a deed of absolute sale executed on July 17, 1972 and as
evidenced by a Transfer Certificate of Title No. 3700807. Upon acquisition
of the land, the Sarmiento spouses appointed PEDRO OGSINER as their
overseer.
 
On August 15, 1972, the subject land was mortgaged by the Sarmiento
spouses to Carlos Moran Sison (Mr. Sison) as a security for a sixty-five
thousand three hundred seventy pesos and 25/100 loan obtained by the
Sarmiento spouses from Mr. Sison.
 
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated
the extra-judicial foreclosure sale of the mortgaged property, and
on October 20, 1977, the said property was foreclosed through the Office
of the Sheriff of Rizal, which accordingly, issued a certificate of sale in favor
of Mr. Sison, and which Mr. Sison caused to be annotated on the title of
Sarmiento spouses on January 31, 1978.
 
On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property
in an auction sale conducted by the Municipal Treasurer of Marikina for
non-payment of taxes. After paying P3,400.00, he was issued a certificate of
sale and caused it to be registered in the Registry of Deeds of Marikina. No
redemption having been made by the Sarmiento spouses, a final bill of sale
was issued in his (Mr. Puzon) favor. Thereafter, Mr. Puzon filed a petition
for consolidation of ownership and issuance of new title over the subject
property before the Regional Trial Court of Pasig, Branch 155. The said
petition, which was docketed as LRC Case No. T-3367, was granted by the
court in its Order dated August 03, 1984. Thereafter, Transfer Certificate of
Title No. 102902 was issued in the name of Jose Puzon.
 
On August 16, 1986, Mr. Puzon sold the property in question to herein
plaintiff-appellee. By virtue of such sale, a transfer certificate of title over
the subject property was issued in favor of the plaintiff-appellee. Records
show that Mr. Puzon assured the plaintiff-appellee that he (Jose Puzon) will
take care of the squatters in the subject property by filing an ejectment
case against them. However, Mr. Puzon failed to comply with his promise.
 
On December 19, 1986, plaintiff-appellee filed a complaint for recovery of
possession with damages against the Sarmiento spouses and Pedro
Ogsiner, the Sarmiento spouses caretaker of the subject property who
refused to vacate the premises. In its complaint, plaintiff-appellee alleged
that the Sarmiento spouses lost all the rights over the property in question
when a certificate of sale was executed in favor of Mr. Sison for their failure
to pay the mortgage loan.
 
On January 30, 1987, the Sarmiento spouses filed a motion for leave to file
a third-party complaint against Mr. Sison, the Provincial Sheriff of Pasig, Mr.
Puzon, the Judge of Regional Trial Court of Branch 155 in LRC Case No. R-
3367 and the Register of Deeds of Marikina. On the same date the
Sarmiento spouses filed their answer to the complaint. Expectedly, plaintiff-
appellee opposed the motion.
 
In its order dated June 16, 1987, the trial court denied the motion of the
Sarmiento spouses. Records show that the said order of the trial court was
set aside in a petition for certiorari filed before this Court. Hence, the third-
party complaint was admitted. Consequently, Mr. Sison, the Register of
Deeds of Marikina filed their answer, while Mr. Puzon filed a motion to
dismiss the third-party complaint on the grounds of misjoinder of causes of
action and non-jurisdiction of the trial court over said third-party
complaint. In a motion to set for hearing its special and affirmative
defenses, the Register of Deeds of Marikina moved for the dismissal of the
third-party complaint against them. The motion of Mr. Puzon was held in
abeyance by the trial court ratiocinating that the issues raised in the motion
still do not appear to be indubitable.
 
On October 20, 1988, Mr. Puzon filed his answer.
 
In its order dated February 22, 1989, the trial court dismissed the third-
party complaint against the Register of Deeds of Marikina on the ground
that the case may proceed even without the Register of Deeds being
impleaded.
 
On April 29, 1991, the trial court issued its assailed decision in favor of the
plaintiff-appellee. A timely appeal was filed by the Sarmiento spouses. In
their manifestation filed on July 17, 1989, the Heirs of Mr. Sison prayed for
substitution for their late father. Consequently, the Heirs of Mr. Sison
moved for new trial or reconsideration on the ground that they were not
properly represented in the case after the death of Mr. Sison. In its order
dated November 28, 1991, the trial court granted the motion.
 
On February 4, 1993, the trial court dismissed the claim of Mr. Sison as
represented by his heirs, that he is the beneficial owner of the subject
property. In its order dated May 18, 1993, the court a quo denied the
motion for reconsideration of the Heirs of Mr. Sison. [3]
 
 
 
The dispositive portion of the trial court ruling dated 29 April 1991 reads as
follows:
 
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff against all defendants:
 
1)                                         ordering defendant Pedro Ogsiner and all persons
claiming rights under him to vacate the premises and surrender peaceful
possession to the plaintiff within fifteen (15) days from receipt of this order;
 
2)                                         ordering defendant spouses Sarmiento to pay the
sum of P20,000.00 as and for attorneys fees;
 
3)                                         ordering the defendants jointly and severally to
pay the sum of P300.00 a month as reasonable compensation for the use of
the property in question starting June, 1986 until such time that they
actually surrendered the possession of the property to the plaintiff;
 
4)                                         ordering defendant spouses Sarmiento to pay the
cost of this suit.
 
Defendants third-party complaint against all third-party defendants is
hereby dismissed for lack of sufficient merit.[4]
 
 
On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento
spouses) and by the heirs of Carlos Moran Sison, the Court of Appeals
rendered the assailed Decision, dated 27 November 2001, the dispositive
portion of which reads:
 
WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED. The
assailed April 29, 1991 Decision of the Regional Trial Court of Pasig, Metro
Manila is hereby AFFIRMED with the modification that the award of P
20,000.00 as attorneys fees is hereby DELETED. The February 03, 1993
Resolution and the May 18, 1993 Order of the trial court are also hereby
AFFIRMED.[5]
 
 
 
On 08 March 2002, the Court of Appeals rendered the assailed Resolution
denying petitioners motion for reconsideration.
 
The Sarmiento spouses anchor their petition on the following legal
arguments:
 
1)                 The ruling of the Court of Appeals that private respondent RRCs
certificate of title cannot be collaterally attacked and that their right to
claim ownership over the subject property is beyond the province of the
action for recovery of possession is contrary to law and applicable decisions
of the Supreme Court;
2)                 The ruling of the Court of Appeals that private respondent RRC
is entitled to ownership of subject property simply by virtue of its title as
evidenced by Transfer Certificate of Title (TCT) No. N-119631 is contrary to
law and jurisprudence and is not supported by evidence; and
3)                 The affirmation by the Court of Appeals of the award of rentals
to private respondent RRC lacks factual and legal basis.
 
First Issue:
 
The Court of Appeals, in holding that the third-party complaint of the
Sarmiento spouses amounted to a collateral attack on TCT No. N-119631,
ratiocinated as follows:
 
In resolving the errors/issues assigned by the herein parties, We should be
guided by the nature of action filed by the plaintiff-appellee before the
lower court, and as previously shown it is an action for the recovery of
possession of the property in question with damages. Thus, from the said
nature of action, this Court believes that the focal point of the case is
whether or not the plaintiff-appellee has a better right to possess the
contested real property. Corollary, it must also be answered whether or not
the Transfer Certificate of Title No. N-119631 can be collaterally attacked in
an action for recovery of possession.
 
...
 
In their assigned errors, the Sarmiento spouses alleged that the plaintiff-
appellee is not a purchaser in good faith, as they were chargeable with the
knowledge of occupancy by Pedro Ogsiner in behalf of the Sarmiento
spouses, and that the auction sale of the property in favor of Mr. Puzon is
null and void for its failure to comply with the requirement of notice
provided by the law. The same have been argued by the Heirs of Mr. Sison.
 
The above assertions, We rule, amounts to a collateral attack on the
certificate of title of the plaintiff-appellee. A collateral attack is made when,
in another action to obtain a different relief, an attack on the judgment is
made as an incident in said action. This is proper only when the judgment
on its face is null and void, as where it is patent that the court, which
rendered said judgment has no jurisdiction. On the other hand, a direct
attack against a judgment is made through an action or proceeding the
main object of which is to annul, set aside, or enjoin the enforcement of
such judgment, if not carried into effect, or if the property has been
disposed of, the aggrieved party may sue for recovery.
 
In the present case, to rule for the nullity of the auction sale in favor of Mr.
Puzon will result in ruling for the nullity of the order of Branch 155 of
the Regional Trial Court ofPasig City, granting the petition for consolidation
of ownership over the subject property filed by Mr. Puzon. It will also result
in the nullity of title issued in the name of Mr. Puzon. Hence, the end
objective in raising the aforementioned arguments is to nullify the title in
the name of the plaintiff-appellee. In fact, a reading of the answer of the
Sarmiento spouses and the Heirs of Mr. Sison reveals that they are asking
the court to nullify all documents and proceedings which led to the
issuance of title in favor of the plaintiff-appellee. This is obviously a
collateral attack which is not allowed under the principle of indefeasibility
of torrens title. The issue of validity of plaintiff-appellees title can only be
raised in an action expressly instituted for that purpose. A certificate of title
shall not be subject to collateral attack. It cannot be altered, modified, or
canceled except in a direct proceeding in accordance with law. Case law on
the matter shows that the said doctrine applies not only with respect to the
original certificate of title but also to transfer certificate of title. Hence,
whether or not the plaintiff-appellee has a right to claim ownership over
the subject property is beyond the province of the present action. It does
not matter whether the plaintiff-appellees title is questionable because
this is only a suit for recovery of possession. It should be raised in a
proper action for annulment of questioned documents and proceedings,
considering that it will not be procedurally unsound for the affected
parties to seek for such remedy. In an action to recover possession of real
property, attacking a transfer certificate of title covering the subject
property is an improper procedure. The rule is well-settled that a torrens
title as a rule, is irrevocable and indefeasible, and the duty of the court is to
see to it that this title is maintained and respected unless challenged in a
direct proceeding.[6] (Emphasis and underscoring supplied)
 
 
An action is deemed an attack on a title when the object of the action or
proceeding is to nullify the title, and thus challenge the judgment pursuant
to which the title was decreed.[7] The attack is direct when the object of the
action is to annul or set aside such judgment, or enjoin its enforcement.
[8]
 On the other hand, the attack is indirect or collateral when, in an action
to obtain a different relief, an attack on the judgment is nevertheless made
as an incident thereof.[9]
 
In its analysis of the controversy, the Court of Appeals, alas, missed one
very crucial detail which would have turned the tide in favor of the
Sarmiento spouses. What the Court of Appeals failed to consider is that
Civil Case No. 54151 does not merely consist of the case for recovery of
possession of property (filed by RRC against the Sarmiento spouses) but
embraces as well the third-party complaint filed by the Sarmiento spouses
against Carlos Moran Sison, Jose F. Puzon (Mr. Puzon), the Provincial
Sherriff of Pasig, Metro Manila, the Municipal Treasurer of Marikina, Rizal,
the Judge of the RTC, Branch 155, in LRC Case No. R-3367 and the Register
of Deeds of the then Municipality of Marikina, Province of Rizal.
The rule on third-party complaints is found in Section 22, Rule 6 of the 1997
Rules of Court, which reads:
 
Sec. 22. Third, (fourth, etc.)party complaint.  A third (fourth, etc.)-party
complaint is a claim that a defending party may, with leave of court, file
against a person not a party to the action, called the third-party defendant,
for contribution, indemnity, subrogation or any other relief, in respect of
his opponents claim.
 
 
 
A third-party complaint is in the nature of an original complaint. This is so
because it is actually independent of and separate and distinct from the
plaintiffs complaint.[10]In herein case, after leave of court was secured [11] to
file a third-party complaint, the third-party complainants (Sarmiento
spouses) had to pay the necessary docket fees. [12]Summonses were then
issued on the third-party defendants[13] who answered in due time.[14]
 
In Firestone Tire and Rubber Company of the Philippines v. Tempongko,
[15]
 we had occasion to expound on the nature of a third-party complaint,
thus:
 
The third-party complaint, is therefore, a procedural device whereby a third
party who is neither a party nor privy to the act or deed complained of by
the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-
party defendant a right for contribution, indemnity, subrogation or any
other relief, in respect of the plaintiffs claim. The third-party complaint is
actually independent of and separate and distinct from the plaintiffs
complaint. Were it not for this provision of the Rules of Court, it would
have to be filed independently and separately from the original complaint
by the defendant against the third-party. But the Rules permit defendant
to bring in a third-party defendant or so to speak, to litigate his separate
cause of action in respect of plaintiffs claim against a third party in the
original and principal case with the object of avoiding circuity of action and
unnecessary proliferation of lawsuits and of disposing expeditiously in one
litigation the entire subject matter arising from one particular set of
facts. . . When leave to file the third-party complaint is properly granted,
the Court renders in effect two judgments in the same case, one on the
plaintiffs complaint and the other on the third-party complaint. (Emphasis
supplied)
 
 
 
Prescinding from the foregoing, the appellate court grievously erred in
failing to appreciate the legal ramifications of the third-party
complaint vis--vis the original complaint for recovery of possession of
property. The third-party complaint for cancellation of TCT being in the
nature of an original complaint for cancellation of TCT, it therefore
constitutes a direct attack of such TCT.
 
The situation at bar can be likened to a case for recovery of possession
wherein the defendant files a counterclaim against the plaintiff attacking
the validity of the latters title. Like a third-party complaint, a counterclaim
is considered an original complaint, as such, the attack on the title in a case
originally for recovery of possession cannot be considered as a collateral
attack. We thus held in Development Bank of the Philippines (DBP) v. Court
of Appeals:[16]
 
Nor is there any obstacle to the determination of the validity of TCT No.
10101. It is true that the indefeasibility of torrens titles cannot be
collaterally attacked. In the instant case, the original complaint is for
recovery of possession filed by petitioner against private respondent, not
an original action filed by the latter to question the validity of TCT No.
10101 on which the petitioner bases its right. To rule on the issue of validity
in a case for recovery of possession is tantamount to a collateral attack.
However, it should not be overlooked that private respondent filed a
counterclaim against petitioner, claiming ownership over the land and
seeking damages. Hence, we could rule in the question of the validity of
TCT No. 10101 for the counterclaim can be considered a direct attack on
the same. A counterclaim is considered a complaint, only this time, it is the
original defendant who becomes plaintiff It stands on the same footing and
is to be tested by the same rules as if it were an independent action.
 
 
 
There being a direct attack on the TCT which was unfortunately ignored by
the appellate court, it behooves this Court to deal with and to dispose of
the said issue more so because all the facts and evidence necessary for a
complete determination of the controversy are already before us.
Again, DBP instructs:
 
. . . In an analogous case, we ruled on the validity of a certificate of title
despite the fact that the original action instituted before the lower court
was a case for recovery of possession. The Court reasoned that since all the
facts of the case are before it, to direct the party to institute cancellation
proceedings would be needlessly circuitous and would unnecessarily delay
the termination of the controversy which has already dragged on for 20
years.[17]
 
 
 
Second Issue:
 
In their third-party complaint, as amended, the Sarmiento spouses asserted
six causes of action. The second[18] to sixth causes of action referred to the
proceedings leading to and resulting from the tax sale held on 28 August
1982, summarized by the trial court as follows:
 
. . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal
Treasurer of Marikina sold at public auction, the same property in favor of
Jose F. Puzon for tax deficiency at the price of Three Thousand Three
Hundred Eighty Four Pesos and 89/100 (P 3,383.89) which is very low
considering that the area of the property is 1,060 square meters; that they
were not notified of the public auction sale and further, the requirements,
such as posting of notices in public places, among other requirements, were
not complied with; that since the property was sold at a very low price, the
public auction sale and the Certificate of Sale issued by Municipal Treasurer
of Marikina in favor of third party defendant Jose F. Puzon are null and
void; that in August 1984, the third party defendant in order to consolidate
his ownership and title to the property filed a Petition with the Land
Registration Commission in the Regional Trial Court, Branch 155, Pasig,
Metro Manila in LRC Case No. R-3367, for consolidation of his ownership
and title; that third party plaintiffs were not notified thereof and did not
have their day in Court; hence, the order of the Judge of the Regional trial
Court in LRC Case No. R-3367 authorizing the consolidation of the
ownership and title of Jose F. Puzon is null and void, that Jose F. Puzon after
having been issued a new title in his name sold in June 1986, the property
in favor of plaintiff RODEANNA REALTY CORPORATION.[19]
 
 
 
The Sarmiento spouses thus prayed that: (a) the certificate of sale executed
by the Municipal Treasurer of the then Municipality of Marikina, Rizal, in
favor of Mr. Puzon be declared null and void and all subsequent
transactions therefrom declared null and void as well; (b) the Order of the
RTC in LRC Case No. R-3367, authorizing the consolidation of ownership of
and issuance of new TCT No. 102909 in favor of Mr. Puzon, be declared null
and void; (c) the Register of Deeds be directed to cancel the Certificate of
Sale and TCT No. 102909 issued in favor of Mr. Puzon as well as TCT No. N-
119631 issued in the name of RRC and that TCT No. 370807 in the name of
the Sarmiento spouses be restored; (d) all third-party defendants be made
to pay, jointly and severally, moral and exemplary damages such amount as
to be fixed by the court as well as attorneys fees in the amount
of P10,000.00; and (e) Mr. Puzon be made to pay P500,000.00 the actual
value of the property at the time of the tax sale in the remote event that
the title of RRC is not invalidated.
 
The trial court held that the Sarmiento spouses were not entitled to the
relief sought by them as there was nothing irregular in the way the tax sale
was effected, thus:
 
Defendants Sarmiento aver that they were not notified of the auction sale
of the property by the Municipal Treasurer of Marikina. However, the Court
would like to point out that during the examination of Amancio Sarmiento,
he testified that in 1969 or 1970, he started residing at No. 13 19 th Avenue,
Cubao, Quezon City; that his property was titled in 1972; that he
transferred his residence from Cubao to No. 76 Malumanay Street, Quezon
City but he did not inform the Municipal Treasurer of the said transfer.
Hence, notice was directed to his last known address.
 
...
 
The law requires posting of notice and publication. Personal notice to the
delinquent taxpayer is not required. In the case at bar, notice was sent to
defendants (sic) address at No. 12 13th Avenue, Cubao Quezon City. If said
notice did not reach the defendant, it is because of defendants fault in not
notifying the Municipal Treasurer of Marikina of their change of address.[20]
 
 
 
The above-quoted ratiocination does not sit well with this Court for two
fundamental reasons. First, the trial court erroneously declared that
personal notice to the delinquent taxpayer is not required. On the contrary,
personal notice to the delinquent taxpayer is required as a prerequisite to a
valid tax sale under the Real Property Tax Code, [21] the law then prevailing
at the time of the tax sale on 28 August 1982.[22]
 
Section 73 of the Real Property Tax Code provides:
 
Sec. 73. Advertisement of sale of real property at public auction.  After the
expiration of the year for which the tax is due, the provincial or 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 provincial building and of all municipal
buildings in the province, or at the main entrance of the city or municipal
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 provincial or city
treasurer, by publication once a week for three consecutive weeks in a
newspaper of general circulation published in the province or 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
municipality or 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 provincial or city treasurer concerned.
(Emphasis supplied)
 
 
 
We cannot overemphasize that strict adherence to the statutes governing
tax sales is imperative not only for the protection of the taxpayers, but also
to allay any possible suspicion of collusion between the buyer and the
public officials called upon to enforce the laws. [23] Notice of sale to the
delinquent land owners and to the public in general is an essential and
indispensable requirement of law, the non-fulfillment of which vitiates the
sale.[24] Thus, the holding of a tax sale despite the absence of the requisite
notice is tantamount to a violation of delinquent taxpayers substantial right
to due process. [25] Administrative proceedings for the sale of private lands
for nonpayment of taxes being in personam, it is essential that there be
actual notice to the delinquent taxpayer, otherwise the sale is null and void
although preceded by proper advertisement or publication. [26]
 
The consequential issue in this case, therefore, is whether or not the
registered owners the Sarmiento spouses were personally notified that a
tax sale was to be conducted on 28 August 1982.
 
The Sarmiento spouses insist that they were not notified of the tax sale.
The trial court found otherwise, as it declared that a notice was sent to the
spouses last known address. Such conclusion constitutes the second
fundamental error in the trial courts disposition of the case as such
conclusion is totally bereft of factual basis. When findings of fact are
conclusions without citation of specific evidence upon which they are
based, this Court is justified in reviewing such finding.[27]
 
In herein case, the evidence does not support the conclusion that notice of
the tax sale was sent to the Sarmiento spouses last known address. What is
clear from the evidence is that the Sarmiento spouses were notified by
mail after the subject property was already sold, i.e., the notice that was
sent to the last known address was the Notice of Sold Properties and not
the notice to hold a tax sale.[28] This was testified upon by third-party
defendant Natividad M. Cabalquinto, the Municipal Treasurer of Marikina,
who swore that per her records, neither notice of tax delinquency nor
notice of tax sale was sent to the Sarmiento spouses. [29] Counsel for
respondent RRC did not cross-examine Ms. Cabalquinto on this on the
theory that Ms. Cabalquinto had no personal knowledge of the tax sale and
the proceedings leading thereto as she became Municipal Treasurer only in
1989.[30]
 
Notwithstanding Ms. Cabalquintos lack of personal knowledge, her
testimony -- that per records in her possession no notice was actually sent
to the Sarmiento spouses -- is sufficient proof of the lack of such notice in
the absence of contrary proof coming from the purchaser in the tax sale,
Mr. Puzon, and from his eventual buyer, herein private respondent RRC. Be
it noted that under Section 73 of the Real Property Tax Code, it is required
that a return of the proof of service to the registered owner be made under
oath and filed by the person making the service with the provincial or city
treasurer concerned. This implies that as far as tax sales are concerned,
there can be no presumption of the regularity of any administrative action;
hence the registered owner/delinquent taxpayer does not have the burden
of proof to show that, indeed, he was not personally notified of the sale
thru registered mail.
 
There can be no presumption of the regularity of any administrative action
which results in depriving a taxpayer of his property through a tax sale.
[31]
 This is an exception to the rule that administrative proceedings are
presumed to be regular.[32] This doctrine can be traced to the 1908 case
of Valencia v. Jimenez and Fuster[33] where this Court held:
 
The American law does not create a presumption of the regularity of any
administrative action which results in depriving a citizen or taxpayer of his
property, but, on the contrary, the due process of law to be followed in tax
proceedings must be established by proof and the general rule is that the
purchaser of a tax title is bound to take upon himself the burden of
showing the regularity of all proceedings leading up to the sale. The
difficulty of supplying such proof has frequently lead to efforts on the part
of legislatures to avoid it by providing by statute that a tax deed shall be
deemed either conclusive or presumptive proof of such regularity.
 
Those statutes attributing to it a conclusive effect have been held invalid as
operating to deprive the owner of his property without due process of law.
But those creating a presumption only have been sustained as affecting a
rule of evidence, changing nothing but the burden of proof. (Turpin v.
Lemon, 187 U.S., 51.)
 
The tax law applicable to Manila does not attempt to give any special
probative effect to the deed of the assessor and collector, and therefore
leaves the purchaser to establish the regularity of all vital steps in the
assessment and sale.
 
 
 
In the fairly recent case of Requiron v. Sinaban,[34]  we had occasion to
reiterate the doctrine laid down in Valencia  with respect specifically to tax
sales conducted under Commonwealth Act No. 470 (Assessment Law).
Nevertheless, no substantial variance exists between Commonwealth Act
No. 470 and the Real Property Tax Code, which took effect on 01 June 1974,
concerning the required procedure in the conduct of public auction sale
involving real properties with tax delinquencies.[35]
 
In sum, for failure of the purchaser in the tax sale (third-party defendant
Mr. Puzon) to prove that notice of the tax sale was sent to the Sarmiento
spouses, such sale is null and void.
 
As the tax sale was null and void, the title of the buyer therein (Mr. Puzon)
was also null and void, which thus leads us to the question of who between
petitioners and private respondent RRC has the right to possess the subject
property.
 
In its complaint for recovery of possession with damages filed before the
trial court, RRC averred that it is the present registered owner of the
subject land which it bought from Mr. Puzon, who was then the registered
owner thereof, free from liens and encumbrances. It also stated that
therein defendant Pedro Ogsiner was an illegal occupant as he was the
overseer for the Sarmiento spouses who no longer had any title to or rights
over the property. It thus prayed that Pedro Ogsiner vacate the property
and that he and the Sarmiento spouses be ordered to pay attorneys fees
and rent in the amount of P500.00 monthly from 1984 until Pedro Ogsiner
finally vacates the land.[36]
 
In their Answer,[37] the Sarmiento spouses invoked certain affirmative
defenses, to wit:
 
(1) The certificate of sale issued by the Municipal Treasurer of Marikina,
Rizal, the order authorizing consolidation of ownership and the issuance of
a new title all in favor of Mr. Puzon were null and void as the Sarmiento
spouses and Pedro Ogsiner were not notified of the tax sale;
(2) Mr. Puzon, knowing that the sale of the subject property by the
Municipal Treasurer of Marikina was null and void, still sold the same to
herein private respondent RRC; and
(3) RRC purchased the property in bad faith, thus the sale to it was null and
void.
 
A complaint for recovery of possession based on ownership (accion
reivindicatoria  or accion reivindicacion) is an action whereby the plaintiff
alleges ownership over a parcel of land and seeks recovery of its full
possession.[38] As possession is sought based on ownership, we must inquire
into the title of RRC which it acquired from Mr. Puzon who, in turn, derived
his title from the void tax sale.
 
The void tax sale notwithstanding, RRCs title cannot be assailed if it is a
purchaser in good faith and for value.[39]
 
In its narration of the facts, the trial court acknowledged that RRC --
through its President, Roberto Siy, and through its representative, Lorenzo
Tabilog conducted an ocular inspection of the subject land and found
therein that its actual occupant, Pedro Ogsiner, had a house erected
thereon and that such occupant was the overseer for the Sarmiento
spouses who claimed ownership over the subject land.[40] Armed with this
knowledge, RRC did only one thing: it offered Pedro Ogsiner P2,000.00 to
vacate the subject property.[41] Relying on the fact that the TCT in Mr.
Puzons name was free of liens and encumbrances and that Mr. Puzon
would take care of the squatters, RRC did not investigate whatever claim
Pedro Ogsiner and the Sarmiento spouses had over the subject land.
 
From the foregoing undisputed facts, the trial court held:
 
There is no doubt that when the plaintiff Rodeanna Realty Corporation
purchased the property, there was a title in the name of Jose Puzon, thus,
making them a purchaser (sic) in good faith and for value. Said buyers relied
on the owners (sic) title which is free and clear of all liens and
encumbrances.
 
...
 
After a careful evaluation of the facts of this case, the Court believes that
plaintiff is entitled to the relief sought for. As enunciated in the case of
Carmelita E. Reyes vs. Intermediate Appellate Court, Gregorio Galang and
Soledad Pangilinan (No. L-60941, February 28, 1985, 135 SCRA 214), a
contract of sale between a buyer from public auction of land sold for
unpaid realty taxes and subsequent innocent purchaser in good faith and
for value is valid whether or not the City Treasurer followed the prescribed
procedure.
 
In the case at bar, assuming that the Municipal Treasurer of Marikina failed
to comply with certain procedure, it does not follow that the Rodeanna
Realty Corporation has no valid title. For as they have asserted, they are
purchaser in good faith and for value in the amount of P190, 000.00. There
is nothing in the record which would show that they were aware or they
were party to the alleged irregularities. Hence, title of Rodeanna Realty
Corporation cannot now be assailed (William vs. Barrera, 68 Phil. 656;
PMHC vs. Mencias, August 16, 1967, 20 SRCA 1031; Pascua vs. Capuyos, 77
SCRA 78).[42]
 
 
 
In affirming the trial court, the Court of Appeals ruled:
 
As proven by the plaintiff-appellee, they obtained the property in question
from Mr. Puzon, who in turn acquired it in a public auction conducted by
the Municipality of Marikina. By virtue of the sale by Mr. Puzon to plaintiff-
appellee, TCT No. N-119631 was issued in its name. The best proof of
ownership of a piece of land is the certificate of title. The certificate of title
is considered the evidence of plaintiff-appellees ownership over the subject
real property, and as its registered owner, it is entitled to its possession.
Hence, as compared to the Sarmiento spouses whose previous title over
the subject property has been cancelled, and to the Heirs of Mr. Sison, who
had not shown any better proof of ownership, the plaintiff-appellee, as
evidenced by its certificate of title, has superior right to possess the
contested property. Xxx[43]
 
 
Verily, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no
way oblige him to go behind the certificate to determine the condition of
the property.[44] Thus, the general rule is that a purchaser may be
considered a purchaser in good faith when he has examined the latest
certificate of title.[45] An exception to this rule is when there exist important
facts that would create suspicion in an otherwise reasonable man to go
beyond the present title and to investigate those that preceded it. Thus, it
has been said that a person who deliberately ignores a significant fact
which would create suspicion in an otherwise reasonable man is not an
innocent purchaser for value.[46] A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of
the vendor.[47] As we have held:
 
The failure of appellees to take the ordinary precautions which a prudent
man would have taken under the circumstances, specially in buying a piece
of land in the actual, visible and public possession of another person, other
than the vendor, constitutes gross negligence amounting to bad faith.
 
In this connection, it has been held that where, as in this case, 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 to ma[k]e inquiries concerning
the rights of the actual possessor. Failure to do so would make him a
purchaser in bad faith. (Citations omitted).
 
...
 
One who purchases real property which is in the actual possession of
another should, at least make some inquiry concerning the right of those in
possession. The actual possession by other than the vendor should, at least
put the purchaser upon inquiry. He can scarely, in the absence of such
inquiry, be regarded as a bona fide purchaser as against such possessors.
[48]
 (Emphasis supplied)
 
 
 
Prescinding from the foregoing, the fact that private respondent RRC did
not investigate the Sarmiento spouses claim over the subject land despite
its knowledge that Pedro Ogsiner, as their overseer, was in actual
possession thereof means that it was not an innocent purchaser for value
upon said land. Article 524 of the Civil Code directs that possession may be
exercised in ones name or in that of another. In herein case, Pedro Ogsiner
had informed RRC that he was occupying the subject land on behalf of the
Sarmiento spouses. Being a corporation engaged in the business of buying
and selling real estate,[49] it was gross negligence on its part to merely rely
on Mr. Puzons assurance that the occupants of the property were mere
squatters considering the invaluable information it acquired from Pedro
Ogsiner and considering further that it had the means and the opportunity
to investigate for itself the accuracy of such information.
 
Third Issue:
 
As it is the Sarmieno spouses, as exercised by their overseer Pedro Ogsiner,
who have the right of possession over the subject property, they cannot be
made to pay rent to private respondent RRC.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated 27 November 2001 and its Resolution dated 08 March 2002 are
REVERSED and SET ASIDE. The public auction sale conducted on 28 August
1982 is declared VOID for lack of notice to the registered owners Amancio
and Luisa Sarmiento. Transfer Certificate of Title No. N-119631 of the
Registry of Deeds of what was then
the Municipality of Marikina, Province of Rizal, in the name of Rodeanna
Realty Corporation is hereby ANNULLED. The Register of Deeds of Marikina
City, Metro Manila, is ordered to cancel TCT No. N-119631 and to issue, in
lieu thereof, a new title in the name of spouses Amancio and Luisa
Sarmiento. Costs against private respondent RRC.
SO ORDERED.
 
  MINITA V. CHICO-NAZARIO

Associate Justice
 

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

   
   
   
DANTE O. TINGA

Associate Justice
 

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

  REYNATO S. PUNO
 Associate Justice

Chairman, Second Division

 

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

  HILARIO G. DAVIDE, JR.

Chief Justice
 

[1]
 Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Ramon A. Barcelona
and Bernardo P. Abesamis concurring, Rollo, pp. 38-48.
[2]
 Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Conchita Carpio-
Morales (now a member of this Court) and Bernardo P. Abesamis concurring, Rollo, pp. 49-50.

 
[3]
 Rollo, pp. 39-42.
[4]
 Rollo, pp. 68-69.
[5]
 Rollo, p. 48
[6]
 Rollo, pp. 45-47.
[7]
 Malilin, Jr. v. Castillo, G.R. No. 136803, 16 June 2000, 333 SCRA 628, 640.
[8]
 Ibid.
[9]
 Ibid.
[10]
 Firestone Tire and Rubber Company of the Philippines v. Tempongko, No. L-24399, 28 March
1969, 27 SCRA 418, 423.
[11]
 The Motion to file a third-party complaint was initially denied by the trial court on 16 June
1987 while the motion for reconsideration was denied on 22 July 1987 (Records, pp. 54-55, 65).
The Sarmiento spouses then elevated the denial to the Court of Appeals via  a Petition
for Certiorari. The Fourteenth Division of the appellate court, composed of Associate Justices
Fidel P. Purisima, Emeterio C. Cui and Jesus M. Elbinias, set aside the trial courts orders and
ordered, instead, the admission of the Sarmiento spouses third-party complaint (Records, pp.
166-170).
[12]
 See Order of the trial court dated 25 January 1988 (Records, p. 121).
[13]
 Ibid.
[14]
 Third-Party defendant Carlos Moran Sison answered on 24 March 1988 (Records, pp. 137-
146). Third-Party Register of Deeds of Marikina filed its Answer on 06 May 1988 (Records, pp.
157-160). Defendant Puzon filed his Answer with Counterclaim on 20 October 1988 (Records,
pp. 214-218) while he filed his supplemental answer to the amended third-party complaint on
26 July 1989 (Rollo, pp. 146-147). RRC likewise filed its Answer to the third-party complaint
(Rollo, pp. 148-149).
[15]
 Supra,  note 10.
[16]
 G.R. No. 129471, 28 April 2000, 331 SCRA 267, 286-287 (citing A. Francisco Realty and
Development Corp. v. Court of Appeals, G.R. No. 125055, 30 October 1998, 298 SCRA 349, 358).
See also Heirs of Simplicio Santiago v. Heirs of Mariano Santiago, G.R. No. 151440, 17 June 2003,
404 SCRA 193, 203-204.
[17]
 Id.  at 287 (citing Mendoza v. Court of Appeals, No. L-62089, 09 March 1988, 158 SCRA 508,
512-514). The instant controversy, on the other hand, is approaching its 19 th anniversary, the
complaint for recovery of possession having been filed before the RTC on 19 December 1986.
[18]
 The first cause of action does not have direct bearing on the present petition as the same was
made against Mr. Sison, the mortgagee who was able to foreclose the subject property and who
had his right annotated on the title which was then still in the name of the Sarmiento spouses. It
will be recalled that Mr. Sison failed to consolidate his title to the property despite non-
redemption by the Sarmiento spouses. When the title to the property was transferred to Mr.
Puzon, the highest bidder in the tax sale, the TCT no longer carried Mr. Sisons annotation. The
trial court ruled in favor of RRC, the plaintiff in the case for recovery of possession and against
the Sarmiento spouses and Mr. Sison. The heirs of Sison, after having been substituted for their
late father, seasonably filed a motion for new trial which motion was granted. After trial,
however, the trial court dismissed the claim of Mr. Sison, as represented by his heirs, that he is
the beneficial owner of the subject property. The trial court denied the motion for
reconsideration of the heirs of Sison who then timely appealed to the Court of Appeals. The
Court of Appeals, however, affirmed the ruling of the trial court. It does not appear from the
records of the case that the heirs of Sison appealed the Court of Appeals decision to this
Court. Before this Court, when required to comment to the instant petition filed by the
Sarmiento spouses, the heirs of Sison, namely George (Rollo, p. 218), Luis (Rollo, p. 221) and
Margarita (Rollo, pp. 227, 230), manifested that they will not file any comment and that they are
willing to comply with the petition. Ricardo Sison, another heir, manifested that he had no
objection to the instant petition (Rollo, p. 260).
[19]
 Rollo, pp. 52-53.
[20]
 Rollo, pp. 66-68.
[21]
 Puzon v. Abellera, G.R. No. 75082, 31 January 1989, 169 SCRA 789, 795.
[22]
 The Real Property Tax Code was the precursor of the Local Government Code of 1991
(Republic Act No. 7160). At present, the notice requirement in tax sales is set forth in Section
178 of Rep. Act No. 7160:

SECTION 178. Advertisement and  Sale. Within thirty (30) days after the levy, the local treasurer
shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as
may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a
period of at least thirty (30) days. It shall be effected by posting a notice at the main entrance of
the municipal building or city hall, and in a public and conspicuous place in the barangay where
the real property is located, and by publication once a week for three (3) weeks in a newspaper
of general circulation in the province, city or municipality where the property is located. The
advertisement shall contain the amount of taxes, fees, or charges are levied, and a short
description of the property to be sold. At any time before the date fixed for the sale, the
taxpayer may stay they proceedings by paying the taxes, fees, charges, penalties and interests. If
he fails to do so, the sale shall proceed and shall be held either at the main entrance of the
provincial, city or municipal building, or on the property to be sold., or at any other place as
determined by the local treasurer conducting the sale and specified in the notice of sale.

Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the
sale to the sanggunian  concerned, and which shall form part of his records. After consultation
with the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of
sale, showing the proceeding of the sale, describing the property sold, stating the name of the
purchaser and setting out the exact amount of all taxes, fees, charges, and related surcharges,
interests, or penalties: Provided, however, That any excess in the proceeds of the sale over the
claim and cost of sales shall be turned over to the owner of the property.

The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray
the costs of collection by means of the remedies provided for in this Title, including the
preservation or transportation in case of personal property, and the advertisement and
subsequent sale, in cases of personal and real property including improvements thereon.
[23]
 Serfino v. Court of Appeals, No. L-40858, No. L-40751, 15 September 1987, 154 SCRA 19, 27.
[24]
 Ibid.  See also Cf.  Tiongco v. Philippine Veterans Bank, G.R. No. 82782, 05 August 1992, 212
SCRA 176, 192; and Cabrera v. Prov. Treasurer, 75 Phil. 780.
[25]
 Supra, note 21.
[26]
 Ibid.; Lopez v. Director of Lands, 47 Phil. 23; Talusan v. Tayag, G.R. No. 133698, 04 April 2001,
356 SCRA 263, 276.
[27]
 Solid Homes, Inc. v. Court of Appeals, G.R. No. 117501, 08 July 1997, 275 SCRA 267, 279.
[28]
 TSN, 16 March 1992, pp. 9-10.
[29]
 Id., p. 8.
[30]
 Id.,  p. 10.
[31]
 Francia v. Intermediate Appellate Court, No. L-67649, 28 June 1988, 162 SCRA 753, 760.
[32]
 Ibid.
[33]
 11 Phil 492, 498-499; and reiterated in Camo v. Buyco, No. 8304, 11 February 1915, 29 Phil.
437, 444-445.
[34]
 G.R. No. 138280, 10 March 2003, 398 SCRA 713, 722.
[35]
 Ibid.
[36]
 Records, pp. 1-3.
[37]
 Records, pp. 263-265.
[38]
 Serdoncillo v. Benolirao,  G.R. No. 118328, 08 October 1998, 297 SCRA 448, 460.
[39]
 Cf.  Reyes v. Intermediate Appellate Court, No. L-60941, 28 February 1985, 135 SCRA 214,
223-224.
[40]
 Rollo, pp. 56-58.
[41]
 Ibid.
[42]
 Rollo, pp. 67-68.
[43]
 Id., p. 45 (citation omitted).
[44]
 Heirs of Tajonera v. Court of Appeals, No. L-26677, 27 March 1981, 103 SCRA 467, 474.
[45]
 Ibid.
[46]
 Development Bank of the Philippines v. Court of Appeals, supra, note 16.
[47]
 Ibid.
[48]
 Id., pp. 290-291. See also Lucena v. Court of Appeals, G.R. No. 77468, 25 August 1999, 313
SCRA 47, 59-60; Santiago v. Court of Appeals, G.R. No. 117014, 14 August 1995, 247 SCRA 336,
345; De Guzman, Jr. v. Court of Appeals, G.R. No. L-46935, 21 December 1987, 156 SCRA 701,
710.
[49]
 RTC Decision, Rollo, p. 6.

THIRD DIVISION

Spouses RAMON and G.R. No. 154027

ROSITA TAN,

Petitioners, Present:

Panganiban, J.,

Chairman,

- versus - Sandoval-Gutierrez,

Corona,
Carpio Morales, and

Garcia,  JJ

GORGONIA BANTEGUI,

Represented by GUADALUPE B.

BAUTISTA; and Spouses FLORANTE Promulgated:

and FLORENCIA B. CAEDO,

Respondents. October 24, 2005

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, J.:

T he 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 courts Decision.

Hence, this Petition.[7]

 

The Issues

Petitioners raise the following issues for the Courts consideration:

I.

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

II.

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.

III.

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

IV.

The Honorable Court of Appeals erred in affirming that petitioners should pay respondents
nominal damages of P50,000 and attorneys fees of P50,000.[8]

The foregoing may be summed up into only one issue: whether the auction sale was valid.

The Courts 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 latters 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 formers 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 possessors 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 latters 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 owners 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 Banteguis 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 attorneys 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.

SO ORDERED.

ARTEMIO V. PANGANIBAN

Associate Justice

Chairman, Third Division

WECONCUR:

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice
     
     
     
  CONCHITA CARPIO MORALES CANCIO C. GARCIA  
  Associate Justice Associate Justice  
 

ATTESTATION
 

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN

Associate Justice

Chairman, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans Attestation, it
is hereby certified that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

[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 attorneys 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 Courts 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]
 Pea, Pea Jr., & Pea, Registration of Land Titles and Deeds (1994 rev. ed.), p. 376. Talusan v.
Tayag, 356 SCRA 263, 276, April 4, 2001.
[11]
 Pea, Pea Jr., & Pea; 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. 3 rd 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]
 Pea, Pea Jr., & Pea; 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]
 Pea, Pea Jr., & Pea; 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.