National Power Corporation (NPC) and Luzon Hydro Corporation (LHC) vs Fatima Tenorio, in her official

capacity as the Provincial Assessor of Ilocos Sur

[G.R. No. 223403, February 28, 2018]

Facts:

In 1996, NPC, a GOCC, entered into a Power Purchase Agreement (PPA) for the design, construction, and
operation of a hydroelectric power plant under a Build-Operate-Transfer Agreement with the
Consortium, with LHC agreeing to assume all rights and obligations of the Consortium under the PPA.
NPC assumed the responsibility of paying real estate taxes and assessments, and other charges.

In 1998, NPC, LHC, and the Municipality of Alilem, Ilocos Sur whereby the Municipality of Alilem agreed
to help the parties in their obligations.

On July 02, 2003, LHC received two notices of assessment on the buildings and certain industrial
machineries of the power plant which required LHC to pay the real property tax (RPT) for the above-
mentioned properties. On August 18, 2003, LHC filed a protest before the Local Board of Assessment
Appeals of the Province of Ilocos Sur (LBAA). NPC intervened, claiming responsibility for the payment of
the RPT.

On April 01, 2005, LHC again received a notice of billing from the Municipal Assessor of Alilem requiring
it to pay the unpaid RPT for the years 2002-2005. LHC filed another protest before the LBAA.

The LBAA dismissed the protests. NPC and LHC separate appeals to the CBAA was likewise dismissed,
motion for reconsideration denied and the petitions for review before the CTA en banc were denied.

Issues:

1. WON the CBAA resolution has attained finality for failure of LHC to timely file its petition for review
before the CTA within the reglementary period, albeit NPC may have timely filed its petition for review?

2. WON the machineries and equipment is exempt from RPT?

3. WON the real properties can be considered as a “special class” of real property and be subject to the
lower 10% assessment level?

4. WON the municipal assessor is correct in imposing an additional 55% on the value of the properties,
representing installation cost of 40% and freight charges of 10% as basis for the assessed RPT?

Ruling:

1. Yes. The Registry Return Receipt reveals that LHC received the CBAA’s resolution on May 22,2013;
however it only filed its petition for review on December 06, 2013, way after the 30 days reglementary
period.
Neither can LHC find reprieve in the fact that NPC timely filed its petition for review before the CTA
because NPC has no legal standing in the case. The Court has previously ruled that the LGU cannot hold
a third party accountable for the tax liability of another by virtue of a mere contractual assumption.
Corollarily, for reasons of fairness, the LGU cannot be compelled to recognize the protest of a tax
assessment from the third party (NPC).

2. No. Section 234 of the LGC enumerates the properties exempt from RPT. Among the enumerations is:
“All machineries and equipment that are actually, directly and exclusively used by local water districts
and govermment owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;”

The requirement of actual, direct and exclusive use by the GOCC engaged generation and transmission
of electricity is absent since it is LHC which has possession and control of the power plant. Hence, the
machineries and equipment is not exempt from RPT.

3. No. Section 216 of the LGC defines “special classes” of real property as those actually, directly and
excusively used for … GOCC’s rendering essential public services in the … generation and transmission of
electric power, which assessment level depends on the actual use of the property. Section 234(c) of the
LGC further requires that to be considered as a “special class”, the properties must be “owned and
used” by a specific entity, a GOCC. Here, NPC is neither the owner nor the possessor of the properties.
Hence, the subject properties cannot be considered a “special class” of real properties.

4. Yes. Section 202 of the LGC requires the person acquiring real property or making an improvement
thereon to file a sworn statement “within 60 days after the acquisition of such property or upon
completion or occupancy of the improvement, whichever comes earlier.” Once the owner of a real
property refuses or fails to make a declaration within the prescribed time, the municipal assessor is
authorized to make the declaration himself, on behalf of the owner, pursuant to Section 204 of the LGC.

Here, LHC belatedly submitted the sworn statement only after repeated demands. Furthermore, the
sworn statement contained no documents or receipts to support it. Thus, absent proof of any grave
abuse of discretion or bad faith, the assessment of the municipal assessor shall enjoy presumption of
regularity.