Ms. Erlinda N. Villadelgado

May 18, 2009 BIR RULING [DA-(I-018) 230-09] DA302-07 Ms. Erlinda N. Villadelgado 6-A B Onrubia Street Project 4 Quezon City Madam : This refers to your letter dated January 23, 2009 stating that Rizalina V. Rosales (Ms. Rosales) is the registered owner of a parcel of land together with the improvements thereon located at Quirino District, Quezon City covered by TCT No. RT-59056 (126766) issued by the Registry of Deeds for Quezon City containing an area of 208.10 square meters; that Ms. Rosales is a permanent resident of the United States of America; that Ms. Rosales entrusted the above-mentioned property for safekeeping to her sister, Genoveva R. Francisco; that sometime in November 1992, Virgilio R. Francisco (Mr. Francisco), the son of Genoveva R. Francisco, forged the signature of Ms. Rosales, who was at that time and until now out of the country, as vendor on an undated Deed of Absolute Sale, notarized by Atty. Evaristo B. Urbina at Pasig City on November 9, 1992, purportedly selling, transferring and conveying to said Mr. Francisco, as defendant, the above-described property; that Atty. Evaristo B. Urbina in notarizing the forged Deed of Absolute Sale, without knowing the true identity of the purported vendor, falsely certified that Ms. Rosales, as plaintiff, was known to be the same persons who executed the said document, thereby imparting a semblance of legality to the simulation of the same by Mr. Francisco; that on the said date of its notarization, Mr. Francisco fraudulently procured the registration of the simulated Deed of Absolute sale with the Registry of Deeds for Quezon City, causing the cancellation of TCT No. RT-59056 (126766) in plaintiff's name and the issuance in said defendant's name the replacement TCT No. 72481; that upon learning of Mr. Francisco's, as defendant, fraud, Ms. Rosales, as plaintiff, executed in San Francisco, California, USA, an Affidavit of Adverse Claim on January 8, 1993; that on March 8, 1993, the duly authenticated original Affidavit of Adverse Claim was presented to the Register of Deeds of Quezon City and was annotated at the back of TCT No. 72481; that subsequently, on March 10, 1993, a Real Estate Mortgage (REM) dated March 4, 1993, executed by the defendant Mr. Francisco over the subject property in favor of Iluminada M. Dandan to guarantee a principal obligation in the amount of P250,000.00 was likewise annotated at the back of TCT No. 72481; that the Regional Trial Court Branch 93, Quezon City, in the case entitled Rizalina V. Rosales, as Plaintiff, versus Virgilio R. Francisco, as Defendant, docketed as Civil Case No. Q-93-16651 rendered a decision as follows: "WHEREFORE, the foregoing premises considered, judgment is hereby rendered in favor of the plaintiff: 1. The Deed of Absolute Sale purportedly executed by plaintiff in favor of defendant Virgilio R. Francisco is declared null and void; 2. The Real Estate Mortgage constituted by defendant Virgilio R. Francisco over the subject property in favor of the defendant Iluminada M. Dandan is likewise declared null and void; 3. The Register of Deeds of Quezon City is directed to cancel Transfer Certificate of Title No. 72481 and issue a replacement certificate of title in the name of plaintiff, free of the mortgage lien or encumbrance in favor of defendant Iluminada M. Dandan, annotated at the back of Transfer Certificate of Title No. 72481; 4. The defendant Virgilio R. Francisco is hereby ordered to pay plaintiff P100,000.00 by way of damages plus P50,000.00 as litigation expenses/attorney's fees and to pay the costs of suit. SO ORDERED." that the Court of Appeals in an Entry of Judgment affirmed the above decision en toto as follows: "WHEREFORE, premises considered, the assailed Judgment dated November 15, 2000 of the Regional Trial Court of Quezon City, Branch 93, is AFFIRMED, en toto ." and that the same has, on February 25, 2007 become final and executory and is hereby recorded in the Book of Entries of Judgment. SDTIHA Based on the foregoing representations, you now request for an opinion that the issuance of a new TCT in favor of Rizalina V. Rosales, by virtue of a Court Order canceling the TCT issued in favor of Virgilio R. Francisco, which was secured thru fraudulent sale, is not subject to capital gains tax and the corresponding documentary stamp tax; and for the issuance of a Certificate Authorizing Registration (CAR) so that title to the property may now be reverted back to the original owner, Rizalina V. Rosales. In reply thereto, please be informed that since the consolidation and/or award of the title over the property to its original owner, Rizalina V. Rosales, is not in connection with a sale, exchange or other disposition of the said property but merely surrendering the property to its rightful owner, the same is not subject to capital gains tax prescribed in Section 24 (D) (1) of the Tax Code of 1997. Moreover, conveyance of the realty not in connection with a sale, to trustees or other persons without consideration is not taxable pursuant to Section 185 of Regulations No. 26, otherwise known as the Documentary Stamp Tax Regulations. It is settled that the consolidation and/or award by virtue of Court Order in favor of the real owner, and without monetary consideration, is not subject to the documentary stamp tax on conveyances of real property under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment is subject to the P15.00 documentary stamp tax prescribed in Section 188, supra. Accordingly, this will serve as an authority for the Revenue District Office concerned to issue the corresponding Certificate Authorizing Registration (CAR) so that title to the said property may now be registered in favor of the real owner, Rizalina V. Rosales. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service