G.R. No. 176703 - Municipality of Cainta vs. Pasig City

Case Summary (G.R. No. 176703)

Procedural Posture and Reliefs Sought

Pasig filed an action in RTC-Pasig for collection of local business taxes, fees and other charges for fiscal year 1997 against Uniwide. Uniwide filed a third-party complaint against Cainta seeking reimbursement of taxes it paid to Cainta in the event Uniwide was held liable to Pasig. Cainta had earlier filed a boundary dispute case against Pasig in RTC-Antipolo (filed 1994). Motions to dismiss or suspend the tax collection proceedings based on litis pendentia, forum shopping, and prejudicial question were denied; Cainta’s certiorari petition to the Court of Appeals (CA) was dismissed. The RTC ruled for Pasig and ordered taxes and attorney’s fees; the CA affirmed with modification (reducing attorney’s fees). Cainta and Uniwide filed separate petitions for review on certiorari to the Supreme Court.

Core Factual Background

Uniwide’s business operated on the subject properties covered by TCTs indicating these parcels were in Pasig. Uniwide obtained building and mayor’s permits from Pasig and paid business and realty taxes, fees and charges to Pasig from 1989 to 1996. Beginning 1997 Uniwide ceased renewing Pasig permits and paid local taxes to Cainta following Cainta’s notice claiming territorial jurisdiction. Uniwide sold the properties to Robinsons Land Corporation on 6 May 1999. There was no court-ordered amendment of the TCTs’ locational entries prior to the disputed tax years.

RTC’s Findings and Judgment

The RTC-Pasig held that the Torrens titles’ locational entries (showing Pasig) are conclusive for purposes of tax collection and that collateral evidence of location would amount to an impermissible collateral attack on Torrens titles. The RTC ordered Uniwide to pay local taxes and fees and real estate taxes from 1997 onward and awarded attorney’s fees of P500,000.00. On Uniwide’s third-party complaint, the RTC ordered Cainta to reimburse Uniwide for taxes and interest and awarded attorney’s fees of P500,000.00 against Cainta.

Court of Appeals Ruling

The CA affirmed the RTC’s decision but modified the attorney’s fees awards, reducing each to P100,000.00. The CA denied motions for reconsideration and resolved the related procedural petitions against Cainta.

Issues Presented to the Supreme Court

(1) Whether the RTC and CA correctly upheld the indefeasibility of the Torrens titles’ locality entries and thus ruled in favor of Pasig despite the pending boundary dispute in RTC-Antipolo; (2) Whether the manner of settling obligations (i.e., recovery from Uniwide and reimbursement by Cainta) was proper; and (3) Whether the award of attorney’s fees was proper.

Legal Principles on Situs of Taxation and Reliance on Certificate of Title

Under the LGC and PD 464, business taxes are payable to, and real property taxes are collected by, the local government unit (LGU) where the business is conducted or the property is situated. The Court emphasized that, for purposes of complying with local tax liabilities, a taxpayer is entitled to rely on the location stated in the certificate of title. PD 1529 (Property Registration Decree), particularly Section 31, makes a decree of registration conclusive as to the land description and location. The land registration process requires sworn applications, survey plans, and adjudication that necessarily determine the property’s technical description and location. Consequently, absent a judicial amendment of the TCT, the location stated therein is presumptively correct and may be relied on by taxpayers and taxing authorities.

Application of Registration Doctrine to Boundary Dispute and Tax Collection

The Court held that documentary evidence and cadastral materials submitted by Cainta to show the properties lie within its territory are matters for RTC-Antipolo, which has jurisdiction to settle the boundary dispute and, if warranted, direct amendments to TCTs under the procedure in PD 1529 Section 108. Until a land registration court orders amendment of Uniwide’s TCTs, the TCT locational entries remaining in Pasig sustain Pasig’s apparent right to levy business and realty taxes. The IRR of the LGC further supports maintaining the pre-dispute status of the affected area pending resolution of a boundary dispute.

Litis Pendentia, Forum Shopping and Prejudicial Question Doctrines

The Court rejected Cainta’s arguments for dismissal on grounds of litis pendentia or forum shopping because the elements for forum shopping were lacking: Uniwide was not a party to the boundary dispute case; the two actions asserted different rights (territorial settlement vs. tax collection); and a decision in the boundary dispute would not operate as res judicata for the tax collection case absent amendment of titles. The claim of a prejudicial question was also rejected because the relevant question—title location—had not been judicially amended, and the taxpayer may rely on the TCT location. Cainta’s filing of a certiorari petition in the CA did not forestall the RTC proceedings; Rule 65 petitions are independent and do not stay the underlying proceedings unless an injunction is issued, which did not occur.

Taxpayer Obligation and Correct Party for Tax Collection

Under LGC Section 146, the tax on a business must be paid by the person conducting the business. The Court affirmed that Pasig may properly pursue Uniwide for local business taxes because Uniwide conducted business at the premises. The Court refused Uniwide’s request that Pasig directly recover from Cainta, concluding the claim for taxes rests against the taxpayer who conducted the business.

Real Property Taxes: Insufficiency of Proof Against Uniwide

The Supreme Court found error in the RTC’s blanket direction that Uniwide pay real estate taxes for the disputed years because Pasig’s complaint did not allege Uniwide’s liability for real property taxes and established evidence showed the registered owner of the subject TCTs was Uniwide Sales Realty and Resources Corporation (a separate juridical person). Further, receipts suggested realty taxes may have been paid by the r

Case Syllabus (G.R. No. 176703)

Case Caption, Docketing and Nature of Proceeding

Consolidated petitions for review on certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 176703 (filed by Municipality of Cainta) and G.R. No. 176721 (filed by Uniwide Sales Warehouse Club, Inc.).
The petitions assail: (a) the 12 July 2006 decision of the Court of Appeals in CA‑G.R. CV No. 81806; and (b) the 14 February 2007 CA resolution denying motions for reconsideration.
The CA decision had affirmed with modification the 30 June 2003 decision of the Regional Trial Court, Branch 267, Pasig City (RTC‑Pasig) in Civil Case No. 66082, a tax collection case originally filed by the City (then Municipality) of Pasig versus Uniwide.
The Supreme Court rendered a decision resolving the consolidated petitions; the dispositive outcome is summarized in the Disposition section below.

Parties and Titles Involved

Petitioner (in G.R. No. 176703): Municipality of Cainta.
Petitioner (in G.R. No. 176721): Uniwide Sales Warehouse Club, Inc. (Uniwide).
Respondent: City (then Municipality) of Pasig; third‑party defendant/respondent: Municipality of Cainta.
Registered owner named on the subject Torrens titles: Uniwide Sales Realty and Resources Corporation (USRRC), an affiliate of Uniwide but a separate juridical person and not a party to the tax collection suit.

Material Facts

The subject parcels of land are covered by Transfer Certificate of Title (TCT) Nos. 72983, 74003, and PT‑74468, issued by the Registry of Deeds of Pasig City and indicating on their faces that the parcels are located in Pasig.
Uniwide constructed and operated its business establishments on the lands described in those TCTs.
Uniwide secured a building permit from Pasig in 1989, obtained Mayor’s Permit and paid business and realty taxes, fees, and other charges to Pasig from 1989 to 1996.
Beginning in 1997, Uniwide ceased renewing its Mayor’s Permit in Pasig and stopped paying taxes to Pasig; instead Uniwide paid local taxes to Cainta after Cainta gave notice and documentary proof asserting that the subject properties fell within Cainta’s territorial jurisdiction.
Pasig filed suit for collection of local business taxes, fees and other charges due for fiscal year 1997 against Uniwide in RTC‑Pasig on 28 January 1997.
Uniwide filed a third‑party complaint against Cainta seeking reimbursement of taxes paid to Cainta should Uniwide be found liable to Pasig.
Uniwide sold the subject properties to Robinsons Land Corporation on 6 May 1999.
Prior to the tax collection suit, Cainta instituted a separate case for settlement of boundary dispute with Pasig before RTC‑Antipolo (Civil Case No. 94‑3006; Municipality of Cainta v. Municipality of Pasig), filed 30 January 1994; among disputed territories were the subject properties.
Cainta moved in RTC‑Pasig to dismiss or suspend proceedings on the ground of litis pendentia on 6 November 2001; RTC‑Pasig denied the motion on 22 January 2002 and denied reconsideration on 7 March 2002.
Cainta filed a petition for certiorari with the Court of Appeals (CA‑G.R. SP No. 70408) seeking TRO/preliminary injunction; CA did not issue TRO/ injunction and dismissed the petition on 30 September 2004 (final and executory on 28 October 2004).

RTC‑Pasig Decision (30 June 2003) — Findings and Orders

The RTC upheld the indefeasibility of the Torrens titles covering the subject properties and treated the location entries in the TCTs as conclusive for purposes of the tax collection action.
RTC held that any evidence purporting to show a different location would amount to a collateral attack on a Torrens title proscribed by law.
RTC ruled that Pasig had the right to collect, administer and appraise business taxes, real estate taxes and other fees and charges from 1997 up to the present.
RTC ordered Uniwide to pay Pasig: (1) local taxes and fees and real estate taxes beginning 1997 up to present; and (2) attorney’s fees in the amount of P500,000.00 plus costs of suit.
On Uniwide’s third‑party complaint, RTC found Uniwide had paid business and real estate taxes and other fees to Cainta beginning 1997 and directed Cainta to reimburse Uniwide those amounts (real estate taxes for 1997 to present plus legal interest), attorney’s fees of P500,000.00 and costs of suit, pursuant to the principle against unjust enrichment (Articles 2154–2155, Civil Code).

CA Decision (12 July 2006) and Resolution (14 February 2007)

The Court of Appeals affirmed the RTC decision with modification limited to the award of attorney’s fees.
CA reduced the award of attorney’s fees: the award to Pasig (against Uniwide) was reduced to P100,000.00; the award against Cainta in favor of Uniwide was likewise reduced to P100,000.00.
All other orders of the RTC were affirmed by the CA.
Motions for reconsideration by Uniwide and Cainta were denied by the CA in its 14 February 2007 resolution.

Assignments of Error (Summary of Arguments)

Cainta’s principal assignments of error (G.R. No. 176703) included alleged errors in:
- Refusing to hold proceedings in abeyance pending resolution of CA‑G.R. SP No. 70408;
- Refusing to dismiss on ground of litis pendentia;
- Refusing to dismiss on ground of forum‑shopping;
- Refusing to suspend proceedings due to the existence of a prejudicial question;
- Erroneously ruling the properties fall within Pasig on the basis of TCT locational entries; and
- Erroneously awarding payment of real estate taxes by Uniwide to Pasig and reimbursement by Cainta to Uniwide.
Uniwide’s principal assignments (G.R. No. 176721) included:
- Error in not ordering Cainta to directly reimburse Pasig the tax payments (expediency argument);
- Error in affirming Uniwide’s liability for attorney’s fees in favor of Pasig;
- Error in affirming the amount of attorney’s fees awarded against Cainta in favor of Uniwide.

Issues Framed by the Court

Whether the RTC‑Pasig and CA were correct in deciding in favor of Pasig by upholding the indefeasibility of the Torrens titles for the subject properties despite the pendency of the boundary dispute before RTC‑Antipolo; and if so, whether they properly determined the obligations due to Pasig.
Whether the award of attorney’s fees was proper.

Legal Framework and Authorities Relied Upon

Local Government Code (LGC):
- Section 146 — Payment of business taxes; taxes payable for every separate establishment and must be paid by the person conducting the business.
- Section 150 — Situs of the tax (tax accrues and shall be paid to the municipality where the branch or sales outlet is located).
- Sections 201 and 247 — Appraisal and collection of real property taxes vested in the locality where the property is situated and charged to the city/municipal treasurer concerned.
Presidential Decree (PD) 464 — Real Property Tax Code:
- Section 5 — Appraisal of real property at current and fair market value prevailing in the local
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