In a dispute over local tax collection between the City of Pasig and the Municipality of Cainta, the Supreme Court affirmed that for purposes of local tax liabilities, the location of a property as stated in its certificate of title prevails, irrespective of pending boundary disputes. This ruling ensures that taxpayers can rely on the certificate of title to determine which local government unit (LGU) is entitled to collect taxes, thereby providing clarity and stability in tax administration. The decision underscores the importance of the Torrens system in defining property location for taxation purposes until a judicial amendment of the title occurs.

Whose Land Is It Anyway? Resolving Taxing Jurisdiction Amidst Boundary Fuzziness

The case originated from a disagreement over which LGU, Pasig or Cainta, had the right to collect local business taxes and real property taxes from Uniwide Sales Warehouse Club, Inc. Uniwide owned properties covered by Transfer Certificates of Title (TCTs) indicating their location as Pasig. From 1989 to 1996, Uniwide paid taxes to Pasig. However, starting in 1997, Uniwide began paying taxes to Cainta, prompted by Cainta’s claim that the properties fell within its jurisdiction. This shift occurred while a boundary dispute between Pasig and Cainta was pending before the Regional Trial Court (RTC) of Antipolo City. Pasig then filed a collection case against Uniwide, who in turn, filed a third-party complaint against Cainta.

The RTC-Pasig ruled in favor of Pasig, citing the indefeasibility of the Torrens title and the location indicated in Uniwide’s TCTs. The court ordered Uniwide to pay taxes to Pasig and directed Cainta to reimburse Uniwide for the taxes it had erroneously collected. Cainta and Uniwide both appealed, but the Court of Appeals (CA) affirmed the RTC’s decision with modifications regarding attorney’s fees. Both LGUs elevated the case to the Supreme Court. The core issue before the Supreme Court was whether the RTC-Pasig and the CA correctly decided in favor of Pasig, upholding the indefeasibility of the Torrens title, despite the ongoing boundary dispute.

The Supreme Court emphasized that local business taxes and real property taxes are collected by the LGU where the business is conducted or the real property is located. To determine the location, the Court relied on the certificate of title, which provides a definitive description of the property’s location. According to Section 150 of the Local Government Code (LGC) regarding the situs of taxation:

Section 150. Situs of the Tax. –
(a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located.

Further, Presidential Decree (PD) 464, or the Real Property Tax Code, and Sections 201 and 247 of the LGC clearly vest the collection of real property taxes in the locality where the property is situated. Given these provisions, the Court determined that for tax compliance, the taxpayer can rely on the location stated in the certificate of title, until it is amended through judicial proceedings. The Court anchored its reasoning on the Property Registration Decree (PD 1529), particularly Section 31, which states that a decree of registration binds the land and quiets title, making it conclusive against all persons, including the government.

The decree of registration shall bind the land and quiet title thereto, subject only to such exceptions or liens as may be provided by law. It shall be conclusive upon and against all persons, including the National Government and all branches thereof, whether mentioned by name in the application or notice, the same being included in the general description “To all whom it may concern.“

The Court cited Odsique v. Court of Appeals, emphasizing that a certificate of title is conclusive not only of ownership but also of location. The TCTs of Uniwide’s properties explicitly stated that they were located in Pasig. Uniwide initially secured permits from and paid taxes to Pasig. There was no court order directing the amendment of the TCTs regarding the location. Thus, Pasig had the apparent right to levy and collect taxes.

The Court noted that evidence presented by Cainta—such as cadastral surveys and maps—should be submitted to the RTC-Antipolo in the boundary dispute case. Documents cannot automatically modify the TCTs for tax compliance. Taxpayers should rely on the certificate of title, which avoids subjecting them to the uncertainties of boundary disputes. The Court pointed to the principle of administrative feasibility, a canon of a sound tax system, indicating that tax systems should be effectively administered with minimal inconvenience to taxpayers.

The Implementing Rules and Regulations (IRR) of the LGC also provide that during a boundary dispute, the status of the affected area prior to the dispute should be maintained. Uniwide had been paying taxes to Pasig since 1989, prior to the boundary dispute. Additionally, Section 108 of the PRD outlines the procedure for amending a certificate of title. If the RTC-Antipolo determines the properties are in Cainta, Cainta can then apply for an amendment to reflect the proper location in the TCTs.

The Supreme Court rejected Cainta’s argument that the tax collection case should have been dismissed or suspended due to litis pendentia or the existence of a prejudicial question. Litis pendentia and forum shopping were not present, as Uniwide was not a party to the boundary dispute case, and the actions involved different issues. A judgment in the boundary dispute would not amount to res judicata in the tax collection case. The basis for tax collection was the location on the certificate of title. Therefore, the boundary dispute did not present a prejudicial question warranting suspension.

The Court also addressed Uniwide’s contention that Pasig should directly recover the tax payments from Cainta. However, Section 146 of the LGC states that the person conducting the business must pay the taxes. Since Uniwide conducted the business, it was obligated to pay the taxes to Pasig. However, the Court found that it was erroneous for the CA to sustain the RTC-Pasig’s decision directing Uniwide to pay real estate taxes, as Pasig’s complaint only concerned fees for Mayor’s Permit, business taxes, and incidental fees. The Court noted that the real estate taxes were paid by Uniwide Sales Realty and Resources Corporation (USRRC), a separate entity. Therefore, Uniwide was only liable to pay local business taxes to Pasig for the applicable years.

Cainta was obligated to return the taxes erroneously paid to it by Uniwide due to the principle against unjust enrichment. Uniwide paid taxes to Cainta, benefiting the latter without a valid basis, which was at the expense of both Uniwide and Pasig. The Supreme Court also determined that the award of attorney’s fees was improper, as the RTC-Pasig did not provide a factual or legal basis in the body of its decision. Awards of attorney’s fees must be clearly explained and justified by the trial court.

FAQs

What was the key issue in this case?	The central issue was determining which local government unit (Pasig or Cainta) had the right to collect local business and real property taxes from Uniwide, given a pending boundary dispute between the LGUs.
What did the Supreme Court rule regarding the location of the property for tax purposes?	The Supreme Court ruled that the location of a property as stated in its certificate of title should be followed for purposes of complying with local tax liabilities, until the title is amended through proper judicial proceedings. This means taxpayers can rely on the title to determine which LGU to pay taxes to.
Why did the Court prioritize the certificate of title over other evidence?	The Court emphasized that the certificate of title is conclusive evidence of ownership and location, binding against all persons, including the government. It provides certainty and stability for tax administration, avoiding taxpayer confusion due to boundary disputes.
What is the principle of administrative feasibility, and how does it apply to this case?	Administrative feasibility means that the tax system should be capable of being effectively administered and enforced with the least inconvenience to the taxpayer. Relying on the certificate of title aligns with this principle by providing a clear and straightforward method for determining tax obligations.
What should Uniwide do regarding its tax payments?	Uniwide must pay the applicable local business taxes to Pasig for the years in question. Cainta must reimburse Uniwide for the taxes that Uniwide erroneously paid to Cainta during that period.
What happens if the boundary dispute is resolved in favor of Cainta?	If the RTC-Antipolo resolves the boundary dispute in favor of Cainta, Cainta can then apply for an amendment to Uniwide’s TCTs to reflect the proper location based on the final judgment. This would then affect future tax obligations.
Why was the award of attorney’s fees deemed improper?	The award of attorney’s fees was deemed improper because the RTC-Pasig did not provide a factual or legal basis for the award in the body of its decision. Such awards must be justified with clear reasoning, not just mentioned in the dispositive portion.
What is the significance of Section 146 of the Local Government Code in this case?	Section 146 of the Local Government Code states that the tax on a business must be paid by the person conducting the business. Since Uniwide was conducting the business, it was the party obligated to pay the taxes to the correct LGU, which was determined to be Pasig.
What is the principle of unjust enrichment, and how does it relate to Cainta’s actions?	The principle of unjust enrichment prevents a person from benefiting at another’s expense without a valid basis. Cainta was unjustly enriched when it collected taxes from Uniwide without having the proper jurisdiction based on the certificate of title, thus requiring reimbursement.

In summary, the Supreme Court’s decision clarifies the primacy of the certificate of title in determining the location of a property for local tax purposes. This ensures stability and predictability for taxpayers amidst boundary disputes between LGUs. The ruling balances the interests of the LGUs and the taxpayers, promoting administrative efficiency and fairness in tax collection.

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: MUNICIPALITY OF CAINTA VS. CITY OF PASIG AND UNIWIDE SALES WAREHOUSE CLUB, INC., G.R. No. 176703, June 28, 2017