BIR Ruling No. 025-15

February 3, 2015 BIR RULING NO. 025-15 PD 1529; BIR Ruling No. 401-2013 Zuniega Olaso Macapundag & Salvador Unit 103, 2/F First Capital Condominium (FCC) Bldg. 119 Rada (Thailand) Street, Legaspi Village, Makati City Attention: Josue Sim M. Zuniega Gentlemen : This refers to your letter dated June 17, 2013 requesting tax exemption of exchange of real properties ruling between Spouses Josue and Thelma Zuniega and Marie Jean Militar and Celia Guantero. Document submitted disclosed that Spouses Josue Zuniega and Thelma Militar are the registered owners of a parcel of land, identified as Lot 13, Block 4 of the consolidation-subdivision plan (LRC) Pcs-481, being a portion of the consolidation of Lots 1303-BB-10-I, 1303-BB-10-J, 1303-BB-10-K, Psd-24532 and Lot 906, Iloilo Cadastre, LRC (GLRO) Record No. 9959 covered by Transfer Certificate of Title (TCT) No. T-39336 issued by the Registry of Deeds for the Province of Iloilo with an area of Two Hundred Forty square meter (240 sq.m.), more or less. On the other hand, Marie Jean Militar and Celia Guantero are the registered co-owners of a parcel of land, identified as Lot 14, Block 4 of the consolidation-subdivision plan (LRC) Pcs-481, being a portion of the consolidation of Lots 1303-BB-10-I, 1303-BB-10-J, 1303-BB-10-K, Psd-24532 and Lot 906, Iloilo Cadastre, LRC (GLRO) Record No. 9959 covered by TCT No. T-101064 issued by the Registry of Deeds for the Province of Iloilo with an area of Two Hundred Twenty Two square meters (222 sq.m.), more or less. However, it was found out later that the improvement constructed by Marie Jean Militar and Celia Guantero are situated on the land owned by Spouses Josue Zuniega and Thelma Militar covered by TCT No. T-39336. Based on the certification dated October 3, 2013 by Engr. Jose S. Manosa Jr. of Manosa Surveying Office, commissioned by Spouses Josue Zuniega and Thelma Militar to conduct a geodetic survey of the metes and bounds of a parcel of lot located at Lot 13 Block 4 in Cuartero, Jaro, Iloilo City covered by TCT No. T-39336 and its adjoining/adjacent properties; that based on the existing titles of the properties in question, the property covered by TCT No. T-39336, with an area of 240 sq.m. owned by Spouses Zuniega, which is supposed to be vacant, is currently being occupied with permanent structures which were not built not owned by the Spouses Zuniegas; and that the adjacent lot, owned by Marie Jean Militar and Celia Guantero, located at Lot 14 Block 4 in Cuartero, Jaro, Iloilo city and registered under TCT No. T-101064 with an area of 222 sq.m., is vacant. IcHDCS In order to correct the foregoing mistake or inadvertence, Marie Jean Militar and Celia Guantero and Spouses Josue Zuniega and Thelma Militar through their attorney-in-fact Josue Greg Zuniega, executed an Agreement dated April 8, 2013 wherein the parties agreed to exchange their respective properties. In reply, please be informed that Sections 2 and 108 of Presidential Decree (PD) 1529 1 partly provides: Sec. 2. Nature of registration proceedings; jurisdiction of courts. Judicial proceedings for the registration of lands throughout the Philippines shall be in rem, and shall be based on the generally accepted principles underlying the Torrens System. Courts of First Instance shall have exclusive jurisdiction over all applications for original registration of title to lands, including improvements and interests therein, and over all petitions filed after original registration of title, with power to hear and determine all questions arising upon such applications or petitions. . . . xxx xxx xxx Section 108. Amendment and alteration of certificates. No erasure, alteration, or amendment shall be made upon the registration book after the entry of a certificate of title or of a memorandum thereon and the attestation of the same be Register of Deeds, except by order of the proper Court of First Instance. A registered owner of other person having an interest in registered property, or, in proper cases, the Register of Deeds with the approval of the Commissioner of Land Registration, may apply by petition to the court upon the ground that the registered interests of any description, whether vested, contingent, expectant or inchoate appearing on the certificate, have terminated and ceased; or that new interest not appearing upon the certificate have arisen or been created; or that an omission or error was made in entering a certificate or any memorandum thereon, or, on any duplicate certificate; or that the same or any person on the certificate has been changed; or that the registered owner has married, or, if registered as married, that the marriage has been terminated and no right or interests of heirs or creditors will thereby be affected; or that a corporation which owned registered land and has been dissolved has not convened the same within three years after its dissolution; or upon any other reasonable ground; and the court may hear and determine the petition after notice to all parties in interest, and may order the entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon a certificate, or grant any other relief upon such terms and conditions, requiring security or bond if necessary, as it may consider proper; Provided, however, That this section shall not be construed to give the court authority to reopen the judgment or decree of registration, and that nothing shall be done or ordered by the court which shall impair the title or other interest of a purchaser holding a certificate for value and in good faith, or his heirs and assigns, without his or their written consent. Where the owner's duplicate certificate is not presented, a similar petition may be filed as provided in the preceding section. All petitions or motions filed under this Section as well as under any other provision of this Decree after original registration shall be filed and entitled in the original case in which the decree or registration was entered. Pursuant to the above provisions, the Regional Trial Court (formerly Court of First Instance) has the authority to act, not only on applications for original registration of title to land, but also on all petitions filed after the original registration of title. Thus, it has the authority and power to hear and determine all questions arising from such applications or petitions. (BIR Ruling No. 401-2013 dated November 7, 2013) Thus, any change or amendment on the land titles or in the ownership of such properties should be done by seeking judicial relief since the properties are titled and registered in the names of the respective owners. The determination of whether or not mistake or inadvertent error attended the titling of the subject properties necessitating the exchange by or reconveyance to the rightful owner thereof is an issue that is within the jurisdiction of the courts. Absent such determination, the herein exchange of properties without monetary consideration finds no basis in fact and in law to be exempt from CGT and DST imposed by Sections 24 (D) and 196 of the Tax Code, as amended. DcTAIH Based on the foregoing, your request for exemption from CGT and DST is hereby denied for lack of factual and legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Footnotes 1. AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES.