Montaño vs. Francisco

Only the registered owner of real property is entitled to notice of tax delinquency and auction sale proceedings; buyers under a conditional sale who have not yet fully paid and thus do not hold title have no standing to demand personal notice, and the validity of the tax sale hinges on whether the registered owner was properly notified.

Spouses Eduardo and Leticia Montaño entered into a Deed of Conditional Sale with the Government Service Insurance System (GSIS) on April 13, 1977, covering a parcel of land in Jaro, Iloilo City, registered in GSIS's name under TCT No. T-41681. Under the conditional sale, GSIS retained ownership until full payment of the purchase price. The subject property was later sold at a public auction for delinquent real property taxes to respondent Rosalina Francisco, who thereafter sought and obtained from the RTC a new owner's duplicate copy of the title to facilitate registration of the final deed of sale. The tax delinquency proceedings were governed by Section 73 of Presidential Decree No. 464 (the Real Property Tax Code), which prescribed the advertisement, notice, and announcement requirements for the sale of delinquent real property at public auction.

On April 13, 1977, spouses Eduardo and Leticia Montaño executed a Deed of Conditional Sale with the Government Service Insurance System (GSIS) covering a parcel of land situated at Block 2, Lot 6, Maharlika Homes, Jaro, Iloilo City, together with the house and improvements thereon, all covered by TCT No. T-41681 registered in the name of GSIS. The Montaños began paying amortization in January 1979 and occupied the house and lot in 1980.

In the summer of 1994, Atty. Salvador Paja I visited the Montaños' residence and claimed that the lot was already owned by respondent Rosalina Francisco. Leticia Montaño investigated and discovered at the Register of Deeds an annotation at the back of TCT No. T-41681 under Entry No. 170334, dated July 17, 1991, stating that a Certificate of Sale of Delinquent Real Property dated June 28, 1991 had been executed by the City Treasurer's Office in favor of Francisco for the sum of ₱2,225.19, representing taxes, penalties, and costs of sale pursuant to Section 76 of P.D. No. 464. A further annotation under Entry No. 201610, dated July 16, 1993, reflected an Order dated April 29, 1993 of Judge Quirico Defensor of the RTC of Iloilo City, Branch 36, directing the Register of Deeds to issue a new owner's duplicate copy of the title in the name of GSIS and declaring the lost copy null and void.

Leticia Montaño learned that Francisco had purchased the property at a public auction sale of delinquent real property conducted by public respondents on June 27, 1991. The Montaños averred that they were neither given any notice of tax delinquency nor informed of the auction sale schedule, were not furnished a copy of the sale certificate, and received no notice of their right to redeem. On June 13, 1994, Leticia requested annotation of a Notice of Adverse Claim on the title. On July 11, 1994, the Montaños filed an action for declaration of nullity of sale and damages before the RTC of Iloilo City, Branch 23, against Francisco, the City Government of Iloilo, the City Treasurer, and the Head of the Treasurer's Enforcement Group, causing a Notice of Lis Pendens to be recorded and paying the tax due by consignation pursuant to Section 267 of the Local Government Code of 1991.

The records of the property presented at trial, in the name of Baldomero Dagdag, consisted of the Notice of Sale of Delinquent Real Property, Certificate of Posting, certifications on the conduct of auction sale by crier, proof of service, Certificate of Sale of Delinquent Property to the City, Report of Sale dated July 2, 1991, Notice of Right to Redeem addressed to GSIS c/o Baldomero Dagdag dated July 12, 1991, and Final Deed of Sale dated July 17, 1992. Public respondents contended that the Montaños were not notified because they had no right to be notified, as the property was owned by GSIS under the care of Dagdag, who were notified in accordance with law. The evidence for Francisco showed that Atty. Paja, acting under a Special Power of Attorney from Francisco, bought the property at the June 27, 1991 auction; since no redemption was made within one year, a Final Deed of Sale was executed. On November 17, 1992, Francisco filed a petition for entry of a new certificate of title, and absent any opposition, the RTC issued the April 29, 1993 Order directing issuance of a new owner's duplicate copy.

The trial court found for the Montaños, declaring the tax delinquency proceedings illegal for failure to comply with publication and notice requirements. The Court of Appeals reversed, holding that GSIS as registered owner was the taxpayer entitled to notice, that notice was regularly served on GSIS through Dagdag, and that the proceedings were valid. The appellate court further noted that in a related case, GSIS vs. City Assessor of Iloilo City (CA-G.R. SP No. 51149), it had already upheld the validity of the assessment and auction sale proceedings, a ruling later affirmed by the Supreme Court in G.R. No. 147192 on June 27, 2006, which had become final.

• Compliance with Publication and Notice Requirements: Petitioners contended that the Court of Appeals erred in holding the tax delinquency proceedings legal and valid, since the requirements regarding the publication and notice of an auction sale under Section 73 of P.D. No. 464 were not complied with.
• Lack of Personal Notice to Petitioners: Petitioners averred that they were neither given any notice of tax delinquency nor informed of the schedule of the public auction sale, were not furnished a copy of the sale certificate, and did not receive any notice of their right to redeem the subject property.

• Registered Owner Entitled to Notice: Public respondents argued that petitioners were not notified because they had no right to be notified, the property being owned by GSIS under the care of Baldomero Dagdag, who were notified in accordance with law.
• No Cause of Action and No Personality to Sue: Public respondents alleged that petitioners had no cause of action insofar as they were concerned and that petitioners had no personality to sue.

• Validity of Tax Delinquency Proceedings: Whether the tax delinquency proceedings conducted on the subject parcel of land were regular and legal.
• Entitlement to Notice: Whether petitioners, as buyers under a conditional sale who had not yet acquired title, were entitled to personal notice of the tax delinquency and auction sale proceedings.

• Validity of Tax Delinquency Proceedings: Yes. The tax delinquency proceedings were legal and with force and effect, the registered owner GSIS having been properly notified as required under Section 73 of P.D. No. 464.
• Entitlement to Notice: No. Only the registered owner of the property is entitled to notice of tax delinquency and related proceedings; buyers under a conditional sale who do not yet hold title have no right to personal notice.

• Validity of Tax Delinquency Proceedings: Section 73 of P.D. No. 464 requires advertisement of the sale by posting, announcement by crier, and, in the treasurer's discretion, publication in a newspaper, as well as service of a copy of the notice on the delinquent taxpayer. The Court of Appeals found that notice was regularly served on GSIS through Baldomero Dagdag, and that publication was made thrice as required, citing the affidavit of the Editor-in-Chief of the Visayan Tribune. Even assuming publication was deficient, the Court in Talusan vs. Tayag held that the interest of the taxpayer is protected by service of personal notice on the registered owner. Critically, the validity of the assessment and auction sale proceedings had already been upheld in GSIS vs. City Assessor of Iloilo City (CA-G.R. SP No. 51149), and the Supreme Court dismissed GSIS's petition for review in G.R. No. 147192 on June 27, 2006, rendering that finding final. The Montaños could not relitigate an issue already resolved with finality against the registered owner.

• Entitlement to Notice: Under a contract to sell, the vendor retains ownership of the property until the full purchase price is paid. Because GSIS remained the registered owner of TCT No. T-41681 at the time of the tax delinquency proceedings, GSIS — not the Montaños — was the taxpayer entitled to notice. Pursuant to Talusan vs. Tayag, for purposes of collection of real property taxes, the registered owner is considered the taxpayer, and only the registered owner is entitled to notice of tax delinquency and other proceedings relative to the tax sale. The Montaños, having merely entered into a conditional sale and not having acquired title, had no legal standing to demand personal notice of the proceedings.

• Registered Owner as Taxpayer for Notice Purposes — For purposes of the collection of real property taxes, the registered owner of the property is considered the taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to the tax sale. The Court applied this doctrine from Talusan vs. Tayag to hold that GSIS, as the registered owner of TCT No. T-41681, was the party entitled to notice — not the Montaños, who were mere buyers under a conditional sale and had not yet acquired title.

• Retention of Ownership Under a Contract to Sell — Under a contract to sell, the vendor retains ownership of the property until the same is fully paid by the vendee. The Court relied on this principle to conclude that GSIS, not the Montaños, was the owner of the subject property at the time of the tax sale, and therefore the proper party entitled to notice.

• Finality of Prior Adjudication on the Same Issue — Where the validity of the assessment and auction sale proceedings has already been upheld in a related case and that ruling has become final, the same issue cannot be relitigated by another party challenging the same proceedings. The Court noted that the finding in GSIS vs. City Assessor of Iloilo City regarding the validity of the auction sale of the subject property had long been final.

• "In Talusan v. Tayag, the Court held that for purposes of the collection of real property taxes, the registered owner of the property is considered the taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to the tax sale." — This passage states the controlling doctrine that determines who is entitled to notice in tax delinquency proceedings, and is the ratio decidendi for denying the Montaños' claim of lack of notice.

• "Under a contract to sell, the vendor retains the ownership of the property until after the same is fully paid by the vendee. Hence, when public respondents caused the service of the notice of sale to Baldomero Dagdag of the GSIS, the interest of the taxpayer was deemed to have been protected and the notice requirement was complied with." — This passage, from the Court of Appeals decision as quoted and affirmed by the Supreme Court, explains why GSIS was the proper recipient of notice and why service on GSIS satisfied the legal requirement.

• "Hence, the finding of the Court of Appeals in regard to the validity of the auction sale proceedings of the subject property has long been final." — This passage underscores that the validity of the auction sale had already been conclusively determined in a related case, foreclosing further challenge by the Montaños.

• Talusan vs. Tayag, 408 Phil. 373 (2001) — Controlling precedent. The Court relied on this case for the doctrine that the registered owner of real property is considered the taxpayer for purposes of collection of real property taxes, and only the registered owner is entitled to notice of tax delinquency and tax sale proceedings.
• GSIS vs. City Assessor of Iloilo City, G.R. No. 147192, June 27, 2006, 493 SCRA 169 — Followed as final and conclusive. The Supreme Court dismissed GSIS's petition for review of the Court of Appeals decision in CA-G.R. SP No. 51149, which upheld the validity of the assessment of real property taxes and the auction sale proceedings on the subject property. The finality of that ruling precluded relitigation of the same issue by the Montaños.

• Section 73, Presidential Decree No. 464 (Real Property Tax Code) — Governs the advertisement and notice requirements for the sale of delinquent real property at public auction, including posting at the provincial or city building and in a public and conspicuous place in the barrio or district, announcement by crier at least three market days, discretionary publication once a week for three consecutive weeks in a newspaper of general circulation, and service of a copy of the notice on the delinquent taxpayer. The Court applied this provision to determine whether the notice requirements were satisfied, concluding that service on the registered owner (GSIS) complied with the law.
• Section 267, Local Government Code of 1991 — Requires that a taxpayer deposit with the court the amount for which the real property was sold, together with interest, before any action assailing the validity of a tax sale may be entertained. The Montaños paid the tax due by consignation pursuant to this provision before filing their action.

Consuelo Ynares-Santiago (Chairperson), Minita V. Chico-Nazario, Presbiterio J. Velasco, Jr., and Antonio Eduardo B. Nachura concurred. No separate concurring opinions were written.