Case Summary (G.R. No. 192300)
Key Dates
- November 16, 1988 & June 29, 1992: NPC enters BOT agreements for power stations.
- March 24, 2003 & August 1, 2005: Transfer of plant and equipment titles to NPC.
- 1st Quarter 2003: NPC pays real property taxes; subsequently ceases payments, invoking exemption under Section 234(c), LGC.
- December 16, 2005: NPC files RTC petition for declaratory relief, annulment of tax notices, and preliminary injunction.
- May 23, 2007: RTC denies relief for failure to exhaust LBAA/CBAA remedies.
- July 18, 2008: CTA Second Division dismisses NPC’s petition on same grounds.
- March 1 & May 6, 2010: CTA En Banc affirms dismissal and denies reconsideration.
- November 24, 2014: Supreme Court grants review.
Applicable Law
- 1987 Philippine Constitution, Article X (Local Government), Section 5 (Fiscal Autonomy).
- Republic Act No. 7160 (Local Government Code of 1991), Sections 226, 229 (assessment appeals), Section 234(c) (exemption), Section 252 (payment under protest).
- R.A. No. 9282 (1996), Section 7(a)(3) & (5) – CTA jurisdiction over local tax cases.
- Revised Rules of Court, Rule 45 (Certiorari).
Statement of Facts
Under BOT agreements, private corporations built and operated gas-turbine plants, subject to NPC’s supervision. Upon title transfer of the plant machineries to NPC in 2003 and 2005, NPC paid real property taxes for one quarter, then ceased payment, claiming statutory exemption for government-owned entities engaged in power generation. The Municipal Treasurer issued multiple Notices of Delinquency, Warrant of Levy, and scheduled auction of the properties, which NPC challenged as void.
Procedural History
- RTC of Malabon: Petition for declaratory relief and injunction denied for non-exhaustion of administrative remedies (appeal to Local and Central Boards of Assessment Appeals) and non-payment of protested tax.
- CTA Second Division: Dismissed NPC’s appeal, upholding RTC’s jurisdictional finding.
- CTA En Banc: Affirmed dismissal, held that appeals to LBAA/CBAA are mandatory before judicial action.
- Supreme Court: NPC’s Rule 45 petition granted.
Issues
- Whether the Court of Tax Appeals has jurisdiction over an RTC decision in a local real property tax declaratory relief case.
- Whether NPC was required to exhaust administrative remedies (LBAA/CBAA) and to pay the tax under protest before judicial relief.
Analysis
- CTA Jurisdiction. Section 7(a)(3) of R.A. 9282 vests the CTA with exclusive appellate jurisdiction over “decisions, orders or resolutions of the Regional Trial Courts in local tax cases.” The term “local taxes” in the statute must be read broadly to include real property taxes, in line with the LGC’s comprehensive treatment of local fiscal powers under the 1987 Constitution.
- Exception to Exhaustion Rule. Judicial relief may be sought directly when the challenge questions the assessor’s and treasurer’s authority to impose or collect tax—i.e., attacks the validity of the assessment, not its correctness or reasonableness. Under Ty v. Trampe, when only questions of law are at issue, appeals to administrative boards and payment under protest are unnecessary. Here, NPC challenged its exemption under Section 234(c) of the LGC
Case Syllabus (G.R. No. 192300)
Facts of the Case
- Petitioner National Power Corporation (NPC) is a government-owned and controlled corporation under R.A. No. 6395, with principal offices in Quezon City.
- Respondents are the Municipal Government of Navotas (LGU), the Sangguniang Bayan of Navotas (legislative body), and Manuel T. Enriquez (Municipal Treasurer).
- On November 16, 1988, and June 29, 1992, NPC entered into Build-Operate-Transfer (BOT) Agreements with Mirant Navotas I Corporation (MNC-I) and Mirant Navotas II Corporation (MNC-II) for 200-MW and 100-MW gas turbine power stations, respectively.
- During the BOT period, NPC had actual and direct control over operations and was obliged to pay all taxes—except business taxes—related to station implementation.
- For the first quarter of 2003, NPC paid real property taxes totaling ₱8,356,585.71 for both stations, then ceased payments, claiming exemption under Section 234(c) of the 1991 Local Government Code (LGC).
- NPC informed the Municipal Assessor by letter (March 30, 2004; July 26, 2005) that machineries and equipment transferred from MNC-I and MNC-II were exempt from real property tax.
- Transfers of fixtures, fittings, plant, equipment, and improvements took place on March 24, 2003 (MNC-I) and August 1, 2005 (MNC-II).
- On May 25, 2005, the Municipal Treasurer issued delinquency notices for the 2nd–4th quarters of 2003 and years 2004–2005, totaling ₱148,298,339.15.
- Warrant of Levy and Notices of Sale followed; a public auction on December 21, 2005 resulted in forfeiture of the properties to the Municipality due to lack of bidders.
Procedural History
- December 16, 2005: NPC filed in RTC Malabon City a petition for declaratory relief, annulment of delinquency notices, warrant of levy, and sale notices, with prayer for TRO.
- RTC denied the TRO; respondents conducted auction and forfeiture.
- May 23, 2007: RTC dismissed the petition for lack of jurisdiction, citing NPC’s failure to exhaust administrative remedies before the Local Board of Assessment Appeals (LBAA) and Central Board of Assessment Appeals (CBAA).
- July 27, 2007: NPC petitioned this Court for review with application for