GR 172267; (August, 2008) (Digest)
G.R. No. 172267, August 20, 2008
NATIONAL HOUSING AUTHORITY, petitioner, vs. ILOILO CITY, as represented by its Mayor, HON. JERRY TREÑAS, ILOILO CITY TREASURER CATHERINE TINGSON, and ROSALINA FRANCISCO, respondents.
FACTS
The National Housing Authority (NHA) filed a complaint to annul a public auction sale of its property conducted by Iloilo City for non-payment of realty taxes. NHA argued the sale was void due to lack of notice and its status as a tax-exempt government entity. The City bought the property at auction and later sold it to respondent Rosalina Francisco. The respondents moved to dismiss the complaint, citing NHA’s failure to comply with the mandatory deposit requirement under Section 267 of the Local Government Code (R.A. 7160). This provision states that no court shall entertain an action assailing a tax auction’s validity until the taxpayer deposits the auction sale amount plus interest. The trial court and the Court of Appeals dismissed NHA’s suit for non-compliance with this condition precedent.
ISSUE
Whether the NHA, as a tax-exempt government entity, is required to make the cash deposit under Section 267 of R.A. 7160 as a condition precedent for filing an action to annul a tax auction sale.
RULING
No. The Supreme Court ruled that NHA is not required to make the deposit. The legal logic is anchored on the distinction between a “taxpayer” and a “tax-exempt entity.” Section 267 explicitly applies to the “taxpayer,” defined as a person obligated to pay a tax. Since NHA is a tax-exempt government corporation by virtue of specific laws (P.D. No. 1922, P.D. No. 2013, and R.A. No. 7279), it is not a “taxpayer” within the contemplation of the law. The deposit is a condition tied to the tax delinquency of the owner; it is not a mere procedural fee. As NHA claims it was illegally assessed taxes from the outset due to its exemption, it cannot be considered a delinquent taxpayer obligated to make the deposit. The purpose of the deposit is to protect the auction purchaser and ensure the action is not frivolous. This purpose is sufficiently served in this case because the government, of which NHA is an agency, is presumed solvent and capable of satisfying any judgment. Therefore, the lower courts erred in dismissing the complaint for non-deposit. The case was remanded to the trial court for further proceedings on the merits.