TL;DR

The Supreme Court declared a tax delinquency sale void because the local government failed to prove that the property owner actually received the warrant of levy. Even though notices were sent via registered mail, the court emphasized that for tax sales, which are considered in personam proceedings, actual notice to the property owner is legally required under the Local Government Code. This ruling protects property owners by ensuring strict adherence to due process and notice requirements before their properties can be sold due to tax delinquency. The purchaser at the void tax sale is entitled to a refund of their payment with interest.

When Registered Mail Isn’t Enough: Safeguarding Property from Tax Sales

Imagine purchasing a property, only to find out it was sold due to the previous owner’s unpaid taxes, and you were never informed. This was the predicament Rosalia Caballero faced. She bought a property but didn’t register the sale. Subsequently, the property was sold in a tax delinquency sale to Laverne Realty due to the registered owner, Vivian Razote’s, unpaid taxes. Caballero challenged the sale, arguing she was not notified, violating her right to due process. The central legal question became: Is sending a notice of levy via registered mail to the last known address sufficient, or is actual receipt by the property owner required to validate a tax delinquency sale under Philippine law?

The Supreme Court, in this case, unequivocally sided with property rights, reinforcing the principle that tax delinquency sales are serious actions that can deprive individuals of their property. The Court underscored that these proceedings are in personam, meaning they directly affect the rights of a specific person, in this case, the property owner. Therefore, mere formal compliance with mailing notices is insufficient. The law, specifically Section 258 of the Local Government Code (LGC), mandates that the warrant of levy must be “mailed to or served upon the delinquent owner…”. The Supreme Court interpreted this to mean that actual notice is necessary to satisfy due process requirements.

To understand the gravity of this requirement, the Court delved into the historical context of tax sales in the Philippines. Tracing back to early cases like Government of the Philippine Islands v. Adriano, the Court highlighted the distinction between in rem and in personam tax proceedings. In in rem proceedings, the tax is against the property itself, and notice by publication might suffice. However, Philippine law, as interpreted by the Supreme Court, treats real property tax collection as in personam. This is because the law initially requires pursuing the property owner’s personal assets before resorting to selling the real property. As the Court stated in Government of the Philippine Islands v. Adriano:

It is further seen that proceedings in the Philippines for the sale of land for the nonpayment of taxes were in personam. (Valencia vs. Jimenez and Fuster [1908], 11 Phil., 492.) The tax was not a charge upon the land alone. The authorities were first required to hunt up the owner and to make the tax out of his personal property. Only the particular interest or title of the person to whom the land is assessed was sold. As a stream cannot rise higher than its source, so the purchaser could not claim any better title than his predecessor.

Building on this principle, the Supreme Court in Spouses Tan v. Bantegui and Salva v. Magpile consistently held that actual notice is indispensable in tax delinquency sales under the Real Property Tax Code and subsequently, the Local Government Code. The Court reiterated that:

Strict adherence to the statutes governing tax sales is imperative not only for the protection of the taxpayers, but also to allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce the laws.

In Caballero’s case, the City Treasurer sent notices to Razote via registered mail, but there was no proof Razote actually received them. The Court found this insufficient. Furthermore, while notices were sent to the property developer, Brittany Corporation, there was no evidence that Brittany Corporation was the property’s occupant or administrator, as required for substitute notice under Section 258. Laverne Realty, the winning bidder, failed to present evidence of compliance with all notice and procedural requirements, which is their burden in such cases. Consequently, the Supreme Court declared the tax delinquency sale void, emphasizing that the failure to ensure actual notice to the property owner constituted a violation of due process and rendered the sale invalid. Caballero, despite not being the registered owner, was recognized as having legal interest as a prior purchaser and thus had standing to question the sale.

The Court also clarified the application of Section 267 of the LGC, which requires a deposit from the taxpayer when assailing a tax sale. The deposit, intended to protect the purchaser, was deemed applicable in this case, and the Court ordered the release of Caballero’s deposit to Laverne Realty. However, the nullification of the sale does not absolve the original owner from the tax liability. Las Piñas City retains the right to pursue other legal means to collect the unpaid real property taxes.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: G.R. No. 244017, August 30, 2023, Supreme Court Third Division