Title
Philippine Suburban Development Corp. vs. Auditor General
Case
G.R. No. L-19545
Decision Date
Apr 18, 1975
PSDC sought a refund of real estate tax paid under protest, claiming ownership transferred to PHHC upon deed execution. SC ruled in favor, stating ownership transferred upon deed execution and possession, exempting PSDC from tax liability.

Case Digest (G.R. No. L-19545)
Expanded Legal Reasoning Model

Facts:

  • Presidential and Administrative Approvals
    • On June 8, 1960, during a Cabinet meeting, the President of the Philippines approved the acquisition by the People’s Homesite and Housing Corporation (PHHC) of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for the purpose of relocating squatters and flood victims from Manila and its suburbs.
    • The approval was based on several agency reports and recommendations, notably from the Committee for surveying lots, the Social Welfare Administrator, and the Manager of the Government Service Insurance System (GSIS).
    • The acquisition was to be financed through the flotation of bonds (initially P4.5 million, later increased to P7,500,000.00) to be absorbed by the GSIS, in alignment with a Presidential directive.
  • Actions and Resolutions of the PHHC
    • On June 10, 1960, the PHHC Board of Directors passed Resolution No. 700, authorizing the purchase of the unoccupied portion of the estate at P0.45 per square meter.
    • The resolution stipulated several conditions precedent, including:
      • Securing confirmation of the purchase price as required by the Office of the Executive Commission (OEC) memorandum.
      • Defining and delineating the specific portion of the estate to be acquired.
      • Ensuring that the necessary funds were provided by the President from the bond issue absorbed by the GSIS.
      • Obtaining the approval of the Auditor General pursuant to the Executive Order dated February 3, 1959.
      • The vendor’s commitment to dismiss with prejudice a pending civil action.
  • Execution of the Deed of Absolute Sale and Possession Transfer
    • On December 29, 1960, a Deed of Absolute Sale was executed between the petitioner (Philippine Suburban Development Corporation, the vendor) and the PHHC (the vendee) covering two parcels of the Sapang Palay Estate (TCT Nos. T-23807 and T-23808).
    • The terms of the contract included the sale price (P3,386,223.00), detailed payment arrangements involving an initial loan secured through GSIS, retention of funds to discharge a pre-existing mortgage lien, and a stipulated period for full payment of the balance.
    • Notably, the contract contained conditions requiring approval by the Auditor General and the registration of the deed as prerequisites for the final transfer, yet there was an actual transfer of possession.
    • The PHHC took possession of the property as early as the first week of June 1960, even before the execution of the deed on December 29, 1960, to immediately begin construction and resettlement efforts.
  • Tax Payment Dispute
    • On April 12, 1961, the Provincial Treasurer of Bulacan withheld an amount of P30,099.79 from the purchase price, representing the real estate tax for 1961, and this sum was later paid by petitioner under protest.
    • Petitioner claimed that, upon execution of the Deed of Absolute Sale and the earlier actual delivery of possession, it had effectively ceased to be the owner of the land and thus should not be liable for the real estate tax for 1961.
    • The request for a refund of the tax was denied by the Secretary of Finance in a decision dated August 22, 1961, prompting the appeal.

Issues:

  • Transfer of Ownership and the Effect of Delivery
    • Does the execution of the Deed of Absolute Sale, coupled with the delivery of actual possession to the vendee, effect the transfer of ownership even though the deed had not yet been registered with the Office of the Register of Deeds?
    • How should the provisions of Articles 1496 and 1498 of the Civil Code, relating to the effect of public instruments and the delivery of goods, be interpreted in this case?
  • Applicability of Registration as a Condition Precedent
    • Is the condition, which required approval by the Auditor General and subsequent registration of the deed, a necessary prerequisite for transferring ownership for the purposes of tax liability?
    • Given that the property is subject to the Torrens system under the Land Registration Act (Act No. 496), does the non-registration of the deed imply that the vendor retains ownership and thus remains liable for the real property tax?
  • Tax Liability Due to Government Ownership or Exemption
    • Considering that the PHHC, as a government entity, is involved in the transaction, what are the implications regarding exemption from real property tax under relevant statutory provisions such as Rep. Act No. 1322?

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)

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