Zarate v. Manila Trading and Supply Co.

[CA No. 12401-R. July 28, 1956.] JUAN F. ZARATE , petitioner and appellee , vs . MANILA TRADING AND SUPPLY CO. , oppositor and appellant . Ross, Selph, Carrascoso and Janda for oppositor and appellant. Delfin S . Sian and Federico L . Cabato for petitioner and appellee. SYLLABUS TAX SALE; REQUIREMENTS FOR ITS VALIDITY; COMMONWEALTH ACT NO. 703. Commonwealth Act No. 703 expressly provides that tax sales must be made in accordance with law before it falls within the exception provided for by the second half of section 3 of said Act. Tax sales in order to be valid must be registered with the Register of Deeds of the province where the land is located and notice of the sale must be sent to the delinquent taxpayer. D E C I S I O N OCAMPO , J p : This is an appeal taken from the order of the Court of First Instance of Baguio ordering the Register of Deeds of Baguio to cancel Transfer Certificate of Title No. 1243, covering a parcel of land known as Lot No. 114-A, Residence Section K of the City of Baguio, and to issue in lieu thereof another one in the name of petitioner Juan F. Zarate, free from all encumbrances and annotations. casia Oppositor-appellant Manila Trading and Supply Co., alleges that the lower court erred (1) in holding that the sale at public auction by the city treasurer of Baguio to appellee Juan F. Zarate transferred the ownership of Lot No. 114-A, Residence Section K, covered by Transfer Certificate of Title No. 1243 to said Juan F. Zarate, and (2) in ordering the Register of Deeds of Baguio to cancel T.C.T. No. 1243 and to issue in lieu thereof a new one in the name of appellee Juan F. Zarate, free and clear of the annotation of appellant's title to the undivided 1,976 square meters interest in the land covered by said title. It appears that Kangi and Bawes were the registered owners of 4,553 square meters of land (Lot No. 114-A, Residence Section K) in Baguio covered by T.C.T. No. 1243. On May 20, 1938, Kangi and Bawes sold an undivided 2,577 square meters of this land to petitioner-appellee Juan F. Zarate. This sale was registered in the office of the Register of Deeds of Baguio (Exhibit 4). On August 25, 1938, Kangi and Bawes sold the remaining undivided portion of 1,976 square meters of said lot to Jose Roldan. This sale was also registered in the office of the Register of Deeds of Baguio (Exhibit 4). In 1938, oppositor-appellant Manila Trading and Supply Co. instituted an action against Jose Roldan. On September 6, 1939, Roldan's interest in the undivided 1,976 square meters of the land was attached in favor of the Manila Trading and Supply Co. On April 21, 1941, said portion was sold at public auction to appellant Manila Trading and Supply Co. The sheriff's certificate of sale was registered with the Register of Deeds (Exhibit 4). On June 9, 1941, Roldan's right to redeem the undivided portion within 12 months was levied upon by a certain Cacmeg. Neither Cacmeg nor Roldan redeemed the property within the period for redemption. On October 1, 1948, appellant Manila Trading and Supply Co. obtained a final certificate of sale from the sheriff of Baguio and registered it in the office of the Register of Deeds of said city (Exhibit 4). Inspite of the various sales of Lot 114-A, the assessment thereof remained in the name of Kangi and Bawes, the previous owners. From 1938 to 1941, appellee Juan F. Zarate paid the taxes on the whole property, including the 1,976 square meters which belonged to appellant Manila Trading and Supply Co. Zarate failed to pay the taxes corresponding to the years 1942 and 1943, so the city treasurer of Baguio advertised the property for sale at public auction. On November 20, 1943, said city treasurer sold the entire property to Juan F. Zarate. Nobody redeemed the property within one year from the sale. On November 23, 1944, the city treasurer of Baguio executed a final deed of sale of the property in favor of appellee Zarate (Exhibit F). Zarate did not register this deed of sale. On May 19, 1953, appellee petitioned the Court of First Instance of Baguio for the cancellation of T.C.T. No. 1243 and the issuance in lieu thereof of a new certificate of title in his name. On October 23, 1953, the lower court granted his petition, hence this appeal by the Manila Trading and Supply Co. Appellant Manila Trading and Supply Co. advances the following grounds as the reasons why the tax sale in 1944 did not transfer its undivided interest in Lot No. 114-A to appellee Juan F. Zarate: "1. Before the appellee brought the present action in 1950, the government had already condoned all delinquencies in the payment of taxes during the war years and had lifted all forfeitures and sales by reason thereof, and returned all properties thus forfeited and sold to their owners. "2. The tax sale in 1943 was vitiated by irregularities in the proceeding. "3. The deed of final sale of November 23, 1944 did not operate to convey and transfer Manila Trading and Supply Company's undivided interest in the property to appellee Juan F. Zarate." With respect to the first alleged ground, appellant Manila Trading and Supply Co. cites Commonwealth Act No. 703, which became law upon its approval on November 1, 1946. The provisions of this act which are pertinent to the case at bar are the following: "SECTION 1. All land taxes and penalties due and payable for the years nineteen hundred and forty-two, nineteen hundred and forty-three, nineteen hundred and forty-four and fifty per cent of the tax due for nineteen hundred and forty-five are hereby remitted. The land taxes and penalties due and payable for the second semester of the year nineteen hundred and forty-one shall also be remitted if the remaining fifty per cent corresponding to the year nineteen hundred and forty-five shall have been paid on or before December thirty-first, nineteen hundred and forty-five. "SECTION 3. All forfeitures of real property by reason of delinquency in the payment of the taxes and penalties corresponding to the abovementioned period are hereby lifted and such properties forfeited shall be returned to the owners thereof, unless the same have already been sold in accordance with law in favor of a third party in which case the former owner is given a period of one year after the approval of this act within which to repurchase the same at the same price for which it has been sold with legal interest plus the reasonable value of the improvements therein made, if any." cdtech However, appellee Juan F. Zarate claims that while the law expressly lifted all forfeitures of real property due to delinquency in the payment of taxes and penalties for the years mentioned in the law, said law, nevertheless, recognized and exception in case the forfeited property had already been sold in accordance with law in favor of a third party. In such a case, the former owner had one year from November 1, 1946 within which to repurchase the property at the same price for which it had been sold. Appellee maintains that C. A. No. 703 applies only to property forfeited in favor of the government and not to the case at bar where the property, due to tax delinquency, was sold to him. Commonwealth Act No. 703 expressly provides that the sale must have been made in accordance with law before it falls within the exception provided for by the second half of section 3 of said Act. Appellant Manila Trading and Supply Co. avers that the tax sale made in appellee's favor was not in accordance with the procedure laid down by law, because (1) said sale was not registered with the Register of Deeds of Baguio; and (2) said sale was made without the appellant corporation having been duly notified. Appellant alleges that the final deed of sale executed on November 23, 1944 by the city treasurer of Baguio in favor of appellee Zarate did not transfer its rights over the undivided 1,976 square meters of the property to said appellee Juan F. Zarate. To support this contention, appellant relies on the provisions of section 50 of the Land Registration Act (Act No. 496) which provides that "no deed, mortgage, lease or other voluntary instrument, except a will, purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the clerk or register of deeds to make registration. The act of registration shall be the operative act to convey and affect the land, and in all cases under this Act the registration shall be made in the office of the register of deeds of the province or provinces or city where the land lies." Lot No. 114-A, Residence Section K of the City of Baguio, is registered land. After the whole property, including the 1,976 square meters being claimed by appellant, was sold to appellee Juan F. Zarate, the latter did not register the final deed of sale. The deed of sale in his favor cannot bind appellant's interest in the undivided 1,976 square meters of this land. We are dealing with registered land, so that any and all instruments covering it must be registered with the Register of Deeds. Inasmuch as appellee Zarate did not take the trouble of registering the sale in his favor, said sale therefore does not have all the requisites necessary for the sale of registered land. Furthermore, it is an admitted fact that the Manila Trading and Supply Co. was an American corporation which was forced to suspend all its activities for the duration of the war. It could not have been notified of the tax sale in 1943. But even if it had been notified by publication, still it could not have done anything to protect its interest. All its other properties were confiscated by the Japanese military government. Its officers could not in any way make representations in behalf of the corporation. In the interests of equity, appellant's undivided interest in the property cannot be allowed to be prejudiced by the tax sale made in 1943. From the foregoing, it is apparent that the tax sale was not made in accordance with law. For this reason it does not fall within the exception recognized by Section 3 of C. A. No. 703. Appellant Manila Trading and Supply Co. is therefore entitled to recover the undivided portion of 1,976 square meters of Lot No. 114-A, Residence Section K of the City of Baguio, Premises considered, the order appealed from is set aside. We hereby order that T.C.T. No. 1243, covering Lot No. 114-A be cancelled; that the portion of 1,976 square meters belonging to appellant Manila Trading and Supply Co. be segregated from the rest of Lot No. 114-A and a certificate of title covering said segregated portion be issued in the name of appellant; and that another certificate of title covering the remaining portion of 2,577 square meters of said lot be issued in the name of appellee Juan F. Zarate. Inasmuch as appellee Zarate bought the whole property in good faith, it is further ordered that appellant Manila Trading and Supply Co. reimburse to appellee Zarate the taxes the latter paid, corresponding to the 1,976 square meters of land which appellant owns. No special pronouncements as to costs. Rodas and Sanchez, JJ . , concur.