NATIONAL POWER CORPORATION, Petitioner, vs. PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO, Respondents.
FACTS
The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property taxes on machineries located in its power plant in Pagbilao, Quezon. The National Power Corporation (Napocor), which had entered into a Build-Operate-Transfer (BOT) Agreement (Energy Conversion Agreement) with Mirant, was furnished a copy of the assessment. Napocor (not Mirant) protested the assessment before the Local Board of Assessment Appeals (LBAA), claiming exemptions under Section 234(c) and (e) of the Local Government Code (LGC) for machineries used in power generation and for pollution control. Alternatively, Napocor argued it was entitled to a lower assessment level of 10% under Section 218(d) of the LGC and an allowance for depreciation under Section 225. The Court, in a Decision dated July 15, 2009, denied Napocor’s claims, primarily on the ground that it lacked the legal standing to protest the assessment. The Court found Napocor did not have the requisite legal interest in the property as it was not the owner and did not have use and possession of the machineries. Napocor filed a motion for reconsideration, insisting it was the beneficial owner and that its contractual assumption of tax liability vested it with legal interest. Napocor also filed a Motion to Refer the Case to the Court En Banc. The Philippine Independent Power Producers Association, Inc. (PIPPA) filed a Motion for Leave to Intervene and a Motion for Reconsideration-in-Intervention.
ISSUE
The primary issue is whether Napocor has sufficient legal interest to protest the real property tax assessment, which is a prerequisite for claiming any tax exemptions or privileges.
RULING
The Court denied Napocor’s motion for reconsideration and affirmed its July 15, 2009 Decision. The Court held that Napocor lacked the legal interest required under Section 226 of the LGC to protest the tax assessment. Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner. Napocor was not the legal owner of the machineries; Mirant retained complete legal and beneficial ownership under the BOT Agreement, subject only to transfer after 25 years. A BOT agreement is not a mere financing arrangement but one where the proponent owns the facility until transfer. Napocor’s contractual assumption of tax liability alone does not confer legal interest, as such liability is enforceable only between the contracting parties and not against the local government unit, a third party. Without legal standing, the tax assessment became final and executory, barring any claim for exemption. The Court also denied the referral to the Court En Banc, finding the issues raised mere reiterations of previous arguments. Consequently, Napocor is not entitled to the claimed tax exemptions or privileges.
