Provincial Government of Cavite V CQM Management - Digest

Provincial Government of Cavite and Provincial Treasurer
of Cavite, petitioners, vs. CQM Management, Inc., (As

successors-in-interest of the Philippine Investment
One)
GR No. 248033, July 15, 2020
Germaine Suzette Austero
Case No. 92 - Tax Review
FACTS:
On December 1, 2004, Philippine Investment One (PI One), a acquired from RCBC, through
a Deed of Assignment, two non-performing loans: (1) Maxon loan in the amount of P30M -
was secured by a REM over a building (Maxon property); and (2) Ultimate loan in the
amount P10.5M - also secured by a REM over a factory building (Ultimate property). Both
proerties were located at the Philippine Economic Zone Authority (PEZA), Rosario, Cavite.
PI One tried to collect the obligations of both Maxon and Ultimate but both failed to pay.
Conmsequently, PI One filed petitions to foreclose the REM wherein the Maxon property
was sold to PI One as the highest bidder while the Ultimate property was sold to CQM
Management. Subsequently, PI One sold all of its rights over the Maxon property to CQM.
CQM started and tried to consolidate its tax declarations over the two properties after the
laps of the redemption periods. However, Maxon and Ultimate have unpaid real property
taxes for the years 1997 - 2013 in the following amounts: (1) Maxon P15.8M (2000-2013);
and (2) Ultimate P6.2M (1997 - 2013). Because of the unpaid real property tax, CQM could
not obtain the necessary tax clearance in order to transfer the TDs under its name. Worse,
the Provincial Treasurer of Cavite issued a tax assessment and a warrant of levy and also
set the same for public acution on December 10, 2014, in order to satisfy the unpaid real
property taxes.
On November 25, 2014, CQM Management filed a petition for injunction with prayer of
temporary restraining order and preliminary injunction against the Provincial Govt of Cavite
and the Provincial Treasurer of Cavite. Which was granted by the RTC causing for the public
auction not to push through.
RTC Ruling
1
RTC rendered its decision in favor of the respondent ruling that the respondent is not liable
for the real property tax over its properties as it is exempt under Sec. 24 of RA 79161, as
amended by RA 8748. It ruled that Maxon and Ultimate properties which are located in a
special economic zone under the PEZA in Cavite are exempt form any local or national tax.
The RTC made permanent the writ of injunction it earlier issued.
CA Ruling
The CA ruled that respondent was neither the owner nor the entity with the actual or
beneficial use or possession of the properties so it would be incongruous to impose a legal
obligation upon the respondent to pay the accrued realty taxes of the properties.
The CA also ruled that the properties involved were exempt from real estate taxation
pursuant to Sec. 24 of RA 7916, as amended.
The CA also ruled that some of the unpaid taxes already prescribed and can no longer be
collected under Sec. 270 of RA 71602. Petitioners failed to offer any plausible reason for
their failure to collect t he accrued real property taxes.
ISSUES:
1. WON the CA was correct in enjoining the tax delinquency sale (YES)
2. WON the respondent is exempt from paying real property taxes (YES)
3. WON the unpaid real taxes sought has already prescribed (YES)
RULING:
1.
The CA was correct in permanently enjoining the petitioners from conducting tax
delinquency sale.
Citing National Power Corp. v. Province of Quezon, et al,. the Court explained that liability of
taxes generally rests on the owner of the real property at the time the tax accrues.
However, personal liability for real property taxes may also expressly rest on the entity with
the beneficial use of the real property. In either case, the unpaid tax attaches to the
1
Sec. 24, RA 7916, as amended. Exemption from Taxes Under the NIRC. - Except for real property taxes
on land owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, 5% of the gross income earned by all
business enterprises within the ECOZONE shall be paid and remitted as follows:
(a) 3% to the National government
(b) 2% which shall be directly remitted by the business establishments to the treasurer’s office
of the municipality or city where the enterprise is located.
2
Sec. 270, RA 7160 (LGC). Basic real property tax shall be collected within 5 years from the date they
become due and that no action for the collection of tax, whether administrative or judicial, shall be
instituted after the expiration of such period.
2
property and is chargeable against the taxable person who had actual or beneficial use and
possession of it regardless of whether or not he is the owner.
Here, CQM was not yet the owner or entity with actual or beneficial use of the poreperties
during the years when the LGU sought to collect real property taxes. To impose the real
property taxes on CQM would not only be contrary to law but also unjust.
Given the foregoing, the petitioners cannot conduct a tax delinquency sale over the
properties which are now owned by the CQM. To do so would effectively make respondent
liable for the payment of real property taxes due on the properties when it did not yet own
or had actual or beneficial use of the properties.
2.
CQM isexempt from paying real property taxes over the properties, as provided in Se.24 of
RA 7916 as amended.
There is nothing to indicate that the respondent is a developer. Thus, considering RA 7916,
as amended, it is evident that save for the payment of 5% fross income tax, respondent is
exempt from the payment of national and local taxes including real property tax on the
subject properties.
3.
The collection of some of the unpaid real property taxes already prescribed.
As provided in Sec. 270 or RA 7160, the basec real property tax shall be collected within 5
years from the date they become due and that no action for the collection of the tax,
whether administrative or judicial, shall be instituted after the expiratio of such period.
Unfortunately, petitioners failed to collect the accrued real property taxes which fate from
as early as 1997.
WHEREFORE, THE PETITION FOR REVIEW ON CERTIORARI is DENIED.

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Provincial Government of Cavite and Provincial Treasurer

of Cavite, petitioners, vs. CQM Management, Inc., (As

WHEREFORE, THE PETITION FOR REVIEW ON CERTIORARI is DENIED.

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