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PROVINCIAL GOVERNMENT OF CAVITE v. CQM MANAGEMENT

FACTS:

CQM Management, Inc. (respondent) filed a petition for injunction against the Provincial Government of Cavite and the Provincial Treasurer of Cavite (petitioners) regarding the tax delinquency sale of the properties owned by Maxon Systems Philippines, Inc. (Maxon) and Ultimate Electronic Components, Inc. (Ultimate).

In 2004, Philippine Investment One (SPV-AMC) Inc. (PI One) acquired the non-performing loans of Maxon and Ultimate. PI One sold its rights over the properties to respondent, making respondent the new owner.

However, respondent could not obtain tax clearance from the petitioners to transfer the properties under its name due to unpaid real property taxes. Petitioners issued a tax assessment and warrant of levy against Maxon and Ultimate, scheduling a public auction to satisfy the unpaid taxes. The RTC issued a preliminary writ of injunction to stop the auction.

The RTC ruled in favor of respondent, stating that it is exempt from real property tax under the Special Economic Zone law and on equity consideration arising from laches and estoppel.

The CA affirmed the RTC decision, stating that respondent was not the owner nor in possession of the properties at the time of tax accrual. The properties were also exempt from real estate taxation under the Special Economic Zone law.

ISSUES:

  1. Whether respondent is obligated to pay the accrued realty taxes of the properties it acquired.

  2. Whether the properties are exempt from real estate taxation.

  3. Whether some of the unpaid realty taxes sought to be collected have already prescribed.

  4. Whether petitioners are barred by laches and estoppel from collecting the real property taxes.

  5. Whether respondent is entitled to a permanent injunction against petitioners.

  6. Whether or not the respondent is exempt from paying real property taxes under Section 24 of Republic Act No. 7916, as amended by Republic Act No. 8748.

  7. Whether or not the respondent is required to secure prior concurrence from the local government unit before availing itself of the tax exemption.

RULING:

  1. The Court denies the petition and affirms the ruling of the RTC which permanently enjoined petitioners from conducting tax delinquency sale over respondent's properties.

  2. The Court affirmed the ruling of the Court of Appeals that the respondent is exempt from paying real property taxes under Section 24 of Republic Act No. 7916, as amended by Republic Act No. 8748. The said provision exempts business establishments operating within the ECOZONE from national and local taxes, except for real property taxes on land owned by developers. The Court held that nothing in Section 24 requires prior concurrence from the local government unit before availing the tax exemption.

  3. The Court ruled that there is no requirement for prior concurrence from the local government unit before the respondent can avail itself of the tax exemption. The Court cited Section 35 of Republic Act No. 7916, which only requires business enterprises within a designated ECOZONE to register with the PEZA to avail themselves of all incentives and benefits provided for under the law.

PRINCIPLES:

  • Liability for taxes rests on the owner of the real property at the time the tax accrues. However, personal liability for real property taxes may also rest on the entity with the beneficial use of the real property. In either case, the unpaid tax attaches to the 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.

  • To impose real property taxes on a party, they must be the owner or the beneficial user of the property during the designated periods. Imposing the tax on a party who did not yet own or have actual or beneficial use of the property would be contrary to law and unjust.

  • Contractual assumption of the obligation to pay real property tax, by itself, is insufficient to make one liable for taxes. The contractual assumption must be supplemented by an interest that the party assuming the liability had on the property.

  • The collection of basic real property tax must be made within five years from the date it becomes due, and no action for collection can be instituted after the expiration of such period.

  • The doctrine of laches and estoppel may bar the collection of real property taxes if there is a violation of substantial justice and fair play.

  • The new owner of a property has a clear right over the property and may be entitled to the issuance of a permanent injunction if there is a clear violation of such right and irreparable damage would be caused by the auction sale of the property.

  • Business establishments operating within the ECOZONE are exempt from national and local taxes, except for real property taxes on land owned by developers, pursuant to Section 24 of Republic Act No. 7916, as amended by Republic Act No. 8748.

  • Prior concurrence from the local government unit is not required for business enterprises within a designated ECOZONE to avail themselves of tax exemptions under Republic Act No. 7916, as long as they have registered with the PEZA, pursuant to Section 35 of the said law.