Legal Clarification on DILG Opinion No. 24, s. 2008

June 30, 2008 DILG LEGAL OPINION NO. 047-08 Mr. Joel M. Aviso Punong Barangay Barangay Bian, Bian Laguna Dear Sir : This has reference to your letter dated 13 June 2008, seeking further legal clarification on DILG Opinion No. 24, s. 2008, rendered in reply to your earlier query on whether or not an agreement entered into by the former barangay officials of Barangay Malamig and your barangay can be implemented, providing for a 50-50 sharing after lumping the 25% each share from the proceeds of the real property tax of the said barangays. Our previous study on your earlier query would show that the subject agreement expressly stipulated the 50-50 sharing of the proceeds of the barangay share on real property tax because there was a boundary dispute between the two barangays. In our reply contained in said DILG Opinion No. 24, we said that agreements enjoy the presumption of regularity. May we note, however, that our reply, as contained in said Opinion, was anchored on the premise that there was indeed a boundary dispute. In your instant query, you informed us that, thru a Certification issued by the local DILG, that on record, there is no boundary dispute existing for the record between Barangays Malamig and Bian. As a clarification, you also verbally represented that Barangay Bian is supposed to receive its full 25% share of the proceeds of the real property tax but the same was compromised in the aforesaid agreement. aTEHCc At this point, as stated in your recent letter, the local DILG issued a Certification that there is no existing boundary dispute on record between Barangays Malamig and Bian. With this development, you now ask the question as to whether or not it is legal to compromise public funds such as that the allocations for two distinct barangays are combined and divided into half for equal distribution to both barangays. You likewise further sought clarification on the definition of "status quo" in terms of the present situation wherein what exists is a 50-50 sharing on all RPT allocations for both barangays. You asked further whether or not the status quo decision means no change in the present computation of distribution or a return to the normal computation of 100% of real property tax allocation for the individual barangays. In reply to your instant query, may we invite your attention to Section 271 of the Local Government Code, which provides that: "SEC. 271. Distribution of Proceeds. The proceeds of the basic real property tax, including interest thereon . . . shall be distributed as follows: In the case of provinces: Province thirty five (35%) percent shall accrue to the general fund; Municipality forty (40%) percent to the general fund of the municipality where the property is located; and Barangay twenty five (25%) percent shall accrue to the barangay where the property is located." Said Section 271 of the Local Government Code further provides, under paragraph (d) thereof, that the share of each barangay shall be released, without need of further action, direct to the Barangay Treasurer on a quarterly basis within five (5) days after the end of each quarter and shall not be subject to any lien or holdback, for whatever purpose. Relatively, Section 118 of the Local Government Code provides that boundary disputes involving two or more barangays in the same city or municipality shall be referred for settlement to the Sangguniang Panlungsod or Sangguniang Bayan concerned. Corollarily, Article 17 of the Implementing Rules and Regulations of the Local Government Code provides for the procedure in settling boundary disputes, to wit: the filing of the petition to be initiated by the Sanggunian concerned in the form of a Resolution before the Sanggunian having jurisdiction over the dispute; the contents of the petition; the documents supposed to be attached to the petition; hearing; decision and appeal. TAEDcS Moreover, Article 18 of the Implementing Rules and Regulations of the Local Government Code provides, to wit: "Maintenance of Status Quo . Pending final resolution of the dispute, the status of the affected areas prior to the dispute shall be maintained and continued for all purposes." At this juncture, it becomes imperative for us to discuss the laws on contracts. Article 1318 of the Civil Code of the Philippines provides that there is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Relating these requisites to the earlier agreement entered into by the former barangay officials of Barangays Bian and Malamig, the cause of the agreement was the supposed boundary dispute between the two barangays which impelled them to agree on a 50-50 sharing on their lumped share in the proceeds of the real property tax. In this regard, it is worth to consider Article 1409 of the Civil Code of the Philippines, which provides that contracts whose cause or object did not exist at the time of the transaction, or contracts whose cause, object or purpose is contrary to law are void or inexistent contracts. This kind of contract produces, as a rule, no legal effect even if it is not set aside by a direct action since there is in law or in reality, no contract at all entered. Along this line, it bears noting that the agreement was entered into by reason of a purported boundary dispute between the two barangays. With the Certification from the local DILG that there is no existing boundary dispute on record between the two barangays it is crystal clear that the agreement entered into by the former barangay officials of Barangays Bian and Malamig are void and inexistent from the beginning as there was in fact and in reality no boundary dispute, which was validly initiated in accordance with the procedure provided for under Article 17 of the Implementing Rules and Regulations of the Local Government Code. The cause of the agreement, therefore, is inexistent at the time the same was entered into. Besides, the object of the contract was the 25% barangay share from the proceeds of the real property tax but this provision of law cannot be a valid subject of a compromise agreement. The object, therefore, which is to compromise the statutory share of the barangay, under the Local Government Code, is contrary to law which would again lead to the void or inexistent character of the said agreement. Considering, therefore, that the agreement was void or inexistent, Barangay Bian is entitled to distinctively receive its full share equivalent to 25% of the proceeds of the real property tax. IHcTDA As to what is meant by "status quo", Article 18 of the Rules and Regulations Implementing the Local Government Code is quite clear in providing that the status quo should refer to the status of the affected area prior to the dispute. Considering that in the first place, there is no boundary dispute to speak of between the two barangays, there is no room to apply the principle of status quo as for all legal intents and purposes, Barangay Bian is supposed to receive distinctively in full its 25% of the real property tax. But even assuming that there is indeed a boundary dispute, then pending resolution thereof, the status quo would still refer to the entitlement of Barangay Bian of its distinctive 25% share of the real property tax. We hope we have enlightened you on the matter. Very truly yours, (SGD.) AUSTERE A. PANADERO Undersecretary Department of Interior and Local Government ATTACHMENT Province of Laguna MUNICIPALITY OF BIAN BARANGAY BIAN June 13, 2008 Hon. Ronaldo Puno Secretary Department of Interior and Local Government Quezon City Dear Secretary Puno : Greetings! As we have previously written to you regarding the 50-50 sharing of the Real Property Tax Allocations for Barangays Bian and Malamig, we are once again writing to ask for further legal clarification on two significant aspects in this distinctive case. DHCcST First, without any concrete beneficial project to both parties and with no existing boundary disputes on record (please see attached DILG Certification), is it legal to compromise public funds such as that the allocations for two distinct barangays are combined and divided into half for equal distribution to both barangays? Secondly, may we please be informed of the definition of status quo in terms of the present situation wherein what exists is a 50-50 sharing on all RPT allocations for both barangays? Will a status quo decision mean no change in the present computation of distribution or a return to the normal computation of 100% of real property tax allocation for the individual barangays? For your easy reference, we are also furnishing you a copy of the position papers submitted by Barangays Bian and Malamig as well as Barangay Bian's reply to the position paper of Barangay Malamig. Thank you very much for your time in sharing your legal opinion on our queries! Very truly yours, (SGD.) Joel M. Aviso, RME, M. Eng. Barangay Chairman