Municipality of Cainta, Rizal vs. Spouses Ernesto E. Braña and Edna C. Braña and City of Pasig

In an interpleader action filed by a taxpayer confronted with conflicting real-property-tax claims from two local government units whose territorial boundary is being litigated, the court cannot order payment to either claimant solely on the basis of locational entries in certificates of title; the proper remedy pending final resolution of the boundary dispute is to order the taxes deposited in escrow, preserving the status quo between the competing local governments while ensuring the taxpayer’s obligation is satisfied.

Spouses Ernesto and Edna Braña owned six parcels of land in Phase 9, Pasig Green Park, Cainta, Rizal. From 1994 to 1996 they paid real estate taxes to the Municipality of Cainta. In 1997, the City of Pasig filed a collection suit against them, asserting that the properties were geographically located in Pasig. The transfer certificates of title indicated “Barrio Santolan, Municipality of Pasig.” A boundary dispute between the two local governments — involving the same properties — had been pending before the RTC of Antipolo since 1994, and in 2002 that court issued an injunction restraining Pasig from collecting taxes from the disputed zones. Faced with demands from both sides, the spouses filed an interpleader to compel the rival local governments to litigate their claims.

• Nature and Title: Sps. Braña were registered owners of six parcels of land located at Phase 9, Pasig Green Park, Cainta, Rizal, covered by TCT Nos. 47350, 47351, 47352, 47353, 46600, and 46601. The locational entries on all titles uniformly stated “Barrio Santolan, Municipality of Pasig, Metro Manila.”

• Initial Tax Payments: Sps. Braña religiously paid real estate taxes on the six parcels to the Municipality of Cainta from 1994 to 1996. Cainta had long assessed the properties for taxation purposes.

• Conflicting Claim by City of Pasig: In 1997, the City of Pasig filed Civil Case No. 5525 against Sps. Braña for collection of unpaid real property taxes, asserting that the properties were geographically situated in Pasig City. Sps. Braña deposited two checks covering taxes for 1995 to 1998 with the Metropolitan Trial Court of Pasig City where the collection case was pending. Despite the deposit, Municipality of Cainta continued to demand payment.

• Interpleader: On June 26, 1998, Sps. Braña filed an action for interpleader with the RTC of Pasig City to compel the two local government units to litigate their adversarial claims and to preempt a second tax collection suit from Cainta.

• Pending Boundary Dispute and Injunction: On January 30, 1994, the Municipality of Cainta had filed a petition for settlement of boundary dispute against the City of Pasig before the RTC of Antipolo City, Branch 74, docketed as Civil Case No. 94-3006. The subject properties were among the territories disputed. On December 16, 2002, the RTC of Antipolo issued an Injunction Order restraining the City of Pasig from: (1) further collecting taxes from the disputed areas under litigation; (2) pursuing a threatened auction sale of affected lots; (3) making pronouncements of jurisdictional title over the disputed areas; and (4) ordering Pasig to reimburse taxes received from paying residents. As of the Supreme Court’s deliberation, Civil Case No. 94-3006 remained pending resolution.

• Municipality of Cainta’s Position in the Interpleader: Cainta claimed entitlement to the real estate taxes on the ground that the properties were located in Brgy. San Isidro, Cainta, Rizal, which fell within its geographical jurisdiction under the Progress Map of CAD-688-D or the Cainta‑Taytay Cadastral Survey. The properties had long been registered for tax purposes with Cainta before Pasig’s assessment in 1997.

• City of Pasig’s Position in the Interpleader: Pasig argued that the locational entries in the TCTs were controlling for tax collection purposes. It invoked Department of Finance rulings that the location stated in the certificate of title shall be followed for tax declaration issuance unless corrected by a competent authority.

• Subsequent Tax Payments: Sps. Braña later paid real estate taxes for the period 1995 up to 2016 to the City of Pasig, as stated in their Manifestation and Compliance filed on August 15, 2016. The Municipal Trial Court of Pasig archived the collection case (Civil Case No. 5525) pending resolution of the boundary dispute.

• Interference with Boundary Case Jurisdiction: The Municipality of Cainta argued that the RTC of Pasig erroneously assumed jurisdiction and adjudicated territorial rights by ordering tax payment to Pasig, even though the exclusive venue for determining territorial jurisdiction was the RTC of Antipolo in the boundary dispute. The decision rendered the Antipolo court’s Injunction Order meaningless and constituted an undue interference with its processes.

• Status Quo Ante: The Municipality maintained that a status quo should be preserved pending final resolution of Civil Case No. 94-3006, and that Sps. Braña should continue paying real estate taxes to Cainta — the local government they had been paying since 1994 — until the boundary court definitively settled the territorial lines.

• Prima Facie Entitlement Based on Title: The City of Pasig argued that the interpleader case merely determined which local government was entitled to collect taxes based on the controlling locational entries in the TCTs. Because the certificates of title stated “Barrio Santolan, Municipality of Pasig,” and these entries had never been corrected by any competent authority, Pasig was the proper taxing authority.

• Non-Suspension of Tax Rules: Pasig contended that the pendency of a boundary dispute does not suspend applicable taxation rules. The Implementing Rules and Regulations of the Local Government Code (Administrative Order No. 270, Rule III, Article 18) provide that pending final resolution of a dispute, the status of the affected area prior to the dispute shall be maintained for all legal purposes. Since the titles reflected Pasig, the status quo prior to the dispute favoured Pasig. Pasig also cited a Department of Finance Indorsement that for tax declaration purposes, the location in the certificate of title must be followed unless corrected by competent authority.

• Sps. Braña’s Neutral Stance: The spouses, as interpleading plaintiffs, did not advocate for either local government unit. They availed themselves of interpleader solely to avoid the risk of double taxation and sought a judicial determination of which claimant was properly entitled to the tax payments. They submitted to the Court’s disposition.

• Entitlement to Tax Collection Pending Boundary Dispute: Whether the RTC of Pasig correctly ordered Sps. Braña to pay real estate taxes to the City of Pasig based exclusively on the locational entries in the TCTs, given a co-equal court’s pending boundary dispute case that included the same properties and had already restrained Pasig from collecting taxes.

• Interference with Co-Equal Court: Whether the RTC of Pasig’s ruling constituted an impermissible interference with the jurisdiction and processes of the RTC of Antipolo, which had issued an Injunction Order prohibiting the City of Pasig from collecting taxes in the disputed area.

• Entitlement to Tax Collection Pending Boundary Dispute: The RTC’s order to pay taxes to the City of Pasig was erroneous. Because the territorial jurisdiction over the properties was the very subject of Civil Case No. 94-3006 before the RTC of Antipolo, the locational entries in the TCTs could not be treated as conclusive. The determination of which local government has the right to assess and collect real property taxes depends on a definitive finding of where the property is situated — a question expressly reserved for the boundary court. The Real Property Tax Code and the Local Government Code both allocate taxing authority to the local government where the property is located, but that location was unsettled. The certificates of title’s entries do not bind the boundary court, and reliance on them by the interpleader court would preempt the outcome of the boundary case. To protect the interests of both contending local government units and to prevent the risk of double payment, the taxes must be deposited in escrow pending final adjudication. The obligation to pay real property taxes continues irrespective of the boundary dispute.

• Interference with Co-Equal Court: The RTC of Pasig’s Decision effectively nullified the RTC of Antipolo’s Injunction Order and interfered with the latter’s exclusive jurisdiction over the boundary dispute. An interpleader action cannot be used to adjudicate territorial rights already sub judice in another court. The proper response was to maintain the status quo between the local governments through an escrow arrangement, thereby deferring to the boundary court’s ultimate resolution.

• Escrow Deposit of Real Property Taxes During Pending Boundary Disputes — When two local government units each claim the right to collect real property taxes over the same property because its location is contested in a pending boundary dispute, the taxpayer must continue paying the taxes, but payment shall be made by deposit in an escrow account opened with the Land Bank of the Philippines in trust for the contending local governments. The proceeds shall be released to the local government unit adjudged by final judgment to have territorial jurisdiction over the area. Certificate-of-title locational entries, while ordinarily controlling for tax-declaration purposes, lose their probative value where the territorial boundary itself is in litigation and an injunction against collection has been issued.

• Interpleader Cannot Determine Territorial Jurisdiction — An action for interpleader is an inappropriate vehicle to determine the territorial jurisdiction of local government units. The determination of territorial boundaries and the consequent right to collect local taxes is vested exclusively in the court hearing the boundary dispute. An interpleader court may not preempt the boundary court by awarding tax-collection rights based solely on certificate-of-title entries that the boundary litigation may ultimately reject or modify.

• “The obligation of Sps. Braña to pay real estate taxes on the properties cannot be questioned. Payment of real estate taxes must continue notwithstanding the boundary dispute case. However, ordering Sps. Braña to pay real estate taxes to the City of Pasig simply because of the locational entries in the TCTs would be counter-productive considering that the RTC of Antipolo has not yet rendered a definitive ruling as to the precise territorial jurisdiction of the City of Pasig and the Municipality of Cainta.” — This passage encapsulates the ratio: the duty to pay taxes is distinct from the determination of which LGU is entitled to receive payment while the boundary remains unsettled.

• “While it is true that Pasig is the location indicated in the TCTs, the Municipality of Cainta have long assessed the same for tax purposes and Sps. Braña were paying the real estate taxes to the Municipality of Cainta. … [T]he same cannot be relied in this case because the location of the property is precisely in dispute. The RTC of Antipolo, which has jurisdiction over the boundary dispute case, would be the best forum to determine the precise metes and bounds … as well as the extent of each local government unit’s authority, such as its power to assess and collect real estate taxes.” — Demonstrates that title entries are not dispositive when the territorial question is sub judice.

• Dio v. Subic Bay Marine Exploratorium Inc., 736 Phil. 216, 224 (2014) — Cited for the definition of a question of law versus a question of fact. The Supreme Court relied on this distinction to conclude that the petition raised a pure question of law (whether the RTC could order payment to Pasig despite a pending boundary dispute and injunction), thus excusing the direct resort to the Court under the hierarchy of courts doctrine.

• Presidential Decree No. 464 (Real Property Tax Code), Sections 5 and 57 — Section 5 provides that all real property shall be appraised at the current and fair market value prevailing in the locality where the property is situated. Section 57 makes the treasurer of the province, city, or municipality where the property is situated responsible for tax collection. The Court acknowledged these as the general rule but held that they cannot be applied where the property’s situs is the very issue in a pending boundary suit.

• Republic Act No. 7160 (Local Government Code), Sections 201 and 247 — Section 201 reiterates the appraisal rule tied to the locality where the property is situated; Section 247 delegates collection responsibility to the city or municipal treasurer concerned. The Court treated these provisions in tandem with the Real Property Tax Code and emphasized that they presuppose a definitive location.

• Administrative Order No. 270 (Implementing Rules and Regulations of the Local Government Code), Rule III, Article 18 — This provision states that pending final resolution of a boundary dispute, “the status of the affected area prior to the dispute shall be maintained and continued for all legal purposes.” The City of Pasig invoked this rule, but the Court did not mechanically apply it because the prior status was ambiguous — Cainta had historically collected taxes, yet the titles reflected Pasig. Instead, the Court opted for an escrow arrangement as the most equitable interim measure.

Leonen, Gesmundo, Zalameda, and Gaerlan, JJ., concurred.