Case Summary (G.R. No. L-18390)
Factual Background
The dispute arose from the sale by PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION of two parcels of the Sapang Palay Estate to the People's Homesite and Housing Corporation (PHHC). The President authorized acquisition of the estate for resettlement of squatters and flood victims and approved financing through bonds to be absorbed by the Government Service Insurance System. The PHHC took possession of the property as early as the first week of June, 1960, with petitioner's consent, to commence development and resettlement works. The parties executed a public instrument titled "Deed of Absolute Sale" on December 29, 1960. The deed recited a purchase price of P3,386,223.00 and contained provisions governing payment, retention of funds to clear liens, guarantee to defend title, and allocation of registration costs. The deed was not registered until March 14, 1961.
Procedural History
After registration, the Provincial Treasurer of Bulacan sought to withhold P30,099.79 from the purchase price to cover the 1961 real property tax and petitioner paid the tax under protest. Petitioner then sought a refund from the Secretary of Finance on June 13, 1961, asserting it had ceased to be the owner as of the December 29, 1960 deed. The Secretary of Finance denied the refund by letter dated August 22, 1961, reasoning that presidential approval came only on February 1, 1961 and that registration occurred on March 14, 1961, so the vendor remained owner for tax purposes. The Auditor General, by decision dated December 11, 1961, disallowed the refund. Petitioner brought the appeal by certiorari to this Court.
Issues Presented
Whether petitioner ceased to be the owner of the property for purposes of real property taxation as of the execution of the Deed of Absolute Sale on December 29, 1960; whether the prior approval of the Auditor General under Administrative Order No. 290 (February 3, 1959) was required for the contract; and whether registration under the Land Registration Act (Act No. 496) was necessary to transfer ownership as between the parties.
The Parties' Contentions
Petitioner contended that title passed upon execution of the public deed, and that constructive and actual delivery had occurred because PHHC was in possession as early as June, 1960. Petitioner relied on Articles 1496 and 1498, Civil Code, and on the rule that registration is not necessary to effect transfer between the contracting parties. Respondent argued that the sale required prior approval by the Auditor General under Administrative Order No. 290, and that, because the land is registered under the Torrens system, the vendor remained owner until actual registration; therefore petitioner remained liable for the 1961 real property tax.
Ruling of the Court
The Court reversed the Auditor General's decision and ordered refund of the real property tax paid under protest by PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, in the amount of P30,460.90. The Court made no pronouncement as to costs.
Legal Basis and Reasoning
The Court first held that the sale was effected to implement a specific Presidential directive and that the transaction already bore Presidential approval. The Court applied its precedent in Federation of the United NAMARCO Distributors v. National Marketing Corporation to conclude that the Auditor General's prior approval under Administrative Order No. 290 was not necessary where the President had already approved the contract entered into to meet a special situation implementing a Presidential directive. The Court then examined modes of delivery under civil law. It noted that delivery may be actual or constructive and that, per Article 1498, Civil Code, execution of a public instrument of sale is equivalent to delivery unless the instrument or circumstances clearly show the contrary. The Court found no express stipulation in the deed that title would remain with the vendor until payment of the balance, nor any other indication that the parties intended to postpone transfer of ownership. The Court emphasized that material possession had been in the PHHC as early as June, 1960, predating the deed, and that possession coupled with the public instrument consummated the transfer. The Court rejected respondent's argument that registration under the Torrens system was required to transfer ownership between the parties, citing a long line of precedents holding that registration is not necessary to make a conveyance valid and effective as between contracting parties because actual notice equals registration, and noting Section 50, Land Registration Act (Act No. 496) which provides that a deed purporting to convey registered land operates as a contract between the parties eve
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Case Syllabus (G.R. No. L-18390)
Parties and Procedural Posture
- PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION was the petitioner seeking refund of real estate tax paid under protest.
- THE AUDITOR GENERAL, PEDRO M. GIMENEZ was the respondent who disallowed the refund and whose decision was appealed by certiorari.
- The case reached the Court on appeal from the Auditor General's decision dated December 11, 1961, denying the refund request.
- The Auditor General had acted after the Secretary of Finance denied petitioner’s administrative claim for refund.
Key Factual Allegations
- The President approved in principle the acquisition by People's Homesite and Housing Corporation of the Sapang Palay Estate for resettling squatters and flood victims.
- PHHC took possession of the property in the first week of June, 1960, with petitioner’s consent, to commence resettlement works.
- On December 29, 1960, petitioner executed a public Deed of Absolute Sale conveying two parcels covered by TCT Nos. T-23807 and T-23808 to PHHC for P3,386,223.00 with specified payment terms.
- The deed contained conditions regarding confirmation of price, delineation of the portion to be acquired, presidential funding, and approval by the Auditor General.
- The Deed of Absolute Sale was not registered until March 14, 1961, because PHHC allegedly lacked immediate funds to advance registration expenses.
- The Provincial Treasurer withheld P30,099.79 from the purchase price as 1961 real estate tax, and PHHC, acting for petitioner, paid the tax under protest and sought refund.
Contract Terms and Performance
- The contract fixed total consideration at P3,386,223.00 and contemplated an initial retained sum of P1,710,000.00 from a GSIS loan to clear encumbrances.
- The deed provided that the remaining balance of P1,676,223.00 was payable upon availability of bond proceeds or within sixty days after delivery of title, subject to a possible sixty-day extension.
- The deed obligated the vendor to warrant and defend title and to bear preparation and notarization expenses while registration costs were for the vendee.
- The deed expressly contained a condition that the contract of sale should be approved by the Auditor General pursuant to an instrument dated February 3, 1959.
Procedural History
- The Auditor General examined the contract and expressed objections because of a reassessment of the hacienda and requested re-examination.
- The President approved the Deed of Absolute Sale on February 1, 1961, notwithstanding the Auditor General’s objections.
- The Secretary of Finance denied petitioner’s administrative refund request by letter-decision dated August 22, 1961, following the Provincial Treasurer’s recommendation.
- Petitioner filed the present appeal by certiorari to challenge the denial and to obtain refund of P30,460.90 paid under protest.
Issues Presented
- Whether the execution of the public deed and the prior actual delivery of possession effected a transfer of ownership that relieved petitioner of liability for real property tax for 1961.
- Whether approval by the Auditor General or registration under the Torrens system was required before ownership could pass as between the parties.
- Whether the national government entity PHHC, as purchaser, could be compelled to pay the realty tax when it is exempt under applicable law.
Contentions of Petitioner
- Petitioner contende