THIRD DIVISION

[G.R. No. 154027. October 24, 2005.]

Spouses RAMON and ROSITA TAN , petitioners, vs . GORGONIA

BANTEGUI, Represented by GUADALUPE B. BAUTISTA; and Spouses
FLORANTE and FLORENCIA B. CAEDO , respondents.

DECISION

PANGANIBAN , J : p

The auction sale of land to satisfy alleged delinquencies in the payment of real
estate taxes derogates or impinges on property rights and due process. Thus, the steps
prescribed by law for the sale, particularly the notices of delinquency and of sale, must be
followed strictly. Failure to observe those steps invalidates the sale.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the
September 27, 2001 Decision 2 and the June 18, 2002 Resolution 3 of the Court of Appeals
(CA) in CA-GR CV No. 51829. The assailed Decision reads as follows:
"WHEREFORE, nding no reversible error in the judgment appealed from,
the same is AFFIRMED , with costs against [petitioners]." 4

The assailed Resolution denied petitioners' Motion for Reconsideration.

The Facts
The antecedents are related by the CA as follows:
"The subject matter of the controversy is a 232 square-meter lot situated at
No. 37-E Calavite St. La Loma, Quezon City, Metro Manila. Said piece of property
was registered in the name of [Respondent] Gorgonia Bantegui (Bantegui for
brevity), married to Jesus Bayot, under Transfer Certi cate of Title [(TCT)] No.
47163 of the Register of Deeds of Quezon City, issued on May 6, 1959, and later
reconstituted under [TCT] No. 28458.

"Bantegui acquired the property sometime in 1954 and rented it to spouses

Florante B. Caedo and Florencia B. Caedo (Caedos for brevity), who resided
therein until 1994. In 1970, she left for the United States of America. She returned
to the Philippines in January 1988 and executed her special power of attorney[,]
making Guadalupe B. Bautista (Bautista for brevity) her representative, [after
which], she went back to the United States.

"Her taxes on the subject property were paid[,] but only until 1977. The real
property taxes from the year 1978 to 1983 amounting to P3,034.99[,] inclusive of
penalties, however, were not paid. TcSaHC

"For failure of Bantegui to pay said taxes, the [c]ity [t]reasurer of Quezon
City sold said property at public auction held on November 21, 1984, to the
spouses Edilberto and Jose na Capistrano (Capistranos for brevity), for the sum
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 of P10,000.00. The Certi cate of Sale of Delinquent Property was subsequently
issued in their favor on November 26, 1984.
"Since the property was not redeemed within the one (1) year redemption
period, title to said property was consolidated to the Capistranos and [TCT] No.
361851 was issued in their names on June 4, 1987. The Capistranos, however,
did not take possession of the land [or inform] the Caedos about the sale or
collected any rent from them. They[,] likewise[,] did not pay real property taxes
thereon.

"The property was later sold on June 20, 1988 by the Capistranos to
spouses Evelyn and Jesse Pereyra (Pereyras for brevity) for P60,000.00. Their
TCT was cancelled and a new [TCT] No. 2059 was issued on January 10, 1989 in
the name of the Pereyras, who also did not take possession of the property in
question. They, however, mortgaged the same to the Rural Bank of Imus, Cavite,
which [mortgage] was annotated on the title of the property.

"These transfers were unknown to Bantegui and the Caedos[,] despite the
fact that Evelyn Pereyra is the daughter of the Caedos, as the latter did not inform
them about anything concerning these transactions. All this time[,] the actual
occupants, the Caedos, considered themselves as tenants of Bantegui, such that
they paid rent to her until December 1993, when they handed the water pump as
payment of their arrears.

"Bantegui, on her part, applied for administrative reconstitution of her title[,]

as it was lost in a re. Reconstituted Title No. 28458 was subsequently issued in
her name. She likewise paid the realty taxes on the subject property for the years
1987 to 1989. The [c]ity [t]reasurer of Quezon City, however, refused to accept her
payment for the year 1990.
"Meanwhile, on May 3, 1990, said property was again sold by the Pereyras
to the spouses Ramon and Rosita Tan (Tans for brevity) for P350,000.00, with the
latter paying the amount of P300,000.00 to the Rural Bank of Imus, Cavite for the
release of the mortgage per agreement by the parties. They likewise paid the
overdue taxes and other expenses incurred by the Pereyras pertaining to said
mortgage.

"The Tans, like their predecessors, did not take immediate possession of
the property [or inform] the occupants (Caedos) of their title to the land. Towards
the latter part of 1990, however, the Tans, thru their lawyer, informed the Caedos
of their ownership over the property and demanded that the Caedos vacate the
property. They subsequently led an action for ejectment against the Caedos
before the Municipal Trial Court of Quezon City on January 18, 1991. On October
31, 1991, the Court ruled in favor of the Tans. The Caedos then interposed an
appeal on February 2, 1992[,] which was remanded to the same Court for further
proceedings, and for failure of the Caedos to appear during the hearing of the
case, they were declared in default and were subsequently ejected from the
property on February 20, 1994, when the house that they erected thereon was
demolished.

"On February 11, 1992, Bantegui, thru her sister Guadalupe Bautista, and
joined by the spouses Caedo[,] led a Complaint for Annulment of Sale, Quieting
of Title, Injunction and Damages with the Regional Trial Court of Quezon City.
The complaint was later amended on May 14, 1992, impleading the spouses
Capistrano and the [c]ity [t]reasurer of Quezon City as co-defendants, and deleting
'quieting of title' from the prayer and inserting 'reconveyance.'" 5
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 After the trial court rendered its Decision 6 in favor of respondents, petitioners
appealed to the CA.
Ruling of the Court of Appeals
In declaring that petitioners were not purchasers in good faith and had no better
right to the subject property than that of any of their predecessors-in-interest, the
appellate court gave the following reasons. First, the auction sale was tainted with
irregularities: no notices of delinquency and of sale were sent to the owner. Second, the
owner continued to pay realty taxes on the property, even after the date of the sale. She
would not have done so had she been aware that it had already been auctioned off. Third,
the selling price was grossly inadequate and, when viewed together with the other facts
and circumstances, would render the sale itself void. Fourth, the purchasers failed to take
possession of the property, pay the real taxes, and inform the lessees of the purchase. As
a result, the latter continued to pay rent to the owner. As stated earlier, the CA a rmed the
trial court's Decision.
Hence, this Petition. 7
The Issues
Petitioners raise the following issues for the Court's consideration:
"I.

"The Honorable Court of Appeals erred in a rming that the tax sale of
Bantegui's property was tainted with irregularities that rendered the same null and
void.

"II.
"The Honorable Court of Appeals erred in a rming that the Resolution of
the Quezon City Regional Trial Court, Branch 85, con rming in favor of the
Capistranos the final bill of sale of the auctioned property is not conclusive.

"III.
"The Honorable Court of Appeals likewise erred in declaring that the
petitioners were not purchasers in good faith and innocent purchasers for value.

"IV.
"The Honorable Court of Appeals erred in a rming that petitioners should
pay respondents nominal damages of P50,000 and attorney's fees of P50,000." 8

The foregoing may be summed up into only one issue: whether the auction sale was
valid. TIEHSA

The Court's Ruling

The Petition has no merit.
Sole Issue:
Whether the Auction Sale Was Valid
The tax sale did not conform to the requirements prescribed under Presidential
Decree (PD) No. 464, otherwise known as the Real Property Tax Code. 9
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 First, no notice of delinquency or of sale was given to either Gorgonia Bantegui, the
delinquent owner; or to her representative.
On the one hand, Section 65 of PD 464 provides:
"SECTION 65. Notice of delinquency in the payment of the real property
tax. —
"Upon the real property tax or any installment thereof becoming delinquent,
the . . . city treasurer shall immediately cause notice of the fact to be posted at the
main entrance of the . . . city hall and in a public and conspicuous place in each
barrio of the . . . city as the case may be. The notice of delinquency shall also be
published once a week for three consecutive weeks, in a newspaper of general
circulation in the . . . city, if any there be, and announced by a crier at the market
place for at least three market days.
"Such notice shall specify the date upon which tax became delinquent, and
shall state that personal property may be seized to effect payment. It shall also
state that, at any time, before the seizure of personal property, payment may be
made with penalty in accordance with the next following section, and further, that
unless the tax and penalties be paid before the expiration of the year for which
the tax is due, or the tax shall have been judicially set aside, the entire delinquent
real property will be sold at public auction, and that thereafter the full title to the
property will be and remain with the purchaser, subject only to the right of
delinquent taxpayer or any other person in his behalf to redeem the sold property
within one year from the date of sale."

On the other hand, Section 73 of PD 464 states:

"SECTION 73. Advertisement of sale of real property at public auction. —

"After the expiration of the year for which the tax is due, the . . . city
treasurer shall advertise the sale at public auction of the entire delinquent real
property, except real property mentioned in subsection (a) of Section forty hereof,
to satisfy all the taxes and penalties due and the costs of sale. Such
advertisement shall be made by posting a notice for three consecutive weeks at
the main entrance of the . . . city or . . . hall in the case of cities, and in a public
and conspicuous place in barrio or district wherein the property is situated, in
English, Spanish and the local dialect commonly used, and by announcement at
least three market days at the market by crier, and, in the discretion of the . . . city
treasurer, by publication once a week for three consecutive weeks in a newspaper
of general circulation published in the . . . city.

"The notice, publication, and announcement by crier shall state the amount
of the taxes, penalties and costs of sale; the date, hour, and place of sale, the
name of the taxpayer against whom the tax was assessed; and the kind or nature
of property and, if land, its approximate areas, lot number, and location stating
the street and block number, district or barrio, municipality and the province or city
where the property to be sold is situated. Copy of the notice shall forthwith be
sent either by registered mail or by messenger, or through the barrio captain, to
the delinquent taxpayer, at his address as shown in the tax rolls or property tax
record cards of the . . . city where the property is located, or at his residence, if
known to said treasurer or barrio captain: Provided, however, That a return of the
proof of service under oath shall be led by the person making the service with
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 the . . . city treasurer concerned."

The auction sale of real property for the collection of delinquent taxes is in
personam, not in rem. 1 0 Although su cient in proceedings in rem like land registration,
mere notice by publication will not satisfy the requirements of proceedings in personam.
1 1 "[P]ublication of the notice of delinquency [will] not su ce, considering that the
procedure in tax sales is in personam." 1 2 It is still incumbent upon the city treasurer to
send the notice directly to the taxpayer — the registered owner of the property — in order
to protect the latter's interests. Although preceded by proper advertisement and
publication, an auction sale is void absent an actual notice to a delinquent taxpayer. 1 3
The sale of land "for tax delinquency is in derogation of property rights and due
process[;] the prescribed steps must be followed strictly." 1 4 In the present case, notices
either of delinquency or of sale were not given to the delinquent taxpayer. Those notices
are mandatory, and failure to issue them invalidates a sale. 1 5
Because it was clearly in contravention of the requirements under the law and
jurisprudence, the subsequent sale of the real property did not make its purchaser the new
owner.
A certi cate of title under the Torrens system serves as evidence of an indefeasible
title to the property in favor of the person whose name appears on it. 1 6 While it is true that
Transfer Certi cates of Title have already been issued in the names of the subsequent
purchasers, they should nonetheless be invalidated. Considering the failure to abide by the
mandatory requirements of a proceeding in personam, no better title than that of the
original owner can be assumed by the transferees.
Besides, the incontrovertible nature of a certi cate of title applies only when the
issue involved is the validity of the original and not of the transfer. Subsequent titles issued
to the prejudice of the rightful owner will produce no legal effects whatsoever. 1 7 Quod
nullum est, nullum producit effectum. That which is a nullity produces no effect. 1 8
A gross inadequacy in the price is of no moment either. It is true that the lower the
price, the easier it will be for the owner to effect redemption; 1 9 but the fact remains that
without the mandatory notices, the registered owner will never be given the opportunity to
redeem the property, despite the lapse of one year from the date the sale is registered. 2 0
Moreover, failure to assert ownership over a property is indicative of the doubtful
validity of its sale. The immediate purchasers in the present case neither took possession
nor informed the occupants (the Caedos) of the former's alleged acquisition of the
property. The purchasers did not even demand rent or ask them to vacate, as a result of
which the Caedos continued to pay rent to Respondent Bantegui. Indeed, registered
owners have the right to enjoy the property that they own, 2 1 including the jus utendi or the
right to receive from it whatever it produces, 2 2 like civil fruits. 2 3
Second, only a copy of the Resolution of Branch 85 of the Regional Trial Court of
Quezon City, con rming the nal bill of sale to the Capistranos, has been submitted by the
city treasurer to show the validity of the sale. 2 4
This Resolution is, however, inconclusive. With greater signi cance is the categorical
and unrefuted statement in it that the "[s]ealed envelope containing a copy of the petition
addressed to Gorgonia Bantegui . . . was returned to sender unclaimed . . . ." 2 5 That
statement de nitely con rms the lack of notices, without which the subsequent
proceeding to sell the property produces no legal effect. "Notice of sale to the delinquent
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 landowners and to the public[,] in general[,] is an essential and indispensable requirement
of law, the non-fulfillment of which vitiates the sale." 2 6
Third, Section 80 of PD 464 provides that "any balance of the proceeds of the sale
left after deducting the amount of the taxes and penalties due and the costs of sale, shall
be returned to the owner or his representative." Again contrary to the mandate of the law,
the balance of the proceeds from the tax sale was not even returned to Respondent
Bantegui or her representative after the issuance of the nal bill of sale. The failure to
return the proceeds reinforced the apparent irregularity not only in the conduct of the tax
sale, but also in its subsequent disposition.
Fourth, petitioners were not innocent purchasers for value. Despite their awareness
of defects in their title, they still failed to investigate or take the necessary precaution.
Good faith is a question of intention. 2 7 It consists in the possessor's belief that the
person from whom a thing has been received is its owner and can convey title. 2 8 It is
determined by outward acts and proven conduct. 2 9
"A purchaser of real estate at the tax sale obtains only such title as that held by the
taxpayer[;] the principle of caveat emptor applies." 3 0 Purchasers cannot close their eyes to
facts that should have put any reasonable person upon guard, and then claim that they
"acted in good faith under the belief that there was no defect in the title." 3 1 If petitioners
do not investigate or take precaution despite knowing certain facts, they cannot be
considered in good faith. The defense of indefeasibility of a Torrens title does not extend
to a transferee who takes the title despite a notice of the aw in it. 3 2 From a vendor who
does not have any title to begin with, no right is passed to a transferee.
In the present case, the exercise of the right of possession over the property was
attempted by none of the purchasers, except petitioners. 3 3 The latter's predecessors-in-
interest did not deny the fact that respondent spouses had continued to stay in and rent
the property from Respondent Bantegui, its registered owner. Information about the
purchase was not at all relayed by Evelyn Pereyra, a subsequent purchaser and former
resident, to the Caedos who were her very own parents. 3 4 When "the land sold is in the
possession of a person other than the vendor, the purchaser is required to go beyond the
certificate of title and make inquiries concerning the rights of the actual possessor." 3 5
Furthermore, nothing on the record shows that, aside from Respondent Bantegui,
the purchasers paid real property taxes, as required of every registered property owner.
The tax on real property for any year shall attach to, become due and payable 3 6 from, and
be the personal liability of its "owner at the beginning of the year." 3 7 Curiously, the city
government allowed Respondent Bantegui to continue paying real property taxes even
after the redemption period and the con rmation of the nal bill of sale. Moreover, the
records mention no payment of real property taxes from 1984 to 1986.
Finally, Respondent Bantegui remained in continuous possession of the owner's
duplicate copy of the Certi cate of Title. She was even allowed to undertake an
administrative reconstitution of her le copy after its destruction by re. Accordingly, the
Register of Deeds issued a reconstituted title in her name, in which the property had been
registered as early as 1959. For reasons known only to the alleged purchasers, no attempt
was even made to have the title immediately cancelled. It is basic that registration does
not vest title, which is a mere evidence of title to a property.
More important, the reconstituted title was allowed despite the fact that several
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 TCTs had already been previously issued in favor of petitioners' predecessors-in-interest.
Although reconstitution alone neither con rms nor adjudicates ownership, 3 8 considering
the surrounding circumstances of this case, the Court hereby con rms Respondent
Bantegui's rightful ownership of the property.
Entitlement to Damages
As the trial and the appellate courts held, respondents indeed failed to offer proof to
justify the award of actual or compensatory damages. The actual value of the house on the
property at the time of the demolition of the structure was not established. One is entitled
to adequate compensation only for pecuniary loss that has been duly proved. 3 9
Nominal damages as granted by the lower courts in the amount of P50,000 may be
a plausible remedy, however. These damages are justi ed especially when common sense
dictates that a pecuniary loss has indeed been suffered, but is incapable of precise
computation. They are adjudicated, not for the purpose of indemnifying respondents for
any loss suffered, but for vindicating or recognizing their right to a property that has been
violated or invaded. 4 0
Lastly, the award by the appellate court of P50,000 in attorney's fees also appears
reasonable because, by petitioners' act, respondents were compelled to incur expenses to
protect their interest. 4 1

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioners. ISDHEa

SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio Morales and Garcia, JJ., concur.

Footnotes

1. Rollo, pp. 9-30.

2. Id., pp. 32-43. Special Eleventh Division. Penned by Justice Juan Q. Enriquez Jr., with the
concurrence of Justices Ruben T. Reyes (Division chair) and Mercedes Gozo-Dadole
(member).
3. Id., pp. 45-46.

4. CA Decision, p. 12; rollo, p. 43. Uppercase and boldface in the original.

5. Id., pp. 3-5 & 34-36. Citations omitted.
6. Rollo, pp. 60-77. The dispositive portion of the Decision reads as follows:
"Wherefore, judgment is hereby rendered:
1. Nullifying the sale at public auction on November 21, 1984 conveying the property of
plaintiff GORGONIA BANTEGUI to the SPOUSES EDILBERTO AND JOSEFINA
CAPISTRANO as highest bidders;
2. Declaring:
A. The deed of absolute sale dated June 20, 1988 executed by JOSEFINA CAPISTRANO in
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 favor of SPOUSES JESSE AND EVELYN PEREYRA null and void;
B. The deed of absolute sale dated May 3, 1990 executed by SPOUSES JESSE AND EVELYN
PEREYRA in favor of SPOUSES RAMON AND ROSITA TAN null and void;
C. Transfer Certi cate of Title No. 361851 (2058) in the name of JOSEFINA CAPISTRANO,
married to EDILBERTO CAPISTRANO, null and void, and ordering the REGISTER OF
DEEDS OF QUEZON CITY to cancel the same from the land records of Quezon City;
D. Transfer Certi cate of Title No. 2059 in the name of JESSE PEREYRA AND EVELYN
PEREYRA null and void, and ordering the REGISTER OF DEEDS OF QUEZON CITY to
cancel the same from the land records of Quezon City;

E. Transfer Certi cate of Title No. 14801 in the name of SPOUSES RAMON TAN AND ROSITA
TAN null and void, and ordering the REGISTER OF DEEDS OF QUEZON CITY to cancel
the same from the land records of Quezon City;
3. Declaring the validity of Transfer Certi cate of Title No. RT-28458 (47103) in the name of
GORGONIA BANTEGUI, married to JESUS BAYOT;
4. Ordering defendants SPOUSES RAMON AND ROSITA TAN to pay to the plaintiffs nominal
damages of P50,000.00 and attorney's fees of P50,000.00; and,
5. Ordering defendants to pay the costs of suit.'"
7. This case was deemed submitted for decision on October 27, 2003, upon this Court's receipt
of respondents' Memorandum, signed by Atty. Jorge Roito N. Hirang Jr. Petitioners'
Memorandum, signed by Atty. Danilo Abaya Tiu, was received by this Court on August
21, 2003.
8. Petitioners' Memorandum, p. 10; rollo, p. 170. Original in uppercase.
9. Secretary of Finance v. Hon. Ilarde, GR No. 121782, p. 12, May 9, 2005.
10. Peña, Peña Jr., & Peña, Registration of Land Titles and Deeds (1994 rev. ed.), p. 376.
Talusan v. Tayag, 356 SCRA 263, 276, April 4, 2001.
11. Peña, Peña Jr., & Peña; supra.
12. Talusan v. Tayag, supra, per Panganiban, J.

13. Puzon v. Abellera, 169 SCRA 789, 795-796, January 31, 1989.
14. Ramos v. Villaverde, 88 Phil. 651, 654, April 28, 1951, per Tuason, J.
15. See Pantaleon v. Santos, 101 Phil. 1001, July 31, 1957.
16. Noblejas & Noblejas, Registration of Land Titles and Deeds (1992 rev. ed.), p. 215.
17. Solid State Multi-Products Corp. v. CA, 274 SCRA 30, 44, May 6, 1991.

18. Ballentine, Law Dictionary with Pronunciations (1948), p. 1077.

19. See §78 of PD 464.
20. Salalima v. Guingona , 326 Phil. 847, 914-915, May 22, 1996, per Davide Jr., J. (later CJ);
citing §78 of PD 464.
21. Art. 428 of the Civil Code.
22. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines (Vol. II,
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 1992), p. 45.
23. Civil fruits here refer to "the price of leases of lands and other property." 3rd paragraph of
Art. 442 of the Civil Code.
24. Rollo, pp. 78-79.
25. Resolution, p. 1; rollo, p. 78.

26. Estate of the late Mercedes Jacob v. CA , 347 Phil. 752, 767, December 22, 1997, per
Bellosillo, J. (quoting Serfino v. CA, 154 SCRA 19, 27, September 15, 1987, per Paras, J.).
27. Peña, Peña Jr., & Peña; supra, p. 147.

28. Arriola v. Gomez de la Serna, 14 Phil. 627, 629, December 17, 1909.
29. Tolentino; supra, p. 247.
30. Serfino v. CA, 154 SCRA 19, 27-28, September 15, 1987, per Paras, J.
31. Leung Yee v. Frank L. Strong Machinery Co ., 37 Phil. 644, 651, February 15, 1918, per
Carson, J.
32. Peña, Peña Jr., & Peña; supra, p. 148.
33. Art. 523 of the Civil Code.

34. RTC Decision, p. 12; rollo, p. 71.

35. Santiago v. CA, 317 Phil. 400, 413, August 14, 1995, per Melo, J. (quoting De Guzman, Jr. v.
CA, 156 SCRA 701, 710, December 21, 1987, per Fernan, J. [later CJ]).
36. §56 of PD 464.
37. Vitug & Acosta, Tax Law and Jurisprudence (2nd ed., 2000), p. 488 (citing City of Manila v.
Mitchel, 52 Phil. 138, 141, October 2, 1928, per Romualdez, J.).
38. Serra Serra v. CA, 195 SCRA 482, 490, March 22, 1991.
39. Art. 2199 of the Civil Code.
40. Arts. 2221 & 2222 of the Civil Code. See Allied Banking Corp. v. CA , 416 SCRA 65, 85,
November 18, 2003.
41. Art. 2208(2) of the Civil Code. See Air Philippines Corp. v. International Business Aviation
Services Phils., Inc., 438 SCRA 51, 79, September 9, 2004, per Panganiban, J.

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