G.R. No. 180654 March 6, 2017
NATIONAL POWER CORPORATION, Petitioner, vs. PROVINCIAL GOVERNMENT OF BATAAN, et al., Respondents.

FACTS

The Provincial Government of Bataan assessed the National Power Corporation (NPC) for local franchise tax delinquency amounting to ₱45.9 million for 2001-2003, based on NPC’s sale of electricity from its Bataan power plants. NPC contested the assessment, arguing that under the Electric Power Industry Reform Act (EPIRA), which took effect in June 2001, it ceased to be liable as it was relieved of its electricity transmission function, and its transmission assets and nationwide franchise were transferred to the National Transmission Corporation (TRANSCO). The Province ignored NPC’s protest and levied upon and auctioned 14 NPC real properties in Limay, Bataan.
NPC filed a Petition for Declaration of Nullity of the foreclosure sale with the Regional Trial Court (RTC). The RTC dismissed the petition, ruling NPC failed to prove it ceased operations in Bataan. NPC appealed to the Court of Appeals (CA). The CA dismissed the appeal for lack of jurisdiction, holding the case was essentially a local tax case appealable to the Court of Tax Appeals (CTA). NPC elevated the matter to the Supreme Court via a Petition for Review.

ISSUE

The primary issue is whether the Court of Appeals correctly dismissed NPC’s appeal for lack of jurisdiction, holding it should have been filed with the Court of Tax Appeals.

RULING

The Supreme Court granted NPC’s petition and set aside the CA’s resolution. The Court ruled that the CA erred in dismissing the appeal for lack of jurisdiction. The core of NPC’s action before the RTC was not merely a protest against the tax assessment but a challenge to the very validity of the foreclosure sale conducted to collect the tax. NPC’s petition sought the annulment of the auction sale and a declaration that it was exempt from the local franchise tax due to the legal effects of the EPIRA. This character of the suit placed it within the realm of an ordinary civil action, not a special proceeding appealable exclusively to the CTA.
The legal logic is that jurisdiction is determined by the nature of the action as pleaded in the complaint. NPC’s primary objective was to nullify the levy and sale of its properties, which it claimed were illegal due to a lack of valid tax liability. While the case involved a tax assessment, the principal relief sought was the annulment of the execution proceedings. Therefore, the RTC properly exercised jurisdiction over the case as an action for the nullification of a foreclosure sale. Consequently, the appeal from the RTC’s decision was correctly taken to the Court of Appeals, not the Court of Tax Appeals. The Supreme Court thus remanded the case to the RTC for further proceedings, with instructions to implead indispensable parties.