Bureau of Local Government Finance Opinion

April 12, 1995 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the Municipal Treasurer, Marikina, Metro Manila, for appropriate action. This refers to the letters stated August 25, 1994 and October 6, 1994 of Mr. Marvin Gonong, Department Manager III, Philippine National Bank, Special Assets Management Department, Escolta, Manila, requesting resolution of the issue regarding the penalty and surcharges imposed by that Office for alleged late payment of transfer tax. Said request was made in connection with the request for consolidation of title of a foreclosed property of PNB formerly owned by Spouses Tadeo and Dolores Palma with the Municipal Treasurer of Marikina. It was represented that the Certificate of Sale in favor of PNB was issued by the Sheriff on June 19, 1991. Said certificate of sale was duly registered in the office of the Registrar of Deeds of Marikina on January 4, 1993. It was represented further that the Affidavit of Consolidation of Ownership and Deed of Sale which were both duly notarized on June 29, 1994, were submitted to the Office of the Municipal Treasurer for computation of the transfer tax. However, that Office allegedly assessed an additional surcharge and penalty on the inability to pay the transfer tax on time. Hence, PNB paid the transfer tax including the surcharge and penalty under protest. Under a letter dated September 12, 1994, that Office denied the said protest stating among others, that the computation should be based on the date of the Certificate of Sale regardless of the redemption period for reason that ownership had been transferred by a virtue of the issuance of the Certificate of Sale. PNB supports a contrary view. It is contended that while the certificate of sale was issued by the sheriff on June 19, 1991, no transfer of ownership emanated in favor of PNB. It is contended further that what was transferred to PNB by virtue of the certificate of sale was an expectancy right which may ripen into full ownership in the event the redemption period expired and redemptioner failed to redeem the foreclosed property. Hence, the liability of the Bank to pay the transfer tax should commence from the date of execution and notarization of the deed of sale and affidavit of consolidation of ownership. Section 6 of Act No. 3135. An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real-Estate Mortgages, as amended by Act No. 4118, provides as follows: "Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; . . . ." The aforequoted provision of the law has been judicially interpreted with consistency by the Supreme Court in a coterie of cases wherein it was held that the one year period of redemption shall be counted from the date of the registration of the certificate of sale in the office of the register of deeds concerned and not from the date of the public auction sale. In view thereof, the one-year redemption period appears to have expired only on January 4, 1994 without the mortgagors exercising the right of redemption over the foreclosed property. Thus, from such date, the absolute ownership of the said real property was automatically transferred in the name of PNB for failure of the mortgagors to redeem the same. Thus, payment of the transfer tax should be made "within sixty (60) days," which, in this case, should be counted from January 4, 1994. Accordingly, while this Department finds merit in the argument that "no transfer of ownership emanated in favor of PNB" upon the issuance of the June 19, 1991 Certificate of Sale referred hereto, the contention that "the liability of the Bank to pay the transfer tax should commence from the date of execution and notarization of the deed of sale and affidavit of consolidation of ownership, "on June 29, 1994, is deemed untenable. cdll That Office is, therefore, hereby instructed to recompute the surcharges and penalties commencing from January 4, 1994 in accordance herewith. Be authority of the Secretary: (SGD.) LORINDA M. CARLOS Executive Director Bureau of Local Government Finance