Case Digest: G.R. No. L-9337 (December 24, 1914) - Prudencio de Jesus vs.

The City of
Manila

Facts:

● In 1901, Pastor Lerma declared a piece of land in Manila for taxation, understating its
area as 337,938.50 square meters, when it was actually 480,695.53 square meters. Due
to this inaccurate declaration, 142,767.03 square meters escaped taxes from 1901 to
1910. In 1907, Prudencio de Jesus purchased the land from Lerma under the Torrens
system and received a certificate of title. In 1910, taxes on the previously undeclared
portion were assessed against De Jesus.

● The city assessed back taxes on the undeclared area for the years it had escaped
taxation and demanded payment from De Jesus. To avoid legal complications, De Jesus
paid the taxes under protest and later filed an action to recover the amount.

● The trial court ruled in favor of De Jesus, holding that a purchaser of registered land
under the Torrens system is not liable for back taxes on undeclared portions that were
assessed after the purchase.

Issue:

● Whether a purchaser of registered land under the Torrens system is liable for back taxes
on undeclared portions that were assessed after the purchase.

Ruling:

● The Supreme Court affirmed the trial court's decision in favor of De Jesus.

Legal Principles Applied:

● Torrens System and Act No. 496: The Torrens system aims to create an indefeasible
and unimpeachable title to registered land, free from hidden defects, liens, and
incumbrances. Act No. 496 established this system in the Philippines.

● Section 39 of Act No. 496: Every purchaser of registered land who takes a certificate of
title for value in good faith shall hold the land free from all incumbrances except those
noted on the certificate, and certain specified incumbrances. The section restricts the
burden of past taxes on registered land to those "within two years after the same have
become due and payable."

● Purpose of Act No. 496: The primary purpose of Act No. 496 is to create and preserve
an unimpeachable title, which can be transferred fearlessly. The protection of the
purchaser is a dominant principle of the Act.
 ● Interplay of Sections 39 and 70: Section 70 of Act No. 496 subjects registered land to
the same burdens and incidents attached to unregistered land. However, Section 39 acts
as an exception to Section 70, prioritizing the protection of the purchaser's title.

Court's Reasoning:

● Exemption for Purchasers for Value: Section 39 of Act No. 496 provides an exemption
for purchasers of registered land for value. This exemption ensures that the title of a
purchaser is clean and free from incumbrances, including taxes, except for those
specified in the section.

● Taxes Must Be Due and Payable: The court emphasized that taxes subject to Section
39 must be both "due and payable" and must be subsisting as liens on the land. Taxes
that were not assessed or levied prior to the land's registration or transfer cannot be
considered "due and payable" within the meaning of the section.

● Purpose of Tax Assessment: Taxes are not due and payable until they have been
levied or assessed as provided by law. The court clarified that taxes assessed for the
first time after the land's registration or transfer cannot be considered due and payable
within two years prior to the registration or transfer.

● Protection of Purchaser: The court highlighted that the aim of the statute is to protect
the purchaser and maintain the quality of the Torrens title. Allowing the collection of
taxes that were never assessed or levied would undermine the purpose of creating an
unimpeachable title.

● Conflict Between Sections: While there may be apparent conflicts between sections
like 39 and 70, the court clarified that such conflicts arise from the nature of the subject
matter they address. The exceptions in Section 39 must be given effect, as they are an
integral part of the law.

Conclusion:

● The court ruled that a purchaser of registered land under the Torrens system is not liable
for back taxes on undeclared portions that were assessed after the purchase, as long as
the taxes were not due and payable within two years prior to the registration or transfer.
The purpose of protecting the purchaser's title and ensuring its unimpeachability takes
precedence over conflicting provisions. The court affirmed the trial court's decision in
favor of Prudencio de Jesus and held that he is entitled to recover the taxes paid for the
undeclared portion.