The Supreme Court ruled that local government units must strictly adhere to the procedures outlined in the Local Government Code (LGC) when levying and selling properties for tax delinquency. This decision protects property owners from losing their land due to irregularities in the tax sale process, emphasizing the importance of due process and proper notice. It serves as a warning against potential abuses of power by local authorities and ensures that property rights are not unduly infringed upon.

Tax Sale Gone Wrong: Did Makati City Follow the Rules?

This case revolves around Noemi S. Cruz and the heirs of Hermenegildo T. Cruz, who lost their condominium unit in Makati City due to unpaid real property taxes. The City of Makati levied the property, and it was eventually sold to Laverne Realty and Development Corporation. The Cruzes contested the sale, alleging several procedural violations by the city government. The central legal question is whether the City of Makati followed the strict requirements of the Local Government Code (LGC) in conducting the tax sale, and whether the failure to do so deprived the Cruzes of their property without due process.

The heart of the matter lies in the Local Government Code, specifically Sections 254, 258, and 260, which outline the steps a local government unit must take before selling a property for tax delinquency. These provisions mandate that the notice of delinquency must be posted in prominent locations, published in a newspaper of general circulation, and served upon the delinquent owner. The warrant of levy must also be properly served, and the sale must be advertised within a specific timeframe. In this case, the Cruzes argued that the City of Makati failed to comply with these requirements, particularly regarding the notice of delinquency and the service of the warrant of levy.

The Supreme Court, in its analysis, emphasized the mandatory nature of these provisions. Citing Salva v. Magpile, the Court reiterated that because the public auction of land impairs property rights and due process, the steps prescribed by law are mandatory and must be strictly followed, otherwise, the sale is invalid. The Court found merit in the Cruzes’ argument that the City of Makati did not properly notify them of the delinquency sale, as billing statements were sent to the wrong unit number (1407 instead of 407), and there was no proof that the warrant of levy was actually received by the Cruzes.

Building on this principle, the Court referred to its previous ruling in Genato Investments, Inc. v. Barrientos, a case involving the same respondent, Laverne Realty. In Genato, the Court held that the buyer did not acquire any valid right to petition for the cancellation of the owner’s title because the notice and warrant of levy were sent to the wrong address, depriving the owner of due process. The Court highlighted that it is unallowable for a property owner to be deprived of their property without any lawful court order or process. This precedent underscored the importance of strict adherence to due process requirements in tax delinquency sales.

The Court also took a strong stance against potential abuses of power by local government units in conducting tax sales. It cautioned that these sales are prone to great abuse, where owners of valuable real property are liable to lose them on account of irregularities committed by these local government units or officials, done intentionally with the collusion of third parties and with the deliberate unscrupulous intent to appropriate these valuable properties for themselves and profit therefrom. The Court stressed that it cannot sanction such barefaced robbery.

The decision also addresses the procedural issues raised by the lower courts. The trial court had dismissed the Cruzes’ complaint for failure to comply with orders to inform the court of developments in a related case. The Court of Appeals affirmed this dismissal. However, the Supreme Court reversed these decisions, holding that the developments in the related case, namely its dismissal for lack of compliance with the LGC, rendered the trial court’s orders moot. There was nothing left to consolidate, and the Cruzes’ failure to comply could no longer be used as grounds for dismissal.

Ultimately, the Supreme Court prioritized the substantive rights of the Cruzes over procedural technicalities. It recognized the grave danger that taxpayers may unwittingly lose their real properties to unscrupulous local government units, officials, or private individuals or entities as a result of an irregular application of the LGC provisions authorizing the levy and delinquency sale of real property for non-payment of the real property tax. It ordered the reinstatement of the Cruzes’ case and directed the trial court to proceed with the proceedings with dispatch.

The Supreme Court’s decision serves as a reminder that the power of local government units to levy and sell properties for tax delinquency is not absolute. This authority is subject to strict compliance with the provisions of the Local Government Code, particularly those relating to notice and due process. The Court’s ruling reinforces the importance of protecting property rights and ensuring that taxpayers are not unjustly deprived of their land.

FAQs

What was the key issue in this case?	The key issue was whether the City of Makati followed the correct procedures under the Local Government Code when selling the Cruz’s property for tax delinquency. The Cruzes argued that they did not receive proper notice of the delinquency and sale.
What did the Supreme Court decide?	The Supreme Court ruled in favor of the Cruzes, finding that the City of Makati likely failed to comply with the LGC’s requirements for notice and due process. The Court reinstated the case and ordered the trial court to proceed with the proceedings.
What are the key provisions of the Local Government Code involved?	Sections 254, 258, and 260 of the LGC outline the requirements for notice of delinquency, service of warrant of levy, and advertisement of sale. These sections require posting, publication, and personal service to the delinquent owner.
Why is strict compliance with these provisions important?	Strict compliance is crucial because the sale of land for tax delinquency infringes on property rights and due process. Failure to follow the procedures can invalidate the sale and deprive the owner of their property unjustly.
What did the Court say about potential abuses of power?	The Court cautioned against potential abuses by local government units in conducting tax sales. It warned of collusion between officials and private parties to appropriate valuable properties through irregularities.
What was the significance of the Genato Investments case?	The Genato Investments case, which involved the same buyer, Laverne Realty, established a precedent that strict adherence to due process is required in tax delinquency sales. The Court used it to underscore the importance of proper notice and service.
What happens now that the Supreme Court has ruled?	The case is sent back to the Regional Trial Court of Makati City, Branch 62, where it will be reinstated. The court is ordered to continue with the proceedings with dispatch, taking into account the Supreme Court’s findings.
What is the effect of voiding a tax sale?	If a tax sale is declared void, the title of the buyer is also null and void, and the original owner retains ownership of the property. The buyer may have recourse to recover the purchase price, but the property reverts to the original owner.

This ruling is a significant victory for property owners, emphasizing the need for local governments to follow the law when conducting tax sales. It highlights the importance of due process and protects against potential abuses of power. By prioritizing substance over form, the Supreme Court ensures that property rights are not sacrificed on the altar of procedural technicalities.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NOEMI S. CRUZ AND HEIRS OF HERMENEGILDO T. CRUZ v. CITY OF MAKATI, G.R. No. 210894, September 12, 2018