Fels Energy, Inc. v. Province of Batangas
REITERATIONFacts
1. The Antecedents: This case concerns the real property tax assessment on power barges leased by FELS Energy, Inc. (FELS) from the National Power Corporation (NPC). FELS, having acquired the rights to a lease contract originally entered into by NPC with Polar Energy, Inc., was assessed real property taxes by the Provincial Assessor of Batangas for the years 1994 and 1995. The lease agreement stipulated that NPC would be responsible for all real estate taxes and assessments concerning the power barges. FELS, in turn, referred the assessment to NPC, asserting NPC's contractual obligation to pay. 2. Procedural History: Following the Provincial Assessor's denial of FELS's request for reconsideration, NPC filed a petition with the Local Board of Assessment Appeals (LBAA). The LBAA denied the petition, ordering FELS to pay the real estate tax. FELS appealed to the Central Board of Assessment Appeals (CBAA), which initially ruled in favor of FELS, exempting the barges from real property tax. However, the CBAA later reversed its decision, affirming the assessment and dismissing FELS's petition and NPC's intervention. FELS and NPC then filed separate petitions for review with the Court of Appeals (CA). The CA, in two separate decisions, denied both petitions, primarily on the ground of prescription, holding that the appeals to the LBAA were filed out of time. 3. The Petition: FELS and NPC filed consolidated petitions for review on certiorari with the Supreme Court, challenging the CA's dismissal of their respective appeals. They argue that the power barges are personal property and thus not subject to real property tax, or alternatively, that they are exempt under Section 234(c) of the Local Government Code. They also contend that NPC, as a government-owned corporation, should be responsible for the tax. Crucially, both petitioners maintain that their appeals were not time-barred, asserting that the filing of a motion for reconsideration with the Provincial Assessor tolled the period for appealing to the LBAA. The Supreme Court, however, found that the petitions were barred by res judicata and constituted forum shopping, given a prior dismissal of a related petition by this Court. The Court also affirmed the CA's findings that the barges are real property subject to taxation and that FELS, as the owner and operator under the agreement, is the taxable entity, not NPC.
Issue(s)
Whether the appeal to the Local Board of Assessment Appeals (LBAA) was filed out of time. Whether power barges, being floating and movable, are personal properties and thus not subject to real property tax. Assuming the power barges are real properties, whether they are exempt from real estate tax under Section 234 of the Local Government Code (LGC). Assuming the power barges are subject to real estate tax, whether NPC should be made to pay the same under the law. Whether the right to question the real property tax assessment is imprescriptible. Whether the present petitions are barred by res judicata and constitute forum shopping.
Ruling
The Supreme Court denied the petitions and affirmed the assailed decisions and resolutions of the Court of Appeals. The Court held that the assessment for real property tax was final and executory due to the failure of FELS and NPC to appeal to the LBAA within the prescribed period. The Court also found that the petitions were barred by res judicata and constituted forum shopping.
Ratio Decidendi
On the issue of prescription and the appeal to the LBAA: The Court reiterated that Section 226 of R.A. No. 7160 mandates that an appeal to the LBAA must be filed within sixty (60) days from the receipt of the written notice of assessment. The notice of assessment explicitly informed FELS of this period. Instead of appealing to the LBAA, NPC filed a motion for reconsideration with the Provincial Assessor, a remedy not sanctioned by law. The Court emphasized that the procedure does not permit a motion for reconsideration before the local assessor, as this would open avenues for corruption. The filing of such a motion does not toll the 60-day period to appeal to the LBAA. Consequently, the failure to appeal within the statutory period renders the assessment final, executory, and demandable, precluding any subsequent challenge on the merits or invocation of defenses that would reopen the question of liability. The Court agreed with the CA that the right to question the assessment had prescribed. On whether power barges are real property subject to tax: The Court affirmed the findings of the CA, CBAA, and LBAA that the power barges are considered real property for taxation purposes. This conclusion was supported by jurisprudence, such as the case of Consolidated Edison Company of New York, Inc., where similar floating power plants were held subject to real property taxation. Furthermore, Article 415(9) of the Civil Code classifies "docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" as immovable property. The power barges, being installed at a specific location with a character of permanency and intended for industry, fall under this classification as immovable property by destination. On the issue of tax exemption: The Court ruled that the power barges are not exempt from real estate tax under Section 234(c) of R.A. No. 7160. While the provision exempts machinery and equipment used by government-owned or controlled corporations engaged in power generation and transmission, the ownership of the power barges was established to be with FELS, a private corporation, as per Article 2.11 of the Agreement. The exemption applies to the machinery and equipment used by the GOCC, not necessarily owned by it. Moreover, Article 5.5 of the Agreement stipulated that FELS (Polar) undertakes to operate the Power Barges. Therefore, FELS, as the owner and operator, could not claim the exemption intended for NPC. The Court stressed that taxation is the rule and exemption is the exception, requiring clear and unmistakable language for any claim of privilege, and doubts are resolved in favor of the taxing authority. On NPC's responsibility to pay: The Court found that NPC's undertaking under Section 10.1 of the Agreement to be responsible for the payment of real estate taxes did not justify FELS's exemption. This covenant was between FELS and NPC and did not bind the Province of Batangas, a third party not privy to the contract. The privilege granted to NPC could not be extended to FELS. The local government's right to collect taxes from the owner of the property (FELS) remained absolute. On the imprescriptibility of the right to question the assessment: The Court rejected the argument that the right to question the assessment is imprescriptible. The Local Government Code provides specific periods for appeal, and failure to comply renders the assessment final and executory. The protracted litigation resulted in the deprivation of revenues for the local government, and the Court emphasized the importance of upholding the right of local government units to collect taxes to support their operations and deliver basic services. On res judicata and forum shopping: The Court found that the petitions were barred by res judicata and constituted forum shopping. It noted that FELS had granted NPC full authority to represent it in proceedings regarding the assessment. Therefore, when NPC filed its petition in G.R. No. 165113, it acted on behalf of both itself and FELS. The decision in G.R. No. 165113, which affirmed the CA's dismissal of the petition in CA-G.R. SP No. 67490 (where FELS was the petitioner), was binding on FELS due to privity of interest. The Court found substantial identity of parties and interests. Furthermore, the filing of multiple petitions seeking the same relief after an adverse judgment in one forum constituted forum shopping, which abuses court processes and degrades the administration of justice. The Court concluded that the elements of res judicata and forum shopping were present, rendering further discussion of other issues unnecessary.
Main Doctrine
Failure to appeal a real property tax assessment to the Local Board of Assessment Appeals (LBAA) within the prescribed 60-day period renders the assessment final and executory, barring any subsequent challenge or claim of exemption. The filing of a motion for reconsideration before the assessor does not toll the prescriptive period for appeal. Furthermore, the doctrine of res judicata and the prohibition against forum shopping apply even if parties are not absolutely identical but possess substantial identity of interest, especially when one party has granted the other full authority to represent it in proceedings.