In Eastern Heights Investments and Development Corporation v. Tagumpay Realty Corporation, the Supreme Court affirmed that a buyer in a tax delinquency sale is entitled to a new certificate of title, compelling the previous owner to surrender their withheld title. This decision reinforces the validity of tax sales when legal requirements are met and clarifies the court’s jurisdiction in resolving disputes related to land registration and tax delinquency. The ruling emphasizes the importance of complying with procedural requirements when challenging tax sales and reinforces the rights of purchasers in these transactions.

From Delinquency to Deed: When Can a Tax Sale Be Successfully Challenged?

The case originated from a petition filed by Tagumpay Realty Corporation (respondent) to compel Eastern Heights Investments and Development Corporation (petitioner) to surrender its owner’s duplicate of Transfer Certificate of Title (TCT) No. 285425 for a 330-square meter property. The respondent purchased the property, located in Barrio Dolores, Taytay, Rizal, at a public auction due to the petitioner’s tax delinquency. After the one-year redemption period lapsed, a final deed of sale was issued to the respondent. However, the petitioner refused to surrender its title, leading to the legal dispute.

The petitioner raised several arguments, including procedural defects in the auction sale and the court’s lack of jurisdiction. They argued that they were not properly notified of the tax levy and sale, violating Sections 254 and 258 of Republic Act No. (RA) 7160, the Local Government Code of 1991. The petitioner also contended that the Regional Trial Court (RTC) lacked jurisdiction to order the surrender of the title, asserting that such an action could only be taken if the validity of the tax sale was not in question, citing Alto Surety & Insurance Co., Inc. v. Limcaco, et al. and Tagaytay-Taal Tourist Dev’t Corporation v. CA.

The Supreme Court, however, disagreed with the petitioner’s arguments, affirming the decisions of the lower courts. The Court held that the amendment of the petition to correct the name of the petitioner from “Eastern Heights Investments” to “Eastern Heights Investments and Development Corporation” was proper. This was considered a mere clerical error, especially since supporting documents like the TCT, tax declaration, certificate of sale, and deed of conveyance all correctly identified the petitioner.

Moreover, the Court noted that the respondent was entitled to amend the petition as a matter of right, as no responsive pleading had been filed by the petitioner. The filing of a motion to dismiss does not qualify as a responsive pleading that would bar such amendment. This underscored the principle that procedural rules should be liberally construed to promote substantial justice.

Regarding the issue of jurisdiction, the Court acknowledged that under the previous Rules of Court, the inclusion of grounds other than lack of jurisdiction in a motion to dismiss did not automatically constitute a voluntary appearance. However, the Court emphasized that the 2019 Amended Rules of Civil Procedure now explicitly consider such inclusion as a voluntary appearance. Even under the old rules, the Court found that the RTC validly acquired jurisdiction over the petitioner.

The Court emphasized that the petitioner filed a “Voluntary Special Appearance and Urgent Motion to Dismiss.” This was deemed a voluntary appearance for that specific instance only. Furthermore, the petitioner’s subsequent conduct, including its counsel’s appearances in court and filing of pleadings, demonstrated a voluntary submission to the court’s jurisdiction, equivalent to a valid service of summons. This established that the petitioner had sufficient notice and opportunity to defend its interests, satisfying due process requirements.

The Court clarified that the RTC had the authority to resolve the petition for the surrender of the withheld title under Sections 75 and 107 of Presidential Decree No. (PD) 1529, the Property Registration Decree. Section 75 allows a purchaser at a tax sale to petition the court for a new certificate of title after the expiration of the redemption period. Section 107 provides a mechanism to compel the surrender of a withheld duplicate certificate of title when a new certificate needs to be issued due to an involuntary instrument, such as a tax sale.

The Court distinguished this case from Alto Surety & Insurance Co., Inc. v. Limcaco, et al., where the petition for cancellation of title was filed in the same court as the collection case. Here, the respondent filed the petition as an original action before the RTC, sitting not only as a land registration court but also as a court of general jurisdiction. This distinction is crucial because Section 2 of PD 1529 confers broad jurisdiction upon the RTC to hear and determine all questions arising from such petitions.

The Supreme Court also addressed the petitioner’s challenge to the validity of the tax delinquency sale. While the petitioner argued that it did not receive proper notice of the tax levy and sale, the Court pointed out that the petitioner failed to comply with the jurisdictional requirement set forth in Section 267 of RA 7160. This section requires the taxpayer to deposit with the court the amount for which the property was sold, plus interest, before the court can entertain any action assailing the validity of the tax sale.

The Court rejected the petitioner’s argument that Section 267 only applies to appeals from the local assessor. It affirmed that the deposit requirement is a jurisdictional prerequisite for challenging the validity of any tax sale. Because the petitioner failed to make the required deposit, the RTC was correct in refusing to consider the petitioner’s challenge to the tax sale’s validity. As a result, the tax delinquency sale remained valid and legally binding, justifying the surrender of the withheld title and the issuance of a new one to the respondent.

FAQs

What was the key issue in this case?	The central issue was whether the buyer at a tax delinquency sale could compel the previous owner to surrender the title to the property, and whether the court had jurisdiction to order such surrender.
Why did the previous owner refuse to surrender the title?	The previous owner argued that the tax sale was invalid due to procedural defects and that the court lacked jurisdiction to order the surrender of the title in a land registration proceeding.
What did the Supreme Court rule regarding the amendment of the petition?	The Supreme Court held that the amendment to correct the name of the petitioner was proper, as it was a mere clerical error and did not prejudice the adverse party.
How did the Court address the issue of jurisdiction?	The Court found that the RTC had jurisdiction because the petitioner voluntarily submitted to the court’s jurisdiction through its actions and pleadings, despite initially claiming lack of proper service.
What is the significance of Section 267 of RA 7160?	Section 267 of RA 7160 requires a taxpayer to deposit with the court the amount for which the property was sold, plus interest, before challenging the validity of a tax sale. This is a jurisdictional requirement.
What happens if the taxpayer fails to comply with Section 267?	If the taxpayer fails to make the required deposit, the court cannot entertain any action assailing the validity of the tax sale, and the sale remains valid and binding.
What is the effect of a valid tax sale?	A valid tax sale divests the previous owner of their title, and the purchaser is entitled to a new certificate of title, compelling the previous owner to surrender their duplicate certificate.
Did the Supreme Court change any existing rules?	The Court noted that the 2019 Amended Rules of Civil Procedure explicitly consider the inclusion of other grounds besides lack of jurisdiction in a motion to dismiss as a voluntary appearance, which differs from the previous rules.

This case illustrates the importance of adhering to procedural requirements when challenging tax sales. The decision underscores that failure to comply with jurisdictional prerequisites, such as the deposit requirement under Section 267 of RA 7160, can prevent a party from contesting the validity of a tax sale. As a result, purchasers at tax sales can rely on the legal mechanisms to obtain clear title to the property they have acquired.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.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: Eastern Heights Investments vs. Tagumpay Realty, G.R. No. 240671, December 06, 2021