G.R. No. 181311 . November 24, 2021
PROVINCE OF BATAAN, HON. ENRIQUE T. GARCIA, JR., EMERLINDA S. TALENTO, AND AMELITA E. ABAD, PETITIONERS, VS. HON. REMIGIO M. ESCALADA, JR., IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT BRANCH 3, BALANGA CITY, BATAAN, VICTOR G. GAWTEE, AND CAMERON GRANVILLE 2 ASSET MANAGEMENT, INC., RESPONDENTS.

FACTS

Sunrise Paper Products, Inc. (Sunrise) owned two parcels of land in Orani, Bataan, covered by TCT Nos. T-210559 and T-210560, on which it operated a paper mill. In 2001, Sunrise mortgaged these real properties (excluding machinery and equipment) to Metropolitan Bank and Trust Company (Metrobank) to secure loans, and the mortgages were annotated on the titles. Due to unpaid real property taxes, the Provincial Treasurer’s Office (PTO) of the Province of Bataan issued a warrant of levy against Sunrise’s real properties, machinery, and equipment on January 3, 2003, which was registered on January 9, 2003. After partial payments by Sunrise, the PTO issued a notice of sale and subsequently held a public auction on February 17, 2004, where the Province bought the properties for P2,291,134.94. The sale was recorded on February 20, 2004.
Separately, on January 8, 2004, Sunrise executed a chattel mortgage over its machinery and equipment in favor of PhilEXIM to secure a credit line. This mortgage was registered on January 16, 2004. Meanwhile, Victor G. Gawtee obtained a favorable judgment against Sunrise for a sum of money in Civil Case No. 7973 on June 29, 2004. PhilEXIM also assigned its mortgagee rights under the chattel mortgage to Gawtee on July 28, 2004. The machinery and equipment were levied on execution pursuant to the judgment in Civil Case No. 7973, and Gawtee purchased them at a public auction on August 10, 2004, receiving a certificate of sale and taking physical possession.
Sunrise filed a petition for injunction with the RTC (Civil Case No. 8164) against the Province and its officials. Gawtee and Metrobank (later substituted by Cameron Granville 2 Asset Management, Inc.) filed petitions-in-intervention. The RTC ruled in favor of the intervenors, declaring the Province’s warrant of levy, notice of sale, and tax auction sale invalid and illegal. It ordered the cancellation of the titles issued to the Province, the restoration of the mortgage lien of Metrobank/Cameron and the execution lien of Gawtee on the original titles, and held the petitioners jointly and severally liable to pay Gawtee actual damages of P120,000,000.00, among other reliefs. The petitioners assailed this decision via a Petition for Certiorari, Prohibition, and Mandamus.

ISSUE

The core issue is whether the Regional Trial Court committed grave abuse of discretion in declaring the Province of Bataan’s tax levy and auction sale of Sunrise’s properties invalid and in awarding damages to respondent Victor G. Gawtee.

RULING

The Supreme Court granted the petition. The RTC committed grave abuse of discretion in taking cognizance of the case and in issuing its rulings. The Court held that the RTC had no jurisdiction over the subject matter of the case. Sunrise’s petition for injunction before the RTC was essentially a protest against the real property tax assessment and collection, which, under the Local Government Code and relevant jurisprudence, must first be filed with the Local Board of Assessment Appeals (LBAA) and then appealed to the Central Board of Assessment Appeals (CBAA), with further appeals to the Court of Tax Appeals (CTA). The RTC cannot entertain such protests directly. Furthermore, the RTC’s judgment annulling the tax sale and canceling the Province’s titles was issued without jurisdiction, as the one-year period for Sunrise to question the sale had prescribed. The Court also found the award of P120,000,000.00 in damages to Gawtee to be baseless and excessive, as it was not supported by evidence and amounted to an unjust enrichment, considering Gawtee had acquired the machinery for a much lower amount at the execution sale. The Supreme Court set aside the RTC Decision and Resolution and dismissed Civil Case No. 8164 for lack of jurisdiction.