Municipal councilors of Corella have sought the assistance of the provincial government in addressing the town’s struggles in settling a 13-year-old debt which continues to balloon due to interest and is feared to constrain the local government unit (LGU) from spending on development projects and hamper its services for the public.

Members of the Sangguniang Bayan (SB) of Corella led by Vice Mayor Danilo Bandala raised before the Sanggunang Panalalawigan (SP) during the provincial legislature’s regular session on Tuesday that their debt to Cebu City-based Philkonstrak Development Corporation has swelled to P29 million as of 2022.

In response to the appeal, the SP relayed the Corella LGU’s concern to Governor Aris Aumentado for “immediate” action.

In 2009, Philkonstrak started construction of Corella’s municipal waterworks system under a P15.9-million contract, but the project which at the time was 50-percent complete was abandoned after then-Mayor Nicanor Tocmo refused to pay the firm and acknowledge liability.

The Supreme Court in a 2022 decision ordered Corella, a fifth class municipality, to pay Philkonstrak P12.2 million, the value for the work done and materials acquired and supplied by the construction company in 2009, plus the amount accumulated from legal interest of six percent per annum as set by the high court.

Corella municipal administrator Ed Macalandag said the LGU will honor the SC’s directive and will “definitely” settle the debt.

However, paying the large sum would leave the municipality cash-strapped and affect its ability to render services to constituents prompting the LGU to seek intervention from the Capitol.

 “Dili na man question ng mo bayad ba ta or di ba. Mo bayad gyud ta kay naa na may decision sa Supreme Court, ang atoa lang ani is unsa kahay mga paagi na dili pud kaayo ma kompromiso ang serbisyo para sa mga taw dinhi sa Corella,” Macalandag said.

 “Definitely ang atoang investment plan ini maguba gyud, ang atoang kamada para unta sa mga development sa umaabot mura og naay gyuy ma displace,” he added.

Macalandag noted that among the possible assistance that may be extended by the provincial government is for it to take over some of the planned development projects of the municipality.

“Usa sa rason na nahidangop ta sa probinsya kay mahimo man sila makatabang sa atong mga laing development while kami pud mo atubang sa among bayronon,” said Macalandag.

The municipal official pointed out road and water projects as among those in the pipeline for Corella which could be shouldered by the provincial government.

Meanwhile, the Corella local government is also planning to form a team that would open negotiations with Philkonstrak and come up with compromises that would ease the burden on the municipality in paying its debt to the firm.

“Ato gyud silang bayaran pero mohanyo pud ta sa mga paagi na dili pud kaayo ma compromise and services na hilanglan nato e-deliver sa katawhan sa Corella,” said Macalandag.

Legal conflict

The legal tussle between Philkonstrak and the Corella LGU stemmed from Tocmo’s refusal to acknowledge the municipality’s liabilities for the project which was started during the term of former mayor Vito Rapal who preceded Tocmo.

Philkonstrak initially sought redress from the Construction Industry Arbitration Commission (CIAC) which ruled in favor of the company and ordered Corella to pay for services rendered and materials acquired by the firm. The decision was contested by the LGU before the Court of Appeals but the appellate court affirmed the CIAC’s decision.

On appeal before the SC, Tocmo questioned the validity of the contract between the LGU and Philkonstrak, alleging that Rapal had no authority to enter into such agreement during his term as mayor of Corella due to lack of authorization from the SB.

The SC sustained Tocmo’s contention recognizing that the municipal ordinance which allowed Rapal to enter into an agreement with Philkonstrak was invalid considering that it was passed without the required number of votes from SB members.

It was noted that only five of the present eight municipal councilors during the session voted in favor of the then-proposed measure, but the SC ruled that majority of all 11 members—which is six—was needed to pass an appropriations ordinance.

With the ordinance deemed invalid, the contract between the LGU and Philkonstrak was declared void as well.

However, while there was no existing valid contract between the two parties, the SC applied the principle of “Quantum meruit” which literally means “as much as he deserves.”

This legal principle, a principle predicated on equity, states that a person may recover a reasonable value of the thing he delivered or the service he rendered.

“The Court has held in the past that recovery on the basis of quantum meruit is allowed despite the invalidity or absence of a written contract between a contractor and a government agency. The absence or invalidity of required documents would not necessarily preclude the contractor from receiving payment for the services he or she has rendered for the government,” it said.

Based on the ruling, Corella was then ordered to pay what was due Philkonstrak.

It also directed the municipality to pay accrued legal interest from the time the CIAC Decision became final on October 27, 2011, at the rate of 12 percent per annum, until June 30, 2013. Since then, interest rate has been at six percent per annum until full payment is made.

Starting July 1, 2013, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgment were lowered to six percent as reflected in the landmark case of Eastern Shipping Lines, Inc. v. CA and the Monetary Board’s Circular No. 799. (Allen Doydora)