Title
Municipality of Cainta vs. Pasig City
Case
G.R. No. 176703
Decision Date
Jun 28, 2017
Uniwide paid taxes to Cainta instead of Pasig due to a boundary dispute. Courts ruled TCT location prevails; Uniwide liable to Pasig, Cainta to reimburse. Attorney fees unjustified.
boundary dispute
taxes
consolidated petitions

Case Summary (G.R. No. 176703)

Factual Background: Uniwide’s Operations and the Boundary Dispute

Uniwide conducted and operated its business in buildings and establishments constructed on parcels of land covered by the above-stated TCTs, all issued by the Registry of Deeds of Pasig City. The TCTs showed, on their face, that the parcels’ location was within Pasig. Uniwide applied for and was issued a building permit by Pasig in 1989 and later obtained the required Mayor’s Permit from Pasig for its business. As a result, Uniwide paid Pasig local business taxes, fees, and other charges from 1989 to 1996.

In 1997, Uniwide did not renew its Mayor’s Permit in Pasig nor paid local taxes there. Instead, it paid local taxes to Cainta after Cainta gave notice, supported by documentary proof, asserting that the subject properties were within its territorial jurisdiction. Pasig then filed an action for collection of local business taxes, fees, and other legal charges for fiscal year 1997 against Uniwide before the RTC-Pasig on 28 January 1997. Uniwide, in turn, filed a third-party complaint against Cainta seeking reimbursement of the amounts it had paid to Cainta if Uniwide were held liable to Pasig.

Separate from the tax collection case, Cainta had initiated, on 30 January 1994, a boundary dispute case with Pasig in the RTC-Antipolo. Among the disputed territories were the subject properties. During the tax collection case, Cainta moved to dismiss or suspend proceedings on 6 November 2001, invoking litis pendentia due to the pending boundary dispute. The RTC-Pasig denied the motion on 22 January 2002 and denied reconsideration on 7 March 2002. Cainta then pursued certiorari in the CA as CA-G.R. SP No. 70408, with a prayer for a TRO or preliminary injunction. The CA dismissed the petition on 30 September 2004, and no TRO or preliminary injunction issued.

Trial Court Proceedings: The RTC’s Approach to Tax Situs and Title

In its 30 June 2003 decision, the RTC-Pasig ruled in favor of Pasig. It treated Uniwide’s Torrens title as indefeasible for the purposes of the action for tax collection. The RTC held that the location indicated in the TCTs was conclusive for tax collection, and that any contrary evidence of location would amount to a collateral attack on a Torrens title prohibited by law. Applying this framework, the RTC found that Pasig had the right to collect, administer, and appraise local business taxes, real estate taxes, and other fees and charges for the period from 1997 up to the present.

The RTC ordered Uniwide to pay Pasig local taxes and fees and real estate taxes beginning 1997, plus attorney’s fees of P500,000.00 and costs of suit. On Uniwide’s third-party complaint against Cainta, the RTC granted relief to Uniwide. It found that beginning 1997, Uniwide had paid taxes and related fees to Cainta for the subject properties instead of to Pasig. It directed Cainta to reimburse Uniwide under the principle against unjust enrichment under Articles 2154 and 2155 of the Civil Code, and it also awarded attorney’s fees and costs.

Appellate Review: CA Affirmance with Modification

On appeal, the CA affirmed the RTC’s decision with modification limited to the attorney’s fees. In its decision dated 12 July 2006, the CA sustained the core ruling that Pasig was entitled to collect local taxes based on the location stated in the TCTs, while also sustaining Cainta’s reimbursement obligation to Uniwide. The CA modified only the amount of attorney’s fees, reducing the award against Uniwide in favor of Pasig to P100,000.00, and reducing the award against Cainta in favor of Uniwide to P100,000.00. The CA denied subsequent motions for reconsideration in its resolution dated 14 February 2007.

The Parties’ Contentions in the Supreme Court

Cainta sought reversal by assailing multiple procedural and substantive rulings. It argued that the RTC should have held the tax collection proceedings in abeyance pending the CA disposition of Cainta’s certiorari petition in CA-G.R. SP No. 70408. It also insisted that the RTC should have dismissed the tax collection suit for litis pendentia, should have dismissed for forum shopping, and should have suspended proceedings due to the existence of a prejudicial question, all in view of the pending boundary dispute before the RTC-Antipolo. Substantively, Cainta challenged the conclusion that the properties were within Pasig’s jurisdiction based on the TCT locational entries.

Uniwide sought partial reversal. It contended that Cainta, rather than Pasig, should directly reimburse Uniwide for the tax payments Uniwide had made in good faith to Cainta. It also argued against the award of attorney’s fees, maintaining that the award was not consistent with law and jurisprudence.

Legal Basis: Situs of Tax and Reliance on Certificate of Title

The Court addressed the controlling legal premise on tax situs. For local business taxes, the Court emphasized that under the Local Government Code (LGC), local business taxes are payable for every separate or distinct establishment or place where business subject to tax is conducted. The tax is payable by the person conducting the business. The Court cited Section 150 of the LGC on the situs of tax for purposes of collection under Section 143, explaining that tax accrues and is paid to the municipality where the branch or sales outlet making the sale or transaction is located.

For real property taxes, the Court anchored collection in the locality where the property is situated, referencing PD 464 and the Real Property Tax Code provisions on appraisal and responsibility of treasurers. The Court further cited Sections 201 and 247 of the LGC, reinforcing that the city or municipal treasurer concerned has responsibility for collection.

From these premises, the Court framed the “primordial question” as how location is determined for purposes of identifying the LGU entitled to collect taxes. The Court held that the location stated in the certificate of title should be followed until amended through proper judicial proceedings. This approach was justified by the binding and conclusive effect of Torrens decrees under the Property Registration Decree (PD 1529), particularly Section 31, which declares that a decree of registration binds the land, quiets title, and is conclusive upon and against all persons, including the government and its branches. The Court stressed that the decree contains a description of the land as finally determined by the court, with technical description and boundaries supported by the applicant’s submissions and the Land Registration authorities’ reports. The Court therefore presumed the correctness of the location stated in the certificate until the title is cancelled or amended.

The Court reinforced that position by citing Odsique v. Court of Appeals, holding that a certificate of title is conclusive not only of ownership but also of the land’s location. Applying these principles, the Court noted that it was undisputed that the TCTs showed the subject properties were situated in Pasig, that the TCT location remained unchanged since issuance, and that Uniwide’s business establishment stood within the subject properties. The Court added that no court order had directed amendment of the TCTs with respect to the location.

Relationship Between Boundary Dispute and Tax Collection: No Need to Suspend

Cainta argued that the pending boundary dispute required suspension or dismissal. The Court rejected the arguments. It characterized Cainta’s evidence, such as cadastral survey materials and DENR certification, as more appropriate for the RTC-Antipolo, where the boundary dispute case was pending. The Court reasoned that, absent final adjudication finally determining the precise territorial jurisdiction of Pasig and Cainta, such documents could not automatically modify or amend the locational entries in the TCTs for purposes of tax collection against a taxpayer entitled to rely on the certificate of title.

The Court further invoked the administrative feasibility canon in taxation. It explained that tax systems must be administrable and enforceable with the least inconvenience to taxpayers. The Court also referenced the LGC’s Implementing Rules and Regulations providing that in boundary disputes, the status of the affected area prior to the dispute should be maintained and continued for all purposes. Since the locational entries in the TCTs remained unchanged and Uniwide had paid local taxes to Pasig before the boundary dispute started, the Court held that such status should remain until final judgment and the consequent amendment, if any, to the TCTs.

Accordingly, the Court held that the tax collection action could proceed despite the pendency of the boundary dispute case and Cainta’s certiorari petition. It ruled that there was no litis pendentia or forum shopping that would justify dismissal. It applied the test for forum shopping by examining whether the elements of litis pendentia existed or whether a final judgment in one case would amount to res judicata in the other. The Court found the first and second requisites wanting: Uniwide was not a party in the boundary dispute case and the two cases involved different causes of action and different reliefs—boundary settlement versus tax collection. It also found the third requisite wanting because a boundary dispute judgment would not automatically create res judicata in the tax collection case given the Court’s governing rule that the apparent right to levy taxes depended on the location stated on the certificate of title.

The Court likewise rejected the claim that the boundary dispute constituted a prejudicial question justifying suspension. The Court reasoned again that tax situs for the relevant period depended on the TCT entries, not on unresolved boundary claims.

Certiorari and the Claimed Effect on the Proceedings

The Court also addressed Cainta’s contention that RTC-Pasig should have suspended the tax collection case pending the CA’s deci

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