Bureau of Local Government Finance Opinion

October 12, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The OIC-Regional Director Bureau of Local Government Finance Department of Finance, Region X 6th Division Corner Tejero Street Patag, Cagayan de Oro City Sir : This refers to your letter of May 26, 2009, referring to this Bureau the letter dated May 8, 2009 of Ms. Sofronia M. Palarca, ICO-City Treasurer of Gingoog City with the following queries: ASaTCE 1. Is the period of redemption in a public auction of real property for tax delinquencies reckoned from the date of auction sale or on the date of registration? 2. How do we deal with taxpayers who repeatedly refuse to receive notice of delinquency? 3. May the owner or subsequent owners of the real property sold at public auction redeem only his/her undivided share? 4. Is it valid for a purchaser of a real property in a public auction to use her maiden name? What is the legal implication? 5. Who is liable for the real property tax due on a real property subject to DAR Program for CLOA issuances? Please be informed and be guided by the following: A. Period of Redemption of Auctioned Real Property With the repeal of Presidential Decree (P.D.) No. 464 (the old Real Property Tax Code) by Republic Act (R.A.) No. 7160 (the Local Government Code of 1991), the provisions of Section 261 of the latter law on redemption of real property sold on public auction now applies, viz. : " SEC. 261. Redemption of Property Sold. Within one (1) year from the date of sale , the owner of the delinquent real property or person having legal interest therein, or his representative shall have the right to redeem the property . . . ." (underlining ours) "Since the passage of R.A. 7160 on January 1, 1992 onwards, the owner or any person having legal interest over a tax delinquent property sold at public auction has one (1) year from the date of auction sale to redeem the property, and not from the date of registration or annotation of sale," said the Supreme Court in the case of City Mayor of Quezon City, et al. versus RCBC, G.R. No. 171333, August 3, 2010. The owner of the delinquent real property or person having legal interest therein or any duly authorized representative can as a matter of right redeem the property within one (1) year from the date of auction sale upon payment of the delinquent tax and other fees. Clearly, from the provisions of Section 261 of R.A. No. 7160, the one (1) year period of redemption of auctioned real property for tax delinquency should be counted not from the date of registration of the certificate of sale as previously provided by Section 78 of P.D. No. 464, but rather, on the date of sale of the tax delinquent property. The Supreme Court explained, however, that if the local tax ordinance is explicit that the one-year redemption period should be counted from the date of registration or annotation of the sale of the property at the proper registry, then this must be followed. It seems that this provision runs counter to that of Section 261, but this was reconciled by the Supreme Court, saying that R.A. No. 7160 is to be construed as a general law, while an ordinance is a special law, emanating only from R.A. No. 7160, and with limited territorial application only in the province or city concerned. It is a legal principle that a general law and a special law on the same subject should be accordingly read together and harmonized, to give effect to both. Where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflicts with the special act, the special act must prevail, since it reflects the legislative intent more clearly than that of the general act, and must be taken as intended to constitute an exception to the rule. DIECTc Therefore, in light of the aforecited decision of the Supreme Court, the redemption period of a tax delinquent property sold at public auction is reckoned from the date of auction sale by virtue of Section 261 of R.A. No. 7160, which is a general law, and which may be provided for in the local tax ordinance, unless the local tax ordinance itself which is a special law provides that such period of redemption is reckoned from the date of registration or annotation of the certificate of sale. B. Refusal by the Real Property Owner to Receive Notice of Tax Delinquency Reference is hereby made from the provisions of Section 254 of R.A. No. 7160, as follows: "SEC. 254. Notice of Delinquency is the Payment of the Real Property Tax. (a) When the real property tax or any other tax imposed under this Title becomes delinquent, the provincial, city or municipal treasurer shall immediately cause a notice of the delinquency to be posted at the main entrance of the provincial capitol, or city or municipal hall and in a publicly accessible and conspicuous place in each barangay of the local government unit concerned. The notice of delinquency shall also be published once a week for two (2) consecutive weeks, in a newspaper of general circulation in the province, city, or municipality. "(b) Such notice shall specify the date upon which the tax became delinquent and shall state that personal property may be distrained to effect payment. It shall likewise state that at any time before the distraint of personal property, payment of the tax with surcharges, interests and penalties may be made in accordance with the next following Section, and unless the tax, surcharges and penalties are paid before the expiration of the year for which the tax is due, except when the notice of assessment or special levy is contested administratively or judicially pursuant to the provisions of Chapter 3, Title two, Book II of this Code, the delinquent real property will be sold at public auction, and the title to the property will be vested in the purchaser, subject, however, to the right of the delinquent owner of the property or any person having legal interest therein to redeem the property within one (1) year from the date of sale." It may be observed that Section 254 does not require the notice of delinquency to be served upon the delinquent owner or any person having legal interest on the delinquent property or representative. Notwithstanding and inasmuch as the notice of delinquency is a pre-auction notice, prudence dictates that a copy thereof may be served upon the registered owner or person having legal interest in the delinquent property or representative. This is to protect the interest of the delinquent registered owner and in compliance with due process a very important requirement for the validity of auction of delinquent real property. The service of such notice may be effected through registered mail with return card or personal service. In case of personal service and the registered owner or person having legal interest in the delinquent property or representative refuses to receive the notice of delinquency and sign for it, the serving officer shall serve it by tendering or leaving a copy of the same at the address in the presence of some person of suitable age and discretion residing therein. IHaSED C. Redemption of the Undivided Share from the Auctioned Real Property Apparently in this query, there exists a co-ownership over the delinquent real property sold through public auction. Under Article 484 of R.A. No. 386, as amended, otherwise known as the Civil Code of the Philippines, there is co-ownership whenever the ownership of an undivided thing or right belongs to different persons. This means that each co-owner owns an undivided or inchoate portion or share of the real property. Thus, the extent of ownership of each co-owner is only up to his/her undivided or inchoate portion or share. Article 488 of the same Code provides that each co-owner has the right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes due thereon . Anyone of the co-owners may exempt himself/herself from this obligation by renouncing so much of his/her undivided interest as may be equivalent to his/her share of the expenses and taxes, but no such waiver shall be made if it is prejudicial to the co-ownership. Accordingly, in preservation of the delinquent property owned in common, any one of the co-owners thereof has the right to compel the other co-owners to exercise their right of redemption. Any co-owner may also exercise such right of redemption upon the undivided or inchoate share of the other co-owners who might not have the financial capability at the moment to exercise the same, subject to the right of reimbursement. In this light, redemption of the auctioned property by the co-owners must be in whole and not per portion or share. D. Use of Maiden Name in Purchasing a Property on Auction Sale Article 370 of the Civil Code of the Philippines provides that a married woman may use: 1. Her maiden first name and surname and add her husband's surname, or 2. Her maiden first name and her husband's surname, or 3. Her husband's full name, but prefixing a word indicating that she is his wife, such as 'Mrs'. The presumption in the instant query involves a married woman of legal age purchasing a real property in auction sale using her maiden name. Article 93 of E.O. No. 209, otherwise known as the Family Code of the Philippines provides that property acquired during the marriage is presumed to belong to the community property, unless it is proved that it is one of those excluded therefrom. Thus, it is submitted that any property acquired by the wife shall form part of the community property, notwithstanding the use of her maiden name. E. Liability for Delinquent Real Property Taxes on Lands Covered by the Agrarian Reform Program TDcHCa The owner of the land with delinquent real property taxes that is covered by the Agrarian Reform Program is liable thereon if incurred prior to the transfer of ownership to the beneficiary. Such delinquencies are deductible from the compensation paid to the landowner. Please be further guided by the following pertinent provisions of Sections 18 (3) and 66 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988: " SEC. 18. Valuation and Mode of Compensation . The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and LBP or as may be finally determined by the court as just compensation for the land. "The compensation shall be paid in one of the following modes at the option of the landowner: xxx xxx xxx "(3) Tax credits which can be used against any tax liability; "(4) LBP bonds, which shall have the following features: xxx xxx xxx "(b) Transferability and negotiability . Such LBP bonds may be used by the landowner, his successors-in-interest or his assigns, up to the amount of their face value for any of the following: xxx xxx xxx (v) Payment for various taxes and fees to the government: Provided, That the use of these bonds for these purposes will be limited to a certain percentage of the outstanding balance of the financial instrument. . . . " SEC. 66. Exemptions from Taxes and Fees of Land Transfers. Transactions under this Act involving transfer of ownership whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof. Provided, that all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled . (underlining supplied) It is recommended that to ensure the collection of real property tax delinquencies due from lands covered by the Agrarian Reform Program and which are located in that city, that treasury office should maintain a list of the same and closely coordinate with the Department of Agrarian Reform and the Land Bank of the Philippines for the payment of said taxes. We hope that all matters raised herein have been clarified. ADTCaI Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director