Sta. Lucia Realty & Development, Inc. vs. City of Pasig

A local government unit may collect real property taxes only upon showing that the property is unquestionably within its territorial jurisdiction, so that a collection case covering properties in a disputed boundary area must await final settlement of the boundary dispute. Mere reliance on the locality stated on the face of the transfer certificates of title does not suffice where the technical descriptions allegedly point to the rival locality and the boundaries themselves remain unresolved.

Sta. Lucia Realty & Development, Inc. is the registered owner of several parcels in the Barrio Tatlong Kawayan area claimed by both the City of Pasig and the Municipality of Cainta, Province of Rizal. Pasig and Cainta have a long-standing and still-pending boundary dispute, docketed as Civil Case No. 94-3006 before Branch 74 of the RTC in Antipolo City, each asserting territorial jurisdiction over the same area. The power to appraise and collect real property tax under Presidential Decree No. 464 and Republic Act No. 7160 is vested in the province, city, or municipality where the property is situated.

Sta. Lucia Realty & Development, Inc. is the registered owner of parcels originally covered by Transfer Certificates of Title Nos. 39112, 39110 and 38457, all stating Barrio Tatlong Kawayan, Municipality of Pasig as their location. The lot under TCT No. 39112 was consolidated with that under TCT No. 518403, stated to be in Barrio Tatlong Kawayan, Municipality of Cainta, and the combined lots were partitioned into three lots covered by TCT Nos. 532250, 598424 and 599131, all bearing the Cainta address. TCT No. 39110 was divided into TCT Nos. 92869 and 92870, while the lot under TCT No. 38457 was not segregated but became the site of a commercial building owned by Sta. Lucia East Commercial Center, Inc., a separate corporation. Upon Pasig's petition, the Land Registration Court on June 9, 1995 ordered amendment of TCT Nos. 532250, 598424 and 599131 to read that the lots derived from TCT No. 39112 were located in Barrio Tatlong Kawayan, Pasig City.

Thereafter, on January 31, 1994, Cainta had filed before the Antipolo RTC a petition for settlement of its land boundary dispute with Pasig, docketed as Civil Case No. 94-3006 and still pending. On November 28, 1995, Pasig filed against Sta. Lucia Civil Case No. 65420 for collection of real estate taxes, including penalties and interests, on the lots covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457, including improvements thereon. According to Sta. Lucia, it had religiously paid its real estate taxes to Cainta pursuant to Cainta's demands, assessments and tax declarations, as its predecessors had done since 1913, on the claim that the properties were within Cainta's jurisdiction. Cainta, allowed to intervene, averred that it had collected real property taxes on the properties even before Sta. Lucia acquired them and that establishment of boundary monuments would show the properties within its metes and bounds.

When Sta. Lucia and Cainta moved to suspend the collection case pending the Antipolo boundary case as a prejudicial question, the Pasig RTC denied suspension on December 4, 1996. After trial, the Pasig RTC on August 10, 1998 gave judgment for Pasig for unpaid taxes and penalties, attorney's fees and costs, and ordered Cainta to refund taxes it had collected, then on October 9, 1998 additionally adjudged taxes and penalties on the improvements. The Court of Appeals in CA-G.R. CV No. 69603 affirmed with modification deleting attorney's fees, treating the titles as conclusive as to location and rejecting suspension, litis pendentia and forum shopping.

• Suspension Pending Boundary Dispute: Petitioner argued that the Court of Appeals erred in affirming the RTC and in not suspending Civil Case No. 65420 in view of the pendency of the boundary dispute in the Antipolo RTC which will finally determine the situs of the subject properties.
• Validity of Payment to Cainta: Petitioner maintained that payment of realty taxes through Cainta was valid payment, having been made pursuant to Cainta's demands and assessments and consistent with payment since 1913 by its predecessors-in-interest.
• Preservation of Status Quo: Petitioner argued that in the meantime that the Antipolo boundary case is being finally resolved, it should keep paying realty taxes through Cainta to preserve the status quo.

• Conclusiveness of Titles and Independence of Actions: Respondent Pasig countered that the TCTs clearly show on their faces that the properties are situated in its territorial jurisdiction, that the collection case is independent of the Antipolo boundary case, and that litis pendentia, forum shopping and res judicata are inapplicable for absence of their requisites.
• No Prejudicial Question Between Civil Cases: Respondent Pasig argued that the doctrine of prejudicial question, which has a definite legal meaning, cannot be invoked where both cases are civil, so no legal ground precluded simultaneous hearing or warranted suspension.
• Territorial Jurisdiction and Title Discrepancy: Intervenor Cainta reiterated its legal authority over the properties within its jurisdiction, claiming collection since 1913 while Pasig covered the same properties only in 1990, 1992 and 1993, and insisting that discrepancy between locational entries and technical descriptions in the TCTs required awaiting settlement of the boundary dispute.

• Suspension Pending Boundary Dispute: Whether the RTC and the CA were correct in deciding Pasig's Complaint without waiting for the resolution of the boundary dispute case between Pasig and Cainta.
• Proper Taxing Authority: Whether Sta. Lucia should continue paying its real property taxes to Cainta, as it alleged to have always done, or to Pasig, as the location stated in Sta. Lucia's TCTs.

• Suspension Pending Boundary Dispute: No. The Pasig RTC should have held proceedings in abeyance because the outcome of the Antipolo boundary case will determine which local government unit is entitled to exercise governmental powers including taxation over the disputed properties.
• Proper Taxing Authority: Not yet determinable. Entitlement to collect cannot be resolved on the face of the TCTs alone while stated location and technical descriptions allegedly conflict and territorial boundaries remain unsettled; succeeding taxes must meanwhile be deposited in escrow.

• Suspension Pending Boundary Dispute: Under Presidential Decree No. 464 and Republic Act No. 7160, appraisal and collection of real property tax belong to the treasurer of the province, city or municipality where the property is situated, making situs an imperative prerequisite. Because territorial boundaries define the limits of lawful governmental power and acts beyond them are ultra vires, delineation with precise metes and bounds is essential to avoid costly conflicts prejudicial to public welfare. Here Pasig sued not because Sta. Lucia refused to pay but because payment had already been made to Cainta, so deciding collection before boundaries are fixed risked double liability and conflicting judgments. Although strict prejudicial question under the Rules contemplates civil-criminal relations, courts possess inherent power under Rule 135 to control proceedings and stay one action to abide another closely interrelated action in the interest of good order, economy, and avoidance of multiplicity of suits; the same parties' boundary case in City of Pasig vs. Commission on Elections was thus treated as requiring prior resolution.
• Proper Taxing Authority: While a certificate of title is generally conclusive as to ownership and location, it merely confirms or records existing title and cannot vest title, shield fraud, protect a usurper, or permit unjust enrichment. Reliance on the word Pasig on the titles was insufficient where both Sta. Lucia and Cainta averred that the metes-and-bounds descriptions place the properties within Cainta, creating a possible conflict between stated and technically described locations that is conclusive only if both point to the same area. Consistent with Pioneer Insurance and Surety Corporation vs. Heirs of Vicente Coronado, which remanded for determination of exact location despite the title rule, and City Government of Tagaytay vs. Guerrero, which faulted taxation outside territorial jurisdiction, the Antipolo RTC as boundary court must finally determine the precise metes and bounds. In the interim, Sta. Lucia was directed to deposit succeeding taxes on the lots and improvements in an escrow account with the Land Bank of the Philippines to avoid further animosity.

• Local taxation limited to territorial jurisdiction — A province, city or municipality may fix, appraise and collect real property tax only with respect to property situated within its own locality; situs prevailing in the locality where the property is situated is an imperative prerequisite under the Real Property Tax Code and the Local Government Code. Applied to hold that neither Pasig nor Cainta could be adjudged entitled to Sta. Lucia's taxes until the Antipolo boundary litigation fixed which unit embraces the properties.
• Boundaries define lawful governmental power; extra-territorial acts are ultra vires — Territorial boundaries must be drawn with precise strokes in metes and bounds with technical descriptions because a local government unit can legitimately exercise powers only within its territorial jurisdiction, and uncertainty sows costly conflicts prejudicial to public welfare. Applied to require prior delineation of Pasig-Cainta boundaries before exercise of the taxing power over the disputed lots.
• Conclusiveness of Torrens title as to ownership and location, with limits — A transfer certificate of title is generally conclusive evidence of ownership and location and indefeasible against the whole world, but it merely confirms title already existing and vested and cannot create title, protect a usurper, shield fraud, or enrich one at another's expense. Applied to reject mechanical reliance on the Pasig entry where the technical descriptions were alleged to place the lots in Cainta, requiring resolution of the conflict by the boundary court.
• Inherent power to stay proceedings pending related case — Every court may amend and control its process to conform to law and justice and, in sound discretion, hold an action in abeyance to abide the outcome of another pending case, especially where rights in the second action cannot be properly determined until questions in the first are settled, to avoid multiplicity, vexation, conflicting judgments and confusion. Applied to direct suspension of the Pasig collection case pending final judgment in Antipolo Civil Case No. 94-3006, with interim escrow of taxes.
• Prejudicial question in loose vs. strict sense — Strict prejudicial question under Rule 111 generally contemplates civil and criminal actions, but jurisprudence permits suspension in the interest of good order where another civil case closely interrelated or linked must logically be resolved first. Applied to treat the Pasig-Cainta boundary dispute as functionally prejudicial to barangay-creation plebiscites and to the tax collection suit despite both cases being civil.

• "The importance of drawing with precise strokes the territorial boundaries of a local unit of government cannot be overemphasized. The boundaries must be clear for they define the limits of the territorial jurisdiction of a local government unit. It can legitimately exercise powers of government only within the limits of its territorial jurisdiction. Beyond these limits, its acts are ultra vires." — States the jurisdictional foundation for requiring metes-and-bounds certainty before taxation, drawn from Mariano, Jr. vs. Commission on Elections.
• "We agree with the petitioners that, generally, a certificate of title shall be conclusive as to all matters contained therein and conclusive evidence of the ownership of the land referred to therein. However, it bears stressing that while certificates of title are indefeasible, unassailable and binding against the whole world, including the government itself, they do not create or vest title." — Qualifies the Torrens conclusiveness rule to explain why the Pasig entry alone could not decide situs, drawn from De Pedro vs. Romasan Development Corporation.
• "The court in which an action is pending may, in the exercise of a sound discretion, upon proper application for a stay of that action, hold the action in abeyance to abide the outcome of another pending in another court, especially where the parties and the issues are the same, for there is power inherent in every court to control the disposition of causes (sic) on its dockets with economy of time and effort for itself, for counsel, and for litigants." — Articulates the inherent stay power justifying suspension of the collection case pending the boundary case.
• "While this may be the general rule, this Court has held in Vidad v. RTC of Negros Oriental, Br. 42, that, in the interest of good order, we can very well suspend action on one case pending the final outcome of another case closely interrelated or linked to the first." — Explains why suspension was allowed although both the boundary and collection matters were civil, not civil-criminal.

• City of Pasig vs. Commission on Elections, 372 Phil. 864 (1999) — Controlling precedent followed; held plebiscites for proposed barangays must await final settlement of Pasig-Cainta boundary dispute in Civil Case No. 94-3006, applied by analogy to require abeyance of tax collection.
• Mariano, Jr. vs. Commission on Elections, 312 Phil. 259 (1995) — Followed on necessity of clear metes-and-bounds boundaries as limits of governmental power; quoted to establish ultra vires character of extra-territorial acts.
• De Pedro vs. Romasan Development Corporation, 492 Phil. 643 (2005) — Followed to qualify Torrens conclusiveness; titles confirm but do not create title and cannot shield usurpation or fraud.
• Pioneer Insurance and Surety Corporation vs. Heirs of Vicente Coronado, G.R. No. 180357, August 4, 2009 — Followed and applied; despite title conclusiveness doctrine, case remanded to trial court to determine exact location where situs was in issue.
• City Government of Tagaytay vs. Guerrero, G.R. Nos. 140743 & 140745, September 17, 2009 — Followed; city levying on property outside its jurisdiction constitutes gross negligence, reinforcing situs prerequisite to taxing power.
• Odsigue vs. Court of Appeals, G.R. No. 111179, July 4, 1994 — Cited by the Court of Appeals below for title conclusiveness as to ownership and location; not sustained as dispositive by the Supreme Court given alleged stated-vs.-described location conflict.
• Security Bank Corporation vs. Judge Victorio, 505 Phil. 682 (2005) — Followed on inherent judicial power to stay proceedings to avoid multiplicity, vexation and conflicting judgments.

• Section 5, Presidential Decree No. 464 (Real Property Tax Code) — Requires appraisal at fair market value prevailing in the locality where the property is situated; construed to make situs the predicate for local tax authority.
• Section 57, Presidential Decree No. 464 (Real Property Tax Code) — Makes collection and enforcement the responsibility of the treasurer of the province, city or municipality where the property is situated; applied to deny collection absent proof of situs.
• Section 201, Republic Act No. 7160 (1991 Local Government Code) — Reiterates appraisal at value prevailing in locality where property is situated under Department of Finance rules; same situs application.
• Section 233, Republic Act No. 7160 (1991 Local Government Code) — Authorizes province, city or municipality within Metropolitan Manila Area to fix uniform basic realty tax rates for their respective localities; read as limited to properties within territorial jurisdiction.
• Section 5(g), Rule 135, Revised Rules of Court — Grants every court power to amend and control process and orders to conform to law and justice; basis for discretionary stay of collection case.
• Section 5, Rule 111, Revised Rules of Court — Defines strict prejudicial question; noted to explain loose use of term where both related cases are civil yet suspension remains warranted.

Presbitero J. Velasco, Jr., Acting Chairperson; Lucas P. Bersamin; Mariano C. Del Castillo; Jose Portugal Perez.