National Power Corporation vs. Province of Quezon and the Municipality of Pagbilao

DECISION

UY, J.:

In the Petition for Review before Us, petitioner National Power Corpor tion, pursuant to Sections 7(a)(5) and 11 of Republic Act No. 9282, challenges the Decision of he Central Board of Assessment Appeals dated August 18, 2003 in CBAA Case No. L-29, nd the Board's Resolution dated October 7, 2004, which effectively affirmed the Local Boartf of Assessment Appeals' Order dated November 13, 2000 denying petitioner's "Petition To Declare Exempt From Real Property Tax, Machineries and Equipment For Generation and ransmission Of C.T.A. EB // 46 Power, Under Section 234 (c) of the RA 7160, Located At Pagbilao, in the total amount of Three Billion Five Hundred Ninety Four Million Four Hundred Ei hty Six Thousand Pesos (P3,594,486,000.00) for the period from 1997 until September 2004. Petitioner, National Power Corporation, is a government owneL and controlled corporation created under Commonwealth Act No. 120, as amended 1, with a dress at the NPC Building Complex, Quezon Avenue corner BIR Road, Diliman, Quezon City. It is engaged in the business of providing electric power to the public.

On the other hand, respondents, the Province of Quezon and t~e Municipality of Pagbilao, Quezon, are local government units with address at the Office of the Provincial Attorney of Quezon Province, Provincial Capitol Compound, Lucena City. P rsuant to Section 232 of Republic (R.A) Act No. 7160, or the Local Government Code ("LGC") respondents are empowered to levy ad valorem taxes on real property, not specifically exempt d by law. On November 9, 1991, independent contractor Mirant Pagbilao Corp ration ("Mirant"), previously known as Hopewell Energy International Limited and Southern Energy Quezon Incorporated, entered into an Agreement entitled, "Energy Conversion Agree ent" or ECA with petitioner National Power Corporation. As stipulated therein by the parties, Mi ant shall design, build, operate a 700 megawatts hydraulic plant in Pagbilao, Quezon for the purpose of converting fuel into electricity, while petitioner shall be the recipient of he electricity so generated by the power station conditioned upon payment of fees. 2 The po er plant shall be ceded to petitioner after a period of twenty five (25) years. 3 In a Letter dated March 2, 2000 addressed to Mauro C. Villamar, Mira t's Chief Finance Officer, the Municipality of Pagbilao, Quezon, through its Treasurer, Aristeo G. atalla, assessed Mirant of realty tax delinquencies on the machineries, and equipment of th . thermal power

1 Republic Act No 6395

c.T.A. m #46 plant located at Pagbilao, Quezon, in the aggregate amount of One Billion Fi e Hundred Thirty Two Million Seventy Six Thousand Pesos (P1,532,076,000.00), inclusive of il terests under Tax Declaration Nos. 22-027-577B and 22-027-578-M.4 In the belief that it is exempted from the payment of realty taxes pur uant to the ECA, Mirant apprised petitioner of the action undertaken by the respondents. To rotect its interest, petitioner filed a case on April 14, 2000 before the Local Board of As essment Appeals ("LBAA"), Province of Quezon, Lucena City, entitled "In Re: Petition To Declare Exempt From Real Property Tax Machineries and Equipment For Generation and Transrssion Of Power Under Section 234 (c) of the RA 7160, Located At Pagbilao, Quezon" docke ed as LBAA Case No. 2-2000. Petitioner claims that it is entitled to an exemption from paym nt of realty taxes on the machineries and equipment used in the generation and transmission o electricity under Section 234 (c) of LGC and under its Charter, Republic Act (R.A.) No. 6395. 5 After submitting their Comment therein, respondents filed a Motio

to Dismiss for

failure of petitioner to pay the assailed taxes under protest pursuant to Sect on 252(a) of the Local Government Code or LGC which the LBAA found meritorious. Correspo dingly, the LBAA issued an Order dated November 13, 2000 denying the petition on the grou d that the filing thereof is conditioned upon payment under protest pursuant to Section 252 a) of LGC which was not complied with by petitioner.6 On appeal, the Central Board of Assessment Appeals ("CBAA") took co nizance over the case docketed as CBAA Case No. L-29, and dismissed the same for lack o merit declaring Mirant Pagbilao Corporation as the actual, direct and exclusive user of the pow r plant liable for realty taxes.

The CBAA ruled in this wise:

' Ibid, p.4 " x x x The fact is, that the use of the Pagbilao Power Plant has b en granted to Hopeweii/Mirant by virtue of the BOT law (R.A. 7718, as amend d), and provided for under the Energy Conversion Agreement (ECA) between the National Power Corporation and Hopewell Energy International Limited. Thi is ; Exhibit C- 1 · A nnex C-2 ot'the Pe111ion ror R evi~w C.T.A EB 1/46 the hard fact that vests in Hopeweii/ Mirant the existing ownership, operrtion, hence, use of the Pagbilao Power Plant.

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In view thereof, the Pagbilao Power Plant, being owned, operate~ and used by Hopeweii/M ir·ant, a non-exempt entity, is subject to the Real Pr perty Tax."7 In the interim of the proceedings, the Sangguniang Panlalawigan of Quezon issued Resolution No. 2004-165 dated October 4, 2004 authorizing Provincial Govl rnor Wilfrido L. Enverga to direct the Provincial Treasurer of Pagbilao, Quezon to enforce r al property tax collection and avail of extra-judicial remedies of distraint and/or levy a~ainst the real properties. The Sanggunian contended that the welfare of the respondent~ should not be subordinated to the contractual obligation between petitioner and Mirant in iew of the real estate tax exemption clause in favor of Mirant.8 On October 7, 2004, the Municipal Treasurer of Pagbilao, Quezon ag in sent another demand letter to Mirant through its President, Edgardo Bautista, for the pa taxes in the aggregate amount of Three Billion Five Hundred Ninety Four housand Four Hundred Eighty Six Thousand Pesos (P3,594,486,000.00) for the period of 1997 until September 2004. 9 Petitioner filed a Motion for Reconsideration from the CBAA's Decisio dated August 18, 2003 with Comment/ Opposition from the respondents.

In a Resolution dated October 7, 2004, the CBAA denied petition r's Motion for Reconsideration but ordered Mirant to pay realty taxes subject to depreciati n allowance on the machineries of the Pagbilao Plant pursuant to Section 225 of the LGC. 10 Undaunted, petitioner filed the instant Petition for Review dated No ember 9, 2004 against respondents praying for the issuance of a temporary restraining ord r and/or order of suspension restraining respondents and any of their officers or agents, fro implementing 7 Annex ·'A '", pp. 13- 14 'Annex ·'H" ') Annex "G" "'Petition for Rev1ew, p 8 C.T.A. EB /146 the Central Board of Assessment Appeals Decision and Resolution dated A gust 18, 2003 and October 7, 2004, respectively. It further prayed that respondents be estrained from further imposing/collecting payment, levy, distraint, and/or sale of the Pagbi ao Power Plant or any of its machineries or equipment assessed, pending resolution of this 1ase, subject to the conditions that may be imposed by this Court.

Pursuant thereto, an En Bane Resolution dated November 11, 2004 wa issued by this Court requiring respondents to file Comment to the petition and thereafter, etitioner to file Reply, if it so desires. Additionally, and in order to maintain status quo and o preserve the rights of the parties before the application for a writ of preliminary injunctio can be heard, a temporary restraining order was issued restraining respondents and any f their officers and agents, from implementing the Central Board of Assessment Appeals' ecision dated August 18, 2003, and Resolution dated October 7, 2004, and from further innposing and/or collecting payment, levy, distraint and/or sale of the Pagbilao Power plan or any of its machineries or equipment assessed, for a period of sixty (60) days from notic, thereof. The application for a writ of preliminary injunction was set for hearing on December 15, 2004 with a directive for both parties to appear and for respondents to sl ow cause why the application for a writ of preliminary injunction should not be granted. Orn December 6, 2004, respondents filed their Comment to the Petition.

On January 3, 2005, this Court issued a Resolution granting petition r's application for the issuance of a Writ of Preliminary Injunction enjoining respondents and any of their officers and/or agents from implementing the CBAA's decision dated August 18, 2003 and Resolution dated October 7, 2004 and from further imposing and/or collec ing payment, levy, distraint and/or sale of the Pagbilao Power Plant or any of its achineries or equipment assessed until further notice.

After both parties proffered their Memoranda, the instant petition was deemed submitted for resolution as of February 22, 2005. It appearing however that the docket of

C.T.A. EB #46

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this case had not been forwarded pursuant to legal requirements, the C 1entral Board of

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Assessment Appeals was directed to elevate the entire records of CBAA Cas~ No. L-29 in the

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Resolution dated November 22, 2005.

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Meanwhile, respondents filed a Motion to Lift Writ of PreliminaJ Injunction on November 16, 2005, alleging the following grounds: petitioner National Power Corporation

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is not the real party-in-interest in the instant case; respondents are collecti ~g real property taxes from Mirant Pagbilao Corporation, not from National Power Corporation; neither Mirant Pagbilao Corporation nor Napocor made payment under protest, tax collefion cannot be enjoined as respondents' services to their constituents are affected b~ Mirant's non- payment. Said motion was set for hearing on November 18, 2005. \

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On December 1, 2005, the Central Board of Assessment Appeals I forwarded the entire records of CBAA case No. L-29 entitled "NatiOnal Power Corporaf on, Petitioner, versus Province of Quezon and The Municipality of Pagbilao, Respondents." i

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In the Resolution dated December 6, 2005, the Court En Bane, in 1\eu of hearing, directed petitioner to file its Comment to respondents' aforementioned Moti~n. Thereafter,

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petitioner filed its Opposition (To Respondents' Motion to Lift Writ of Prelimi ~ary Injunction) on December 7, 2005 while respondents filed their Reply (To Opposition date1 06 December

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2005) on January 5, 2006.

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Finding that a resolution of respondents' Motion to Lift Writ of Prelimit ary Injunction would result in a Decision on the merits, and considering that the entire doc{et of this case has been transmitted to this Court, the Court En Bane resolved in the R+olution dated

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January 16, 2006, to defer its resolution thereof and to include the sa~e in the final determination of the instant petition.

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Hence this Decision.

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The Petition interposed the following grounds for the consideration of t e Court:

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C.T.A. EB li46

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"I.

The

CBAA

ERRED

IN

EXERCISING

APPIILLATE

JURISDICTION OVER THE LBAA'S SIN PERJUICIO DECISION. I

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IT.

THE CBAA ERRED IN RULING THAT PETITIO~ER IS

NOT THE ACTUAL,

DIRECT AND

EXCLUSIVE

USER

0~ THE

PAGBILAO POWER PLANT.

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III.

THE CBAA ERRED IN RULING THAT PETITicpNER'S

REAL PROPERTY TAX EXEMPTION

LOCAL GOVERNMENT CODE.

WAS WITHDRAWN Bt THE

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IV.

THE CBAA ERRED IN RULING THAT

PETIT~ONER

MUST BE ENGAGED IN BOTH GENERATION AND TRANSMISSION OF POWER BEFORE THE EXEMPTION UNDER SECTION 234 (c) dF THE LGC APPLIES.

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V.

THE

CBAA

ERRED

IN

NOT CONSTRUING[ THE

EXEMPTIONS UNDER THE LGC IN HARMONY WITH PETITiqNER'S

CHARTER AND THE BOT LAW.

.

i VI.

ASSUMING

THE

PAGBILAO

POWER

PLAN:r

IS

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TAXABLE , THE CBAA NONETHELESS ERRED IN

REFUSING TO

REMAND THE CASE TO THE

LBAA FOR THE PURPOS[E OF

DETERMINING THE ADJUSTMENTS OF THE REAL ESTATE TAXES

DUE ON ACCOUNT OF THE USE OF THE 10% ASSESSMENT ~EVEL AND THE EXCLUSION OF POLLUTION REDUCING.

i i VII.

THE CBAA ERRED IN HOLDING THAT PAYMENT

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UNDER PROTEST OF THE ASSESSED REAL PROPERTY TAX~S IS REQUIRED BEFORE THE PETITION FOR EXEMPTION CAN BE CSIVEN DUE COURSE."11 i On the other hand, respondents, in their Comment filed on December 16, 2004 assert i the following claims and defenses:

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The appealed LBAA Decision of November 13, .aJOO is notr a "Sin Perjuicio" judment and the petitioner National Power Corporation I cannot question the appellate jurisdiction of the CBAA because it is the same party who invoked such jurisdiction when it filed the instant appeal; i If The Central Board Of Assessment Appeals did not err in rulilng that petitioner NPC is not the actual, direct and exclusive user of the the ~~agbi lao Power Plant;

III. The CBAA did not err in ruling that petitioner's real propJrty tax exemption was withdrawn by the Local Government Code;

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II PetiliOil ror Review, pp. 8-9 i

C.T.A. Ef3 //46 i

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IV. Payment under protest is a mandatory requirement before any appeal is considered, much more, given due course by the honorable trilhunal;

v. It is necessary that the GOCC (NPC) is engaged in both geheration and transmission of electricity;

VI. The Energy Conversion Agreement (ECA) acknowledged lhat the subject real properties of Hopewell (Mirant, Phil.) fall under the category of taxable real properties;

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VII. Taken in its entirety, the Energy Conversion Agreement between

NPC and Hopewell

(Mirant) is a recognition of the latter's ownershi~ of the

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power plant in Pagbilao until the designated transfer date; .

VIII.

The

Energy

Conversion

Agreement

is a contract executed/consummated for the sole benefit of the contractor acting p~rty-NPC and Hopewell (Mirant, Phil.) on November 09, 1991 - hence, it does nqt in any way bind(s) the municipal government of Pagbilao and the province of Q 1uezon;

IX.

Petitioner National Power Corporation (NPC) is bereft of 4ause of action and/or right of action to institute the present petition; · X.

Petitioner National Power Corporation (NPC) is not the "rdal party

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in interest" but Mirant, Phil., sufficiently clothed with the personali~ as the declared real property owner and in reality, the actual, direct and e( clusive "user", and therefore liable for payment of the real property tax whq should interpose the instant petition, if it really felt aggrieved by the 3.6 billion RPT imposition.

The pivotal issues raised in lhis pelilion are sutTtmarized as follows: ;

1.

Whether or not the Decision in LBAA Case No. 2.-2.000 of t~e LBAA of the Province of Quezon is a "sin perjuicio" decision;

2.

Whether or not the LBAA correctly relied on the provisions of $ection 2.52. (a)

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of the LGC in dismissing LBAA Case No. 2.-2.000;

3.

Whether or not petitioner is the real-party-in interest to file the instant petition;

4.

Whether or not the machineries and equipments of the Pagbil~o Power Plant

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are subject to realty taxes pursuant to Section 234 (c) i of the Local

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Government Code;

5.

Whether or not petitioner is liable to pay subject realty taxes;

c r./\. E13 11'16

' Before delving into the merits of the petition, We look into the alleged procedural flaws of the case.

On the alleged infirmity of the LBAA's decision being devoid of fact and law, petitioner alleges that the CBAA does not exercise appellate jurisdiction overl the LBAA's sin

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perjuicio decision.

Being a defective ruling under Section 14, Article 8 of the 1987

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Constitution, the CBAA should have remanded the case to the LBAA for furth ~ r proceedings,

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instead of exercising jurisdiction over the case. 12 Respondents counter that the LBAA's decision is not a decision "sin perjuicio" as it is allegedly founded on fact and law, mandating that payment be made under[ protest before

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making any petition or appropriate action relative thereto pursuant to Sedion 252 (a) of R.A. 7160 reinforced by Article 343". 13 A "sin perjuicio" decision is a judgment without statement of facts in! support of its conclusion, the effect of which is not binding upon the parties. 14 The Court finds merit in petitioner's claim that the Order of the LBAA M the Province i ' of Quezon, is a "sin perjuicio" Decision.

A perusal thereof shows that the assailed Order

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does not contain findings of facts in support of the dismissal of the case. It nilerely stated a i finding of merit in the contention of the Municipality of Pagbilao that pursuant to Section 252 (a) RA 7160, reinforced by Article 343 which mandates payment under 1protest before making any petition or appropriate pleadings relative thereto, as the ground for the dismissal of LBAA Case No. 2-2000.

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However, on appeal before the CBAA, petitioner assigned several er ro ~s, both in fact

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and in law, pertaining to the LBAA's Decision. Thus, petitioner is bound b) the appellate jurisdiction of the CBAA under the principle of equitable estoppel. In this re~ard, petitioner " Pe1111on l(>r R ~ v1~11 . pp 9- 10 1' R.:sponJcnl ' s Comment. p. J " llerrera, Oscar Remedial l.a11 19'!-1 I(CI ised Ld111on Vol II. r 90 nnd Fcna , Jose. C11 II Procedure A nnotated. Vol i 2, 200 I Edit1on, p.'i

C.T.A. EB #46 is in no position to question the appellate jurisdiction of the CBAA as it is the same party which sought its jurisdiction and participated in the proceedings therein.

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The Supreme Court in the case of Odin Security Agency vs. De La Cert a explained the doctrine of equitable estoppel thus:

' "It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain I such relief, repudiate or question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86hA.L.R. 79). In the case just cited, by way of explaining the rules, it was further said that t, e question whether the court had jurisdiction either of the subject matter of the actiop or of the parties was not important in such cases because the party is barred from sych conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated -obviously fori reasons of public policy.

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"Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to q:uestion the jurisdiction or power of the ~ourt (Pease vs .. Rathbunjones, etc., 243 U.S. 27~ 61 L. E?· 715, 37 S. Ct. 283; St. LOUIS etc. vs. McBnde, 141 U.S. 127, 35 L. Ed. 65 ). And 1n Littleton vs. Burgess, 16 Wyo, 58, the Court said it is not right for a pa · who has affirmed and invoked the jurisdiction of a court in a particular matter to I secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.('15

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Concerning the matter on payment under protest, petitioner argues ~hat the LBAA

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erroneously required payment under protest pursuant to Section 252 (a)l of the Local

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Government Code.

Petitioner's contention is impressed with merit.

Section 252 (a) of the Local Government Code reads:

. i "SEC.252. Payment Under Protest. - (a) No protest shall be entkrtained unless the taxpayer first pays the tax. There shall be annotated on the tax !receipts the words "paid under protest". The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall de~ide the protest within sixty (60) days from receipt."

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i Based on the foregoing legal provision, the taxpayer desiring to protest an

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assessment made by a local government unit, must first pay the tax so asse~sed, while the !

tax receipts shall contain the words "paid under protest" annotated thereo~ . The protest

C.T.A. EEJ 1/4 6 contemplated under this provision questions the reasonableness of an assessment and not the legality thereof.

Payment under protest in the assessment of realty taxes is necessary i~ what is being

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contested is the correctness of the amount of assessment, as held in the case of Pablo R. Olivarez, et.al. vs. Marquez, to wit:

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"Thus, should the taxpayer/real property owner question the excessi1veness or reasonableness of the assessment, Section 252 directs that the taxpayer ishould first pay the tax due before his protest can be entertained. There shall be annotated on the tax receipts the words "paid under protest." It is only after the taxpayer has

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paid the tax due that he may file a protest in writing within thirty dayf from payment of the tax to the ProvinCial, City or Municipal Treasurer, who shall [decide the protest within sixty days from receipt. In no case is the local treasurer 6bliged to entertain the protest unless the tax due has been paid."16

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On the other hand, Section 252 of the LGC is not applicable when it is the legality of

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the assessment that is raised in the protest as elucidated in the case of Ty !vs. Trampe, to wit:

"Again, the protest contemplated under Sec. 252 of RA 7160 is rleeded where tl1ere is a question as to the reasonableness of the amount assessed. fnt 1 ence, if a taxpayer disputes the reasonableness of an increase in a real esta e tax assessment, he is required to "first pay the tax" under protest. In the case at pench however, the petitioners are questioning the very authori ty and power yf the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax.

These ar·e not questions merely of amounts of the increase in the tax but attacks on the very va lidity of any increase."1r :

Similarly in the case at bar, petitioner is not contesting the reaso n ~b leness of the assessment made over subject realties but is questioning the authority of the respondents to ' assess realty taxes against the machineries and equipment of the Pagbilao Power Plant on the assumption that the same are tax exempt.

Thus, the CBAA aptly gave due course to CBAA No. L-29 in accordanqe with Section

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226 of the LGC which provides that any owner or person having legal interest In the property

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who is not satisfied with the action of the provincial, city or municipal a~sesso r in the assessment of his property may, within sixty (60) days from the date of receip~ of the written '' 250 SC RA 500 (December I. 1'!95)

17 -138 SCfV\ 679

C.T.A. EB J/46 notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. Relevant to the matter on payment under protest is the issue as to whether or not petitioner has legal interest to fi le a protest against the assessments for realty taxes over the equipment and machineries of the Pagbilao Power Plant, or simply put, -- is petitioner a real party in interest in this easel A real pa1ty in interest is defined under Section 2, Rule 3 of the 1997 Revised Rules of Court which reads:

SEC. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or j[JjUJ:~Q by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. In the case of Dagadag vs. Tongnawa, 18 the Supreme Court declared that the interest of the parties in the suit or judgment should be material and not a mere contingent interest.

"The word "interest", as contemplated by the Rules, means material interest or an interest in the issue and to be affected by the judgment, as distinguished from mere interest in the question involved or a mere incidental interest. Stated differently, the rule refers to a real or present substantial interest as distinguished from a mere expectancy, or a future, contingent, subordinate, or consequential interest. As a general rule, one who has no right or interest to protect cannot invoke the jurisdiction of the court as party-plaintiff in an action."

Under Section 2.12, Eight Schedule of the Energy Conversion Agreement ("ECA"), petitioner, from November 9, 1991, the date of execution of the ECA, until transfer date, is not the owner, nor the actual and direct user, of the subject machineries and equipment, to wit:

"2.12. OWNERSHIP OF POWER STATION. From the Effective Date until the Transfer Date, HOPEWELL SHALL, directly or indirectly, own the power station and all the fixtures, fittings, machinery and equipment on the site or used in connection with the Power Station which have been supplied by it or at its cost. HOPEWELL shall operate, manage and maintain the Power Station for the purpose of converting Fuel of NAPOCOR into electricity."

'' .f)U SCRA 1137 (fehruar) 3. 20\15)

C.T.A. EB #46

Considering therefore that petitioner is presently not the owner of the machineries and equipment located at the Pagbilao Power Plant, it has no legal standing to claim for exemption from real property taxes imposed upon subject machineries and equipment in LBM Case No. 2-2000.

Ineluctably, petitioner is not a real party-in-interest. And one having no right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action.19 If the suit is not brought in the name of or against the real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of action, pursuant to Section l(g) of Rule 16 of the 1997 Rules of Civil Procedure, as amended. As invoked by respondents in their Comment and Motion to Lift Writ of Preliminary Injunction, petitioner is not the real party-in-interest to claim for exemption from real property taxes of subject machineries and equipment for the generation and transmission of power.

Thus, the dismissal of the case is justified which gives legal basis to grant respondents' Motion to Lift Writ of Preliminary Injunction. Going to the merits of the case, We shall now ascertain whether the machineries and equipment of the Pagbilao Power Plant are subject to realty taxes? Realty tax is a direct tax imposed on the privilege to use real property such as land, building, machinery and other improvements, unless specifically exempted.20 By virtue of Section 234 of the LGC, real properties enjoying exemption from realty taxes are as follows: "Section 234. Exemptions from Real Property Tax. -The following are exempted from payment of real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof had been granted for consideration or otherwise , to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings and 19 Raila v. Raila, 199 SCRA 495 [1 991]

C.T.A. E[3 /1'16 improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of wa ter and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection" (emphasis supplied).

Petitioner finds solace on the pr·ovision of Section 234 (c) of the LGC in its claim for tax exemption. It must be remembered however, that said law grants realty tax exemption only to machineries and equipment which are actually, directly and exclusively used in the generation and transmission of electricity by a government-owned and controlled corporation such as petitioner. For emphasis, the government owned and controlled corporation must be engaged both in the generation and transmission of electricity. A perusal of Article 7 Part A of the ECA clearly shows that it is Hopewell, now Mirant, and not petitioner that converts the fuel supplied by the latter into electricity, to wit: "7.1 SUPPLY. Subject to NAPOCOR supplying the necessary Fuel and start-up electricity pursuant to Article 6, HOPEWELL agrees to convert such Fuel into electricity and NAPOCOR agrees to take and pay for all electricity reglJs;.?ted b'i.__[:JAPOCOR in accordance with the procedures set out in the Sixth Schedule (Electricity Delivery Procedures) and the operating Parameters set out in the Second Schedule (Operating Parameters). HOPEWELL shall dedicate the entire power Station output (net of Power Station usage) to NAPOCOR."

Clearly, Mirant is responsible for generating, supplying and selling electricity exclusively to the petitioner on a wholesale basis. And considering that Mirant is not a government-owned and controlled corporation, but a private foreign corporation primarily engaged in the business of generating electric power, the machineries and equipment of the Pagbilao Power Plant are thus subject to really taxes. In this light, petitioner's reliance on Section 234 (c) of the LGC as basis for realty tax exemption is unavailing.

C.T.A. EB 1146

After having established the taxability of the machineries and equipment of the power plant, is petitioner liable to pay the subject realty taxes7 There is no quarrel that until transfer date, Mirant is the owner of the power station and all the fixtures, fittings, machinery and equipment on the site, or used in connection therein, and all acts of administration, operation, control and supervision are all vested with Mirant.

And as aptly observed by respondents in their Comment, Mirant is the actual, direct and exclusive user of the Pagbilao Plant, to wit:

"No matter how NPC plays with words and semantics, the glaring truth cannot be suppressed. NPC has nothing to do with the machineries in the Pagbilao Power Plant Station that is assessed for tax by the Province of Quezon and the Municipality of Pagbilao, because NPC is neith(C;r the owner nor tjJ.r,_J.JSer. " 21 Thus, the CBAA correctly ruled that Mirant is liable to pay realty taxes and not petitioner.

WHEREFORE, in view of the foregoing considerations, the instant Petition is hereby DISMISSED for lack of merit. Accordingly, the Resolution dated January 3, 2005 granting the writ of preliminary injunction is LIFTED and SET ASIDE and the Writ of Preliminary Injunction issued on January 4, 2005 is hereby DISSOLVED.

Page 16

WE CONCUR:

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~-i*' a. aT~ . Ck OffiANITO C. CASTANEDA,~.

Associate Justice

$ CAESAR A. CASANOVA

Associate Justice

~~.Ck ERNESTO D. ACOSTA

Presiding Justice

(On Official Business)

LOVELL R. BAUTISTA

Associate Justice

L;LL~·~ o~LGA PALANCA-E~i<iu~z

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court En Bane. Q_-~.~ ERNESTO D. ACOSTA

Presiding Justice