Republic v. Mandaluyong
REITERATIONFacts
The Antecedents: The Department of Transportation and Communications (DOTC) entered into a Build, Lease and Transfer (BLT) Agreement for the EDSA Metro Rail Transit (MRT) III with Metro Rail Transit Corporation Limited (Metro Rail), which later assigned its rights to Metro Rail Transit Corporation (MRTC). MRTC turned over the EDSA MRT III System to DOTC for operation. The City Assessors of Mandaluyong and other cities fixed the value of EDSA MRT III. The Office of the City Assessor of Mandaluyong issued a Tax Declaration in the name of MRTC and subsequently demanded payment of real property taxes. Demands for deficiency real estate tax were made on MRTC, leading to Notices of Delinquency and a Warrant of Levy upon MRTC's properties. Procedural History: The Republic of the Philippines (Republic), represented by DOTC, filed a case for Declaration of Nullity of Real Property Tax Assessment and Warrant of Levy, arguing that MRTC had no beneficial use or possession to be taxed and that the Republic itself is exempt from local taxes. The RTC denied the applications for TRO and preliminary injunction. A public auction was conducted, and the properties were forfeited in favor of the City of Mandaluyong. The Republic filed a petition for certiorari before the Court of Appeals challenging the denial of the TRO and injunction. Meanwhile, the City Treasurer executed a Final Deed of Sale in favor of the City of Mandaluyong, and a new Tax Declaration was issued in its name. The City of Mandaluyong filed an ex parte petition for a writ of possession before the RTC, which was granted. The Republic's motion for reconsideration was denied. The Republic filed the instant petition for review on certiorari, arguing the impropriety of the writ of possession due to the pendency of other cases and the alleged invalidity of the tax assessment and auction sale. The Petition: The Republic assails the issuance of a writ of possession by the RTC, contending that the EDSA MRT properties are beneficially owned by the DOTC, making it exempt from real property taxes. Consequently, no tax delinquency exists to justify the auction sale and the subsequent writ of possession. The Republic further argues that the auction sale cannot be likened to an extrajudicial foreclosure sale under Act No. 3135, as no mortgage contract was involved. Lastly, the Republic invokes litis pendencia, citing the pendency of a certiorari petition before the Court of Appeals challenging the denial of the TRO and injunction.
Issue(s)
Whether the RTC erred in issuing a writ of possession despite the pendency of cases assailing the validity of the real property tax assessment and the subsequent auction sale. Whether the EDSA MRT III properties are subject to real property tax assessment and delinquency sale. Whether the auction sale conducted by the City of Mandaluyong can be considered an extrajudicial foreclosure sale justifying a writ of possession.
Ruling
The petition is GRANTED. The Decision and Order dated 30 July 2008 and 6 October 2008, respectively, of RTC Branch 213 of Mandaluyong City in LRC Case No. M-08-460 are VACATED and SET ASIDE. The status quo Order dated 10 November 2008 is MAINTAINED. The Court of Appeals is ORDERED to resolve CA-G.R. SP No. 98334 with deliberate dispatch.
Ratio Decidendi
On the propriety of the writ of possession: The Supreme Court held that the issuance of a writ of possession was premature. A writ of possession is a mere incident in the transfer of title. In this case, it stemmed from the exercise of alleged ownership by the respondent over the EDSA MRT III properties by virtue of a tax delinquency sale. However, the issue of whether the auction sale should be enjoined was still pending before the Court of Appeals. The Court emphasized that the denial by the RTC of an injunction or TRO does not automatically grant the respondent the liberty to proceed with the actions sought to be enjoined, especially when a certiorari petition assailing the denial is still pending. Therefore, it was premature for the RTC to issue a writ of possession where the ownership of the subject properties is derived from an auction sale whose validity is still being threshed out. On the taxability of the EDSA MRT III properties: The Court noted that the case involves the conflict between a local government's power to tax and the national government's privilege of tax exemption. The Republic argued that the EDSA MRT III properties are beneficially owned by the DOTC, a governmental entity, and thus exempt from real property taxes under Section 234 of the Local Government Code. The respondent, City of Mandaluyong, did not contest the Republic's immunity from local taxes, but rather assessed MRTC for the real property tax. The Court acknowledged that this issue requires full hearing and deliberation, as it was pending before the RTC. On the nature of the auction sale: The Republic argued that the auction sale conducted by the respondent cannot be likened to an extrajudicial foreclosure sale of a real estate mortgage under Act No. 3135. This is because the EDSA MRT properties were not put up as collateral or security for a loan, nor was there any mortgage contract voluntarily entered into by the Republic or MRTC. The respondent, however, averred that the public auction sale is an execution sale within the purview of Section 33, Rule 39 of the Rules of Court, thus a writ of possession was validly issued. The Court, in vacating the writ of possession, implicitly agreed that the validity of the auction sale, and by extension its nature, was still a matter to be determined.
Main Doctrine
A writ of possession, which is a mere incident in the transfer of title stemming from an alleged ownership by virtue of a tax delinquency sale, is premature and has no force and effect if the validity of the auction sale and the underlying tax assessment is still pending litigation before higher courts, especially when a status quo order has been issued.