Camarines Norte Electric Cooperative, Inc. v. Hon. Ruben D.

Torres

GR No. 127249, February 27, 1998

Facts:

Petitioner CANORECO is an electric cooperative organized under the provisions of PD No.

269, otherwise known as the National Electrification Administration Decree, as amended by PD No.
1645.

On March 10, 1990, then Pres. Corazon Aquino signed into law RA No. 6938 and RA No.
6939. The former is the Cooperative Code of the Phils., while the latter created the Cooperative
Development Authority and vested solely upon the CDA the power to register cooperatives.

CANORECO registered with the CDA, and it issued a Certificate of Provisional Registration
effective for 2 years. On March 1, 1995, the CDA extended this provisional registration until May 4,
1997. However, on July 10, 1996, CANORECO filed with the CDA its approved amendments to its
Articles of Cooperation converting itself from a non-stock to a stock cooperative.

Previously, on March 11, 1995, the Board of Directors of CANORECO approved Resolution
No. 22 appointing petitioner Reynaldo Abundo as permanent Gen. Manager. And the Board was
composed of the other petitioners.

On May 28, 1995, the private respondents held a special meeting of the Board of Directors of
CANORECO, the minutes of the meeting showing that the petitioners were absent. Those present in
the special meeting declared all positions in the board vacant and thereafter proceeded to hold
elections by secret balloting with all the directors present considered candidates for the positions.
The private respondents won and were declared as the newly elected officers of the CANORECO.
Thereafter, the newly elected officers approved several resolutions.

The petitioners challenged the resolutions and the election of officers by filing with the CDA
a Petition for Declaration of Nullity of Board Resolutions and Election of Officers with Prayer for
Issuance of Injunction or TRO. In its Resolution of February 15, 1996, the CDA resolved the petition in
favor of the petitioners.

On December 3, 1996, the President of the Philippines issued a Memorandum Order No. 409
constituting an Ad Hoc Committee to temporarily take over and manage the affairs of CANORECO.

On December 11, 1996, the petitioners filed this petition.

Issue:

WON the Office of the President can validly constitute an ad hoc committee to take over and manage
the affairs of an electric cooperative.

Held:

No. Polce power cannot be invoked to clothe with validity the assailed Memorandum Order
No. 409. Police power is the power inherent in a government to enact laws, within constitutional
limits, to promote the order, safety, health, morals, and general welfare of society. It is lodged
primarily in the legislature. By virtue of a valid delegation of legislative power, it may also be
exercised by the President and administrative boards, as well as the lawmaking bodies on all
municipal levels, including the barangay. Delegation of legislative powers to the President is
permitted in Sections 23(2) and 28(2) of Article VI of the Constitution. The pertinent laws on
cooperatives, namely, R.A. No. 6938, R.A. No. 6939, and P.D. No. 269 as amended by P.D. No. 1645 do
not provide for the President or any other administrative body to take over the internal management
of a cooperative.

Memorandum Order No. 409 has no constitutional and statutory basis. It violates the basic
underlying principle enshrined in Article 4(2) of R.A. No. 6938 that cooperatives are democratic
organizations and that their affairs shall be administered by persons elected or appointed in a manner
agreed upon by the members. Likewise, it runs counter to the policy set forth in Section 1 of R.A. No.
6939 that the State shall, except as provided in said Act, maintain a policy of non-interference in the
management and operation of cooperatives.

Batangas Power Corporation v. Batangas City and NAPOCOR

GR No. 152675, April 28, 2004

Facts:

On June 29, 1992, Enron Power Development Corporation and respondent NPC entered into
a Fast Track BOT project. Enron agreed to supply a power station to NPC and transfer its plant to the
latter after 10 years of operation. Sec. 11.02 of the BOT Agreement provided that NPC shall be
responsible for the payment of all taxes that may be imposed on the power station, except income
taxes and permit fees. Subsequently, Enron assigned its obligation under the BOT Agreement to
petitioner Batangas Power Corporation.

On Sept. 13, 1992, BPC registered itself with the Board of Investments as a pioneer
enterprise. On Sept. 23, 1992, the BOI issued a certificate of registration to BPC as a pioneer
enterprise entitled to a tax holiday for the period of 6 years. The construction of the power station in
respondent Batangas City was then completed. BPC operated its station.

On Oct. 12, 1998, Batangas City sent a letter to BPC demanding payment of business taxes
and penalties, commencing from the year 1994. BPC refused to pay, citing its tax exempt status under
Sec. 133 (g) of the LGC.

On April 15, 1999, the city treasurer of Batangaas City modified the city’s tax claim and
demanded payment of business taxes from BPC only for the years 1998-1999.

BPC still refused to pay the tax. It insisted that its 6-year tax holiday commenced from the
date of its commercial operation on July 16, 1993, not from the date of its BOI registration in Sept.
1992. In the alternative, BPC asserted that the city should collect the tax from the NPC as the latter
assumed responsibility for its payment under their BOT Agreement.

While admitting assumption of BPCs tax obligations under their BOT Agreement, NPC
refused to pay BPCs business tax as it allegedly constituted an indirect tax on NPC which is a tax-
exempt corporation under its charter.

Issues:

1. WON BPC’s 6-year tax holiday commenced on the date of its BOI registration as a pioneer
enterprise or on the date of its actual commercial operation as certified by the BOI;

2. WON NPC’s tax exemption privileges under its Charter were withdrawn by Sec. 193 of the LGC
Held:

1. Sec. 133(g) of the LGC, which proscribes LGUs from levying taxes on BOI-certified pioneer
enterprises for a period of 6 years from the date of registration, applies specifically to taxes imposed
by the LGU, like the business tax imposed by Batangas City on BPC in the case at bar. Reliance of BPC
on the provision of EO No. 226 is clearly misplaced as the 6-year tax holiday provided therein which
commences from the date of commercial operation refers to income taxes imposed by the national
government on BOI-registered pioneer firms. Clearly, it is the provision of the LGC that should apply
to the tax claim of Batangas City against the BPC. The 6-year tax exemption of BPC should thus
commence for the date of BPCs registration with the BOI on July 16, 1993 and end on July 15, 1999.

2. In the case of NPC v. City of Cabanatuan, the court recognized the removal of the blanket exclusion
of government instrumentalities from local taxation as one of the most significant provisions of the
1991 LGC. Specifically, we stressed that Sec. 193 of the LGC, an express and general repeal of all
statutes granting exemptions from local taxes, withdrew the sweeping tax privileges previously
enjoyed by the NPC under its charter. Consequently, when NPC assumed the tax liabilities of the BPC
under their 1992 BOT Agreement, the LGC which removed NPCs tax exemption privileges had already
been in effect for 6 months. Thus, while BPC remains to be the entity doing business in the said city, it
is the NPC that is ultimately liable to pay said taxes under the provisions of both the 1992 BOT
Agreement and the 1991 LGC.