Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS M a n i l a
NATIONAL POWER CORPORATION, Petitioner-Appellant,
– versus – CBAA CASE NO. M-23
Re: THE LOCAL BOARD OF ASSESSMENT
Taxability of NMPC-1 & NMPC – 2
APPEALS OF ILIGAN CITY, (LBAA Case No. 2004-01) Appellee,
– and –
CITY TREASURER OF ILIGAN CITY, Respondent-Appellee.
O R D E R
Pending resolution before this Board are the following incidents, to wit:
a) Petitioner-Appellant’s Petition for
Reconsideration dated April 11, 2007 relative to
the Decision of this Board dated December 20,
2006 dismissing its appeal (Records, pp. 104-
b) Respondent-Appellee’s Motion for
Reconsideration dated May 28, 2007 (Records,
pp. 165-169) in connection with the Board’s
Order dated May 7, 2007 ordering the City of
Iligan and it’s City Treasurer to lift the
levy/distraint on subject properties x x x
(Records, pp. 139-142); and
c) The parties Joint Motion (To Approve and
Render Judgment Based on Compromise
Agreement) dated August 3, 2010 (Records, pp.
Records disclose that on December 20, 2006, this Board rendered a
Decision in the above-entitled case, the dispositive portion of which reads as
“Wherefore, premises considered, the instant appeal is hereby dismissed for lack of merit.” (Records, pp. 82-103)
Alleging that it received a copy of said Decision on March 27, 2007,
petitioner-appellant filed with Us, on April 11, 2007, its Petition for
Reconsideration (with Urgent Prayer for Cease and Desist Order), assigning
the following errors, to wit:
The CBAA erred in ruling that the machineries and equipment of NMPC 1 & 2 are not actually, directly, and exclusively used by NPC for generation and transmission of power.
The CBAA erred in ruling that the buildings and other improvements of NMPC 1 and 2 cannot be classified as Special Classes of Properties.
The CBAA erred in ruling that NPC failed to show proof that the power plant subject of this appeal has already been transferred by NMPC to NPC.
On May 7, 2007, this Board issued an Order stating thus:
“This Board has yet to receive the aggrieved party’s Opposition to Petitioner-Appellant’s Motion for Reconsideration, as provided for in Section 4, Rule V of the Rules before the CBAA (supra). Delay-in-transit thereof however, is quite inevitable, what with the distance and the mail service to be reckoned with? As demanded therefore, a reasonable time is required before this Board could proceed to deliberate and act on the instant Motion for Reconsideration.
Apropos, this Board will deal with the said Motion for Reconsideration in due time. In the meantime, Petitioner-Appellant’s hold on subject property is direly threatened: Warrants of Levy have been issued by the OIC City Treasurer of Iligan City on Iligan Diesel Power Plants 1 & 2 on April 2, 2007.
The above-entitled case, by virtue of the present Motion for Reconsideration, is being proceeded and still within the jurisdiction of this Board, hence, a Warrant of Levy is not warranted: it will preempt any resolution or judgment by this Board and shall render the same ineffectual, nugatory and illusory. In view of said principle, this Board is bound to issue such Cease and Desist Order pursuant thereto.
Sec. 231 however, of the Local Government Code of 1991 (R. A. 7160) provides:
‘Sec. 231. Effect of Appeal on the Payment of Real Property Tax. – Appeal on assessments of real property x x x shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal.
Pursuant thereto, Section 7, RULE IV of the Rules before the CBAA reads:
‘Section 7. Effect of appeal on collection of taxes – An appeal shall not suspend the collection of the corresponding realty taxes on the real property subject of the appeal as assessed by the assessor concerned without prejudice to subsequent adjustment depending upon the final outcome of the appeal.
‘If the corresponding realty taxes are not paid, the Central Board may nevertheless entertain an appeal by requiring the appellant to file a bond to guarantee the payment of said taxes if found to be due, subject to the approval by the Central Board.’
As above provided, the alternative of filing “a bond to guarantee the payment of said taxes if found to be due, subject to the approval by the Central Board”, is hereby required.
WHEREFORE, with the filing of a bond for approval by this Board, the City of Iligan through its City Treasurer is hereby ordered and directed to lift the levy/distraint on subject properties and said City, through its officials, representatives, agents, and all persons acting on their behalf is further ordered and directed to cease and desist from further implementing said warrants of levy/distraint so that the proceedings on the instant case can move freely, unhampered and undisturbed before this Board.” (Records, pp. 135-138)
On June 12, 2007, respondent-appellee City Treasurer of Iligan
submitted a Motion for Reconsideration relative to the Order dated May 7, 2007
advancing the following arguments:
x x x x x x
“3. Real Property Tax is an ad valorem tax levied on real property itself and not on the owner of said property. It is a tax lien or legal claim or charge
on property which was established by law as a sort of security for the payment of tax obligation. Hence, regardless of its owner or possessor/user, real property tax is attached to the property being taxed and if not paid, it follows the property taxed whoever its owner/possessor. This is a general principle in real property taxation. Hence, the ground advanced by petitioner-appellant is misplaced. Adopting this proposition of petitioner-appellant would leave the local government on an empty bag since what the property owner shall do if he can not pay real estate taxes on his property was to transfer it to his dummy or other person to escape payment of such tax.
x x x x x x
6. As we have alleged in our opposition to the Motion for Reconsideration of the Petitioner-Appellant on the decision dated December 20, 2006 of this Honorable Court, with respect to its prayer for cease and desist order, since there is no injunction issued by this Board or Court at the time of the scheduled auction sale on April 25, 2007, the City Treasurer can legally sold (sic) those subject property in the public auction, which incidentally had no bidder, and pursuant to Sec. 263 of RA 7160, it was purchased by the City Treasurer for the City of Iligan. It should be noted that protest or appeal will not suspend the collection of real property taxes as provided for in Sec. 231 of R. A. 7160;
7. With the auction sale legally conducted on April 25, 2007 and Certificate of Sale issued by the City Treasurer, copy of which is hereto attached as Annex 1 to 9, the instant Cease and Desist Order of the Honorable Board at the time it was issued on May 7, 2007, which was received by us on May 22, 2007, is now moot and academic as the acts which it seeks to stop had already been performed and accomplished;
x x x x x x
9. Petitioner-Appellant should deposit the amount for which the properties were sold, which is P350,174,494.10, plus 2% interest per month from the date of sale to the time it institute an action in court to invalidate the auction sale conducted by the City Treasurer;
10. The Honorable Board, before approving any bond as security for payment of their total real estate tax, should give the respondent-appellee an opportunity to examine it to determine its sufficiency, and bonding company’s qualification which issue it. (Records, pp. 166-169)
On August 27, 2010, the parties submitted a Joint Motion (To Approve
and Render Judgment Based on Compromise Agreement), the text of which
This Compromise Agreement is made and entered into this 29th day of June 2010, at Iligan City and Makati City, by and among:
NATIONAL POWER CORPORATION, a government owned and controlled corporation of the Republic of the Philippines, created and existing by virtue of Republic Act No. 6395, as amended, with principal address at BIR Road corner Quezon Avenue, Diliman, Quezon City 1101, Philippines, represented herein by its President, Froilan A. Tampinco (hereinafter referred to as “NPC”);
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, a government owned and controlled
corporation created pursuant to Section 49 of Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001” with principal address at 7th Floor, Bankmer Building, 6756 Ayala Avenue, Makati City 1226, Philippines, represented herein by its Acting President & Chief Executive Officer, Maria Luz L. Caminero (hereinafter referred to as “PSALM” and collectively with NPC, the “Agencies”);
– and –
CITY GOVERNMENT OF ILIGAN, a local government unit created and existing pursuant to Republic Act No. 525, otherwise known as the Iligan City Charter, with principal address at City Hall, Buhanginan Hills, Pala-o, Iligan City 9200, Philippines, represented herein by its Mayor, Honorable Lawrence L. Cruz (hereinafter referred to as the “City of Iligan”).
Each of the Parties named above are at times individually referred to herein as a “Party” and collectively as “Parties.”
WHEREAS, on June 29, 1992, NPC and Northern Mindanao Power Corporation (“NMPC”) entered into a Build, Operate and Transfer Agreement (“BOT 1”) for the construction of the 58 MW Bunker-Fired Diesel Power Station (“IDPP 1”);
WHEREAS, on November 19, 1992, NPC and NMPC entered into another Build, Operate and Transfer Agreement (“BOT 2”) for the construction of the 40 MW Bunker-Fired Diesel Power Station (“IDPP 2”);
WHEREAS, on June 25, 2001, Republic Act No. 9136 otherwise known as the “Electric Power Industry Reform Act” took effect creating PSALM which took ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate and all other disposable assets of NPC;
WHEREAS, on July 25, 2003, NMPC issued a Notice to the City of Iligan that IDPP 1, including all its rights, title and interests in and to the fixtures, fittings, plant and equipment (including test equipment and special tools) and all improvements comprising the power plant, will be transferred to NPC effective August 1, 2003 at no cost to NPC pursuant to BOT 1 between NMPC and NPC;
WHEREAS, under Clause 2.03 of both BOT 1 and BOT 2 “NAPOCOR shall be responsible for the payment of all real estate taxes and assessments, rates and other charges in respect of the Site and the buildings and improvements thereon”;
WHEREAS, all Notices of Assessment of Real Property Tax for IDPP 1 and IDPP 2 received by NMPC from the City of Iligan were forwarded to NPC for payment pursuant to the above-quoted provision of BOT 1 and BOT 2, and NPC paid the real property taxes assessed by the City of Iligan on IDPP 1 and IDPP 2 until sometime in 2003;
WHEREAS, on November 11, 2003, NPC filed a tax protest with the City Treasurer of Iligan (the “City Treasurer”) contesting the assessment imposed on IDPP 1 and IDPP 2;
WHEREAS, on January 8, 2004, NPC received a letter from the City Treasurer dated December 9, 2003 denying its tax protest on the ground that IDPP 1 and IDPP 2 are not owned by NPC but by NMPC, a private entity;
WHEREAS, on March 8, 2004, NPC appealed to the Local Board of Assessment Appeals (“LBAA”) the decision of the City Treasurer dated December 9, 2003, which appeal was docketed as LBAA Case No. 2004-01;
WHEREAS, on June 9, 2004, NPC received a Decision from the LBAA dated June 2, 2004 denying the appeal, and subsequently, NPC appealed the decision of the LBAA to the Central Board of Assessment Appeals (“CBAA”) docketed as CBAA Case No. M-23 (the “CBAA Case”);
WHEREAS, on January 16, 2006, NMPC issued a notice to the City of Iligan that IDPP 2, including all its rights, title and interests in and to the fixtures, fittings, plant and equipment (including test equipment and special tools) and all improvements comprising the power plant, will be transferred to NPC effective February 8, 2006 at no cost to NPC pursuant to the BOT 2 between NMPC and NPC;
WHEREAS, on December 20, 2006, the CBAA dismissed NPC’s appeal and affirmed the decision of the LBAA;
WHEREAS, on April 2, 2007, NMPC received a copy of the Warrants of Levy issued by the City Treasurer levying on real properties of IDPP 1 and IDPP 2 (“the Subject Properties”);
WHEREAS, on April 11, 2007, NPC filed its Motion for Reconsideration (with Urgent Prayer for Issuance of Cease and Desist Order) of the CBAA Decision dated December 20, 2006;
WHEREAS, on April 25, 2007 at 10:00 a.m., during the pendency of the CBAA Case, the Subject Properties were sold at a public auction by the City of Iligan but were subsequently sold to the City of Iligan pursuant to Section 263 of the Local Government Code (the “Code”) due to the absence of bidders during the auction sale;
WHEREAS, the CBAA, acting on NPC’s Motion for Reconsideration, issued a Cease and Desist Order on May 7, 2007 directing the City of Iligan to lift the levy and distraint on the Subject Properties, and to cease and desist from implementing said warrants of levy and distraint so that the CBAA Case can move freely, unhampered and undisturbed;
WHEREAS, despite the Cease and Desist Order issued by the CBAA, the City of Iligan subsequently published in the Gold Star Daily newspaper a Notice of Resale of the Subject Properties scheduled on October 10, 2008 at 10:00 a.m.;
WHEREAS, on October 8, 2008, NPC filed a Petition to Declare the Nullity of the April 25, 2007 Auction Sale (with Prayer for Issuance of Temporary Restraining Order/Injunction enjoining the October 10, 2008 Auction Resale) with the Regional Trial Court (“RTC of Iligan”) of the City of Iligan (the “RTC Case” and collectively with the CBAA Case, referred to as the “Cases”) pursuant to Section 267 of the Code; however, no injunction was issued by the RTC of Iligan;
WHEREAS, the scheduled October 10, 2008 Auction Resale of the Subject Properties took place but was unsuccessful because there was only one bidder, Conal Holdings Corporation;
WHEREAS, at present, the Cases are still pending before the CBAA and the RTC of Iligan;
WHEREAS, the Parties, cognizant of the state of calamity declared by President Gloria Macapagal-Arroyo for Mindanao on March 12, 2010 due to severe drought brought about by the “El Niño” phenomenon, and aware of the benefits of avoiding a protracted litigation and of concluding an amicable and mutually beneficial compromise, have decided to settle the Cases;
NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual covenants contained in this Compromise Agreement, the Parties hereby agree as follows:
1. Subject to the provisions of this Compromise Agreement and in consideration of the mutual undertakings of the Parties hereunder, the Agencies unconditionally and irrevocably relinquish all their rights, title, interests and claims in the Subject Properties in favor of the City of Iligan and recognize the ownership of the latter over the Subject Properties as of April 25, 2007.
2. The City of Iligan absolutely acknowledges that the foregoing relinquishment by the Agencies constitutes the full satisfaction and extinguishment of any and all the real property tax liabilities over the Subject Properties, including but not limited to all interests, penalties and incidental expenses, which have accrued prior to the execution of this Compromise Agreement (“Tax Liabilities”). Further, the City of Iligan hereby releases, remises and forever discharges the Agencies, its officers, employees and representatives from any and all claims, demands, liabilities, actions, causes of actions, suits at law or equity of whatsoever kind and natures, whether known or unknown, relating to, arising out of, or in connection with the Tax Liabilities.
The City of Iligan recognizes that IDPP 1 and IDPP 2 were operated and maintained by the Agencies. Hence, all civil and industrial fruits, but not limited to, the electricity generated by IDPP 1 and IDPP 2, belong to the Agencies until the effectivity of this Compromise Agreement. Corollarily, claims from third parties of whatever nature arising from the operations of IDPP 1 and IDPP 2 before the effectivity of this Compromise Agreement shall be for account of the Agencies.
The operation and maintenance of IDPP 1 and 2 by the Agencies prior to the Compromise Agreement prevented the further deterioration of the plants’ condition and degradation of plants’ efficiency. It has also extended the plants’ economic life.
In the operation and maintenance of IDPP 1 and 2, the Agencies incurred financial losses at an annual average of about P405.53 million during the period 2006-2009, resulting to subsidy to electricity consumers of about P17.35 per kWh based on the average electricity production cost of IDPP 1 and 2 of P20.48 per kWh against the average selling rate in Mindanao of P3.13 per kWh for the same period.
Despite these losses, IDPP 1 and 2 were operated to augment power requirements and sustain baseload and peaking requirements as a result of the generation deficiency of the hydroelectric power plants. The electricity generated by the plants redounded to economic benefits for Iligan and neighboring areas, supported economic growth and investment opportunities and subsidized the cost of power to consumers. Additionally, IDPP 1 was operated from January to May 2010 at an average production cost of P8.0562 per kWh against the average selling rate in Mindanao of Php3.0549 per kWh for the same period.
Subject to the terms of this Compromise Agreement, each of the Parties hereby agree to desist from further prosecuting the Cases and such claims or counterclaims as may be related thereto, and from instituting any other action, suit or proceeding of whatever nature, against each other, their respective agents, representatives, officers, employees, successors and assigns, arising from, related to, or in connection with, the Tax Liabilities.
Within fifteen (15) days from the execution of this Compromise Agreement, the Parties shall, through their respective counsels, execute and file a Joint Motion to Approve and Render Judgment based on this Compromise Agreement with the Regional Trial Court of Iligan City (Civil Case No. 7212) and the Central Board of Assessment Appeals (CBAA Case No. M-23).
5. If, for any reason, additional documents or acts need to be executed or performed in order to effect the terms and intention of this Compromise Agreement, the Parties hereby agree to execute such documents and perform such acts in an expedited manner, without need of demand by or from the other Party.
6. The Parties further agree that if any of them fail to, for whatever reason or due to whatever cause, fulfill any of their respective obligations under this Compromise Agreement, the other Party may apply with the RTC of Iligan or Central Board of Assessment Appeals for, and shall be entitled to, the immediate issuance of a writ of execution or of such other orders, writs or processes as may be necessary or appropriate to implement this Compromise Agreement.
7. The Parties warrant that they each have the requisite power, authority and capacity to execute, deliver and perform its obligations under this Compromise Agreement and that this Compromise Agreement constitutes their legal, valid, and binding obligation, enforceable against them in accordance with its terms.
8. This Compromise Agreement constitutes the entire agreement of the Parties about this subject matter, and any previous agreements or understandings on the subject matter shall cease to have any effect. Any amendment, alteration or modification of this Compromise Agreement shall not be valid and binding unless and until reduced into writing and signed by the Parties.
9. If any provision of this Compromise Agreement or the application thereof to any situation or circumstance shall be declared invalid or unenforceable, the remaining provisions of this Compromise Agreement shall not be affected, and each remaining provision shall be valid and enforceable to the fullest extent. In the event of such partial invalidity, the Parties shall seek in good faith to agree on replacing any such legally invalid provision with a provision which most nearly and fairly approaches the effect of the invalid provision.
IN WITNESS WHEREOF, the Parties hereto have set their hands on the date and in the place above written.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
NATIONAL POWER CORPORATION
Maria Luz L. Caminero
Acting President & Chief Executive Officer
Froilan A. Tampinco President
CITY OF ILIGAN, LANAO DEL NORTE
Hon. Lawrence L. Cruz City Mayor
SIGNED IN THE PRESENCE OF:
REPUBLIC OF THE PHILIPPINES )
CITY OF MAKATI ) S. S.
Before me, a notary public in and for the city named above, personally appeared:
Name Competent Evidence of Date/Place of Issue Identity and CTC
National Power Corporation PASSPORT NO. EA 0029052 DATE ISSUED-8 FEB 2010 By: EXPIRY – 7 FEB 2015 Froilan A. Tampinco ISSUED IN – DFA, MLA.
Power Sector Assets and Liabilities Management Corporation
Maria Luz L. Caminero PASSPORT NO. VV0510060
DATE ISSUED – 6/22/2007 EXPIRY – 6/22/2012
who were identified by me through competent evidence of identity to be the same persons described in the foregoing Compromise Agreement, who acknowledged before me that their respective signatures on the instrument were voluntarily affixed by them for the purposes stated therein, and who declared to me that they have executed the instrument as their free and voluntary act and deed and that of the principals they respectively represent.
This document refers to the Compromise Agreement consisting of five (5) pages, including this page where the acknowledgement is written, which has been signed by the parties and their instrumental witnesses on the left margin of each and every page except the signature page where the signatures already appear at the foot of the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this 29th day of June, 2010 at Makati City.
Doc. No. 306; Page No. _62; Book No. VII; Series of 2010.
CECILIO G. GELLADA, JR. Notary Public Appt. No. M-186
Until December 31, 2010 Roll of Attorney No. 30354
IBP No. 810499 (1-8-2010) Q.C.
PTR No. 2124375 (1-19-2010) Makati City
7th Floor Bankmer Bldg., Ayala Ave. Makati City
REPUBLIC OF THE PHILIPPINES )
CITY OF MAKATI ) S. S.
Before me, a notary public in and for the city named above, personally appeared:
City of Iligan, Lanao del Norte By:
Lawrence L. Cruz
Competent Evidence of Identity and CTC
CTC No. 07137152
Date/Place of Issue
January 4, 2010 Iligan City
who was identified by me through competent evidence of identity to be the same persons described in the foregoing Compromise Agreement, who
acknowledged before me that his signature on the instrument was voluntarily affixed by him for the purposes stated therein, and who declared to me that he has executed the instrument as his free and voluntary act and deed and that of the principal he represents.
This document refers to the Compromise Agreement consisting of six (6) pages, including this page where the acknowledgement is written, which has been signed by the parties and their instrumental witnesses on the left margin of each and every page except the signature page where the signatures already appear at the foot of the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this 29th day of June, 2010 at Iligan City.
Doc. No. __240; Page No. __ 48; Book No. __10; Series of 2010.
(SGD) RANULFO D. CENAS
NOTARY PUBLIC UNTIL DECEMBER 31, 2010
PTR NO. No. 50337921-ROLL No. 31687
IBP LIFE MEMBER NO. MCLE NO. 135-495449”
After a close examination of the Compromise Agreement, this Board
finds the same to be in order, fair, equitable and not contrary to existing laws,
words, good custom, public order and public policy.
WHEREFORE, this Board resolves as follows:
(a) Said Compromise Agreement, to the extent compatible with law, is
hereby approved. The parties are enjoined to strictly comply with the terms and
conditions of the same; and
(b) The parties respective Motions for Reconsideration, having become
moot and academic, the same are hereby denied.
Manila, Philippines, May 23, 2011.
(Signed) OFELIA A. MARQUEZ
(Signed) RAFAEL O. CORTES
(with dissenting opinion) ROBERTO D. GEOTINA
Atty. Rainer B. Butalid Atty. Gordon S. Montojo
Atty. Mark Anthony S. Actub Atty. Eufracio R. Rara
Counsels for Petitioner-Appellant National Power Corporation NPC Bldg., Quezon Ave. Corner BIR Road, Diliman
Atty. Cipriano Benedicto E. Ratunil Registrar of Deeds as Chairman of
Local Board of Assessment Appeals 2nd Floor, Phil. Veterans Bank Bldg.
Roxas Avenue, Iligan City