JUAN PARREÑO, PLAINTIFF-APPELLANT VS. IRENEO GANANCIAL, DEFENDANT-APPELLEE.

Parreño versus Ganancial

The Case

This is an action by Juan Parreño against Ireneo Ganancial to recover possession of a portion of a parcel of land in Sagay, Negros Occidental, and the value of the products the defendant received from the date of the final bill of sale. Juan Parreño claims the land because he bought it at a public auction held by the Provincial Treasurer to satisfy unpaid real estate taxes. Ireneo Ganancial resists, claiming ownership of the portion he actually possesses. The case matters because it fixes the reach of a tax sale: what exactly does a purchaser at a delinquent tax auction acquire, and when may he be heard to say that he relied on the tax declaration of the person in whose name the land was assessed?

Procedural History

Juan Parreño filed the complaint in the trial court against Ireneo Ganancial for recovery of possession and of the value of the products. The defendant answered, denying the plaintiff's right and asserting ownership in himself of the portion he possessed, allegedly covering some fifteen hectares. The trial court, in its decision of August 27, 1963, found in favor of the defendant and dismissed the complaint, without costs. Juan Parreño appealed, and the case reached the Supreme Court on that appeal.

Facts

The property in dispute is lot number 1097 of the Sagay cadastre, situated in barrio Lopez-Jaena, municipality of Sagay, Negros Occidental, with an area of 18.5180 hectares. It was declared for tax purposes in the name of Sebastian Parreño under a tax declaration issued on December 29, 1950. In 1956 the property was advertised for sale at public auction by the Provincial Treasurer to satisfy the unpaid real estate taxes thereon. The winning bidder was Juan Parreño, the plaintiff and now appellant, in whose favor a certificate of sale was issued on October 30, 1956, followed by a final bill of sale two years later, on October 31, 1958. In both instruments it was clearly stated that the delinquent taxpayer was Sebastian Parreño. The final bill of sale was registered in the Office of the Register of Deeds on November 13, 1958.

It turned out, however, that a greater portion of lot number 1097 was and had been in the possession of Ireneo Ganancial, for which reason Juan Parreño filed the present action against him for the recovery of such possession and of the value of the products received by the defendant from the date of the execution of the final bill of sale.

The material antecedent facts are undisputed, being a matter of official record. Lot number 1097 was formerly public land which was the subject of several homestead applications by different parties, among them Sebastian Parreño, Juan Parreño, and Ireneo Ganancial. In the decision of the Director of Lands dated July 27, 1950, the application of Sebastian Parreño was rejected; that of Ireneo Ganancial was amended so as to cover only portion A of the lot in dispute and thereafter continued to be given due course; and Juan Parreño was given a period of sixty days from his receipt of a copy of the decision within which he may file an appropriate application for portion B of the lot in question, otherwise his preferential rights thereto may be declared forfeited. Juan Parreño filed a petition in the Bureau of Lands on August 27, 1951, seeking relief from that decision, but was turned down by order dated September 21, 1951 on the ground that it was filed out of time. It thus appears that when the public sale was advertised and carried out by reason of tax delinquency on the part of Sebastian Parreño, he was not the owner of the property and had no rights whatsoever thereto.

Issues

• Whether or not a purchaser at a public auction for delinquent real estate taxes acquires the land itself, or only the particular interest of the person in whose name the land was assessed.
• Whether or not the failure of the actual possessor to obtain a tax declaration in his own name and to pay the corresponding taxes bars him from recovering the land from the tax-sale purchaser.
• Whether or not the tax-sale purchaser may rely on the tax declaration in the name of the delinquent taxpayer as evidence of ownership and as the basis of a good title against the real owner.

Applicable Provisions

The decision applies the Assessment Law, whose pertinent provisions were formerly found in the old Provincial Assessment Law. On the duty to declare newly acquired real estate, the Court quotes the old law:

And this, notwithstanding the categorical mandate of section 2484 of the Revised Administrative Code, which she was presumed to know, and which makes it the duty of each person acquiring real estate in the city to make a new declaration thereof, with the advertence that failure to do so shall make the assessment in the name of the previous owner valid and binding on all persons interested, and for all purposes, as though the same had been assessed in the name of its actual owner.

This is the provision the appellant invokes to penalize the actual owner's negligence, and the Court explains why it does not reach the facts of this case.

Ruling

On the first issue, the Court holds that the tax sale conveyed nothing by derivative title from the supposed tax delinquent. Since Sebastian Parreño was not the owner of the property and had no rights whatsoever thereto when the sale was advertised and carried out, the purchaser acquired nothing from him. The Court adopts the rule that the provisions of the Assessment Law for the sale of land for non-payment of taxes establish a proceeding in personam, not in rem, as the tax is not a charge on the land alone; and what is sold is only the particular interest of the person in whose name the land is assessed.

On the second issue, the Court acknowledges that the record reveals the appellee obtained a tax declaration in his own name and paid the taxes only in 1959. But the negligence of the actual owner does not, by itself, defeat him. The Court distinguishes the earlier case of Paguio versus Ruiz, where the declared owner was herself the real owner of the property sold. Here Sebastian Parreño, in whose name the land was assessed, did not have any right whatsoever thereto. The rule penalizing negligent taxpayers is, in the Court's words, obviously for the benefit of the government and only incidentally, if at all, for the benefit of third persons dealing with it as purchasers at tax sales.

On the third issue, the Court holds that the appellant cannot claim the protection of good faith. He knew, or at least was charged with notice as a party in the homestead case, that Sebastian Parreño could not possibly have been a delinquent taxpayer because his tax declaration had become functus oficio, that is, spent and without further legal effect, and knew likewise that Ireneo Ganancial was the owner, or the one entitled to and in actual possession of portion A of the lot, as declared by the Director of Lands. The Court states the principle that governs:

Even the Torrens system of land registration, which proclaims the indefeasibility of a registered title, protects only innocent third parties.

Accordingly, the appellant had no right to rely on the tax declaration in the name of Sebastian Parreño as evidence of ownership and to claim that it could be the basis of a good title in himself as against the real owner.

Doctrine

A sale of real estate for delinquent taxes is a proceeding in personam, not in rem; the tax is not a charge on the land alone, and what is sold is only the particular interest of the person in whose name the land is assessed. Where the declared owner has no right whatsoever to the property, the purchaser at the tax sale acquires nothing by derivative title from him. The failure of the actual owner to obtain a tax declaration in his own name and to pay the taxes does not vest title in the tax-sale purchaser, because the rule penalizing negligent taxpayers exists for the benefit of the government and only incidentally for the benefit of third persons. A purchaser who knows, or is charged with notice, that the declared owner had no right to the land cannot invoke good faith, and the Torrens system protects only innocent third parties.

Disposition

The Supreme Court affirmed the judgment appealed from, without prejudice to the appellant's right of action against the appellee for the recovery of whatever amount was paid by the appellant in the tax sale, to the extent that the appellee has been benefited thereby, with no pronouncement as to costs.

Remember This

Memorize the line that a tax sale is in personam and sells only the interest of the person in whose name the land is assessed, so that a purchaser from one who had no right at all acquires nothing. Examiners use this case to test the limits of the negligence rule in tax sales and the good faith required of a tax-sale purchaser against the real owner in possession.