G.R. No. 210894 - Cruz vs. City of Makati

Case Summary (G.R. No. 210894)

Factual Background

The petitioners were the registered owners of Condominium Unit 407, Cityland Condominium 10, Tower II, Makati City (the subject property). The City of Makati levied on the subject property for alleged nonpayment of real property taxes after the petitioners’ designated employee-representative allegedly failed to remit entrusted tax payments amounting to P201,231.17 and purportedly absconded with the funds. The City sold the property at auction to Laverne Realty and Development Corporation as highest bidder for P370,000.00. Petitioners failed to redeem the subject property and later filed suit for annulment of the sale with prayer for injunctive relief and damages in Civil Case No. 07-1155 before Makati RTC Branch 62, alleging defective notice, defective warrant of levy, failure to post required notices under the Local Government Code, and failure to remit excess proceeds to them.

Trial Court Proceedings in Civil Case No. 07-1155

The City of Makati and the City Treasurer answered the complaint. Petitioners sought to declare Laverne and the Makati Register of Deeds in default for failure to file responsive pleadings. On August 26, 2009, Makati RTC Branch 62 granted injunctive relief but refused to declare Laverne in default. Petitioners later filed an Omnibus Motion on November 18, 2011 to consolidate Civil Case No. 07-1155 with LRC Case No. M-5237 (the petition to surrender the owner’s duplicate title) and to declare Laverne in default. The trial court on November 25, 2011 ordered more time and directed petitioners to inform the court of developments before ruling on consolidation or default.

Orders of Makati RTC Branch 62

On March 29, 2012 the trial court denied petitioners’ motion to consolidate and denied their motion to declare Laverne in default, expunged Laverne’s Answer with Compulsory Counterclaim for filing beyond the reglementary period without a motion for admission, and admonished petitioners for failure to comply with court orders and rules governing proof of service. On June 26, 2012 the trial court dismissed Civil Case No. 07-1155 under Section 3, Rule 17 for petitioners’ failure to comply with the order to inform the court of developments in LRC Case No. M-5237. Petitioners’ omnibus motion for reconsideration and renewed motion to declare Laverne in default were denied in the court’s December 27, 2012 Order.

Proceedings in LRC Case No. M-5237

Separately, Laverne filed LRC Case No. M-5237 seeking surrender of the owner’s duplicate title. Petitioners filed a demurrer to evidence. Makati RTC Branch 148 granted the demurrer in an Order dated May 26, 2015, finding inadequate proof of compliance with the posting, publication, and service requirements under Sections 254, 258 and 260 of the Local Government Code. The court observed that the Notice of Tax Delinquency was not shown to have been posted at Makati City Hall or in Barangay Dasmariñas, that publication of the Notice of Tax Delinquency occurred only once instead of twice, and that there was no proof the warrant of levy was actually served on the taxpayer. The petition to surrender was dismissed. Laverne’s motion for reconsideration was denied, and its appeal to the Court of Appeals was dismissed for failure to file a brief.

Ruling of the Court of Appeals

Petitioners sought certiorari relief before the Court of Appeals to assail the Makati RTC Branch 62 Orders of March 29, 2012 and December 27, 2012. On July 22, 2013 the CA denied the petition and affirmed the trial court. The CA held that the trial court acted within its sound discretion in refusing consolidation because LRC Case No. M-5237 was a non-litigious, summary proceeding and consolidation would prejudice Laverne which had already adduced evidence. The CA further held that the trial court properly denied petitioners’ motion to declare Laverne in default because petitioners failed to show proof of personal service of their omnibus motion to declare defendant in default, and that the present rules require notice of the motion to be given to the defending party.

Issues Presented to the Supreme Court

The Supreme Court identified the principal issues as follows: (1) whether the Court of Appeals erred in affirming the trial court’s dismissal of Civil Case No. 07-1155 given the alleged gross and inexcusable negligence of petitioners’ counsel which led to dismissal and consequent deprivation of property without due process; and (2) whether the CA erred in denying relief on procedural grounds and thus improperly foreclosing adjudication on the merits of petitioners’ contention that the delinquency sale was void.

Petitioners’ Contentions

Petitioners urged the Court to set aside the CA dispositions and remand the case for consideration on the merits. They argued that the levy and sale were null and void for failure to comply with the Local Government Code requirements on sending, publication, and posting of the Notice of Tax Delinquency, on service of the warrant of levy, and on sending billing statements. Petitioners maintained that their failure to comply with the trial court’s directive to inform it of consolidation developments was attributable to their counsel’s negligence and should not bind them, and they relied on the principle that a litigant should not be deprived of his day in court when counsel’s incompetence has prejudiced the client. They further asserted that the irregularity of the sale deprived them of property without due process and that technicalities should not bar adjudication on a merit that affects fundamental rights.

Respondents’ Contentions

The City of Makati and the City Treasurer contended that petitioners’ counsel’s mistakes bound petitioners and that the CA correctly affirmed the trial court’s exercise of discretion. Laverne Realty and Development Corporation argued that petitioners availed themselves of the wrong remedy by filing an original petition for certiorari instead of appealing the dismissal, that dismissal under Section 3, Rule 17 operates as an adjudication on the merits and therefore required appeal, and that petitioners’ repeated failure to comply with lawful court orders warranted dismissal. Laverne stressed that the right to appeal is statutory and must comply with prescribed requisites.

Ruling of the Supreme Court

The Supreme Court granted the petition. It reversed and set aside the CA Decision dated July 22, 2013 and the CA Resolution of January 15, 2014. The Court likewise reversed and set aside the Makati RTC Branch 62 Orders dated June 26, 2012 and December 27, 2012, except for the trial court’s ruling expunging Laverne’s Answer, which remained. Civil Case No. 07-1155 was reinstated and the Makati RTC Branch 62 was ordered to proceed with dispatch.

Legal Basis and Reasoning

The Court explained that the trial court dismissed Civil Case No. 07-1155 solely because petitioners repeatedly failed to comply with orders to inform the court of developments in LRC Case No. M-5237. The Court observed that subsequent developments in LRC Case No. M-5237—namely, its dismissal by Makati RTC Branch 148 for noncompliance with statutory requirements under the Local Government Code and the dismissal of Laverne’s appeal before the Court of Appeals—demonstrated that there was in fact nothing to consolidate. The Court concluded that the trial court’s orders compelling petitioners to report consolidation developments lost relevance and that petitioners’ failure to comply could no longer justify dismissal.

The Court emphasized the paramount need to protect private property owners from undue deprivation of property thr

Case Syllabus (G.R. No. 210894)

Parties and Procedural Posture

Noemi S. Cruz and Heirs of Hermenegildo T. Cruz, represented by Noemi S. Cruz, were the plaintiffs and petitioners in the proceedings below.
City of Makati, City Treasurer of Makati, Register of Deeds of Makati, and Laverne Realty and Development Corporation were respondents in the proceedings below.
Petitioners filed Civil Case No. 07-1155 for annulment of the delinquency sale of their condominium unit and sought injunctive relief and damages.
Laverne Realty and Development Corporation filed LRC Case No. M-5237 to surrender the owner’s duplicate title and seek possession after purchase at the tax sale.
Petitioners elevated the denial of relief by the Regional Trial Court, Branch 62, and the Court of Appeals' affirmation to the Supreme Court via a Petition for Review on Certiorari.

Key Factual Allegations

Petitioners owned Unit 407, Cityland Condominium 10, Tower II, 146 H.V. Dela Costa Street, Makati City, which was levied and sold for alleged real property tax delinquency.
Petitioners alleged that tax billing statements were misaddressed to Unit 1407 instead of Unit 407 and that a designated employee-representative entrusted with remitting payments absconded with PHP 201,231.17.
Petitioners alleged lack of receipt of warrant of levy, nonposting of notice of delinquency sale, defective mailing and publication, and failure to remit any excess sale proceeds to petitioners.
Laverne Realty and Development Corporation bought the property as highest bidder for PHP 370,000.00 at the tax sale.

Trial Court Orders

The Makati RTC, Branch 62, initially granted injunctive relief on August 26, 2009, but denied default motions against Laverne.
On March 29, 2012, Branch 62 ordered the expunction of Laverne’s Answer with Compulsory Counterclaim and denied plaintiffs’ motions to consolidate and declare Laverne in default for procedural noncompliance.
On June 26, 2012, Branch 62 dismissed Civil Case No. 07-1155 pursuant to Section 3, Rule 17 of the 1997 Rules of Civil Procedure for plaintiffs’ failure to comply with court orders.
On December 27, 2012, Branch 62 denied petitioners’ omnibus motion for reconsideration and to declare Laverne in default and reiterated procedural noncompliance under Sections 6 and 13, Rule 15 and Section 19, Rule 14 of the Rules of Court.

Proceedings in LRC Case No. M-5237

In LRC Case No. M-5237, Branch 148 granted a demurrer to evidence on May 26, 2015 and dismissed Laverne’s petition to surrender the owner’s duplicate title for failure to prove compliance with the Local Government Code provisions on notices, warrants of levy, posting, and publication.
Branch 148 found that the Notice of Tax Delinquency was published only once instead of twice as required by Section 254 of R.A. 7160, and that posting in City Hall and the barangay was not proven.
Branch 148 also found lack of proof of actual service of the warrant of levy despite registry mailing and noted discrepancies in billing addresses showing Unit "1407" instead of "407".
Laverne appealed the dismissal to the Court of Appeals, which dismissed the appeal for non-filing of brief; the CA denied reconsideration on January 27, 2017.

Court of Appeals Ruling in CA-G.R. SP No. 128390

The Court of Appeals affirmed Branch 62’s March 29, 2012 and December 27, 2012 Orders and denied the petition for certiorari on July 22, 2013.
The CA held that the trial court acted within its sound judicial discretion in denying consolidation because LRC Case No. M-5237 was a summary, non-litigious proceeding and Civil Case No. 07-1155 was a full adversarial civil action.
The CA further held that denial of a default declaration was justified by petitioners’ failure to prove proper notice and proof of personal service for their motion to declare Laverne in default, citing the requirement that motions to declare default be noticed under the 1997 Rules.

Issues Presented

Whether the Court of Appeals committed reversible error in affirming the trial court’s dismissal of Civil Case No