Lanao del Norte Electric Cooperative (LANECO) v.
assailing the validity and constitutionality of the
Provincial Government of Lanao del Norte (PGLN)
Facts:
Petitioner LANECO was the electricity
distributor of over 14 municipalities in the province
of Lanao del Norte. In order to finance its
operations, LANECO contracted several loans from
1972-1991 with the National Electrification
Administration (NEA) secure by real estate
mortgages over its properties, said loans totaling
Php117.6Million.
In 1991, the Local Government Code was
enacted empowering LGU’s to impose real property
taxes.
January 7, 1993, the Sangguniang
Panlalawigan of PGLN enacted its own Provincial
Revenue Code, pursuant to the LGC.
Upon the enactment of RA 9136 (EPIRA
2001), Power Sector Assets and Liabilities
Management (PSALM) assumed LANECO’s loan
balance of Php32.5Million to the NEA.
2006: the Provincial Treasurer of PGLN
wrote a letter to LANECO demanding payment of
Php22.8Million and Php8.2M, representing real
property taxes it owed to 9 municipalities for 1995-
2005.
PGLN refused to give LANECO a copy of the
Provincial Revenue Code when the former
demanded it.
LANECO filed a Petition for Declaratory
Relief with Preliminary Prohibitory Injuction with
the RTC of Lanao del Norte, questioning the validity
of the real property tax assessments and the
Provincial Revenue Code, however said case was
dismissed as the parties resolved the issues before
the Bureau of Local Government Finance.
Notwithstanding this, PGLN continued to demand
payment from LANECO, and the latter reiterated its
request for a copy of said ordinance, but to no avail.
December 5, 2008: LANECO filed a Petition for
Prohibition and Mandamus under Rule 65 to enjoin
PGLN from levying and auctioning off all the assets
of LANECO to satisfy its unpaid real property taxes.
- LANECO does not dispute its liability,
however it argues that PGLN can file a collection
case against it instead of levy to enforce payment in
said taxes.
December 9, 2008: LANECO filed a Petition for
Declaratory Relief (Special Civil Case 012-07-2008)
franchise tax provisions of the same tax ordinance,
before the RTC of Tubod, Br. 7; RTC decided on May
11, 2010 declaring the tax ordinance
unconstitutional.
March 30, 2009: PGLN issued a Memorandum
directing 8 municipalities to issue warrants of levy
against LANECO
August 14, 2009: LANECO filed another Petition for
Prohibition (Civil case 015-07-2009) against PGLN to
annul the real property tax provisions under the said
tax ordinance; decided by RTC on May 17, 2010 in
favor of LANECO citing the May 11 decision, and
cancelling the warrants of levy as well as the
annotations of the levy on the TCTs on the
properties levied
LANECO filed a Petition for Declaratory
Relief and Injunction (020-07-2010) questioning
Provincial Ordinance no. 001-2006 on the ground
that said tax ordinance is invalid for failure to
comply with the required hearings, consultations,
and publication.
Issue/s:
1. W/N LANECO committed forum shopping
2. W/N LANECO’s properties cannot be the
subject of levy pursuant to Sec. 60 of the EPIRA
which purportedly prohibits electric cooperatives
from disposing its assets within the period of the
rehabilitation and modernization program.
3. W/N the levy impairs the government
contracts entered into by NEA and PSALM violating
the constitutional right of national agencies to enter
into a contract.
Ruling:
1. Yes. Elements of forum shopping: a) identity
of parties; b) identity of rights asserted and reliefs
prayed for, the relief being founded on the same
facts; and c) any judgment rendered in either action
will amount to res judicata in the other.
2. No. The law does not prohibit LGUs from
resorting to the administrative remedy of levy on
real property. Instead, these provisions merely
ascribe limitations on, and lay down the
consequences of, any voluntary transfer and
disposition of assets by the electric cooperatives
themselves. They do not limit the LGUs' remedies
against electric cooperatives to judicial actions in
collecting real property taxes.
3. No. To fall within the prohibition on the
impairment of the obligation of contracts, the
change must not only impair the obligation of the
existing contract, but the impairment must be
substantial. To constitute impairment, the law must
affect a change in the rights of the parties with
reference to each other and not with respect to non-
parties. In this case, regardless of whether the
mortgages on LANECO’s properties are liens
thereon, these cannot defeat the right of the PGLN
to make those properties answerable for delinquent
real property taxes, since local government taxes
serve as superior lien over the property subject of
the tax, as expressed in Sec. 257 of the LGC. Thus,
respondent PGLN is well within its right to assess
LANECO with RPT, and to exercise its remedies
under Sec. 256 of the LGC for the collection thereof,
including by administrative action thru levy.