®@ Republic of the Philippines Supreme Court ‘Manila SECOND DIVISION PROVINCIAL GOVERNMENT G.R. No. 248033, OF CAVITE and PROVINCIAL TREASURER OF CAVITE, Present: Petitioners, PERLAS-BERNABE, Chairperson, HERNANDO INTING, DELOS SANTOS, and QM MANAGEMENT, INC, GAERLAN, J [as suecessor-imincerest of the Phitippine Investment One (SPV- AMO), Ine. 4 Respondent, 15. Promulgated: This is a Peon for Review on Certiorai! under Rule 45 of the Rules of Court assiling the Decision’ dated May 23, 2018 and the Resolution’ dated Jure 20, 2019 of the Court of Appeals (CA) in CA- GR. CY No, 107654, The CA affirmed the Decision dated February 19, 2016 and the Resolution dated July 7, 2016 of Branch 65, Regional Trai Court (RTC), Makati City that enjoined the Provincial Government of Cavite and the Provincial Treasurer of Cavite from conducting a tax delinquency sale ofthe real properties of CQM Management, ne ADesison GR.No. 248003 The Facts (On November 25, 2014, COM Management, Ine. (respondent) filed petition for injunction with prayer for temporaty restraining order ‘and preliminary injunetion against the Provincial Government of Cavite and the Provincial Treasurer of Cavite (collectively, petitioners), Maxon Systems Philippines, Ine, (Maxon), and Uhimate Electronic ‘Components, Inc (Ltimate) in connection with Maxon’s and Uttimate’s Unpaid real property taxes and the impending tax delingueney sale of their properties. On December 1, 2004, Philippine Investment One (SPV-AMC) Inc. (PI One), a domestic corporation organized as a Special Purpose Vehicle by virtue of The Special Purpose Vehicle (SPV) Act of 2002 or the Republic Act No. (RA) 9182, acquired from Rizal Commercial Banking Corporation (RCBC), through @ Deed of Assignment of even date, two non-performing loans—that of Maxon (Maxon loan) and Ultimate (Likimate oan), The Maxon loan was secured by a real estate ‘mortgage over a building (Maxon property), located atthe Main Avenui, Philippine Economic Zone Autherity (ELA), Rosario, Cavite containing an area of 17,466 square meters (sq.m.), and declared for tax purposes under Tax Declaration No. (TD) 17-009.01506, As af October 25, 2013, the outstanding obligation of Maxon to Pl One stood at 130,000,000.00. (a the other Sand, the Ultimate loan was also secured by a real estale mortgage over a factory building (Ultimate property), likewise located at the PEZA, Rosario, Cavite, containing an area of 3,000 sqm. and declared for tax purposes under TD 17-0009-03191. As of February 7, 2014, the outstasfing loan obligation of Ultimate to Pl One stood at P10,500,000.00. Thus, Pl One ied (© collect the obligations of Maxon and Utimate, but the two companies failed vo pay their obligation to Pl One. ‘Consequently, PI One filed petitions to foreclose the realestate mortgage ‘of both Maxon and Ultimate, Subsequently, auction safes wereDecision 3 GRNo. 248033 conducted on the Maxon and Ultimate properties, The Maxon property ‘ns sold to Pl One as the highest bidder; while the Litimate property ‘was sold to respondent. Subsequently, PI One sold all of ofits rights ‘over the Maxon property to respondent through a Deed of Assignment ddated March 31, 2014. Thus, respondent became the new owner of both the Maxon and Uhimate properties.” ‘The problem arose when respondent started and tried 10 consolidate its tax declarations over the two properties after the lapse of the redemption periods. From the records of the Provincial Treasurer of Cavite, Maxon and Ultimate have unpaid real property taxes in the following amounts: (1) Maxon - 15,888,089.09 (for the years 2000- 2013); and (2) Ultimate - %6,238,407.76 (for the years 1997-2013). Because of the unpoid real property taxes, respondent could not obtain the necessary tax clesrance from petitioners in order to transfer the TDs fover the Maxon and Ulkimate properties under its name, Worse, the Provincial Treasurer of Cavite issued a tax assessment and a warrant of levy against Maxon and Ultimate after having declared the properties as delinquent. I also set the same for public auction on December 10, 2014, {in order to satisty the unpaid real property taxes assessed against them. However, the scheduled auction did not push through asthe RTC issued «timely preliminary writ of injunction enjoining the prospective sale The RIC Ruling (On February 19, 2016, the RTC rendered its Decision” in favor of respondent. The RT ruled that respondent isnot Hable for the teal Property tax over its properties as it is exempt under Section 24" of RA 7916." as amended by RA 8748, as well as on equity consideration arising ftom laches and estoppel. It ruled that the Maxon and Ultimate ins ‘ownod ty npn mc al intl al AC ape bee ‘btshmens spas wii the EEOZONE. Is se feet 909 he Bos "TT: pace (4) Nationa Goreme io ni lt ay ty de Baines tas we © te spel Camm 208 AtoDecision 4 GR.No, 248003 properties which are iocated ina specia! economic zane under the PEZA in Cavite are exempt ftom any local or national tax, save fora 5% tax on theit gross income Thus, the RTC made permanent the writ of injunction which i e:eier issued.” Petitioners filed a motion for reconsideration, but the RTC denied it in its Resolution dated July 7, 2016." The CA Rating In its Decision" dated May 23, 2018, the CA denied the petition ‘The CA ruled that respondent was neither the owner nor the entity with the actual of heneficial use or possession of the pieces of real Property for which real property taxes for the taxable years 2000-2013 (Maxon property) and 1997-2013 (Ultimate property) were sought by Petitioner. I explana that respondent became the owner of the Ulkimate property only upon sie expiration ofthe three-month redemption period ‘which was in August, 2014. Respondent also became the absolute owner ‘of Maxon only wher PI One assigned is vight over the realty following, the expiration of th> three-month redemption period in March, 2014, ‘Thus, it would be incongruous to impose a legal obligation upon respondent to pay the accrued realty taxes of the properties considering, ‘that respondent was not in possession thereof. Further, inasmuch as respondent was not the owner nor did it have actual or beneficial use or possession of the suoject properties atthe time of acerual ofthe taxes. sought to be collected, its right to file a protest under the Local Government Code ws contrary to petitioners perception, non-existent." The CA also red thatthe properties involved were exempt fiom real estate taxation pursuant to Section 24 of RA 7916, as amended. Moreover, the provisions of RA 7916 were mite as to any requirement of prior concurrence from the local government unit involved before respondent can avail itself ofthe tax exemption provided under the law. Instead, Section 35" of RA 7916 required business enterprises within @Decision s GR No, 248033 designated ecozone to repister with PEZA in order to aval themselves of the incentives and benefits under RA 7916, Such requirement was demonstrated by respondent's Registration and Lease Agreements with PEZA."" ‘The CA furthcr ruled that some of the unpaid realty taxes sought to be collected by the Provincial Goverment of Cavite already prescribed and ean n. longer be collected under Section 270 of RA 7160, also known as the Local Government Cade, which provides that the basic real property tx shall be collected within five years from the date ‘they become due and that no action for the collection ofthe tax, whether ‘administrative or judicial, shall be instituted after the expiration of such Period. Here, Maxon had been delinquent in the payment ofits realty tax Since 2000, while Uhimate filed to pay realty taxes since as ently as 1997. Petitioners failed to offer any plausible reason for their failure t0 collet the accrued real property taxes.” ‘The CA furthe-more ruled tht petitioners are barred by laches ad estoppel, substantia justice, and fair play firm collerting the real propery taxes due on the properties previously owned by Maxon and Ultimate” Lastly, the CA ruled that respondent sufficiently established its, Fight to the issuance of a permanent injunction against petitioners. It explained that as the new owner, respondent had a clear right over the properties and that there was a clear violation of such right in the threatened auction sale of the properties by the Provincial Treasurer of Cavite forthe unpai¢ realty taxes thereon. Moreover, irreparable damage Wold be caused to respondent if the auction sale of the properties will proceed.” Hence, the prion fay.Dee'son 6 GR. No, 248083 The Courts Ruling ‘The Court denies the petition for failure of petitioners to show that the CA committed any reversible errr in dismissing its appeal ‘The CA is cerect in denying petitioners’ appeal and in effect, affirming the ruling af the RTC which permanently enjoined petitioners from conducting tx delinquency sale over respondent's properties whieh are located atthe PEZA, Rosario, Cavite, In National Pewer Corp.» Province of Quezon, et al. the Court ‘explained that the liability for taxes generally rests on the owner of the real property at the time the tax accrues as a necessary repercussion of ‘exclusive dominion However, personal lability for real property taxes ‘may also expressly rest on the entity with the beneficial use of the rel property.™ In ether case, the unpaid tox attaches to the property and, is chargeable against the taxable person who had actual or beneficial use ‘and possession oft regardless of whether or not he isthe owner” Here, as corestly pointed out by the CA, respondent was not yet the owner or entity withthe actual or beneficial use ofthe building which \was previously owned by Maxon (Maxon property) and the building \hich was previously owned by Ultimate (Ultimate property) during the years for which putitoners sought 0 collect real property taxes, Specifically, petitioners sought to collet from respondent real property taxes due on the Maxon property for the years 2000-2013 and on the Ultimate property forthe years 1997-2013, However, tespondent became the owner of the Maxon property and the Ultimate property only in March 2014, and August 2014, respectively. To impose the ral property taxes on respondent, which was neither the owner or the beneficial user ‘of the property durin the designated periods would not only be contrary to law but also unjus.* a8 om at ting of ap Boog, 1S Pl 21822522498 a eal Ba ‘om 3) cay hing Rl Ph if pan 1 i $20. ng id Sos ciig Teu fa of Cacia Flaw Cif Mo, 361 PL 2 607 2 teDesision 7 GR No, 249033 Not even @ stipulation in the Deed of Assignment that PI One.is, selling, assigning and conveying in favor of respondent allright, titles, obligations, benefits and interests in the Maxon Property will. make respondent liable for the teal property tax over the Maxon property. In National Power Comp, w Province of Quezon, et al." relying on the Court's pronouncement in Testate Estate of Concordia T. Lim w City of ‘Manila, the Court ruled that contractual assumption of the obligation to pay real property ta, by itself, is insufficient to make one liable for taxes." The contractual assumption of tax lability must be supplemented by an interest thatthe party assuming the liability had on the propery; the person from whom payment is sought must have also aquired the beneficial use of the property taxed.” In other words, he must have the use and possession 0 the property.” Given the foregoing, petitioners cannot conduct a tax delinquency sale of the Maxon and Uimate properties which are now owned by respondent. To do so would effectively make respondent liable for the payment of real property taxes due on the Maxon property forthe years 2000-2013 and on the Ultimate properties for the years 1997-2013 when [ead not yet own or had actual or heneiicial use of the properties. As the ‘Court has discussed above, such isnot only contrary to las, but is also unjust Parenthetically, respondent is exempt ftom paying real property tunes over the Mavon and Ultimate properties from the time it had acquired ownership andior actual or beneficial use of the properties [pursuant to Section 24 of RA 7916, as amended by RA 8748, to wit ‘SEC.24. Bemption fom National an Laval Taxes. — Except for real propery tates on land wns! hy developers no taxes, ea and national, soll be imposed on basins establishments operating within the CO ONE. tai thereof, ive percent (SH) ofthe, gross income eared ball business enterprises within the ECOZONE shall ‘opal and om te fallow 7 Natal Power Commi on rains of Qo. sype mle 2, Sabo Natal Pwr Gop Proce Do 20 ®t a, ovo Poa Commision Prin of cms te 22a $7; Sa Nana mean Prime Qc al pre aDecision s GR.No, 248033 (@) Three percent (59%) tothe National Goverment () Two percent (294) which shall be dtecly remitted by the business estlishments (© the wearers fice of the ‘municipality ret where the enterprises ated AAs correctly ruled by the CA, there is nothing in Section 24 which requires prior concurrence from the local government unit. before respondent can avail itself of the exemption provided under the law. In fact, under Section 35 of RA No. 7916, the only requirement for business enterprises within a designated ECOZONE to avail themselves of all incentives and benefits provided for under RA 7916 is to register with the PEZA. This requirement was satisified by respondent. Respondent's Registration and Lease Agreements with the PEZA. which were cited by the CA in its Decision dated May 23, 2018 indicate that respondent was registered as an Ecozone Facilities Enterprise." Section 2, Rule XVI, Part Vil of the Implementing Rules and Regulations (IRR) of RA 7916 provides forthe incentives of an Eeazone Facilities Enterprise, to wit SECTION 2. £COZONE Facies, Utes and Touro LEnerpries. — ECOZONE Facilites, Uitte and Tourism rps sal be entiled othe following inestives {Exemption from national ad local taxes and te ther payment of a special tar rane of fie persent (390 on ‘205 Income in accordance wth Seton (1) of ule AI ‘and Rae of these Rates, 1b. Additional Deduction for Training Expenses — The same Incentives as provided foe under Seton 1(B) of Rule XIV of these Rules shall also apply to ECOZONE Fries, Ute and Tourism Enterprises: Incentives provided under R.A, 6957 a amended by R.A, TTB, hore knowen a the ll Operate an Transfer aw, subject to soc conditions as ay be presi by ‘he Boards 4. Other incemtves avaiable under the Code, a6 may he etemined by she Board subject to. the conlions provided under Sections 3 and $ of Rule XI of these les. hie supplied)Dexison 5 GR. No 248033 Significantly, in response to queries made by registered economic zone enterprises as 19 whether they are exempled fom securing LGU Permits and from payment of local taxes, fees, licenses, ete, the PEZA, issued Memorandun> Circular No. 2004-024 whic! provides in par that “PEZA-tegistered economic zone enterprises availing of the 5% [gross income tax] incentive are exempted from payment of all national and ocal taxes, except real property tax on land ewned by developers,” In this ease, there is nothing 10 indicate that respondent is @ developer. Thus, considering RA 7916, as amended, its IRR, and Memorandum Circu'ar No. 2004-024, it is evident that save for the payment of 5% gross income tax, respondent is exempt from the ‘payment of national and local taxes including real property tax on the Maxon and Ultimate Properties. Lastly, as corrsty ruled by the CA, the colletion of soine of the unpaid real propery taxes sought by petitioner already prescribed Section 270 of RA 7160 provides that “[tJhe basic real property tx xx x shall be collected within five (5) years from the date they hams due,” and that “{nfo action forthe colletion af the tax, whether administra ‘or jusicial, shall be instituted after the expiration of such period.” Unfortunately, as discussed by the RTC and the CA, petitioners failed to collect the acctued real property taxes which date fom as early as 1997 WHEREFORE, the Petition is DENIED, The Decision dated May 23, 2018 and ve Resolution dated June 20, 2019 of the Court of Appeals in CA-G.R. CV No, 107654 are AFFIRMED. SO ORDERED. a sexe RL rnc Associate JusticeDecision 10 GR. No, 248033 oo stevie: peswape ‘SAMUEL H. GAERLAN Associate Justice ATTESTATION [attest that the conclusions in the above Decision hd been reached in consultation before the case was assigned to the writer of the opinion ‘Senior Associate Justice ChairpersonDecision h GR. No. 268003 CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, [eerify ‘that the conclusions in the above Decision hid been reached in consultation before the ease was assigned tothe writer of the opinion of the Cour’s Division,