Privatization and Management Office v. City Government of Tacloban
REITERATIONFacts
1. The Antecedents: The Privatization and Management Office (PMO), the Province of Leyte, and the Philippine Tourism Authority (PTA) are co-owners of the Leyte Park Hotel, Inc. (LPHI). The facilities of LPHI were leased to Unimaster Conglomeration, Inc. (UCI). The City Government of Tacloban (City) sent demand letters to UCI for unpaid real property taxes on LPHI, amounting to P23,377,353.08. Despite demands, the taxes remained unpaid, leading the City to file a collection complaint against LPHI and UCI, later impleading the co-owners. The PMO argued that the liability for real property taxes devolved on UCI as the lessee. 2. Procedural History: The Court of Tax Appeals (CTA) Special First Division initially held UCI liable for the unpaid real property taxes. Following UCI's appeal to the CTA En Banc, the City filed a motion for execution pending appeal, which was denied. Nevertheless, the City issued warrants of levy against the properties of the PMO. In response, the PMO filed a motion for suspension of collection and cancellation of warrants of levy with the CTA En Banc. The CTA En Banc granted the suspension but required the PMO to post a surety bond equivalent to one and one-half of the amount sought to be collected. The PMO's subsequent motion for exemption from posting the bond was deemed moot after it filed a GSIS surety bond ad cautelam. A motion for reconsideration was subsequently denied. 3. The Petition: This Petition for Certiorari under Rule 65 of the 1997 Rules of Court assails the resolutions of the CTA En Banc that required the PMO to post a surety bond to suspend the collection of real property tax and declared its motion for exemption moot. The PMO argues that as an agency of the national government, it is exempt from posting such a bond, citing the presumption of solvency of the state. The core issue is whether the PMO, as a government instrumentality, is exempt from posting a surety bond as a condition for the suspension of real property tax collection, particularly when the collection method employed by the City was allegedly contrary to law and jurisprudence, and the property in question is of public dominion.
Issue(s)
Whether the Court of Tax Appeals committed grave abuse of discretion in requiring the Privatization and Management Office (PMO) to post a surety bond as a condition for the suspension of the collection of real property tax, given the City's method of collection. Whether PMO, as a national government agency, is exempt from posting a surety bond, considering the solvency of the State.
Ruling
The Supreme Court GRANTED the Petition for Certiorari, SET ASIDE the assailed Resolutions of the Court of Tax Appeals En Banc insofar as they required PMO to file a surety bond as a condition precedent for suspending real property tax collection, and ORDERED the CTA to release the GSIS Surety Bond filed by PMO.
Ratio Decidendi
On the Issue of Requiring a Surety Bond: The Court held that while Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, generally requires a taxpayer to deposit the amount claimed or file a surety bond for the suspension of tax collection, this requirement is not absolute. The Court reiterated the principle established in The Collector of Internal Revenue v. Reyes and Spouses Pacquiao v. Court of Tax Appeals that the bond requirement may be dispensed with when the method employed by the government agency in collecting the tax is not sanctioned by law. In this case, the City's resort to warrants of levy and the threat of public auction against a property of public dominion, owned by government entities, was found to be contrary to law and jurisprudence. Such a method jeopardized the interest of the government entities owning the property, not just the beneficial user, UCI. Therefore, requiring a bond to suspend an illegal collection method would be an absurdity. On the Exemption of Government Agencies from Posting Bonds: The Court affirmed the established rule that the State, and by extension its agencies like PMO, is not required to put up a bond because it is presumed to be always solvent and able to meet its obligations. Requiring the Republic to submit such a bond would be an indirect requirement on the state itself. The purpose of the bond is to guarantee payment, a purpose already served by the presumed solvency of the national government. Thus, PMO, as an agent of the national government, should have been exempted from posting the surety bond.
Main Doctrine
The requirement of posting a surety bond as a condition precedent for the suspension of collection of taxes under Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, may be dispensed with when the method employed by the government agency in collecting the tax is not sanctioned by law, thereby jeopardizing the interest of the taxpayer.