G.R. No. L-12758; November 28, 1959
FRANCISCO COLLEGE, INC., petitioner-appellee, vs. TOMAS P. PANGANIBAN, ET AL., oppositors-appellants.

FACTS

Petitioner Francisco College, Inc. filed a petition for the cancellation of an annotation on its Transfer Certificate of Title (TCT) No. 38606. The property was originally owned by Jose J. Francisco, who mortgaged it to the Rehabilitation Finance Corporation (RFC). Due to foreclosure, the RFC acquired the property at public auction on April 12, 1950, and TCT No. 26609 was issued to it free from lien on July 13, 1951. Petitioner bought the property from RFC on February 17, 1955, and TCT No. 38606 was issued in its favor, also free from lien. Subsequently, the Register of Deeds annotated on the back of this title a final deed of tax sale executed by the City Treasurer of Manila on August 4, 1949, in favor of oppositors Luciano L. Tapia and Tomas P. Panganiban. This tax sale was based on the alleged failure of Jose Urrutia Francisco to pay real estate taxes for 1945-1947, with the auction held on February 14, 1948, and the final deed issued after the redemption period. The oppositors registered this deed only on June 16, 1955, which was after petitioner’s title was issued. The trial court ordered the cancellation of the annotation, prompting the oppositors’ appeal.

ISSUE

Whether the trial court erred in ordering the cancellation of the annotation of the tax sale deed on petitioner’s certificate of title under Section 112 of the Land Registration Act, given the oppositors’ claim of a prior tax lien and sale.

RULING

The Supreme Court affirmed the trial court’s order. The issue was not one of ownership but of priority between two sales concerning the same registered land. The Court held that while a tax lien for taxes due within two years is a statutory lien that need not be registered to bind third persons under Section 39 of Act No. 496 (the Land Registration Act), the sale of registered land to foreclose such a tax lien must be registered to affect third persons. Citing Metropolitan Water District vs. Reyes, the Court distinguished between the lien itself and its foreclosure: the lien is automatically effective, but the sale pursuant to foreclosure must be registered under Sections 50 and 77 of Act No. 496 , where registration is the operative act to convey and affect the land. Here, petitioner acquired and registered its title (TCT No. 38606) on February 17, 1955, free from the annotation of the tax sale. The oppositors registered their deed of tax sale only on June 16, 1955, months later. Therefore, under the principle “he who is first in time is preferred in right,” petitioner’s registered title, acquired for value and in good faith, prevails and must be held free from the subsequent annotation. The trial court correctly ordered its cancellation.