G.R. No. 248033 , July 15, 2020
PROVINCIAL GOVERNMENT OF CAVITE AND PROVINCIAL TREASURER OF CAVITE, PETITIONERS, VS. CQM MANAGEMENT, INC., [AS SUCCESSOR-IN-INTEREST OF THE PHILIPPINE INVESTMENT ONE (SPV-AMC), INC.], RESPONDENT.

FACTS

On December 1, 2004, Philippine Investment One (SPV-AMC) Inc. (PI One) acquired non-performing loans from Rizal Commercial Banking Corporation (RCBC), secured by real estate mortgages over properties owned by Maxon Systems Philippines, Inc. (Maxon) and Ultimate Electronic Components, Inc. (Ultimate), both located within the Philippine Economic Zone Authority (PEZA) in Rosario, Cavite. After Maxon and Ultimate failed to pay their obligations, PI One foreclosed on the mortgages. The Maxon property was sold to PI One at auction, and the Ultimate property was sold to CQM Management, Inc. (respondent). Subsequently, PI One assigned all its rights over the Maxon property to respondent, making respondent the owner of both properties. Respondent encountered problems when it tried to consolidate the tax declarations, as the Provincial Treasurer of Cavite had records of unpaid real property taxes for Maxon (years 2000-2013) and Ultimate (years 1997-2013). Due to these unpaid taxes, respondent could not obtain a tax clearance to transfer the tax declarations to its name. The Provincial Treasurer issued a tax assessment, a warrant of levy, and scheduled a public auction of the properties for December 10, 2014, to satisfy the unpaid taxes. The Regional Trial Court (RTC) issued a preliminary writ of injunction to stop the auction.

ISSUE

Whether the Provincial Government of Cavite and the Provincial Treasurer of Cavite can validly conduct a tax delinquency sale of the subject properties, now owned by respondent, for the unpaid real property taxes that accrued during the ownership of the previous owners, Maxon and Ultimate.

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision, which upheld the RTC’s permanent injunction against the tax delinquency sale. The Court ruled that respondent was not liable for the real property taxes that accrued for the years 1997-2013 (Ultimate) and 2000-2013 (Maxon) because it was neither the owner nor the entity with actual or beneficial use or possession of the properties during those taxable periods. Respondent acquired ownership of the Maxon property only in March 2014 and the Ultimate property in August 2014. To impose the tax liability on respondent for periods before its ownership would be contrary to law and unjust. Furthermore, from the time respondent acquired ownership, the properties were exempt from real property taxes under Section 24 of Republic Act No. 7916 (The Special Economic Zone Act of 1995), as amended, as they are business establishments operating within the PEZA ecozone. The Court also noted that the right to collect some of the unpaid taxes (dating back to 1997 and 2000) had already prescribed under Section 270 of the Local Government Code, which requires collection within five years from the date the taxes become due.