FELS ENERGY INC.

V PROVINCE OF BATANGAS
Petitioner: Fels Energy, Inc | National Power Corporation
Respondent: Province of Batangas and Provincial Assessor |
LBAA-Batangas, Lauro Andaya (Assessor) and Province of
Batangas
Summary: NPC and Polar Energy entered into a lease contract
over power barges, with an undertaking that NPC will pay the
taxes. Polar assigned its rights to Fels. Fels was assessed RPT by
the Province of Batangas. NPC, in behalf of FELS, moved to
reconsider the assessment instead of appealing straight to the
LBAA. The parties appealed all the way to the SC but the SC
upheld the assessment and ruled that FELS, not NPC is liable.
Doctrine: The 60-day period to appeal to the LBAA is reckoned
from the date of receipt of the notice of assessment. If a
taxpayer fails to appeal in due course, the right of the LGU to
collect taxes due with respect to the taxpayers property
becomes absolute upon the expiration of the period to appeal.
FACTS:
1. 1993: NPC entered into a lease contract denominated as an
Energy Conversion Agreement with Polar Energy over
3x30MW diesel engine power barges for a period of 5 years.
2. Article 10 of the Agreement: NAPOCOR shall be responsible
for the payment of (a) all taxes, import duties, fees, charges
and other levies imposed by the National Government of the
Republic of the Philippines or any agency or instrumentality
thereof to which POLAR may be or become subject to or in
relation to the performance of their obligations under this
agreement (other than (i) taxes imposed or calculated on
the basis of the net income of POLAR and Personal Income
Taxes of its employees and (ii) construction permit fees,
environmental permit fees and other similar fees and
charges) and (b) all real estate taxes and assessments,
rates and other charges in respect of the Power Barges.
3. Polar then assigned its rights to FELS. On August 7,1995,
FELS received an assessment for real property taxes on the
power barges for P56, 184, 088.40 per annum.
FELS
reminded NPC of its obligation under the Agreement and
gave it full authority to represent FELS in any conference
regarding the assessment.
4. On September 7, 1995, NPC sought reconsideration of the
assessment but the Provincial Assessor denied. NPC

appealed to the LBAA for the setting aside of the

assessment and the declaration of the barges as nontaxable items.
- Assessor: barges were real property for purposes of
taxation under Sec 199c of the LGC
- NPC: based on the DOF Opinion dated May 20, 1996,
power barges are not real property subject to real
property assessment
5. LBAA: Petition denied. FELS is ordered to pay. Power
plant facilities are considered real property because they are
installed at a specific location with a character of
permanency. In any case, the petition was filed out of time.
6. FELS appealed to the CBAA. Meanwhile, the Provincial
Treasurer issued a Notice of Levy and Warrant of Distraint,
which was served to FELS. The CBAA issued an Order lifting
the levy and distraint.
7. Meanwhile, the NPC filed a Motion for Intervention, which
was approved.
8. CBAA: Reversed. The barges are exempt from RPT
because they are owned by NPC and were actually, directly
and exclusively used by it.
9. CBAA on MR: Reversed. Petition is dismissed. LBAA is
affirmed.
10. FELS and NPC filed separate petitions for review before the
CA. The parties were required to filed their respective
Memoranda but tey filed to do so even after a year.
11. CA: Denied. The right to question the assessment has
prescribed.
12. FELS and NPC: the appeal to the LBAA was not time-barred;
the running of the period was tolled when NPC moved for
the reconsideration of the assessment; the 60-day period for
the appeal should be reckoned from its receipt of the denial
of its MR
ISSUE: WON FELS is liable to pay RPT YES
RULING: DENIED
RATIO:
1. The 60-day period is reckoned from
the date of
receipt of the assessment notice
a. Sec 226 of the LGC: appeal to the LBAA within 60
days from receipt of the written notice of assessment

b. The assessment sent to FELS contained the same

provision but NPC opted to file a MR, which is a
remedy not sanctioned by law
2. In Callanta v Ombudsman, the court ruled that the last
action of the local assessor on a particular
assessment shall be the notice of assessment; it is
this last action which gives the owner of the property the
right to appeal to the LBAA. The procedure likewise does not
permit the property owner the remedy of filing a motion for
reconsideration before the local assessor.
- Perfection of an appeal within the period is both
mandatory and jurisdictional, and failure in this regard
renders the decision final and executory.
3. Power barges = real property subject to RPT
- Art 415 (9) of the New Civil Code provides that docks
and structures which, though floating, are intended by
their nature and object to remain at a fixed place are
considered immovable property (by destination)
4. FELS is the owner of the property and is the taxable
entity
- Clear stipulation of ownership in the Agreement; FELS
cannot invoke the exemption under the LGC for

properties actually, directly and exclusively used by

GOCCs
- The Agreement stipulates that Polar will operate the
power barges, not NPC; the privilege granted to NPC
cannot be extended to FELS
- The covenant between FELS and NPC does not bind the
Province, which is not privy to it.
5. Res Judicata: FELS gave NPC the full power and
authority to represent it in any proceeding regarding real
property assessment. Therefore, when petitioner NPC filed
its petition for review docketed as G.R. No. 165113, it did so
not only on its behalf but also on behalf of FELS. Thus, the
decision in G.R. No. 165116 is binding on petitioner FELS
under the principle of privity of interest. In fine, FELS and
NPC are substantially identical parties as to warrant the
application of res judicata.
6. Forum Shopping: Petitioners engaged in forum shopping
when they filed G.R. Nos. 168557 and 170628 after the
petition for review in G.R. No. 165116. Indeed, petitioners
went from one court to another trying to get a favorable
decision from one of the tribunals which allowed them to
pursue their cases.