LEGAL OPINION RE GLOBE'S TAXABILITY (REAL PROPERTY TAXATION)

Republic of the Philippines
Province of South Cotabato
City of Koronadal
OFFICE OF THE CITY LEGAL OFFICER
________________________________________________________________

LEGAL OPINION NO. __________

6 June 2012

MR. JOSELO V. GALLEGO
City Assessor
This City

Sir:

Kanami Koronadal!

This is with reference to the inquiry of the Assistant City Treasurer, Remegia M. Palabrica, regarding the taxability of Globe Telecom Inc., which you indorsed to our office, specifically on the following matters:

1. Basis of tax exemption;
2. Tax exemption effectivity;
3. Kinds of property exempted; and
4. Should the City Government of Koronadal exempt Globe from the penalties from their previous payments.

The first three (3) issues have been the subject of the position paper submitted by the legal counsel of Globe Telecom Inc. In their letter, Globe's representatives are claiming for the exemption of Globe from real property tax on all its real properties. The fourth issue pertains to penalties which Globe owes to the LGU due to nonpayment of RPT in the previous years.

To put things in their proper context, it is important to discuss first the laws pertinent to the franchise and operation of Globe.

Republic Act No. 402 was enacted on 18 June 1949, granting the Clavecilla Radio System a franchise to establish radio stations for broadcasting, telecommunication and television. Section 9 thereof provides, thus:

x x x

“SECTION 9. (a) The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property, exclusive of the franchise, as other persons or corporations are now or hereafter may be required by law to pay.

(b) The grantee shall further pay to the Treasurer of the Philippines each year, within ten days after the audit and approval of the accounts as prescribed in this Act, one and one-half per centum of all gross receipts from business transacted under this franchise by the said grantee in the Philippines.

(c) In order to foment local industry and the development of television in the Philippines, radio and television receiving sets manufactured or assembled in the Philippines, with Filipino labor and materials to the extent possible, shall be exempted from all taxes during a period of five years to be counted from the date this Act becomes into force and effect.”

x x x

On 19 June 1965, the aforequoted provision was amended by Section 3 of Republic Act No. 4540, thus:

x x x

“SEC. 3. Section nine of the same Act is hereby amended to read as follows:

‘SEC. 9. (a) The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property, exclusive of the franchise, as other persons or corporations are now or hereafter may be required by law to pay, except radio equipment, machinery and spare parts needed in connection with the business of the grantee, which shall be exempt from customs duties, tariffs and other taxes, as well as those declared exempt in this section.

‘(b) The grantee shall further pay to the Treasurer of the Philippines each year after the audit and approval of the accounts as prescribed in this Act, one and one-half per centum of all gross receipts from business transacted under this franchise by the said grantee in the Philippines, in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which the grantee is hereby expressly exempted, effective from the date of the approval of Republic Act Numbered Sixteen hundred eighteen.

“(c) In order to foment local industry and the development of television in the Philippines, radio and television receiving sets manufactured or assembled in the Philippines, with Filipino labor and materials to the extent possible, shall be exempted from all taxes from the date this Act becomes into force and effect.”

x x x


However, the Local Government Code of 1991, which took effect on 1 January 1992, repealed Section 9 (a) and (b) of Clavecilla’s franchise with respect to local taxes. Sections 137, 151, and 193 of the Local Government Code of 1991 provide that –

x x x

"Section 137. Franchise Tax. Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at the rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction.

In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereon, as provided herein."

"Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes."

"Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code."

x x x

On 19 March 1992, Congress enacted Republic Act No. 7229 entitled "An Act approving the merger between Globe Mackay Cable and Radio Corporation and Clavecilla Radio System and the consequent transfer of the franchise of Clavecilla Radio System granted under Republic Act No. 402, as amended, to Globe Mackay Cable and Radio Corporation, extending the life of said franchise and repealing certain sections of RA No. 402, as amended."

Interestingly, the "in lieu of all taxes" clause was not re-enacted in the franchise of Globe Mackay Cable and Radio Corporation (Globe) when Congress adopted Republic Act No. 7229 approving the merger of Globe and Clavecilla Radio System (Clavecilla). Hence, from 1 January 1992 up to the enactment on 19 March 1992 of RA No. 7229, Clavecilla did not enjoy, with respect to local taxes, the tax exemption under its "in lieu of all taxes" clause. Neither were the other exemptions provided under Section 9 of R.A. 402, as amended, were re-enacted. In other words, none of these exemptions therefore was restored. Justice Antonio T. Carpio (now Acting Chief Justice), in his separate opinion in PLDT vs. City of Davao (G.R. No. 143867, 25 March 2003) made a persuasive discourse, thus:

x x x

“xxx. The only question is whether RA No. 7229 re-enacted Section 9 (b) of Clavecilla’s old franchise to restore its "in lieu of all taxes" clause, at least with respect to local taxes.

The answer is a categorical no for two reasons. First, there is no language in RA No. 7229, express or even implied, re-enacting Section 9 (b) of Clavecilla’s old franchise with respect to local taxes. RA No. 7229 merely approved the merger of Globe and Clavecilla, and transferred the then existing franchise of Clavecilla to the surviving corporation, Globe. When Congress approved RA No. 7229, Clavecilla’s then existing franchise did not contain the "in lieu of all taxes" clause with respect to local taxes. Logically, the transfer of Clavecilla’s franchise to Globe did not transfer the "in lieu of all taxes" clause since Clavecilla’s franchise no longer had such clause with respect to local taxes.

Second, RA No. 7229 expressly provides that original provisions of the franchise of Clavecilla under Republic Act No. 402, as amended, which have not been repealed, shall continue in full force and effect. The clear intent of the law is that provisions in Clavecilla’s franchise which had already been repealed as of the enactment of RA No. 7229 shall remain repealed and shall not be re-enacted with the passage of RA No. 7229. Thus, Section 11 of RA No. 7229 states –

"All other provisions of Republic Act No. 402, as amended by Republic Act Nos. 1618 and 4540, and other provisions of Batas Pambansa Blg. 95 which are not inconsistent with the provisions of this Act and are still unrepealed shall continue to be in full force and effect." (Emphasis supplied)

Clearly, Congress did not intend to re-enact any of the provisions in the franchise of Clavecilla that had already been repealed by prior laws.

Tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. Tax exemptions cannot arise by mere implication, much less by an implied re-enactment of a repealed tax exemption clause. In the instant case, there is even no implied re-enactment of Section 9 (b) of Clavecilla’s old franchise since Section 11 of RA No. 7229 expressly states that only unrepealed provisions of Clavecilla’s franchise shall continue in force and effect. Measured against these well-recognized principles of taxation, PLDT’s claim to tax exemption based on the franchise of Globe must necessarily fail.”

x x x

Globe, in its position paper, represents that Section 9 (a) and (b) of R.A. No. 402, as amended by Section 3 of R.A. No. 4540 were re-enacted into law via Republic Act No. 7229 after the effectivity of the Local Government Code. Such representation is misleading in the light of the above disquisitions.

Globe’s reliance on RCPI vs. Provincial Assessor of South Cotabato (G.R. No. 144486, 13 April 2005) is also misleading. The High Court has ruled therein --

x x x

“Respondents assert that RCPI not only changed its arguments, RCPI also made incorrect arguments. RCPI earlier maintained that its radio relay station tower, radio station building, and machinery shed are personal properties and are thus not subject to the real property tax. RCPI now argues that its radio relay station tower, radio station building, and machinery shed are tax-exempt because of the “in lieu of all taxes” clause in its franchise, which exempts RCPI from the real estate tax.

RCPI contends that the “in lieu of all taxes” clause in its amended franchise exempts it from paying all taxes other than franchise tax. It is thus no longer necessary to determine whether the tower, relay station building, and machinery shed are radio equipment for purposes of exemption from the real estate tax.

RCPI also states that legislative enactments during the pendency of this petition caused it to lose and then regain its tax-exempt status. RCPI enumerated thus:

1. First, Congress passed the Local Government Code that withdrew all the tax exemptions existing at the time of its passage—including that of RCPI’s.
2. Second, Congress enacted the franchise of telecommunications companies, such as Islacom, Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the “in lieu of all taxes” proviso.
3. Third, Congress passed RA 7925 entitled “An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services” which, through Section 23, mandated the equality of treatment of service providers in the telecommunications industry.

We are not persuaded.

As found by the appellate court, RCPI’s radio relay station tower, radio station building, and machinery shed are real properties and are thus subject to the real property tax. Section 14 of RA 2036, as amended by RA 4054, states that “[i]n consideration of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter be required by law from other individuals, copartnerships, private, public or quasi-public associations, corporations or joint stock companies, on real estate, buildings and other personal property x x x.” The clear language of Section 14 states that RCPI shall pay the real estate tax.

The “in lieu of all taxes” clause in Section 14 of RA 2036, as amended by RA 4054, cannot exempt RCPI from the real estate tax because the same Section 14 expressly states that RCPI “shall pay the same taxes x x x on real estate, buildings x x x.” The “in lieu of all taxes” clause in the third sentence of Section 14 cannot negate the first sentence of the same Section 14, which imposes the real estate tax on RCPI. The Court must give effect to both provisions of the same Section 14. This means that the real estate tax is an exception to the “in lieu of all taxes” clause.

Subsequent legislations have radically amended the “in lieu of all taxes” clause in franchises of public utilities. As RCPI correctly observes, the Local Government Code of 1991 “withdrew all the tax exemptions existing at the time of its passage — including that of RCPI’s” with respect to local taxes like the real property tax. Also, Republic Act No. 7716 (“RA 7716”) abolished the franchise tax on telecommunications companies effective 1 January 1996. To replace the franchise tax, RA 7716 imposed a 10 percent value-added-tax on telecommunications companies under Section 102 of the National Internal Revenue Code. The present state of the law on the “in lieu of all taxes” clause in franchises of telecommunications companies was summarized as follows:

4. The existing legislative policy is clearly against the revival of the “in lieu of all taxes” clause in franchises of telecommunications companies. After the VAT on telecommunications companies took effect on January 1, 1996, Congress never again included the “in lieu of all taxes” clause in any telecommunications franchise it subsequently approved. Also, from September 2000 to July 2001, all the fourteen telecommunications franchises approved by Congress uniformly and expressly state that the franchisee shall be subject to all taxes under the National Internal Revenue Code, except the specific tax. The following is substantially the uniform tax provision in these fourteen franchises:

Tax Provisions. — The grantee, its successors or assigns, shall be subject to the payment of all taxes, duties, fees, or charges and other impositions under the National Internal Revenue Code of 1997, as amended, and other applicable laws: Provided, That nothing herein shall be construed as repealing any specific tax exemptions, incentives or privileges granted under any relevant law: Provided, further, That all rights, privileges, benefits and exemptions accorded to existing and future telecommunications entities shall likewise be extended to the grantee.

5. Thus, after the imposition of the VAT on telecommunications companies, Congress refused to grant any tax exemption to telecommunications companies that sought new franchises from Congress, except the exemption from specific tax. More importantly, the uniform tax provision in these new franchises expressly states that the franchisee shall pay not only all taxes, except specific tax, under the National Internal Revenue Code, but also all taxes under “other applicable laws.” One of the “other applicable laws” is the Local Government Code of 1991, which empowers local governments to impose a franchise tax on telecommunications companies. This, to reiterate, is the existing legislative policy.

RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic Act No. 7925. The franchises of Smart, Islacom, TeleTech, Bell, Major Telecoms, Island Country, and IslaTel, all expressly declare that the franchisee shall pay the real estate tax, using words similar to Section 14 of RA 2036, as amended. The provisions of these subsequent telecommunication franchises imposing the real estate tax on franchisees only confirm that RCPI is subject to the real estate tax. Otherwise, RCPI will stick out like a sore thumb, being the only telecommunications company exempt from the real estate tax, in mockery of the spirit of equality of treatment that RCPI is invoking, not to mention the violation of the constitutional rule on uniformity of taxation.

It is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer’s duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted.

x x x


Globe further seeks to strengthen its position by invoking BLGF Memorandum Circular No. 01-2010. Globe has alleged that the BLGF MC “affirms GLOBE’s position that this particular provision of its franchise exempts from real property tax its machineries and equipment." To be certain, it is worthy to quote the MC, thus:

x x x

“The BLGF, under its Memorandum Circular No. 04-2006, issued on May 2, 2006, and subsequent opinions clarified that ‘Globe is liable to pay real property tax on its radio station building, machinery shed, and radio relay stations tower, while radio equipment, accessories, and spare parts needed in the business are exempt therefrom,’ on the basis of the case entitled ‘RCPI vs. Provincial Assessor of South Cotabato,’ (G.R. No. 144486) promulgated on April 13, 2005.”

x x x

Globe therefore seeks to expand the scope of such exemption to all its properties.

More importantly, it is respectfully submitted that BLGF failed to consider the fact that the exemptions granted to Clevecilla in its old franchise was never re-enacted in RA 7229. It must be remembered that the exemptions contained in the old franchise of Clavecilla, which formed the basis of the BLGF opinion, were effectively removed by the Local Government Code. To reiterate, RA No. 7229 merely approved the merger of Globe and Clavecilla, and transferred the then existing franchise of Clavecilla to the surviving corporation, Globe.

Besides, it has been repeatedly held by the High Court that the findings of the BLGF are not conclusive. In Smart Communications, Inc. vs. City of Davao (G.R. No. 155491, 16 September 2008), thus:

x x x

“[T]he BLGF opined that §23 of R.A. No. 7925 amended the franchise of petitioner and in effect restored its exemptions from local taxes. Petitioner contends that courts should not set aside conclusions reached by the BLGF because its function is precisely the study of local tax problems and it has necessarily developed an expertise on the subject.

To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, a highly specialized court which performs judicial functions as it was created merely to provide consultative services and technical assistance to local governments and the general public on local taxations, real property assessment , and other related matters, among others. The question raised by petitioner is a legal question, to wit, §23 of R.A. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.

Petitioner likewise argues that the BLGF enjoys the presumption of regularity in the performance of its duty. It does enjoy this presumption, but this has nothing to do with the question in this case. This case does not concern the regularity of performance of the BLGF in the exercise of its duties, but the correctness of its interpretation of a provision of law.”
x x x


Also, in Digitel Telecommunications Philippines, Inc. vs. City Government of Batangas (G.R. No. 15640, 11 December 2008), the Supreme Court has ruled:

x x x

On 25 October 2004, the BLGF issued Memorandum Circular No. 15-2004. This circular reversed the BLGF’s Letter-Opinion dated 8 April 1997 recognizing realty tax exemption under the phrase "exclusive of this franchise." This later circular states that the real properties owned by Globe and Smart Telecommunications and all other telecommunications companies similarly situated are subject to the realty tax. The BLGF has reversed its opinion on the realty tax exemption of telecommunications companies. Hence, petitioner’s claim of tax exemption based on BLGF’s opinion does not hold water. Besides, the BLGF has no authority to rule on claims for exemption from the realty tax.

x x x


The same argument should apply to the Legal Opinion of the Secretary of the Department of Justice. The error committed by the DOJ Secretary becomes apparent when it mistook real property tax with a local franchise tax. These two types of taxes are separate and distinct from each other. Hence, the reliance by the DOJ on the case of City Government of Quezon City, et al vs. Bayan Telecommunications, Inc. (G.R. No. 162015, 6 March 2006) and Smart Communications, Inc. vs. City of Davao (G.R. No. 155491, 16 September 2008) is misplaced considering that these cases pertain only to exemption from payment of local franchise tax, not real property tax.

Globe cannot rely on such decisions which were based on substantially different set of facts. As it has argued in its position paper, in parrying away the applicability of the decision in Digitel Telecommunications Philippines, Inc. vs. City Government of Batangas (G.R. No. 15640, 11 December 2008), “Globe is not a party at all in that case xxx. Said the Supreme Court, it is elementary that strangers to a case are not bound by the judgment rendered by the court and such judgment is not available as an adjudication either against or in favor of such person (QBE Insurance Phil., Inc. vs. Lavińa, 536 SCRA 372). The underlying reason behind this jurisprudential pronouncement is basic due process enshirened in our Constitution’s Bill of Rights. Globe Telecom was not given its day in court to argue for itself.” If Globe may invoke such right, the LGU is equally entitled to the same right and treatment.

Besides, the cases of City Government of Quezon City, et al vs. Bayan Telecommunications, Inc. (G.R. No. 162015, 6 March 2006) and Smart Communications, Inc. vs. City of Davao (G.R. No. 155491, 16 September 2008) were decided only by different divisions of the Supreme Court. The Supreme Court en banc, through Justice Antonio T. Carpio (now Acting Chief Justice), has made a more categorical determination of taxability of telecommunication companies in the more recent case of Digitel Telecommunications Philippines, Inc. vs. City Government of Batangas (G.R. No. 15640, 11 December 2008), thus:

x x x

“In PLDT v. City of Davao, it was observed that after the imposition of VAT on telecommunications companies, Congress refused to grant any tax exemption to telecommunications companies that sought new franchises from Congress, except the exemption from specific tax. More importantly, the uniform tax provision in these new franchises expressly states that the franchisee shall pay not only all taxes, except specific tax, under the National Internal Revenue Code, but also all taxes under "other applicable laws," one of which is the Local Government Code which imposes the realty tax.”

x x x


This was strengthened by the ruling of the Supreme Court on the motion for reconsideration filed by Smart Communications, Inc. in G.R. No. 155491, thus:

x x x

“In sum, the aforecited jurisprudence suggests that aside from the national franchise tax, the franchisee is still liable to pay the local franchise tax, unless it is expressly and unequivocally exempted from the payment thereof under its legislative franchise. The “in lieu of all taxes” clause in a legislative franchise should categorically state that the exemption applies to both local and national taxes; otherwise, the exemption claimed should be strictly construed against the taxpayer and liberally in favor of the taxing authority.

Republic Act No. 7716, otherwise known as the “Expanded VAT Law,” did not remove or abolish the payment of local franchise tax. It merely replaced the national franchise tax that was previously paid by telecommunications franchise holders and in its stead imposed a ten percent (10%) VAT in accordance with Section 108 of the Tax Code. VAT replaced the national franchise tax, but it did not prohibit nor abolish the imposition of local franchise tax by cities or municipalities.

The power to tax by local government units emanates from Section 5, Article X of the Constitution which empowers them to create their own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide. The imposition of local franchise tax is not inconsistent with the advent of the VAT, which renders functus officio the franchise tax paid to the national government. VAT inures to the benefit of the national government, while a local franchise tax is a revenue of the local government unit.”

x x x

What actually muddles the issue here is the series of comparisons being made by Globe with those telecommunication companies which were subjects of previous litigations and Supreme Court decisions. Needless to state, the fate of Globe has never reached the High Court, but it must be emphasized that Globe’s franchise is based on R.A. No. 402, as amended by R.A. No. 4540. Provisions of these laws pertaining to tax exemptions were effectively repealed by R.A. No. 7160. These exemptions were never re-enacted despite the passage of R.A. No. 7229, which merely approved the merger of Globe and Clavecilla, and transferred the then existing franchise of Clavecilla to the surviving corporation, Globe. In fine, Globe cannot continue to invoke the tax exemptions already scrapped by R.A. No. 7160.

Based on the foregoing, Globe’s real properties, including immovable machineries and equipments, whether or not directly or indirectly used in its business, are NOT exempt from real property tax. Globe must also be subject to the payment of the local franchise tax. Also, Globe cannot deny liability for penalties considering that its tax liability was never dependent on the circumstances of other telecommunication companies. Even without the passage of Republic Act No. 7716 or the ruling of the Supreme Court in the Digitel case, Globe has long been taxable in all its properties since the time its exemptions were removed by Congress and its failure to comply with its obligation to pay such taxes for such a long period of time makes it liable for appropriate penalties.

I hope your queries have been fully addressed.



Yours truly,




ATTY. EUFEMIO A. SIMTIM, JR.
City Legal Officer



cc: CMO, CTO, File

LEGAL OPINION RE PARTIAL PAYMENT ON PROCUREMENT OF GOODS/SERVICES

Republic of the Philippines
Province of South Cotabato
City of Koronadal
CITY LEGAL OFFICE
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Legal Opinion No.____________

March 1, 2013

MR. MARLOUN C. GUMBAO, CPA
BAC Chairman
This LGU


Sir:

Respectfully returned to the BAC Chairman, his within request for opinion on whether or not SHEMARIE Construction, Inc. may collect the 50% progress payment for the Project- Tricycle Painting and Renumbering.

While RA 9184, otherwise known as the Government Procurement Reform Act, provides for the rules and regulations governing the procurement activities of the government, its agencies and the local government units, a contract which is very vital in the procurement activities entered into by the procuring entity and the winning bidder or supplier may not be limited to the provisions of RA 9184 but may be enforced according to what has been agreed by both parties. A contract was made for the purpose of enforcing the obligation based on what is considered to be convenient and favourable to them. The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. As long as it is not contrary to law, morals, customs and public policy, the contract shall be valid.

Art. 1159 of the Civil Code of the Philippines provides, to wit:

“Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)”
Statutes prescribe and restrict the terms of a contract where the general public is affected. The courts may not create a contract for the parties. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable.
It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, usually even if the contract appears to be improvident or a bad bargain, as long as it did not result from Fraud, duress, or Undue Influence.
The binding force of a contract is based on the fact that it evinces a meeting of minds of two parties in Good Faith. A contract, once formed, does not contemplate a right of a party to reject it. Contracts that were mutually entered into between parties with the capacity to contract are binding obligations and may not be set aside due to the caprice of one party or the other unless a statute provides to the contrary.
RA 9184 does not expressly provide for Progress Payments for Goods but neither does the law prohibit the same. The rule on statutory construction tells us that if the law does not prohibit, it may be allowed provided that it is not against the law, morals, good customs, public order and public policy.
In an express contract, the parties state the terms, either orally or in writing, at the time of its formation. There is a definite written or oral offer that is accepted by the offeree (i.e., the person to whom the offer is made) in a manner that explicitly demonstrates consent to its terms.
It is important to stress that even the Manual of Procedures for the Procurement of Goods and Services for Local Government Units allows the partial payment contemplated in the contract. It provides, to wit:

x x x

“7. Payment

7.1. Method of Payment for Contracts for the Procurement of Goods

The method and conditions of payment must be specified in the contract. However, the following guidelines may be considered by the LGU in preparing the contract provisions regarding payment:

1.xxxxxxxx xxxxxxxx xxxxxxx

Page 93 on the Manual of Procedures for the Procurement of Goods and Services for Local Government Units


2. Partial payment of the contract price will only be allowed if the contract provides/allows for partial or staggered delivery of goods procured, and such partial payment must correspond to the value of the goods delivered and accepted;

3. Payment must only be made after the appropriate inspection and acceptance procedures, as mandated by existing government rules and regulations, have been complied with by the LGU; and

4. Payment must be made in accordance with prevailing accounting and auditing rules and regulations.”

x x x

Based on the foregoing, while RA 9184 is silent on progress payment for goods, it does not necessarily follow that progress payment for goods is prohibited. Progress payments here may also be equated as partial payment because the intention of the transaction is just the same. The Manual of Procedures for the Procurement of Goods and Services for Local Government Units specifically provides that partial payment of the contract price is allowed if the contract provides/allows for partial or staggered delivery of goods procured, and such partial payment must correspond to the value of the goods delivered and accepted. Said manual was formulated by the GPPB within its power and authority granted under RA 9184, hence, the same must carry weight in the construction of the provisions of the law.

In sum, the undersigned is of the opinion that progress payments for goods may be allowed. A contract involving tricycle painting and renumbering is done by each unit. The painting of one (1) unit of a tricycle is dependent on the availability of the unit, without which the job required cannot be performed. Thus, the 100% completion for tricycle painting is not that certain to happen. If partial payment will not be allowed, chances are that the supplier will be fully paid on a date no one knows when. Certainly, this not what the law contemplates.

Premises considered, your query is answered in the affirmative.




Yours truly,



ATTY. EUFEMIO A. SIMTIM, JR.
City Legal Officer

-and-


ALEXANDER A. ALCAZAR
Legal Asst. II

LEGAL OPINION RE DISBURSEMENT OF BURIAL ASSISTANCE THRU CASH ADVANCE

Republic of the Philippines
Province of South Cotabato
City of Koronadal
OFFICE OF THE CITY LEGAL OFFICER
Telephone No. (083) 228-1742
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LEGAL OPINION NO. _________

DATE : 13 March 2012

TO : HON. PETER B. MIGUEL, MD, FPSO-HNS
City Mayor

MS. IMELDA A. TAMAYO, CPA
City Accountant
This City

RE : Disbursement Of Burial Assistance Through Cash Advance
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Kanami Koronadal!


This has reference to your query on whether or not burial assistance may be disbursed through cash advance. The undersigned is of the opinion that applicable laws, rules and regulations allow the same.


Pursuant to Section 339 of the Local Government Code of 1991, the Commission On Audit (COA) has prescribed rules and regulations pertaining to cash advances made by a local official or employee, through certain issuances, among which is the Commission on Audit Circular No. 97-002 dated 10 February 1997, reinstating and amending COA Circular No. 90-331 dated 3 May 1990, the pertinent portion of which is provided hereunder, to wit:


x x x

“2. GENERAL PRINCIPLES

Ideally, cash should be handled under the general principles of the imprest system, to wit:

1. Daily receipts on collections must be deposited intact with the proper bank.
2. All payments must be made by check.
3. Only payments in small amounts may be made through the petty cash fund. Replenishment of the petty cash fund shall be equal to the total amount of expenditures made there from.

In practice, however, there are certain instances when it may be very difficult, impractical or impossible to make payments by check. In such a case, payments may be made by the disbursing officer in the form of cash through his cash advance. (Emphasis supplied)

3. DEFINITIONS AND SCOPE

Cash Advance shall be of two types, namely, the regular cash advances, and the special cash advances.

3.1. Regular cash advances are those granted to cashiers, disbursing officers, paymasters, and/or property/supply officers for any of the following purposes:

3.1.1. Salaries and Wages
3.1.2. Commutable allowances
3.1.3. Honoraria and other similar payments to officials and employees
3.1.4. Petty operating expenses consisting of small payments for maintenance and operating expenses which cannot be paid conveniently by check or are required to be paid immediately.

3.2. Special cash advances are those granted on the explicit authority of the Head of the Agency only to duly designated disbursing officers or employees for other legally authorized purposes, as follows:

3.2.1. Current operating expenditures of the agency field office or of the activity of the agency undertaken in the field when it is impractical to pay the same by check, such as –

- Salaries, Wages and Allowances
- Maintenance and other operating expenses

3.2.2 Travel expenditures, including transportation fare, travel allowance, hotel room/lodging expenses and other expenses incurred by officials and employees in connection with official travel….
x x x


The same was stipulated in toto under COA Circular No. 368-91, Volume I, Chapter 2, Sections 172-173. The said circular, along with the other aforementioned COA Circulars, clearly allow the maintenance and other operating expense to be disbursed through cash advance. Also, the NGAS Manual for Local Government Units provides, thus:


x x x

Sec. 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the LGU for one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amount received. The official receipt shall be attached to the PCV.
x x x

While the NGAS Manual for Local Government Units does not spell out the non-recurring, emergency and petty expenses covered thereby, reference can be made to the previous issuances of the COA.
The issue that needs to be resolved therefore is whether or not burial assistance can be considered as maintenance and other operating expense.

In a complex agency such as a Local Government Unit, particularly a City, burial expenses as assistance to its constituents, is a regular expense which falls within the scope of maintenance and operating expense under the Office of the City Mayor. The fact that it falls under the category of MOOE leaves no doubt as to its classification.
As a matter of fact, it has become regular as an expense considering that giving a dignified burial to its constituents is an inherent duty of the government under the general welfare clause and is undeniably part of the regular operations of the Office of the City Mayor. Therefore, burial expense is allowed by law and other applicable rules and regulations to be disbursed through cash advance.

The guidelines established by the COA are designed to prevent abuses and excesses in the disbursement of government money. They were not meant to suppress the need to expedite the delivery of the basic services to the populace, not to mention the underprivileged sector of our society. Laws and rules must be construed not by the letter that killeth, but by the spirit that giveth life.

The reason advanced for the innovation sought to be implemented, that is, to make the services readily accessible to the beneficiaries and to remove the undue and unnecessary burden to the recipients already in grief due to the loss of a loved one, is tenable as long as the safeguards are properly installed and observed to insure that the release of burial assistance does not become whimsical and capricious. Hence, there must still be a policy on qualification and standard operating procedure duly established to determine the qualified beneficiaries by the duly authorized LGU officer, i.e., a Government Social Worker. The same must form part of the supporting documents for the release of the cash assistance and for audit purposes.

I hope we have fully addressed your query.


Yours truly,



EUFEMIO A. SIMTIM, JR.
City Legal Officer