National Power Corporation vs. Province of Lanao del Sur

A government-owned corporation's tax exemption, once withdrawn by law but validly restored by FIRB resolution approved by the Minister of Finance pursuant to the authorizing statute, remains effective such that no real property tax delinquency accrues and any auction sale conducted on the premise of delinquency is null and void.

National Power Corporation (NPC) is a non-profit public corporation wholly owned by the Republic of the Philippines, created under Commonwealth Act No. 120 to undertake the development of hydraulic power and the production of power from other sources. Its charter, as revised by Republic Act No. 6395, declared it exempt from all forms of taxes, duties, fees, imposts, and other charges to enable it to pay its indebtedness and obligations and to carry out the national policy of total electrification. Over the years, various presidential decrees and executive orders — PD 380, PD 938, PD 464 (Real Property Tax Code), PD 776 (creating the Fiscal Incentives Review Board), PD 1931, and EO 93 — alternately withdrew and authorized the restoration of NPC's tax exemption privileges, generating the legal dispute over whether NPC remained tax-exempt for the period June 14, 1984 to December 31, 1989.

National Power Corporation (NPC) is the owner of certain real properties situated in Saguiaran, Lanao del Sur, covered by Tax Declarations Nos. D-802-A, D-803-A, D-804-A, D-805-A, D-806, and D-807 issued by the Office of the Provincial Assessor of Lanao del Sur. These properties comprise NPC's Agus II Hydroelectric Power Plant Complex, which generates and supplies electricity to the island of Mindanao. NPC was created as a non-profit public corporation wholly owned by the government under Commonwealth Act No. 120, and its charter, as revised by Republic Act No. 6395, granted it exemption from all forms of taxes, duties, fees, imposts, and other charges to enable it to pay its indebtedness and obligations and to further the state policy of total electrification.

Over the years, NPC's tax-exempt status was the subject of successive legislative and executive actions. Section 10 of PD 938, issued May 27, 1976, consolidated NPC's various tax exemptions into a general exemption from all forms of taxes. On June 11, 1984, PD 1931 withdrew all tax exemption privileges granted to government-owned or controlled corporations, including NPC's, but its Section 2 empowered the President and/or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB), to restore such exemptions. Pursuant to this authority, FIRB Resolution No. 10-85, issued February 7, 1985, restored NPC's tax and duty exemption privileges effective from June 11, 1984 up to June 30, 1985, and FIRB Resolution No. 1-86 extended the same indefinitely from July 1, 1985 onwards. Thereafter, Executive Order No. 93, promulgated December 17, 1986 and effective March 10, 1987, again withdrew all tax and duty incentives, but its Section 2 authorized the FIRB to restore exemptions withdrawn thereunder. On June 24, 1987, FIRB Resolution No. 17-87 restored NPC's tax exemption privileges effective March 10, 1987, and this resolution was confirmed and approved by Acting Executive Secretary Catalino Macaraig, Jr., by authority of the President, on October 5, 1987.

Notwithstanding these restorations, the Provincial Assessor of Lanao del Sur assessed NPC real estate taxes on the subject properties in the amount of P154,114,854.82 covering the period from June 14, 1984 to December 31, 1989, on the ground that NPC's exemption from realty taxes had been withdrawn. On August 7, 1990, respondent Provincial Treasurer sent a demand letter to NPC for payment of the assessed real property taxes. A second demand letter followed on August 21, 1990, warning that legal remedies would be resorted to if the obligation remained unsettled. On December 14, 1990, a Notice of Auction Sale covering the subject properties was served on NPC. The notice was posted for one month from December 17, 1990 to January 17, 1991 at the main entrance of the provincial capitol building in Marawi City and at the plant site in Saguiaran, and was published in the December 17 and 24, 1990 and January 5, 1991 issues of the Philippine Daily Inquirer and the December 17 and 24, 1990 issues of the Lake Lanao Times.

On January 18, 1991, NPC filed directly with the Supreme Court a petition for prohibition with prayer for a writ of preliminary injunction and/or temporary restraining order. On January 21, 1991, the Court issued a temporary restraining order enjoining respondents from proceeding with the auction sale. The auction sale was nevertheless held as scheduled on January 22, 1991 at 10:00 a.m., with the Province of Lanao del Sur as the sole bidder. A certificate of sale was immediately issued and registered with the Register of Deeds at 1:30 p.m. of the same day. The respondent Provincial Governor and Provincial Treasurer received telegraphic notices of the Court's restraining order at 2:30 and 3:00 p.m., respectively — after the registration of the sale had already been accomplished.

• Tax-Exempt Status Never Lost: Petitioner maintained that it had never been effectively deprived of its tax and duty exemption privileges granted under CA 120, as amended, and RA 6395, as amended. Although temporarily withdrawn by PD 1931 and EO 93, these exemptions were just as quickly restored by FIRB Resolutions Nos. 10-85, 1-86, and 17-87, such that at no time did NPC lose its tax-exempt status.
• No Realty Tax Liability: Petitioner argued that because it never ceased to be tax-exempt, it never became liable for realty taxes, and therefore the subject properties were wrongfully levied upon and sold at auction.

• FIRB Resolutions Void for Excess of Authority: Respondents contended that NPC's exemption from payment of realty taxes had been withdrawn by PD 1931 and never validly restored by the FIRB Resolutions, rendering NPC liable for realty taxes for the period June 14, 1984 to December 31, 1989. Relying on National Power Corporation vs. Province of Albay, respondents argued that under Section 2 of PD 776 and Section 2 of PD 1931, the FIRB was granted only recommendatory power and was devoid of authority to impose taxes or revoke existing ones, which only the legislature could do. Neither could it validly prescribe exemptions or restore taxability by itself.
• Undue Delegation of Taxing Power: Respondents argued that FIRB Resolutions Nos. 10-85 and 1-86 were issued in excess of authority and constituted an undue delegation of taxing power, rendering them constitutionally defective and null and void. They likewise assailed EO 93, insofar as it authorized the FIRB to restore tax and/or duty exemptions, as similarly void.
• Invalid Signatory and Defective Process: Respondents assailed the FIRB resolutions as invalid and ineffective because in each case there was only one signatory — then Acting Minister of Finance Alfredo Pio de Roda, Jr. for Resolution No. 10-85 and then Minister of Finance Cesar E.A. Virata for Resolution No. 1-86 — emphasizing that the FIRB is not a one-man body. They further argued that two separate and distinct acts were required — a recommendation and an approval — which could not be combined and performed by a single person acting both as head of the FIRB and as Minister of Finance.
• Repeal by PD 1177: Respondents contended that PD 1177, issued for the formulation and implementation of a national budget, repealed NPC's tax exemption privilege under RA 6395 by virtue of the decree's general repealing clause.

• Validity of FIRB Resolutions: Whether FIRB Resolutions Nos. 10-85, 1-86, and 17-87 validly restored NPC's tax exemption privileges withdrawn by PD 1931 and EO 93.
• Real Property Tax Exemption: Whether the subject properties of NPC are exempt from real property taxes under Section 40(a) of the Real Property Tax Code (PD 464).
• Validity of Auction Sale: Whether the auction sale and registration of NPC's properties conducted by respondents on January 22, 1991 are null and void.

• Validity of FIRB Resolutions: Yes. FIRB Resolutions Nos. 10-85, 1-86, and 17-87 validly restored NPC's tax exemption privileges, the FIRB having acted pursuant to the authority granted by Section 2 of PD 1931 and Section 2 of EO 93, with approval by the Minister of Finance in his dual capacity as FIRB Chairman.
• Real Property Tax Exemption: Yes. The subject properties are exempt from real property taxes under Section 40(a) of the Real Property Tax Code, which exempts real property owned by the Republic or any government-owned corporation so exempt by its charter.
• Validity of Auction Sale: Yes, the auction sale is null and void. Because the properties were exempt from realty taxes, no delinquency existed, and the province never acquired any right to sell or purchase the properties at auction.

• Validity of FIRB Resolutions: Although Section 1 of PD 1931 withdrew all tax exemptions of government-owned or controlled corporations, Section 2 thereof expressly authorized and empowered the President and/or the Minister of Finance, upon recommendation of the FIRB, to restore such exemptions. FIRB Resolution No. 10-85, signed by Acting Minister of Finance and Acting FIRB Chairman De Roda, Jr., restored NPC's exemptions effective June 11, 1984 to June 30, 1985. FIRB Resolution No. 1-86, signed by Minister of Finance and FIRB Chairman Virata, fully restored the exemption as of July 1, 1985 for an indefinite period. When EO 93 again withdrew the exemptions, FIRB Resolution No. 17-87 restored them effective March 10, 1987, and was confirmed and approved by Acting Executive Secretary Macaraig by authority of the President. The Court held that the arguments against the validity of these resolutions — that the FIRB possessed only recommendatory power and that the single-signatory process was defective — were no longer tenable in light of Maceda vs. Macaraig, Jr., which expressly ruled that FIRB Resolutions Nos. 10-85 and 1-86 were valid because they were issued in compliance with Section 2 of PD 1931 and were approved by the Minister of Finance, who was duly authorized to approve the same. The Court noted that the officials signed the resolutions in their dual capacity as Chairman of the FIRB and Minister of Finance, and that requiring separate acts of recommendation and approval by the same person was a superfluity. Maceda also upheld EO 93 as a valid delegation of legislative power to the FIRB, emphasizing the increasing complexity of modern life and the legislature's inability to cope directly with all problems. The Court further rejected the argument that PD 1177 repealed NPC's tax exemption by its general repealing clause, holding that NPC's exemption from all forms of taxes subsisted even with the enactment of PD 1931, and that repeals by implication are not favored absent a manifest legislative intent to repeal.

• Real Property Tax Exemption: Apart from the FIRB resolutions, the Court found another cogent reason for exemption: Section 40(a) of the Real Property Tax Code (PD 464) expressly exempts real property owned by the Republic or any of its political subdivisions and any government-owned corporation so exempt by its charter. The subject properties comprise the Agus II Hydroelectric Power Plant Complex, which generates and supplies electricity to Mindanao. These are government properties wholly owned by NPC and devoted directly and solely to public service, utilized in implementing the state policy of total electrification at the least cost to the public. NPC's non-profit character has been maintained throughout its existence, and it is mandated to devote all returns from capital investment and excess revenues to expansion. The assessment and levy on the properties were therefore null and void for having been made in violation of Section 10 of PD 938 and Section 40(a) of the Real Property Tax Code. The Court limited its ruling to the period June 14, 1984 to December 31, 1989, and declined to rule on the effect of the Local Government Code of 1991 (RA 7160) on NPC's tax-exempt status.

• Validity of Auction Sale: Because the realty tax assessment was void, NPC never became delinquent in the payment of taxes to respondent province, and the province never acquired any right to sell or purchase the properties at auction. Section 65 of the Real Property Tax Code authorizes sale at public auction only upon the real property tax becoming delinquent; since the properties were exempt, no delinquency was possible. Section 73 of the Code further excludes properties mentioned in Section 40(a) from advertisement of sale at public auction. The Court noted that the precipitate conduct of the auction sale and immediate registration — completed before respondents received the Court's TRO — was a transparent attempt to render nugatory any injunctive relief, and brought respondents only rebuke and condemnation. The auction sale and registration were totally bereft of legal basis and therefore null and void, and could not vest title over the properties in favor of respondent province.

• Stare Decisis and Doctrinal Stability — The Court emphasized the necessity of upholding the authoritativeness and stability of its pronouncements. Having reversed itself in Maceda vs. Macaraig, Jr. from the earlier ruling in National Power Corporation vs. Province of Albay, and having fortified such reversal through the Resolution denying the motion for reconsideration in Maceda (termed "Maceda Part II"), the Court deemed it more important to stress that its decisions are reached after due deliberation. Reverting to the old doctrine would add to the instability and uncertainty of the law and undermine public confidence in the judiciary.

• Repeals by Implication Not Favored — Repeals by implication are not favored and will not be decreed unless it is manifest that the legislature so intended. Laws are presumed to be passed with deliberation and full knowledge of all existing ones on the subject. Every effort must be used to make all acts stand, and if by any reasonable construction they can be reconciled, the later act will not operate as a repeal of the earlier. The Court applied this doctrine to reject respondents' argument that PD 1177 repealed NPC's tax exemption under RA 6395 by virtue of its general repealing clause.

• Valid Delegation of Legislative Power — Delegation of legislative power has become the rule and its non-delegation the exception, owing to the increasing complexity of modern life and many technical fields of governmental functions, coupled by the growing inability of the legislature to cope directly with the many problems demanding its attention. The Court applied this doctrine to uphold EO 93 as a valid delegation of legislative power to the FIRB, which met the standards set in Pelaez vs. Auditor General.

• Tax Exemption of Government-Owned Corporations — A government-owned corporation declared by its charter as non-profit and exempt from all forms of taxes is exempt from real property taxes under both its charter and Section 40(a) of the Real Property Tax Code, provided the beneficial use of the property has not been granted to a taxable person. The Court applied this to NPC's Agus II Hydroelectric Power Plant Complex, which is devoted directly and solely to public service.

• "The inescapable conclusion is that the tax exemption privileges of petitioner had been validly restored and preserved by said FIRB resolutions." — This passage states the Court's ratio decidendi on the preliminary issue: that the chain of FIRB resolutions effectively preserved NPC's tax-exempt status throughout the disputed period.

• "as FIRB Resolutions Nos. 10-85 and 1-86 were duly approved by the Minister of Finance, hence they are valid and effective. To this extent, this decision modifies or supersedes the Court's earlier decision in Albay afore-referred to" — This quotation from Maceda vs. Macaraig, Jr., as adopted by the Court, articulates the doctrinal shift from Albay to Maceda on the validity of FIRB resolutions approved by the Minister of Finance.

• "The assessment of realty tax being void, petitioner never became delinquent in the payment of said taxes to respondent province, and the latter never acquired any right to sell nor to purchase the said properties at auction. In short, there were never any taxes, delinquent or otherwise, to satisfy." — This passage establishes the logical chain from the voidness of the assessment to the voidness of the auction sale, forming the basis for the dispositive.

• "The Supreme Court has the constitutional duty not only of interpreting and applying the law in accordance with prior doctrines but also of protecting society from the improvidence and wantonness wrought by needless upheavals in such interpretations and applications." — This passage articulates the Court's policy rationale for adhering to stare decisis and refusing to revert to the overruled Albay doctrine.

• Maceda vs. Macaraig, Jr., 197 SCRA 771 (1991) — Controlling precedent. The Court expressly relied on and applied Maceda's ruling that FIRB Resolutions Nos. 10-85 and 1-86 were validly issued pursuant to Section 2 of PD 1931 and were effective because they were approved by the Minister of Finance. The Court also relied on Maceda's affirmation through its Resolution promulgated June 8, 1993 (223 SCRA 217), termed "Maceda Part II," which denied the motion for reconsideration and reaffirmed the validity of the FIRB resolutions and the tax-exempt status of NPC.

• National Power Corporation vs. Province of Albay, 186 SCRA 198 (1990) — Distinguished and superseded. The Court noted that Albay had held FIRB Resolutions Nos. 10-85 and 1-86 null and void for lack of presidential approval, but this ruling was modified and superseded by Maceda vs. Macaraig, Jr., which held the resolutions valid because the Minister of Finance was duly authorized to approve them under Section 2 of PD 1931.

• Pelaez vs. Auditor General, 15 SCRA 569 (1965) — Cited in Maceda as the standard for valid delegation of legislative power. The Court noted that EO 93, as a delegating law, was complete in itself and met the standards set in Pelaez.

• United States vs. Palacio, 33 Phil. 208 (1916) — Followed on the doctrine that repeals by implication are not favored. The Court applied this principle to reject the argument that PD 1177 repealed NPC's tax exemption.

• Cabagnot vs. COMELEC, G.R. No. 124383 (1996) — Cited to reinforce the policy against needless flip-flops in judicial decisions, chiding imprudent volte face moves that undermine public faith and confidence.

• Section 13, Commonwealth Act No. 120 — Created NPC as a non-profit public corporation and exempted it from all forms of taxes, duties, fees, imposts, costs, and service fees to enable it to pay its indebtedness and obligations.

• Section 13, Republic Act No. 6395 (as amended by PD 380 and PD 938) — Revised NPC's charter and granted exemption from all forms of taxes, duties, fees, imposts, and other charges by the government and its instrumentalities. Section 10 of PD 938 consolidated the various tax exemptions into a general exemption from all forms of taxes, direct and indirect.

• Section 2, Presidential Decree No. 1931 — Withdrew all tax exemption privileges of government-owned or controlled corporations but empowered the President and/or the Minister of Finance, upon recommendation of the FIRB, to restore such exemptions. The Court held that FIRB Resolutions Nos. 10-85 and 1-86 were validly issued pursuant to this provision.

• Section 2, Executive Order No. 93 — Again withdrew all tax and duty incentives but authorized the FIRB to restore exemptions withdrawn thereunder. The Court upheld this as a valid delegation of legislative power and found FIRB Resolution No. 17-87 validly issued and approved thereunder.

• Section 40(a), Presidential Decree No. 464 (Real Property Tax Code) — Exempted real property owned by the Republic or any of its political subdivisions and any government-owned corporation so exempt by its charter from real property tax. The Court applied this provision as an independent ground for NPC's exemption from realty taxes on the subject properties.

• Sections 65 and 73, Presidential Decree No. 464 (Real Property Tax Code) — Section 65 authorizes sale at public auction only upon the real property tax becoming delinquent; Section 73 excludes properties under Section 40(a) from advertisement of sale at public auction. The Court applied these provisions to hold that because the properties were exempt, no delinquency existed and the auction sale was void.

• Section 2, Presidential Decree No. 776 — Created the Fiscal Incentives Review Board (FIRB) and tasked it with recommending the withdrawal, modification, revocation, or suspension of tax exemptions. The Court interpreted this provision in conjunction with Section 2 of PD 1931 to hold that the FIRB's recommendations, when approved by the Minister of Finance, validly restored tax exemptions.

Narvasa, C.J., Romero, Bellosillo, Melo, Puno, Kapunan, Francisco, Hermosisima, Jr., and Torres, Jr., JJ., concurred. Regalado and Mendoza, JJ., concurred in the result.

• Justice Hilario G. Davide, Jr. (with Padilla and Vitug, JJ., concurring) — Justice Davide maintained that FIRB Resolutions Nos. 10-85 and 1-86 were null and void because they were not valid acts of the FIRB, the former having been signed only by Acting Minister of Finance De Roda, Jr. in his concurrent capacities as Acting Minister of Finance and Acting Chairman of the FIRB, and the latter only by Minister of Finance Virata. He argued that the FIRB, as a board composed of five members, must act as a body with a quorum and majority vote, and that no one other than the duly appointed Secretary of Finance could sit as Chairman. He further contended that the grant to the Minister of Finance of the authority to restore tax exemptions under Section 2 of PD 1931 was an invalid delegation of legislative power, as the power to grant tax exemption is corollary to the power to tax and cannot be delegated except to local government units. As to FIRB Resolution No. 17-87, he argued that the Presidential approval was invalid because at the time of approval, the first Congress under the 1987 Constitution had already been convened and was in session, such that only Congress could validly restore tax exemption privileges. He also contended that Section 40(a) of the Real Property Tax Code provided no relief because the exemption granted therein was among those withdrawn by PD 1931. He voted to deny the petition and suggested a reexamination of Maceda vs. Macaraig, Jr.