Municipality of Cainta vs. City of Pasig and Uniwide Sales Warehouse Club, Inc.

For purposes of local taxation, the location stated in a certificate of title is presumed correct and must be followed until amended through proper judicial proceedings; the taxpayer is entitled to rely on that locational entry in determining which local government unit may exact local business and real property taxes. The land registration court necessarily passes upon the technical description and location of the land when it confirms title, and the resulting decree of registration is conclusive upon all persons, including the National Government and all its branches, until the certificate is cancelled or amended.

The controversy involves two local government units — the then Municipality (now City) of Pasig and the Municipality of Cainta — whose territorial claims overlap over the parcels of land on which Uniwide Sales Warehouse Club, Inc. conducted its business. Under the Local Government Code, local business taxes accrue and are payable to the municipality where the branch or sales outlet is located, while real property taxes are the responsibility of the treasurer of the locality where the property is situated; Presidential Decree No. 464 and the Property Registration Decree (PD 1529) supply the related rules on appraisal, collection, and the conclusiveness of a Torrens title. The case thus turns on how the situs of local taxation is fixed when the territorial boundary between the taxing units is itself in dispute.

Uniwide Sales Warehouse Club, Inc. conducted and operated its business in buildings and establishments constructed on parcels of land covered by Transfer Certificate of Title Nos. 72983, 74003, and PT-74468, all issued by the Registry of Deeds of Pasig City. On the face of these titles, the parcels of land are indicated as being located in Pasig. In 1989, Uniwide applied for and was issued a building permit by Pasig for its building, secured the requisite Mayor's Permit for its business from Pasig, and consequently paid Pasig its business and realty taxes, fees, and other charges from 1989 to 1996.

Beginning 1997, however, Uniwide did not file any application for renewal of its Mayor's Permit in Pasig and stopped paying local taxes there. Instead, it paid local taxes to Cainta after the latter gave it notice, supported by documentary proof of its claims, that the subject properties were within Cainta's territorial jurisdiction.

On 28 January 1997, Pasig filed a case for collection of local business taxes, fees, and other legal charges due for fiscal year 1997 against Uniwide before the RTC-Pasig. Uniwide, in turn, filed a third-party complaint against Cainta for reimbursement of the taxes, fees, and other charges it had paid to the latter in the event it was adjudged liable for payment of taxes to Pasig. On 6 May 1999, Uniwide sold the subject properties to Robinsons Land Corporation.

Prior to the institution of the tax collection case, Cainta had filed a petition for settlement of its boundary dispute with Pasig on 30 January 1994 before RTC, Branch 74, Antipolo City, docketed as Civil Case No. 94-3006, in which the subject properties were among the disputed territories. During the trial of the tax collection case, Cainta filed a motion to dismiss or suspend the proceedings on 6 November 2001 on the ground of litis pendentia in view of the pending boundary dispute. The RTC-Pasig denied the motion on 22 January 2002 and denied reconsideration on 7 March 2002. Cainta then filed a petition for certiorari with the CA, docketed as CA-G.R. SP No. 70408, with a prayer for the issuance of a temporary restraining order or a writ of preliminary injunction; no such relief was issued, and the CA dismissed the petition on 30 September 2004.

On 30 June 2003, the RTC-Pasig ruled in favor of Pasig. It upheld the indefeasibility of the Torrens titles held by Uniwide, whose TCTs indicate that the parcels described therein are located within the territorial limits of Pasig, and held that the location indicated in the TCTs is conclusive for purposes of the action for tax collection, any other evidence of location constituting a collateral attack on a Torrens title proscribed by law. Uniwide was ordered to pay Pasig local taxes and fees and real estate taxes beginning 1997, plus attorney's fees of P500,000.00 and costs of suit. On Uniwide's third-party complaint, the RTC-Pasig found that Uniwide had paid business and real estate taxes and other fees due beginning 1997 to Cainta instead of Pasig, and directed Cainta to return these amounts to Uniwide under the principle against unjust enrichment pursuant to Articles 2154 and 2155 of the Civil Code, plus attorney's fees and costs of suit.

On the realty tax aspect, Pasig alleged, and Uniwide admitted in its answer, that the realty taxes for the subject properties are paid by their registered owner. Both the RTC-Pasig and the CA found that the subject TCTs are registered in the name of Uniwide Sales Realty and Resources Corporation, an affiliate of Uniwide with a separate and distinct personality and not a party to the case. The RTC-Pasig likewise found that Uniwide had paid Pasig realty taxes for the subject properties amounting to P2,200,000.00 for the years 1996 to the first quarter of 1999, evidenced by an official receipt dated 22 June 1999, and that the properties had already been conveyed to Robinsons Land Corporation on 6 May 1999.

• Suspension of Proceedings and Litis Pendentia: Cainta argued that the RTC-Pasig erred in refusing to hold the tax collection case in abeyance pending resolution of its certiorari petition in CA-G.R. SP No. 70408 and in refusing to dismiss the original complaint on the grounds of litis pendentia and forum shopping.
• Prejudicial Question: Cainta maintained that the pendency of the boundary dispute case before the RTC-Antipolo raised a prejudicial question that warranted suspension of the hearing on the original complaint.
• Locational Entries in the Torrens Titles: Cainta contended that the RTC-Pasig erred in ruling that the properties subject of the disputed taxes fell within the jurisdiction of Pasig on the basis of the locational entries appearing in the respective certificates of title.
• Real Estate Taxes and Reimbursement: Cainta argued that the RTC-Pasig erred in awarding the payment of real estate taxes by Uniwide to Pasig and, correspondingly, in awarding reimbursement thereof by Cainta to Uniwide on the third-party complaint.
• Direct Reimbursement to Pasig: Uniwide argued that the CA erred in not ordering Cainta to directly reimburse Pasig the tax payments which Uniwide erroneously but in good faith had paid to Cainta.
• Attorney's Fees Against Uniwide: Uniwide contended that the CA erred in affirming its liability for attorney's fees in favor of Pasig.
• Attorney's Fees Against Cainta: Uniwide argued that the CA erred in fixing the award of attorney's fees against Cainta in favor of Uniwide in a manner not in accord with law and jurisprudence.

• Situs of Local Taxation and Locational Entries in Torrens Titles: Whether the location stated in the certificate of title determines which local government unit is entitled to collect local business taxes and real property taxes, despite the pendency of the boundary dispute case between Pasig and Cainta.
• Litis Pendentia, Forum Shopping, and Prejudicial Question: Whether the tax collection case should have been dismissed or suspended on the grounds of litis pendentia, forum shopping, or the existence of a prejudicial question, or by reason of the pendency of Cainta's petition for certiorari before the CA.
• Liability for Business and Real Estate Taxes and Reimbursement: Whether Uniwide is liable to Pasig for both local business taxes and real estate taxes, and whether Cainta must reimburse Uniwide the taxes the latter paid to it.
• Attorney's Fees: Whether the award of attorney's fees was proper.

• Situs of Local Taxation and Locational Entries in Torrens Titles: Yes. The location stated in the certificate of title is presumed correct and must be followed for purposes of determining the situs of local taxation until it is amended through proper judicial proceedings, so Pasig was the local government unit entitled to collect the taxes.
• Litis Pendentia, Forum Shopping, and Prejudicial Question: No. None of the elements of litis pendentia or forum shopping was present, no prejudicial question existed, and the pendency of the certiorari petition did not interrupt the tax collection case absent an injunctive writ.
• Liability for Business and Real Estate Taxes and Reimbursement: Partly yes. Uniwide, as the person conducting the business, was liable for local business taxes to Pasig but not for real estate taxes, for lack of sufficient proof; Cainta was obligated to return the taxes it had erroneously collected under the principle against unjust enrichment.
• Attorney's Fees: No. The award was improper because the trial court failed to state the factual or legal basis for it in the body of its decision.

• Situs of Local Taxation and Locational Entries in Torrens Titles: Under Section 150 of the Local Government Code, local business taxes accrue and are paid to the municipality where the branch or sales outlet is located; under Sections 5 and 57 of Presidential Decree No. 464 and Sections 201 and 247 of the Local Government Code, real property taxes are collected by the locality where the property is situated. Because both classes of taxes are collected by the local government unit where the business is conducted or the property is located, the primordial question is how location is determined for purposes of identifying the collecting unit. The Court held that the location stated in the certificate of title should be followed until amended through proper judicial proceedings. PD 1529 requires the land registration court, in confirming title, to pass upon the technical description and consequently the location of the land, based on the applicant's proof and the reports of the Commissioner of Land Registration and the Director of Lands; Section 31 thereof makes the decree of registration, which necessarily includes the registered location, conclusive upon all persons, including the National Government and all its branches. There is thus basis to presume the locational entry correct and to rely on it for determining the situs of local taxation until the certificate is cancelled or amended. Odsique vs. Court of Appeals was cited for the rule that a certificate of title is conclusive not only of ownership of the land but also of its location. Applying this, it was undisputed that the subject properties are covered by TCTs showing on their faces that they are situated in Pasig; that Uniwide's business establishment is situated within the subject properties; that the stated location has remained unchanged since issuance; that prior payments of the subject taxes, fees, and charges had been made to Pasig; and that no court order directed amendment of the TCTs as to location. Pasig therefore had the apparent right to levy and collect realty taxes on the properties and business taxes on the businesses conducted therein. Cainta's evidence — cadastral survey and maps and a certification from the DENR — was more properly submitted to the RTC-Antipolo in the boundary dispute, which was best situated to ascertain the extent and reach of the two local government units' respective territories; absent a final adjudication, those documents alone could not automatically modify or amend the locational entries in the TCTs for purposes of exacting tax compliance. The taxpayer is entitled to rely on the location clearly reflected in the certificate of title; to hold otherwise would subject taxpayers to the vagaries of boundary disputes, to their prejudice and inconvenience and to the detriment of proper tax administration, contrary to administrative feasibility as a canon of a sound tax system (citing Diaz vs. Secretary of Finance). Article 18 of the Implementing Rules and Regulations of the Local Government Code further provides that in case of a boundary dispute, the status of the affected area prior to the dispute shall be maintained and continued for all purposes; the locational entries had remained unchanged since issuance and Uniwide had faithfully paid its local taxes to Pasig since 1989, prior to the institution of the boundary dispute. Under Section 108 of PD 1529, a registered owner or other person having an interest in registered property may apply by petition to the court to amend a certificate of title upon any reasonable ground; should the RTC-Antipolo render judgment finding that the properties lie within Cainta, Cainta may be considered a person having an interest in registered property for purposes of seeking amendment of Uniwide's TCTs, but until then the stated location is presumed correct and subsisting.

• Litis Pendentia, Forum Shopping, and Prejudicial Question: The test to determine the existence of forum shopping is whether the elements of litis pendentia are present or whether a final judgment in one case amounts to res judicata in the other. The elements are (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration (citing Heirs of Marcelo Sotto vs. Palicte). The first and second requisites were wanting: Uniwide was not a party to the boundary dispute case between Cainta and Pasig, and the first action was for settlement of a boundary dispute while the second was for collection of taxes. The third requisite was likewise wanting because, regardless of which party was successful, a judgment in the boundary dispute case would not amount to res judicata in the tax collection case; the basis for determining which local government unit has the apparent right to collect local taxes is the location appearing on the certificate of title, unless an amendment thereto is duly made. For this same reason, the boundary dispute case did not present a prejudicial question warranting suspension of the tax collection case. As to the pendency of Cainta's certiorari petition, a special civil action for certiorari under Rule 65 is an original or independent action (citing Province of Leyte vs. Energy Development Corporation and Republic of the Philippines vs. Bayao); an independent action does not interrupt the course of the case unless there be a writ of injunction stopping it (citing Mortel vs. Judge Leido, Jr., citing Palomares, et al. vs. Jimenez). Although Cainta's petition sought a temporary restraining order and/or preliminary injunction, none was issued by the CA, and the petition had in any case been decided against Cainta on 30 September 2004, which became final and executory on 28 October 2004.

• Liability for Business and Real Estate Taxes and Reimbursement: Section 146 of the Local Government Code expressly provides that the tax on a business must be paid by the person conducting the same. Uniwide being undisputedly the person conducting the business under consideration, it was the party against whom Pasig could properly pursue payment of local business taxes. It was, however, erroneous for the CA to sustain the RTC-Pasig's directive for Uniwide to also pay real estate taxes to Pasig for the applicable years. Pasig's complaint alleged only that Uniwide did not pay the fees for Mayor's Permit, business taxes, and other incidental fees and charges, and prayed for the payment thereof; it did not allege that Uniwide was also liable for payment of real estate taxes. Pasig itself alleged, and Uniwide admitted in its answer, that the realty taxes for the subject properties are paid by their registered owner. Both the CA and the RTC-Pasig found that the subject TCTs are registered in the name of Uniwide Sales Realty and Resources Corporation, an affiliate of Uniwide with a separate and distinct personality and not a party to the case. The RTC-Pasig also found that Uniwide had paid Pasig realty taxes for the subject properties amounting to P2,200,000.00 for the years 1996 to the first quarter of 1999, evidenced by an official receipt dated 22 June 1999. These circumstances created doubt as to Uniwide's liability for real estate taxes "beginning the year 1997 up to present," especially since the properties had already been conveyed to Robinsons Land Corporation on 6 May 1999. For lack of sufficient proof, Uniwide could be held liable only for local business taxes to Pasig for the applicable years. Cainta, on the other hand, was obligated to return the taxes erroneously paid to it by Uniwide pursuant to the principle against unjust enrichment, which has two conditions: first, a person must have been benefited without a real or valid basis or justification; and second, the benefit was derived at another person's expense or damage (citing Loria vs. Munoz, Jr.). Prior to final adjudication by the RTC-Antipolo on the boundary dispute and the necessary amendment to the TCTs, Cainta had no apparent right to collect the taxes on the subject properties; thus, when Uniwide paid taxes to it, Cainta was benefited without real or valid basis, and that benefit was derived at the expense of both Uniwide and Pasig.

• Attorney's Fees: The award of attorney's fees is the exception rather than the general rule. It is necessary for the trial court to make findings of fact and law that would bring the case within the exception and justify the grant of such award. The matter of attorney's fees cannot be mentioned only in the dispositive portion of the decision; it must be clearly explained and justified by the trial court in the body of its decision. On appeal, the CA is precluded from supplementing the bases for awarding attorney's fees when the trial court failed to discuss in its decision the reasons for awarding the same (citing S.C. Megaworld Construction and Development Corporation vs. Parada, citing Frias vs. San Diego-Sison). Because the RTC-Pasig automatically awarded attorney's fees in the dispositive portion of its decision without stating the factual or legal basis therefor in the body of the decision, the award had to be deleted.

• Situs of Local Taxation Determined by the Certificate of Title — Local business taxes and realty taxes are collected by the local government unit where the business is conducted or the real property is located. Because the taxpayer is entitled to rely on the location stated on the face of the certificate of title, that locational entry is presumed correct and must be followed for purposes of determining the situs of local taxation until it is cancelled or amended through proper judicial proceedings. The Court applied this rule to hold that Pasig, not Cainta, had the apparent right to levy and collect the taxes on the subject properties.
• Conclusiveness of the Torrens Title as to Location — Under Section 31 of the Property Registration Decree, a decree of registration binds the land, quiets title thereto, and is conclusive upon and against all persons, including the National Government and all its branches. The land registration court, in confirming title, necessarily passes upon the technical description of the land and consequently its location, based on the applicant's proof and the reports of the Commissioner of Land Registration and the Director of Lands. The Court relied on this to presume correct the locational entry in the TCTs, citing Odsique vs. Court of Appeals for the rule that a certificate of title is conclusive not only of ownership but also of location.
• Amendment of a Certificate of Title under Section 108 of the Property Registration Decree — A registered owner or other person having an interest in registered property may apply by petition to the court, upon any reasonable ground, for the amendment or alteration of a certificate of title. The Court held that should the RTC-Antipolo rule that the subject properties lie within Cainta, Cainta may be considered a person having an interest in registered property for purposes of seeking amendment of Uniwide's TCTs to reflect the proper locational entry based on the final judgment.
• Status Quo Rule in Boundary Disputes under the LGC IRR — Article 18 of the Implementing Rules and Regulations of the Local Government Code provides that in case of a boundary dispute, the status of the affected area prior to the dispute shall be maintained and continued for all purposes. The Court applied this to hold that the locational entries, unchanged since issuance, and Uniwide's payment of local taxes to Pasig since 1989, prior to the boundary dispute, should be maintained until final judgment and the necessary amendments to the TCTs.
• Administrative Feasibility as a Canon of a Sound Tax System — The tax system should be capable of being effectively administered and enforced with the least inconvenience to the taxpayer. The Court invoked this canon, citing Diaz vs. Secretary of Finance, in holding that taxpayers should not be subjected to the vagaries of boundary disputes in complying with local tax obligations.
• Litis Pendentia and Forum Shopping — Forum shopping exists when the elements of litis pendentia are present or when a final judgment in one case amounts to res judicata in the other. The elements are: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration. The Court found all three requisites wanting because Uniwide was not a party to the boundary dispute and the two actions asserted different rights and reliefs.
• Prejudicial Question — No prejudicial question warranted suspension of the tax collection case because, regardless of the outcome of the boundary dispute, a judgment therein would not amount to res judicata in the tax collection case, the basis for the collecting unit's apparent right being the locational entry in the certificate of title unless amended.
• Certiorari as an Independent Action — A special civil action for certiorari under Rule 65 is an original or independent action that does not interrupt the course of the case unless a writ of injunction stops it. The Court applied this to hold that the pendency of Cainta's certiorari petition did not bar the RTC-Pasig from proceeding with the tax collection case, especially since no injunctive relief was issued and the petition had already been dismissed.
• Unjust Enrichment — The principle has two conditions: first, a person must have been benefited without a real or valid basis or justification; and second, the benefit was derived at another person's expense or damage. The Court applied this to order Cainta to reimburse Uniwide the taxes the latter had paid to Cainta, since Cainta had no apparent right to collect them prior to final adjudication of the boundary dispute and amendment of the TCTs.
• Attorney's Fees Must Be Justified in the Body of the Decision — The award of attorney's fees is the exception rather than the general rule; the trial court must make findings of fact and law bringing the case within the exception and justify the award in the body of its decision, not merely in the dispositive portion. On appeal, the CA is precluded from supplying the bases omitted by the trial court. The Court applied this to delete the award of attorney's fees.

• "This Court holds that the location stated in the certificate of title should be followed until amended through proper judicial proceedings." — This is the ratio decidendi of the case, fixing the rule by which the situs of local taxation is determined while a boundary dispute remains unresolved.
• "To hold otherwise would subject taxpayers to the vagaries of boundary disputes, to their prejudice and inconvenience and to the detriment of proper tax administration. Such scenario is contrary to the canons of a sound tax system." — This passage supplies the policy justification for the ruling, grounding it in administrative feasibility as a canon of a sound tax system.
• "The principle of unjust enrichment has two conditions. First, a person must have been benefited without a real or valid basis or justification. Second, the benefit was derived at another person's expense or damage." — This states the canonical two-condition formulation of unjust enrichment relied upon to order Cainta to reimburse Uniwide.
• "The award of attorney's fees is the exception rather than the general rule. As such, it is necessary for the trial court to make findings of fact and law that would bring the case within the exception and justify the grant of such award." — This articulates the standard for awarding attorney's fees and explains why the award in this case was deleted.

• Odsique vs. Court of Appeals, 305 Phil. 25 (1994) — Cited as controlling authority for the rule that a certificate of title is conclusive not only of ownership of the land but also of its location, supporting the Court's reliance on the locational entries in the TCTs.
• Diaz, et al. vs. The Secretary of Finance, et al., 669 Phil. 371 (2011) — Cited for administrative feasibility as one of the canons of a sound tax system, invoked to justify reliance on the certificate of title rather than on evidence adduced in the boundary dispute.
• Heirs of Marcelo Sotto vs. Palicte, 726 Phil. 651 (2014) — Cited for the elements of forum shopping and litis pendentia, which the Court applied to reject Cainta's motion to dismiss.
• Province of Leyte vs. Energy Development Corporation, G.R. No. 203124, June 22, 2015, 760 SCRA 149 — Cited for the rule that a special civil action for certiorari under Rule 65 is an original or independent action.
• Republic of the Philippines vs. Bayao, 710 Phil. 279 (2013) — Cited, together with Province of Leyte, for the same rule on the independent character of a certiorari action.
• Mortel vs. Judge Leido, Jr., 297 Phil. 198 (1993), citing Palomares, et al. vs. Jimenez, 90 Phil. 773 (1952) — Cited for the rule that an independent action does not interrupt the course of the case unless a writ of injunction stops it.
• Loria vs. Munoz, Jr., 745 Phil. 506 (2014) — Cited for the two conditions of the principle of unjust enrichment, applied in ordering Cainta to reimburse Uniwide.
• S.C. Megaworld Construction and Development Corporation vs. Parada, 717 Phil. 752 (2013), citing Frias vs. San Diego-Sison, 549 Phil. 49 (2007) — Cited for the rule that attorney's fees must be justified by findings of fact and law in the body of the decision, and that the CA cannot supply the omitted bases on appeal.

• Section 150, Local Government Code — Provides the situs of the tax, requiring that the tax on sales be paid to the municipality where the branch or sales outlet is located, or to the city or municipality of the principal office where there is no such branch or sales outlet. Cited to establish that local business taxes are collected by the local government unit where the business is conducted.
• Section 146, Local Government Code — Provides that the taxes imposed under Section 143 are payable for every separate or distinct establishment or place where the business is conducted, and that the tax on a business must be paid by the person conducting the same. Applied to hold Uniwide, as the person conducting the business, liable to Pasig for local business taxes.
• Sections 201 and 247, Local Government Code — Provide that real property shall be appraised at the current and fair market value prevailing in the locality where the property is situated, and that collection of the real property tax and enforcement of remedies shall be the responsibility of the city or municipal treasurer concerned. Cited to establish that realty taxes are collected by the locality where the property is situated.
• Sections 5 and 57, Presidential Decree No. 464 (Real Property Tax Code) — Provide that all real property shall be appraised at the current and fair market value prevailing in the locality where the property is situated, and that collection of the real property tax shall be the responsibility of the treasurer of the province, city, or municipality where the property is situated. Cited for the same proposition on the situs of real property taxation.
• Section 31, Presidential Decree No. 1529 (Property Registration Decree) — Provides that the decree of registration shall bind the land and quiet title thereto, and shall be conclusive upon and against all persons, including the National Government and all branches thereof; it also requires the decree to contain a description of the land as finally determined by the court. Applied to presume correct the locational entry in the TCTs and to make it binding for purposes of determining the situs of local taxation.
• Section 108, Presidential Decree No. 1529 — Allows a registered owner or other person having an interest in registered property to apply by petition to the court, upon any reasonable ground, for the amendment or alteration of a certificate of title. Applied to hold that Cainta may seek amendment of the TCTs should the RTC-Antipolo rule in its favor in the boundary dispute.
• Sections 15, 17, and 29, Presidential Decree No. 1529 — Require the applicant to file a sworn application containing a description of the land, the original muniments of title or copies thereof, and a survey plan approved by the Bureau of Lands; require the land registration court to render judgment confirming title after considering the evidence and the reports of the Commissioner of Land Registration and the Director of Lands. Cited to show that the registration court necessarily passes upon the technical description and location of the land.
• Articles 2154 and 2155, Civil Code — Provide the basis for the principle against unjust enrichment. Applied to order Cainta to return the taxes erroneously paid to it by Uniwide.
• Article 18, Implementing Rules and Regulations of the Local Government Code — Provides that in case of a boundary dispute, the status of the affected area prior to the dispute shall be maintained and continued for all purposes. Applied to maintain the locational entries in the TCTs and Uniwide's prior payments to Pasig until final judgment and amendment of the titles.
• Rule 65, Rules of Court — Governs the special civil action for certiorari, which is an original or independent action. Applied to hold that the pendency of Cainta's certiorari petition did not interrupt the tax collection case absent an injunctive writ.

• Mendoza (Acting Chairperson, Second Division)
• Leonen
• Caguioa

Carpio (Chairperson), J., was on official leave.