LEGAL OPINION RE SUN CELLULAR'S TAXABILITY

Republic of the Philippines
Province of South Cotabato
City of Koronadal
CITY LEGAL OFFICE
_______________________________________________________________

LEGAL OPINION NO. __________

Date: 23 June 2014

TO: MR. JOSELO V. GALLEGO
City Assessor
This City

RE: Request for Tax Exemption and Cancellation of RPT Assessment of Sun
Cellular (DMPI)


Sir:

Kanami Koronadal!

This is with reference to the letter of Sun Cellular (DMPI) to the City Treasurer, Mr. Marloun C. Gumbao, dated 20 May 2014, on their claim of real property tax (RPT) exemption on machineries. The claim for exemption is based on the following:

1. Republic Act No. 9180, dated December 11, 2002, otherwise known as “An Act Granting the Digitel Mobile Philippines, Inc. a Franchise to Construct, Install, Establish, Operate and Maintain Telecommunications Systems Throughout the Philippines”;
2. DOJ Opinion, dated May 18, 2007;
3. BLGF Memorandum Circular No. 01-2010, dated January 13, 2010 and No. 4-2006, dated May 2, 2006, reiterating that GLOBE is liable to pay RPT on its radio station building, machinery shed, and radio relay station tower, while radio equipment, accessories and spare parts needed in the business are exempt therefrom; and
4. Supreme Court Decision in RCPI v. Provincial Assessor of South Cotabato, GR No. 144486, April 13, 2005.

The City Government of Koronadal has long been confronted with similar issues. The City Legal Officer of the Koronadal City has previously issued Legal Opinion No. 2012-06-04, resolving the said issue on taxability of the real properties, although said legal opinion involved GLOBE TELECOM, Inc. Thus, any reference to Globe by Sun Cellular in its letter should be deemed resolved under the said legal opinion and will no longer be discussed in this opinion.

In the request of Sun Cellular, they cited the same grounds to support their claim on tax exemptions. Verily, Sun Cellular was granted with a franchise to construct, install, establish, operate and maintain telecommunications systems throughout the Philippines by virtue of Republic Act 9180. Hence, the implementing law relative to taxability of the Sun Cellular is RA 9180.

Section 12 of RA 9180 provides, thus:

xxxx xxxx xxxx

Sec. 12. Tax Provisions. - The grantee, its successor 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 exceptions, incentives, or privileges granted under any relevant law: Provided, further, That all rights, privileges, benefits and exemptions accorded to existing and future telecommunications franchise shall likewise be extended to the grantee.

The grantee shall file the return with the city or province where its facility is located and pay the income tax due thereon to the Commissioner of Internal Revenue or his duly authorized representatives in accordance with the National Internal Revenue Code and the return shall be subject to audit by the Bureau of Internal Revenue.

xxxx xxxx xxxx

Sec. 18. Equality Clause. - Any advantage, favor, privilege, exemption or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchise concerning territory covered by the franchise, the life span of the franchise, or the type of services authorized by the franchise. (Underscoring provided)

xxxx xxxx xxxx

Reliance by Sun Cellular on the provision of Section 12 as one of its bases in claiming tax exemptions holds no water. It is a hornbook rule that one who claims tax exemption shall prove it clearly since the general rule is always to tax. As worded by the Supreme Court in the case of DIGITEL v. Province of Pangasinan (G.R. No. 152534, February 23, 2007), “[t]he tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.”

In the said case, the Supreme Court has explained the word “exemption” as used in the statutes as follows:

xxxx xxxx xxxx

“The case at bar is actually not one of first impression. Indeed, as far back as 2001, this Court has had the occasion to rule against the claim for tax exemption under Republic Act No. 7925. In the case of Philippine Long Distance Telephone Company, Inc. v. City of Davao, we already clarified the confusion brought about by the effect of Section 23 of Republic Act No. 7925 – that the word “exemption” as used in the statutes refers or pertains merely to an exemption from regulatory or reporting requirements of the DOTC or the NTC and not to the grantee’s tax liability.

The issue in the PLDT v. City of Davao case was whether or not, by virtue of Section 23 of Republic Act No. 7925 (Public Telecommunications Policy of the Philippines), PLDT is again entitled to an exemption from the payment of local franchise tax in view of the grant of a tax exemption to Globe and Smart telecommunications companies. Before the enactment of Republic Act No. 7925 in 1995, the Congress of the Philippines granted in favor of Globe and Smart franchises that contain “in-lieu-of-all-taxes” clauses or provisos. Then came Republic Act No. 7925, particularly Section 23 thereof, providing, more or less, that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall be made part of previously enacted franchises and made automatically applicable to the grantees thereof. Subsequently, in “January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro Excahnge, it was required to pay the local franchise tax for the first to the fourth quarter of 1999 xxx. PLDT challenged the power of the city government to collect the local franchise tax and demanded a refund of what it had paid as local franchise tax for the year 1997 and for the first to third quarters of 1998.” The latter believed itself to be exempt from payment of such tax even though Section 12 of its franchise (Republic Act No. 7082) containing the “in-lieu-of-all taxes” proviso had already been withdrawn by the provisions of the Local Government Code. Its belief was anchored on the effect of the above-mentioned Section 23 of Republic Act No. 7925 – that because the franchises of Globe and Smart contain “in-lieu-of-all-taxes” clauses or provisos, the same grant of tax exemption must be regarded to have become ipso facto part of PLDT’s previously granted telecommunications franchise.

In denying PLDT’s petition, this Court, speaking through Mr. Justice V. Mendoza, held that in approving Section 23 of Republic Act No. 7925, Congress did not intend it to operate as a blanket tax exemption to all communications entities; thus, it cannot be considered as having amended petitioner PLDT’s franchise so as to entitle it to exemption from the imposition of local franchise taxes. x x x”

xxxx xxxx xxxx

More Importantly, in Digital Telecommunications v. City Government of Batangas, et.al. (G.R. No. 156040, December 11, 2008), the Supreme Court, with reference to Section 12 of RA 9180, clarified, thus:

xxxx xxxx xxxx

“In fact, Section 12 of Republic Act No. 9180 (RA 9180), the legislative franchise of Digitel Mobile, a 100% owned subsidiary of
petitioner, states that the franchisee, its successors or assigns shall be subject to the payment of “all taxes, duties, fees or charges and other imposition under the National Internal Revenue Code of 1997, as amended, and other applicable laws.”

Section 12 of RA 9180 provides:

xxxx xxxx xxxx

Thus, Digitel Mobile is subject to tax on its real estate and personal properties, whether or not used in its telecommunications business.” (Emphasis ours)

xxxx xxxx xxxx

Also, nowhere in the case of RCPI v. Provincial Assessor of South Cotabato (GR No. 144486, April 13, 2005) can we find that the Supreme Court exempts the RCPI from payment of realty tax. The Decision reads:

xxxx xxxx xxxx
“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:
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.
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.
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.”
xxxx xxxx xxxx

Based on the foregoing and the previous legal opinion issued by this Office, Sun Cellular’s real properties, like those of any other telecommunications company, are taxable.



Yours truly,




(SGD) ATTY. EUFEMIO A. SIMTIM, JR.
City Legal Officer

- and -



(SGD) ATTY. MARY GRACE L. VENTURA
Attorney IV


cc: CMO, CTO, File

LEGAL OPINION RE TRICYCLE CODING ORDINANCE

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


LEGAL OPINION NO.: _____________

21 July 2014

MR. CYRUS JOSE J. URBANO, CPA, MBA
City Administrator
This City

Sir:

Kanami Koronadal!

This is with reference to the Reports of the SP Committee on Good Government, Public Ethics, & Accountability dated April 28, 2014 and June 16, 2014, both re: Petition of Jonathan Bugnos, et al., dated April 10, 2014, urging the Sangguniang Panlungsod of Koronadal to investigate the implementation of Ordinance No. 08, Series of 2011 (Ordinance, for brevity), which you forwarded to this Office for perusal and recommendation.

As gathered, the facts are as follows:

1. The Ordinance mandated, among others, that as a condition for issuance of tricycle franchises, the units must be painted in accordance with the standards provided under the ordinance.
2. The said Ordinance also provided for the allocation of funds to cover a portion of the expenses for the painting to be subsidized by the City Government.
3. The City Bids and Awards Committee conducted a competitive bidding in accordance with RA 9184 and its IRR, and as a result, Shemarie Construction Supply (Shemarie, for brevity) qualified, won and was awarded with the contract.
4. Via Resolution No. 1087, Series of 2012, the SP subsequently approved new MTOP’s, but although the Ordinance requires the units to be painted in accordance with the stated standards, no funds were appropriated in the form of subsidy for the painting thereof.
5. The City Franchising Office, as mandated to implement the Ordinance, continued to require the tricycle operators to have their units painted as a condition for the issuance of their franchises, this time, on their own. The operators are, however, referred to Shemarie, being the one with the technical knowledge and expertise in the color combination and security features, and for purposes of maintaining uniformity. Relative thereto, it is to be stressed that the philosophy behind the color codification is primarily to ensure that despite the ingenuity of some to imitate the color combination, it would be easier for the traffic enforcers to determine the colorum tricycles from the legitimate tricycles.

This Office is therefore confronted with the following issues:

1. May the tricycle operators granted with new MTOP’s demand for the subsidy provided under the Ordinance?
2. May the tricycle operators choose any painter to perform the painting jobs for purposes of complying with the Ordinance?
3. May Shemarie continue to perform painting jobs for its clients?
4. May Shemarie continue to use the grounds of the City Hall in conducting such business?
5. What must be done now that the contract with Shemarie has already expired and no funds were allocated to partly subsidize the painting and renumbering of the tricycle units issued with new MTOP’s?

On the first question, the tricycle operators granted with new MTOP’s cannot demand for the subsidy as provided under the Ordinance, because the funds appropriated thereunder were intended for the “painting and renumbering of all motorized tricycles-for-hire with active MTOPs” (See Section VIII, par. 1). Unless and until a new appropriation ordinance is enacted granting such subsidy for the newly issued MTOP’s, it cannot be enforced as a matter of right.

The second question must be answered in the negative. Only sign painters duly appointed by the City Government may perform the painting and renumbering of the subject tricycles. The Ordinance, particularly, Section VI, par. A (1), in relation to Section IV (7), expressly provides:

xxxx xxxx

“SECTION VI. RULES AND PROCEDURES

xxxx xxxx

B. MOTORIZED TRICYCLE-FOR-HIRE: COLOR CODING AND RENUMBERING

xxxx xxxx

1. All operators of motorized tricycles-for-hire with active MTOP issued by the city government must cause their units to be painted with GOLDEN YELLOW by a sign painter duly appointed by the City Government.

xxxx xxxx

“SECTION IV. DEFINITION OF TERMS

As used in this ordinance, the following terms shall mean as:

xxxx xxxx

7. SIGN PAINTERS – are those persons duly appointed by the city government to perform the painting and renumbering of tricycles with active MTOPs for the purpose of uniformity.” (emphasis supplied)

xxxx xxxx

As to the third issue, on the assumption that it has the requisite business permit, Shemarie is not prohibited from doing business, including painting jobs for tricycle units. However, for purposes of the issuance of the MTOP’s, Shemarie is required to secure an accreditation from the City Government before it could perform the painting and renumbering of the tricycle units.

On the fourth issue, however, considering that Shemarie now conducts its business on its own, after its contract with the City Government has ended, Shemarie cannot validly utilize the City Hall grounds without the permission of the City Government in the conduct of its business operations.

As to the last question, considering that there is no appointed sign painter yet, after the contract of Shemarie expired, the Local Chief Executive may now fill in the gaps in the implementation of the Ordinance through the issuance of an Executive Order setting forth the requirements for the accreditation of the sign painter. For purposes of the MTOP’s, only the accredited sign painters may perform the painting and renumbering of the tricycle units to give life to the intent of the Ordinance of ensuring uniformity, thereby helping our law enforcers in the implementation of the Ordinance.

We therefore disagree with the recommendation of the SP Committee on Good Government, Public Ethics and Accountability “[t]o allow the operators of Motorized Tricycles-For-Hire with approved MTOP to cause the painting of their own units, unless and until the City Government of Koronadal shall be able to identify and duly designate an official painter for the codification of tricycle units in the City of Koronadal xxx.” This would be violative of the very Ordinance which the SP itself enacted.

The City Government, however, may appropriate funds to partly subsidize the painting and renumbering of the tricycle units with newly issued MTOP’s, in the same manner that it subsidized the painting and renumbering of the first batch of tricycles. This would be in keeping with the principle of fairness and equality before the law.

Pending the accreditation of the sign painters, those tricycle operators with approved MTOP’s should be allowed to operate their units because they cannot be unduly burdened by the circumstances that are beyond their control.

We hope that we have sufficiently addressed your concerns.



Yours truly,




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

- and -



ATTY. MARY GRACE L. VENTURA
Attorney IV



cc: CMO, CAdmin, File

LEGAL OPINION RE CONFLICTING CLAIMS OVER THE NEW ALKOR GALLERA FOR PURPOSES OF THE ISSUANCE OF BUSINESS PERMIT [DELAYED POSTING]

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


LEGAL OPINION NO. ________

DATE : 27 August 2013

TO : Hon. PETER B. MIGUEL, M.D., FPSO-HNS
City Mayor

RE : AS STATED
____________________________________________________


Kanami Koronadal!


This has reference to your request for legal opinion regarding the conflicting claims over the New Alkor Gallera, situated at Lot No. 33-D-3, (LRC) Psd-159732, with an area of 10,000 square meters, more or less, between Joveniano Tiu, et al. and Engr. Ernie Padernal. Said lot was formerly covered by TCT No. T-31907.

As gathered, it appears that the subject property, which was originally registered in the name of Alfredo (deceased) and Rufina Padernal, was mortgaged to the Philippine National Bank (PNB) by Ernie and Evelyn Padernal on the strength of a Special Power of Attorney from the registered owners. Upon default of the mortgagor, the mortgage was extrajudicially foreclosed and PNB was able to acquire the property, including the improvements thereon. Eventually, the title was consolidated in the name of PNB under TCT No. T-91167.

Subsequently, PNB entered into a Contract to Sell with Joveniano Tiu, et al. and authorized the latter to operate the said cockpit. The vendees formed a corporation and have now a pending application with the Securities and Exchange Commission.

Prior thereto, Joveniano Tiu, et al. used to operate the said cockpit on the strength of a contract of lease with the Padernals, which however had already expired. Considering that the subject property has already been sold to them by PNB, Joveniano Tiu, et al. are now applying for a business permit/special permit to operate the same. Engr. Ernie Padernal interposed an objection thereto claiming that he is the licensee as regards the said cockpit and that although there already was a foreclosure, there was no writ of possession from the court yet allowing PNB to take possession of the subject property.

We are therefore confronted by an issue of whether or not Joveniano Tiu, et al. may be issued business permit/special permit with respect to the operation of the subject cockpit.

We answer in the affirmative, subject only to the requirements set by the law and ordinance.

As discussed, PNB, the new registered owner of the subject property, has already entered into a Contract to Sell with Joveniano Tiu, et al., on 18 February 2013. In addition, PNB, through its Branch Manager, Evelyn B. Tampus, has authorized Joveniano Tiu, et al., via a Memorandum/Certification dated 19 July 2013 to operate the said cockpit. Considering that they have been in possession of the subject property, we find no logic in requiring them to secure first a writ of possession from the Court. A writ of possession is needed only if the prevailing party in an action or proceeding is not yet in possession of the property. It is a remedy available to the purchaser at a public auction and to any subsequent buyers thereof, which remedy may or may not be availed of. In this case, such writ is no longer necessary because the purchasers have been in possession of the property and have in fact been operating the same. This is a case of possessors who have been enjoying the beneficial use of a property, who have subsequently acquired the naked ownership of the same property. Needless to say, Engr. Padernal had already ceased to be the owner of the property; hence, his objection has no leg to stand on.

We hope that we have guided you accordingly.




In public service,




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




ABEGAIL F. BATARA, LLB
Legal Assistant II