Title
Corporate Strategies Development Corp. vs. Agojo
Case
G.R. No. 208740
Decision Date
Nov 19, 2014
CSDC contested a tax delinquency auction sale of its Makati property, alleging lack of notice and procedural violations. The Supreme Court ruled the sale invalid due to non-compliance with legal requirements, reinstating CSDC's ownership.
tax delinquency auction sale
null and void
legal requirements
A

Case Summary (G.R. No. 260731)

Factual Background: The Tax Delinquency and Auction Sale

CSDC remained the registered owner of the subject parcel and the tax assessments and declarations were in its name, including Tax Declaration Nos. F00401455 and F00401456. The record showed delinquency in the payment of real property taxes amounting to P1,458,199.85 from 1994 to 2006. Following the issuance of the April 7, 2006 warrant, a public auction sale was held on May 24, 2006. Respondent emerged as the highest bidder and received a certificate of sale on the same date, which was later registered.

Respondent then secured the Final Deed of Conveyance on July 3, 2007, after the expiration of the redemption period. With that conveyance, respondent pursued judicial confirmation by filing the petition in the RTC for the issuance of a new certificate of title.

RTC Proceedings and the Petition for New Certificate of Title

Respondent’s petition was set for hearing by the RTC on February 13, 2008, with directives for service of notice of hearing upon all interested persons, including petitioners herein, the Land Registration Authority (LRA), and the Register of Deeds of Makati City. CSDC filed an opposition on August 22, 2008, and Prieto, acting as CSDC President, filed his opposition on October 20, 2008.

Petitioners anchored their opposition on lack of due process in the tax delinquency sale. They alleged that they did not receive notice of the tax delinquency or the warrant because the notices were allegedly sent to an old office address despite CSDC’s earlier transfer of offices. They further alleged that the tax delinquency sale violated multiple procedural requirements under the LGC, focusing on: the claimed failure to take further steps to send the warrant at the address where the property itself was located; the claimed failure to serve the warrant upon the occupant of the property as required by Section 258 of the LGC; the claimed failure to serve copies of the warrant of levy upon the Register of Deeds and the City Assessor prior to the auction; the claimed failure to annotate the notice of levy on the title prior to the auction; and the asserted gross inadequacy of the bid price, which allegedly represented only five percent of the property’s zonal value of P35,000,000.00.

Confronted with the proceeding’s eventual disposition, petitioners also moved to deposit the amount of P3,080,000.00 as a guarantee to respondent, invoking Section 267 of the LGC, should the sale be declared void. The RTC granted the motion in an order dated August 29, 2008.

RTC Decision

On January 15, 2010, the RTC dismissed respondent’s petition and voided the auction sale. The RTC’s dispositive statement reflected the court’s finding of insufficiency in respondent’s proof of compliance with legal requirements for a valid tax delinquency sale. It concluded that the sale was invalid for failure of respondent to establish compliance with mandatory requirements that affected the substantive rights of the oppositors.

The RTC further ordered that the amount deposited by the oppositor, covered by an official receipt dated September 9, 2008 in the amount of P3,086,000.00, intended to cover the purchase price with interest, would be paid to the purchaser at the auction sale upon nullification of the deed.

CA Proceedings: Initial Affirmance and Subsequent Reversal

Respondent appealed to the CA, arguing that the RTC erred in not applying the presumption of regularity in the performance of official duties by the City Treasurer. On January 26, 2012, the CA initially affirmed the RTC. It held that the City failed to fully comply with requirements on publication, posting, and service of notices of delinquency and the warrant of levy under the LGC, and thus the RTC correctly dismissed respondent’s petition.

After respondent’s motion for reconsideration, the CA reversed course. On March 18, 2013, the CA reconsidered its earlier decision and declared the auction sale valid. The CA reasoned that the presumption of regularity applied and that other requirements for a valid tax delinquency sale, such as publication, service, and posting of the notice and warrant of levy, were deemed complied with because the sale was conducted by the OIC-Treasurer of Makati in the performance of official duty.

Petitioners sought reconsideration, but the CA denied it in an August 15, 2013 resolution. Petitioners then elevated the matter to the Supreme Court.

Issues Raised by Petitioners

Petitioners assigned reversible error to the CA in applying the presumption of regularity to administrative action that deprived a taxpayer of property through a tax sale. They argued that the CA disregarded the LGC’s legal requirements on tax delinquency sales, improperly shifted the burden of proof to them, and failed to consider the gross inadequacy of the bid price.

Petitioners invoked jurisprudence emphasizing that there can be no presumption of regularity in administrative action resulting in deprivation of property through tax proceedings, and that the buyer at a tax sale must establish compliance with all vital statutory requirements. They also criticized respondent’s reliance on presumptions rather than documentary proof, particularly as to service of notice of delinquency and notice of levy, posting and publication requirements, and annotation of levy prior to auction.

Respondent countered by insisting that the tax sale enjoyed a presumption of regularity and that he had shown compliance through the documentary records he submitted, including documents such as the warrant of levy, notice of public auction, certificate of posting, certificate of sale, annotations, and the Final Deed of Conveyance. He also insisted that inadequacy of bid price was not a basis to nullify the sale. He additionally raised an issue on counsel’s compliance with MCLE requirements, seeking expungement of the pleadings or treatment of the petition as not properly signed.

Supreme Court’s Ruling

The Court granted the petition. It reversed and set aside the CA’s March 18, 2013 Amended Decision and its August 15, 2013 Resolution, and it reinstated the RTC’s January 15, 2010 decision dismissing respondent’s petition.

The Court treated respondent’s MCLE-related procedural challenge as moot because the required MCLE certificates for the fourth compliance period had been submitted, and the issue no longer affected the merits.

Legal Basis and Reasoning: No Presumption of Regularity in Tax Sales

The Court anchored its decision on Section 75 of P.D. No. 1529, which recognizes the registered owner’s right to pursue legal and equitable remedies to impeach or annul proceedings for the issuance of new certificates of title upon expiration of the redemption period. Here, petitioners opposed the issuance of a new certificate of title by attacking the validity of the tax delinquency sale on due process grounds and alleged statutory noncompliance.

The Court held that the CA erred in treating the tax delinquency sale as protected by the general presumption of regularity of administrative acts. Citing Spouses Sarmiento v. CA, the Court reiterated the rule that there could be no presumption of the regularity of any administrative action resulting in depriving a taxpayer of property through a tax sale. This doctrine was described as an exception rooted in due process and evidentiary principles established in older cases such as Valencia v. Jimenez and Fuster, and reiterated in subsequent cases including Camo v. Boyco and Requiron v. Sinaban.

The Court emphasized that a sale for tax delinquency is in derogation of property and due process rights. Accordingly, legal steps required by the LGC must be strictly followed. The burden to show that those steps were taken rested on the person claiming validity of the sale. The Court rejected the CA’s approach because it allowed the presumption of regularity to stand where due process required proof of compliance with essential statutory requirements.

Statutory Compliance Under the LGC: Notice, Levy, Publication, Posting, and Service

After determining that respondent carried the burden to prove compliance, the Court assessed the requirements of the LGC.

Under Section 254 of the LGC, the notice of delinquency had to be posted at the main hall and in a publicly accessible and conspicuous place in each barangay of the local government unit, and it had to be published once a week for two consecutive weeks in a newspaper of general circulation in the province, city, or municipality.

Under Section 258 of the LGC, once the treasurer issued a warrant of levy, it had to be mailed to or served upon the delinquent owner or the person having legal interest, or served upon the administrator or occupant if the owner was out of the country or could not be located. Written notice of the levy with the attached warrant also had to be mailed or served upon the assessor and the registrar of deeds within the relevant jurisdiction for annotation on the tax declaration and certificate of title.

Under Section 260 of the LGC, within thirty days after service of the warrant of levy, the treasurer had to proceed with public advertisement for sale or auction through both posting at designated places and publication once a week for two weeks in a newspaper of general circulation.

The Court concluded that respondent failed to prove crucial compliance. First, the Court found no evidence that the notice of levy was received by CSDC and no proof that the notice was served on the occupant of the property. The Court held that actual notice to the delinquent taxpayer was essential, and noncompliance rendered the sale null and void even if proper advertisement or publication was later shown. It characterized administrative proceedings for the sale of private lands for nonpayment of taxes as personam, thus requiring notice consistent with due process.

Second, the Court found that the notice of delinquency was not proven to have been posted in the City Hall and in the

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