G.R. No. 231679 - National Power Corp. vs. Bohol I Electric Cooperative, Inc.

Bohol I Electric Cooperative, Inc. (BOHECO I) filed a complaint against the National Power Corporation (NAPOCOR) for recovery of possession and payment of back rentals concerning a 5MVA Substation Transformer (Subject Transformer).
NAPOCOR filed a third-party complaint against the National Electrification Administration (NEA), asserting that its possession of the transformer was legitimate by virtue of NEA’s directive.
The transformer’s ownership was claimed by BOHECO, who asserted only a loan or borrowing arrangement with NAPOCOR.

On September 13, 1979, BOHECO received a radio message from NEA directing BOHECO to allow NAPOCOR to borrow the 5MVA Substation Transformer for its Tongonan Geothermal Plant in Ormoc.
NAPOCOR’s Engineer prepared requisition vouchers for the transformer and related materials, which BOHECO’s Acting General Manager approved with notes indicating that the transfer was “subject to NEA, NPC & BOHECO I negotiations.”
The transformer was physically pulled out from BOHECO’s office by NAPOCOR engineers in September 1979, but no formal contract transferring ownership was documented.

BOHECO repeatedly requested, starting March 1985, for possible rental compensation and demanded the return of the transformer, but its requests were ignored.
BOHECO continued paying monthly amortizations for the transformer to NEA during the time NAPOCOR had physical possession of it.
BOHECO passed several board resolutions (1986 and 1987) demanding return of the transformer and payment of rental fees.

Trial on merits was conducted; BOHECO presented evidence proving ownership and unauthorized withholding of the transformer by NAPOCOR.
NAPOCOR witnesses testified that the transformer transfer was by NEA’s instruction as a replacement arrangement swapping transformers to save shipping costs, denying any borrowing or leasing agreement.
NEA denied instructing or authorizing NAPOCOR to take possession and challenged the existence of any binding agreement.

RTC declared BOHECO owner of the transformer, ordered NAPOCOR to return it, and ordered NAPOCOR and NEA to pay P450,000.00 as back rentals plus attorney's fees.
Upon appeal, the Court of Appeals (CA) upheld BOHECO’s ownership and NAPOCOR’s obligation to return the transformer but modified the decision by deleting attorney’s fees and holding only NAPOCOR liable for rentals in arrears from the time of pulling out until return.

Whether NAPOCOR had legitimate possession and/or ownership of the transformer by virtue of NEA’s directive.

Whether only NAPOCOR or both NAPOCOR and NEA are liable to pay rentals to BOHECO for the use of the subject transformer.

Whether the amount awarded as back rentals was properly supported by evidence and whether attorney’s fees should be awarded.