BIR Ruling [DA-461-99]

August 11, 1999 BIR RULING [DA-461-99] Ms. Cristina dela Cruz 17 Real Street Pamplona, Las Pias Metro Manila M a d a m : This refers to your letter stating that Spouses Abner Paulo Relente and Angelita M. Relente (Spouses Relente) are the absolute and registered owners of a parcel of land located at Barrio Capri, Novaliches, Quezon City covered by TCT No. 292196 of the Registry of Deeds of Quezon City; that this property was declared for assessment purposes in the name of Spouses Relente; that on May 5, 1988, Spouses Relente sold the aforementioned property to Ms. Eliza C. Lambot and the latter, on November 28, 1989 sold the said property in your favor for P350,000.00; that when you bought the property from Ms. Eliza C. Lambot, you were not given the owner's duplicate copy of the title due to the fact that Ms. Eliza C. Lambot submitted it to the Office of the Register of Deeds for registration purposes and eventual transfer in her (Ms. Eliza C. Lambot) name, but unfortunately, fire broke in the said Office on June 1, 1988 and the title was among those burned; that you were not able to take immediate possession of the said property after the sale because the caretaker (Spouses Romeo and Florame Lambot) refused to surrender possession, claiming that they have acquired rights over it; that without your knowledge and consent, Ms. Eliza C. Lambot appears to have sold the same parcel of land to Spouses Romeo and Florame Lambot but the truth of the matter is that Ms. Eliza C. Lambot merely mortgaged the same property for a loan secured by the latter from the former; that it was their agreement of which you are not privy, that Spouses Romeo and Florame Lambot shall take possession of the said property; that upon learning that the Spouses Romeo and Florame Lambot occupied the property in question and of the supposed mortgage contract made to appear as a Deed of Absolute Sale, you demanded from both Ms. Eliza C. Lambot and Spouses Romeo and Florame Lambot to turn over the possession of the property in your favor; that on October 24, 1991, you filed a case for recovery of possession and ownership of the subject property before the Regional Trial Court of Quezon City, Branch 81, against Spouses Romeo and Florame Lambot et al. docketed as Civil Case No. Q-91-10449; that in a Decision dated June 23, 1995, issued by Honorable Judge Ignacio M. Capulong, it was ruled as follows: "xxx xxx xxx "After a careful study and analysis of the evidence presented, the Court finds the plaintiff legally entitled to the subject property. Records show that the subject property was first sold to the plaintiff by Eliza Lambot and then later to defendants, the former not having paid her loan to the latter in the amount of P150,000.00 and for which the subject property was mortgaged. The law provides that in cases of double sale, the general rule is PRIOR TEMPORE, PRIOR JURE or first in time, priority in right. This means that the first buyer to purchase a particular thing will have priority when it pertains to the right of legal ownership. This is however qualified under Article 1544 of the New Civil Code which reads: "If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. "Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. "Should there be no inscription, the ownership shall pertain to the person who in good faith was in the possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith." "In the instant case, it is quite evident that plaintiff was the first who acquired the property in good faith on November 28, 1989 as evidenced by the Deed of Absolute Sale executed by Eliza Lambot in her favor (Exh. "A"). Hence, applying the general rule prior tempore, prior jure, plaintiff has a better right over the subject property. On the other hand, defendants as second purchasers can defeat plaintiff's right over the subject property only upon obtaining the circumstances envisioned under Article 1544. However, it must be observed that defendants do not fall under any of the three qualifications in said provision of law as there appears no registration in good faith of the second sale, neither can they present the oldest title over the land in good faith. With respect to the aspect of possession in good faith, though defendants may be in possession of the subject land, they cannot be considered as innocent purchasers for value and in good faith. On this point, the Court considers the particular significance of the relationship of the defendants to Eliza Lambot and the occurrence in the first meeting between defendants Florame Lambot and the plaintiff. As testified by the plaintiff during her inspection of the subject property, she met Florame Lambot and instituted to her the projected sale. "xxx xxx xxx "WHEREFORE, premises considered, judgment is hereby rendered ordering defendants Spouses Romeo and Florame Lambot to surrender the possession of the subject property located at Barrio Capri, Novaliches, Quezon City covered by TCT No. 292196 to the plaintiff. "SO ORDERED. "Quezon City, June 23, 1995." that in an Order dated October 23, 1997 entitled "In the Matter of the Reconstitution of Transfer Certificate of Title No. 292196 of the Registry of Deeds of Quezon City docketed as LRC Case No. Q-8562(96) issued by the Honorable Judge Justo M. Sultan of the Regional Trial Court, National Capital Judicial Region, Branch 98, Quezon City, it was ruled as follows: "xxx xxx xxx "WHEREFORE, the Register of Deeds of Quezon City is hereby directed, upon payment of the corresponding fees therefor, to reconstitute the original copy of Transfer Certificate of Title No. 292196 of the Registry of Deeds of Quezon City based on the owner's certified true copy of said title and on the plan and technical description of Lot I, Block I, (LRC) Pcs-2056 approved by the Land Registration Authority under (LRA) PR-16804 pursuant to the provisions of Section 12 of Republic Act No. 26 and to issue new owner's duplicate copy thereof in the same terms and conditions as the original thereof provided that no certificate of title covering the same parcel of land exists in the Office of the Register of Deeds of Quezon City. "SO ORDERED. "Quezon City, Metro Manila, October 23, 1997." Based on the foregoing representations, you are now requesting that, as the buyer of the said property, you be allowed to pay the capital gains tax and documentary stamp tax without the corresponding surcharge, interest and compromise penalties in the total amount of P17,500.00 and P5,250.00, respectively, so that title to said property can be registered by the Register of Deeds in your name. In reply, please be informed that under then Section 21(c) of the Tax Code, as amended [now Section 24(D)(1) of the Tax Code of 1997], the above transaction is subject to the capital gains tax. The seller, Ms. Eliza C. Lambot and not you, is the party liable for the payment of the capital gains tax which consist of 5% [now 6%] based on the gross selling price or the fair market value prevailing at the time of sale. However, since the seller, Ms. Eliza C. Lambot is unable to pay the capital gains tax, you as the buyer and the one interested in registering the title of the said property in your favor are allowed to pay the capital gains tax and documentary stamp tax for and in the name of the seller, Ms. Eliza C. Lambot. cdlex Moreover, in view of the above-stated justifiable reason, this Office has decided to forego the imposition of the 25% surcharge provided by then Section 248(a)(1) of the Tax Code, as amended [also Section 248(A)(1) of the Tax Code of 1997] as well as the compromise penalty imposed under Revenue Memorandum Order No. 1-90, for late payment of the capital gains tax and documentary stamp tax but not the 20% interest imposed by Section 249 of the same Code. To facilitate the immediate payment of said taxes and interest, you are required to submit to the Revenue District Officer of the place where the property is located the Deed of Absolute Sale showing the amount of the selling price and the date of sale which should be the basis in computing the capital gains tax and documentary stamp tax due thereon. Only upon full payment of said taxes will the Certificate Authorizing Registration (CAR) should be issued by the Revenue District Officer concerned which will enable you to register the title of the said property in your favor. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. llcd Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue