Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS 7th Floor, EDPC Building, BSP Complex Roxas Boulevard, Manila

LBAA CASE NO. 03-006 LBAA CASE NO. 03-007

CBAA CASE NO. L-46 and CBAA CASE NO. L-47

NATIONAL POWER CORPORATION, Petitioner-Appellant,

– versus –

THE LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS CITY,
Appellee,

– and –

EMELINDA C. ATIENZA, CITY ASSESSOR OF BATANGAS CITY and BENJAMIN S. PARGAS, CITY TREASURER OF BATANGAS.
Respondents-Appellees.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

R E S O L U T I O N

National Power Corporation (NPC), as Petitioner-Appellant, simultaneously

filed two (2) separate Appeals before this Board, against two (2) separate

decisions rendered by the same Local Board of Assessment Appeals of

Batangas City, over the same Respondents-Appellees, Mrs. Emelinda C.

Atienza, City Assessor of Batangas City and Mr. Benjamin S. Pargas, City

Treasurer of Batangas City. The two (2) appeals were docketed as CBAA Cases

Nos. L-46 and L-47.

Besides the identicalness of the parties there were overlapping tax

declarations in the two (2) cases: In the hearing for L-46 on June 9, 2004, the

cases, L-46 and L-47 were consolidated at the option of both Petitioner-Appellant

and Respondents-Appellees. The parties were then given one month to reconcile

their respective records for submission to the Board.

At the hearing on July 8, 2004 counsel for NPC, Atty. Mark Anthony C.

Actub, after admitting difficulty in entering into a compromise agreement, having

thus defied negotiations, manifested merely to file a memorandum and submit

Reference: Book XII, pp. 163-173

the consolidated cases for decision. Counsel for Respondents-Appellees, Atty.

Teodulfo A. Dequito conceded, manifesting that Respondents-Appellees would

also submit memorandum and consider the consolidated cases submitted for

decision on the pleadings thus far submitted.

The L-46 Case is as follows:

Two (2) letters, both addressed to the Project Manager, INGP, Ibaan,

Batangas (Annexes “A” and “A-1” to “A-3”): one, dated February 5, 2002, over

the real property taxes due and payable for the year 2002 on parcels of land and

pipeline facilities in Brgy. Ilijan, Batangas City, the other, dated February 22,

2002, on pipeline and transmission facilities in Brgy. Haligue Kanluran,

Tabangao Ambulong, San Miguel, Sto. Niño, Dumuclay, Dumantay, Sampaga,

Tabangao Dao, Haligue Silangan, De la Paz Proper, Conde Labac, and Soro-

Soro, Batangas City, were issued by City Treasurer Benjamin S. Pargas of

Batangas City.

Against the Two (2) letters, the National Power Corporation (NPC) on April

3, 2002 filed a petition before the Local Board of Assessment Appeals (LBAA) of

Batangas City, dated December 3, 2001 alleging among others:

(1) That the real property tax assessment dated February 5 and 22, 2002 were on its (NPC’s) properties.

(2) That NPC operates under a restored tax exemption by virtue of P.D. 1932 through FIRB, effective July 11, 1984.

(3) That the “tax exemptions for the payment of real property tax embodied in Sec. 234 of the Code”, R.A. 7160, provides:

“Section 234. Exemption from Real Property Tax. – The following are exempted from payment of the real property tax:

X x x

(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 water and/or generation and transmission of electric power”. (Underscoring supplied).

The land where the steel towers, transmission cables and pipeline is situated is also tax exempt, “following the juridical principle in the Civil Code that the accessory follows the principal (Accesio cedit principali): the thing of greater value is the principal, hence the land which is of lesser value than the steel towers, transmission cables and pipeline is the accessory and, “the principal being exempt for taxation purposes by

Reference: Book XII, pp. 163-173

reason of Section 234 of the Local Government Code, naturally its accessory is carried over”.

(4) That “Opinion No. 130 of the Department of Justice support’s NPC’s stand of tax exemption, thus:

“X x x NAPOCOR is exempt from any and all kinds of taxes, fees or imposts chargeable under existing laws by the National Government or any of its political subdivisions and instrumentalities. X x x”.

In hindsight: Why was the Appeal before the LBAA of Batangas City dated

December 3, 2001 when the bases of such Appeal, the letters of the City

Treasurer of Batangas City on the real property tax, was dated February 5 and

22, 2002 respectively? Why was the Appeal done even before there was ground

for the Appeal?

Thereafter, on April 10, 2002 NPC sought and obtained from the same City

Treasurer of Batangas City a certification that NPC is the owner of the properties

covered under the City Treasurer’s letter of February 5, 2002 (supra).

For the LBAA of Batangas City the issue is: whether or not the Petitioner is

exempt from payment of real property tax.

The pertinent portion of the Decision of the Local Board of Assessment

Appeals of Batangas City is hereby reproduced as follows:

“As it may be noted in the case of National Power Corp. vs. Court of Appeals, G.R. 73477, 17 October 1990. The Supreme Court ruled that ‘in case of government-owned or controlled corporations, P.D. No. 1177, confirmed by P.D. No. 1931, withdrawing from said corporations any exemption from the payment of ‘income tax, custom duties and other taxes or fees as imposed under revenue laws’ has been held to cover not only national but likewise local taxes. Clearly, this is the prevailing ruling and incidentally a parallel case to the case at bar.

Besides, the enactment of Sections 193, 234 and 534 (f) of the Local Government Code of 1991 had repealed the provisions of the petitioner’s charter for exemption from payment of realty property tax, being inconsistent and repugnant with one another. It is evident that R.A. 7160 was enacted on a later date and thus, is recognized to be the newest expression of legislative intent and should prevail over the earlier law on the subject.

In the same breath, in Section 193 and 234 of R.A. 7160, it enumerated and listed the juridical entities and properties exempted form real property taxation. Well-settled rule is that when the law enumerated those not included in the enumeration are deemed excluded from the coverage of the law. (Expressio unius est exclusion alterius)

Petitioner not being a local water district, a cooperative duly registered under R.A. 6938, non-stock and non-profit hospital and educational institutions nor the 500 KV Associated Transmission Line and Gas Pipeline are machineries. Transmission Line and Gas Pipeline are indubitably a construction adhering to the soil. It is a real property within the contemplation of Art. 415(1) and (3) of the Civil Code.

Reference: Book XII, pp. 163-173

Be that as it may, the contention of petitioner does not hold water. The provisions of Secs. 193 and 234 are explicit and self-explanatory that all tax exemptions being enjoyed by all persons, whether natural or juridical including all government-owned or controlled corporations are expressly withdrawn upon effectivity of R.A. 7160.

In the light of the foregoing, the instant claim by petitioner for exemption from the payment of real property tax is DENIED devoid of legal basis and the Notices of Assessment dated February 5 and 22, 2002 are hereby affirmed.”

Parenthetically, in its Reply to Respondents answer that NPC’s tax

exemption has not been withdrawn by R.A. 7160, NPC cited the case of City

Government of San Pablo, Laguna v. Reyes (305 SCRA 353), wherein the

Supreme Court held:

“Sec. 534 (f) of the repealing clause of the LGC, provides that all general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. This clause partakes of the nature of a general repealing clause. It is certainly not an express repealing clause because it fails to designate the specific act or acts identified by number or title, that are intended to be repealed.”

Such withdrawal has already been upheld by the Supreme Court in the

case of National Power Corporation vs. City of Cabanatuan (401 SCRA 281), to

wit:

“The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more unequivocal language could have been used.”

Before this Board, Petitioner-Appellant, NPC, assailed the decision of the

Local Board of Assessment Appeals of Batangas City, thus:

“On October 14, 2003, the LBAA of Batangas City issued a decision denying the petition for lack of merit. In the decision, the LBAA of Batangas City ruled that tax exemption privileges of NPC pursuant to its charter (R.A. 6395, as amended) has already been effectively withdrawn by the enactment of the Local Government Code, particularly Sec. 193 and Sec. 234 of the Code. Furthermore, the LBAA of Batangas City ruled that the pipelines and transmission facilities are not machineries but construction adhering to the soil. Thus, it is real property within the contemplation of Art. 415 (1) and (3) of the Civil Code.”

Petitioner-Appellant assigned the following error:

“THE LBAA OF BATANGAS CITY SERIOUSLY ERRED IN RULING THAT THE PIPELINE AND TRANSMISSION LINE FACILITIES OF NPC ARE NOT MACHINERIES BUT REAL PROPERTY WITHIN THE CONTEMPLATION OF THE CIVIL CODE.”

Reference: Book XII, pp. 163-173

Is this to be understood that by conveniently proving that the Pipeline and

Transmission Line Facilities are machineries, they are now exempt from the real

property tax?

While it is true that NPC’s tax exemption has been withdrawn, Sec. 234 (c)

of the Local Government Code (LGC) of 1991 (R.A. 7160) provided for

exemption from real property tax all machineries and equipment that are actually,

directly, and exclusively used by government-owned or controlled corporations

engaged in the generation and transmission of electric power.

Sec. 199 (o) of R.A. 7160 defines machinery, thus:

“’Machinery’ embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes.”

By the above definition therefore, subject Pipeline and Transmission Line

Facilities are in fact machineries and real properties.

Doubtlessly, NPC is a government-owned or controlled corporation

engaged in the generation and transmission of electric power. Therefore if the

actual, direct and exclusive use of such Pipeline and Transmission Line Facilities

is done by NPC it follows that they are exempt from realty taxes.

There is more to the Pipeline and Transmission Line Facilities therefore,

than just being machineries in order to warrant real property tax exemption under

Sec. 234 of R.A. 7160 (supra): Besides (a) their being machineries, they must

also be (b) actually, directly, and exclusively used by local water districts and

government-owned or controlled corporations, (c) for the supply and distribution

of water and/or generation and transmission of electric power.

To recapitulate, with the passage of the Local Government Code of 1991

(R.A. 7160), NPC no longer enjoys a blanket privilege on tax exemptions but is

Reference: Book XII, pp. 163-173

only allowed specific instances, like exemptions from real property tax on

machineries and equipment, that it actually, directly, and exclusively uses.

The issue therefore is: Whether or not the National Power Corporation has

the actual, direct, and exclusive use of said Pipeline and Transmission Facilities.

The actual, direct and exclusive use thereof should have been determined

by Appellee Local Board. This is the fact of the instant case that should have

been ascertained by the Appellee Local Board. Local Boards of Assessment

Appeals are triers of facts: the proceedings before the LBAA’s should be on

questions of facts. Section 229 (b) of R.A. 7160 is quite clear and precise in

providing thus:

“Sec. 229. Action by the Local Board of Assessment Appels. –

X x x.

(b) X x x. The proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts without necessarily adhering to technical rules applicable in judicial proceedings.”

The L-47 case is about the ninety-four (94) units of real property all of

which, by virtue of their tax declarations (Annexes “B-1” to “B-94”) are owned by

the National Power Corporation (NPC): ninety-three (93) units of which (Annexes

“B-1” to “B-93”) are parcels of land and one (1) unit thereof (Annex “B-94”) are

Steel Towers.

Said properties were originally assessed at ten percent (10%) of their

market values. The Statement of Account of the City Treasurer dated May 12,

2003 and received by NPC on May 14, 2003 no longer assessed at ten percent

(10%) but already at twenty-five percent (25%) of market value.

Petitioner-Appellant claimed that the ninety-three (93) parcels of land fall

under the classification of Special Classes of Real Property under Sec. 216 of

the LGC. The Steel Towers, on the other hand, should be exempt from realty tax

being an improvement of the land under Sec. 234 (c) of the LGC. (The

exemption claimed is on improvement. Is this the exemption granted under Sec.

234 (c)? Is not the exemption thereto, on machineries and equipment?)

Secs. 216, 218 and 234 of the LGC are hereby reproduced as follows:

Reference: Book XII, pp. 163-173

“Sec. 216. Special Classes of Real Property. – All lands, buildings, and other improvements thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and government-owned or –controlled corporations rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power shall be classified as special.”

“Sec. 218. Assessment Levels. – The assessment levels to be applied to the fair market value of real property to determine its assessed value shall be fixed by ordinances of the sangguniang panlalawigan, sangguniang panlungsod or sangguniang bayan of a municipality within the Metropolitan Manila Area, at the rates not exceeding the following:

(a) On Lands:

Class

Residential Agricultural Commercial Industrial Mineral Timberland

Assessment Level

20% 40% 50% 50% 50% 20%

(b) On Buildings and Other Structures:

X x x

(c) On Machineries

X x x

(d) On Special Classes: The assessment levels for all lands, buildings, machineries and other improvements:

Actual Use

Cultural Scientific Hospital
Local water districts Government-owned or controlled corporations engaged in the supply and distribution of water and/or genera-tion and transmission of electric power

Assessment Levels

15% 15% 15% 10%

10%

“Sec. 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:

X x x

(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 water and/or generation and transmission of electric power”. (Underscoring supplied).

Appellee Local Board disposed of the case as follows:

“Wherefore, premises considered, the instant petition is hereby DENIED for lack of merit and consequently sustain the respondent in assessing the rate of 25%.”

Reference: Book XII, pp. 163-173

Petitioner-Appellant assigned the following errors:

“I.

The Local Board of Assessment Appeals erred in ruling that Section 218 of the Local Government Code applies only to Metropolitan Manila Area.

II.

The Local Board of Assessment Appeals erred in ruling that property covered by Tax Declaration No. 52-02314, which are steel towers of NPC are not tax exempt because the alleged withdrawal of tax exemption privileges of NPC by virtue of the Local Government Code.”
Appellee Local Board’s Decision, in the meantime failed to ferret out the

facts of the L-47 case. Instead it pounced on Sec. 218 of the LGU and effected

the following:

“A close reading of the provision of Section 218 (Local Government Code), it (sic) readily shows that it is applicable to the Metropolitan Manila Area. The contention of respondents is fallacious and misplaced, for there is no mention in the provision of Batangas City as envisaged by the petitioner. It is of course a well-settled rule that unless the provision of law expressly mention (sic) Batangas City for the imposition of the rate of 10%, then it is the function of this Board to grant the claim of petitioner. Being that case, the respondents correctly assessed the property of petitioner at 25% of their actual market value considering Batangas City is not covered by the limitation provided for in Section 218 of the Local Government Code. Beside, the said provision is explicit and does not need further interpretation.”

There could be a lapse in grammatical judgment on the above-reading.

There is no mention therein of Metropolitan Manila Area to which the imposition

of the rate of ten percent (10%) is applicable. What is mentioned is the

sangguniang bayan of a municipality within the Metropolitan Manila Area, which,

like the sangguniang panlalawigan or the sangguniang panlungsod, shall fix, by

ordinances the assessment levels to be applied to the fair market value of real

property to determine its assessed value. Some of these are the assessment

levels on lands, the class of residential: 20%, agricultural 40%, etc. Then the

special classes: of cultural 15%, scientific 15%, etc. or the controversial

government-owned or controlled corporations engaged in the generation and

transmission of electric power, 10%.

How could the above-Sec. 218 of the Local Government Code be

applicable to the Metropolitan Manila Area only? R.A. 7160 is an act of the

Congress of the Philippines and not by any sangguniang bayan of a municipality

within the Metropolitan Manila Area: the provision of Sec. 218 therein applies to

Reference: Book XII, pp. 163-173

all real property in the Philippines, whether in a municipality within the

Metropolitan Manila Area or within the City of Batangas.

Would it be nice to have the august Congress of the Republic of the

Philippines enact a law only for the municipality of San Juan, Rizal, for example?

Appellee Local Board would concentrate only on Sec. 218 (d), of R.A.

7160 (Special Classes of Property), as if it were the entire Sec. 218 (a) On Lands

or (b) On Buildings and other Structures or (c) On Machineries? On (a), for

example, would the class: Residential, Agricultural, Commercial, Mineral,

Timberland apply only to the Metropolitan Manila Area? Or, are they only found

in the Metropolitan Manila Area. Why are mineral lands included in Sec. 218 (a)?

Are there mines in the Metropolitan Manila Area?

Appellee Local Board therefore, should have determined the fact of

ownership and the fact of use of the properties: Are the parcels of land owned

and used by NPC? If they are (owned and used), then they are within the Special

Classes of Real Property under Sec. 216 of the LGC (supra). Pursuant to Sec.

218 (d), R.A. 7160 (supra) their assessment levels should be at ten percent

(10%) of fair market value.

On the manifestations of both Petitioner-Appellant and Respondents-

Appellees to submit the instant consolidated cases, L-46 and L-47 for Decision

after filing their respective memoranda, this Board, pro tanto, acceded thereto.

This Board, like any Local Board of Assessment Appeals, decides on

questions of facts. Unless this Board obtains the facts by itself it must rely on the

findings of facts by the Board a quo.

Unfortunately, however, Appellee Board’s Decisions on both the L-46 and

L-47 cases made no findings of facts. This Board therefore, is stymied from

rendering its Decision in the consolidated cases at bar.

The essentiality of the statement of the facts in the decision of the lower

court is given distinct emphasis in the case of Director of Lands vs Sanz (45 Phil.

121): “X x x a statement of the facts x x x were essential to a clear understanding

Reference: Book XII, pp. 163-173

of the issues presented by the respective parties as to the facts involved. Had

the appeal come to this court it would, undoubtedly, in view of what it has done

heretofore, have returned to the lower court x x x.”

IN VIEW OF THEREOF, the decisions appealed from are hereby SET

ASIDE and the consolidated cases: LBAA Case No. 03-006/CBAA Case No. L-

46 and LBAA Case No. 03-007/CBAA Case No. L-47, are remanded to the Local

Board of Assessment Appeals of Batangas City for further proceedings on

questions of facts.

SO ORDERED.

Manila, Philippines, August 18, 2005.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)
ANGEL P. PALOMARES Member

(Signed) RAFAEL O. CORTES
Member

Reference: Book XII, pp. 163-173