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FELS ENERGY v. PROVINCE OF BATANGAS

FACTS:

The consolidated cases of G.R. No. 168557 and G.R. No. 170628 were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC) respectively, both challenging the decisions of the Court of Appeals (CA) and were subsequently dismissed on the ground of prescription. On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. for the operation of power barges in Calaca, Batangas. The contract stated that NPC shall be responsible for the payment of all taxes, import duties, fees, charges, and levies imposed by the government, including real estate taxes. Polar Energy, Inc. later assigned its rights under the contract to FELS, which was initially opposed by NPC. FELS received an assessment of real property taxes on the power barges from the Provincial Assessor of Batangas City, amounting to P56,184,088.40 per annum. FELS referred the matter to NPC, as it was NPC's responsibility to pay the real estate taxes. NPC sought reconsideration but the motion was denied. NPC then filed a petition with the Local Board of Assessment Appeals (LBAA) to set aside the assessment and declare the barges as non-taxable items. The LBAA denied the petition, ruling that the barges were considered real property for taxation purposes. FELS appealed to the Central Board of Assessment Appeals (CBAA) and during the pendency of the case, a Notice of Levy and Warrant of Distraint was issued against FELS. The CBAA lifted the levy and distraint and later rendered a decision that the power barges were exempt from real property tax. Both FELS and NPC filed motions to admit bonds to guarantee the payment of real property taxes assessed by the Provincial Assessor. The CBAA approved the bonds.

This case involves a dispute over the real property tax assessment on power barges owned by FELS Energy Inc. (FELS) and used by the National Power Corporation (NPC). The Central Board of Assessment Appeals (CBAA) initially ruled in favor of FELS and NPC, stating that the power barges were covered by exemptions under Section 234(c) of the Local Government Code. However, the CBAA later reversed its decision and affirmed the tax assessment. FELS and NPC filed separate motions for reconsideration, which were denied by the CBAA. FELS filed a petition for review before the Court of Appeals (CA), while NPC filed a separate petition. NPC failed to comply with a resolution directing it to re-file its motion for consolidation, and as a result, the CA denied its petition on the ground of prescription. FELS filed a motion for reconsideration, which was denied. NPC also filed a petition for review before the Supreme Court, but it was denied for failure to show reversible error. The CA also dismissed FELS' petition due to prescription. Both FELS and NPC filed separate petitions before the Supreme Court, which were consolidated. The Court dispensed with the submission of memoranda due to the significance of tax issues involved.

The case involves two petitions filed by FELS Energy, Inc. (FELS) and National Power Corporation (NPC) questioning the decision of the Local Board of Assessment Appeals (LBAA) in dismissing their appeals on the ground of being time-barred. FELS argues that the period to file an appeal with the LBAA was tolled when NPC moved for the assessment to be reconsidered. On the other hand, NPC contends that the 60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for reconsideration. Section 226 of R.A. No. 7160, also known as the Local Government Code of 1991, is cited as the applicable provision governing the filing of appeals. The notice of assessment issued by the Provincial Assessor to FELS contained instructions on how to appeal within 60 days.

ISSUES:

  1. Whether or not the filing of a motion for reconsideration tolls the 60-day period to appeal to the Local Board of Assessment Appeals (LBAA).

  2. Whether or not the Provincial Assessor has the authority to review or readjust an assessment after sending the notice of assessed value.

  3. Whether the doctrine of res judicata applies in this case.

  4. Whether there is forum shopping committed by the petitioners.

  5. Whether the power barges and their accessories are subject to real property taxation.

RULING:

  1. The filing of a motion for reconsideration does not toll the 60-day period to appeal to the LBAA. The only remedy available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property is to file an appeal to the LBAA. The notice of assessment serves as the last action of the local assessor, giving the property owner the right to appeal to the LBAA. The procedure does not permit the property owner to file a motion for reconsideration before the local assessor.

  2. The Provincial Assessor does not have the authority to review or readjust an assessment after sending the notice of assessed value. The appropriate forum to bring an appeal regarding the assessed value is the LBAA. The 60-day period to appeal to the LBAA runs without interruption. Failure to appeal within the prescribed period renders the assessment final, executory, and demandable.

  3. The doctrine of res judicata applies in this case. Res judicata has the following elements: (1) the former judgment must be final; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and the second actions, identity of parties, subject matter and causes of action. In this case, there is substantial identity of parties between the petitioners in the second case and the petitioner in the earlier case. Therefore, the decision in the earlier case is binding on the petitioners under the principle of privity of interest.

  4. There is forum shopping committed by the petitioners. Forum shopping exists when, as a result of an adverse judgment in one forum, a party seeks another and possibly favorable judgment in another forum other than by appeal or special civil action or certiorari. In this case, the petitioners filed two additional cases after the first case in an attempt to obtain a favorable decision. Filing multiple petitions or complaints constitutes abuse of court processes and adds to the congestion of court dockets.

  5. Yes, the power barges and their accessories are subject to real property taxation.

PRINCIPLES:

  • The last action of the local assessor on a particular assessment is the notice of assessment, which gives the property owner the right to appeal to the LBAA. (Callanta v. Office of the Ombudsman)

  • The 60-day period to appeal to the LBAA runs without interruption, and the failure to appeal within the prescribed period renders the assessment final, executory, and demandable.

  • Res judicata requires (1) finality of the former judgment, (2) jurisdiction of the court that rendered it, (3) judgment on the merits, and (4) identity of parties, subject matter, and causes of action.

  • Forum shopping is an abuse of court processes and occurs when there is identity of parties and rights asserted, and the judgment in one case would amount to res judicata in the other.

  • Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise.

  • Factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court.

  • Power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work.

  • The machinery must be actually, directly and exclusively used by the government-owned or controlled corporation for it to be exempt from real property tax.

  • Obligations arising from a contract have the force of law between the parties, and parties are bound by its terms and conditions.

  • Taxation is the rule and exemption is the exception. Doubts should be resolved in favor of provincial governments.

  • The responsibility for payment of real estate taxes cannot be extended to a third person not privy to the contract.

  • The power to tax is an incident of sovereignty and is unlimited in its scope. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion.

  • Local government units are empowered to deliver basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.