Sections 67, 68, and 69 of the civil government act above mentioned (32 Stat. 707, 708) read as follows:

"SEC. 67. That all municipal bonds shall be in denominations of fifty dollars, or any multiple thereof, bearing interest at a rate not exceeding five per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the Government of the Philippine Islands, after dates named in said bonds not less than five nor more than thirty years from the date of their issue, together with the interest thereon, in gold coin of the United States of the present standard value, or its equivalent in value in money of the said islands; and said bonds shall be exempt from the payment of all taxes or duties of the Government of the Philippine Islands, or any local authority therein, or the Government of the United States.

"SEC. 68. That all moneys which may be realized or received from the issue and sale of said bonds shall be utilized under authorization of the Government of the Philippine Islands in providing the municipal improvements and betterments which induced the issue and sale of said bonds, and for no other purpose.

"SEC. 69. That the Government of the Philippine Islands shall, by the levy and collection of taxes on the municipality, its inhabitants and their property, or by other means, make adequate provision to meet the obligation of the bonds of such municipality, and shall create a sinking fund sufficient to retire them and pay the interest thereon in accordance with the terms of issue: Provided, That if said bonds or any portion thereof shall be paid out of the funds of the Government of said islands, such municipality shall reimburse said Government for the sum thus paid, and said Government is hereby empowered to collect said sum by the levy and collection of taxes on such municipality."

The above-mentioned act of February 6, 1905, also provides (33 Stat. 689):

"That all bonds issued by the Government of the Philippine Islands, or by its authority, shall be exempt from taxation by the Government of the United States, or by the Government of the Philippine Islands or of any political

or municipal subdivision thereof, or by any State, or by any county, municipality, or other municipal subdivision of any State or Territory of the United States, or by the District of Columbia."

An act of the Philippine Legislature inclosed by you, enacted December 27, 1910, and approved, as you state, by the President on March 29, 1911, pursuant to the requirements of section 66, above quoted, authorizes "the municipality of Cebu, Province of Cebu," "to incur an indebtedness of one hundred and twenty-five thousand dollars in gold coin of the United States," authorizes the Secretary of War to issue "in the name and on behalf of the municipality of Cebu, Province of Cebu, its bonds covering the said indebtedness for the purpose of providing funds to construct necessary sewer and drainage facilities, to secure a sufficient supply of water, and necessary buildings for primary public schools in said municipality of Cebu," and provides:

"The bonds thus authorized shall be issued and dated January first, nineteen hundred and eleven, shall bear interest at the rate of four per centum per annum, payable quarterly in gold coin, and shall be redeemable at the pleasure of the municipality of Cebu after ten years from date of issue, and payable thirty years after date of issue in said gold coin. Both principal and interest shall be payable at the Treasury of the United States. The said bonds shall be in registered form, in denominations of one thousand to ten thousand dollars, in proportions to suit the purchasers thereof, and shall be registered and transferable at the office of the Treasury Department of the United States at Washington, District of Columbia. The said bonds are declared, by section one of said act of Congress approved February sixth, nineteen hundred and five, to be exempt from the payment of all taxation by the Government of the United States, or by the Government of the Philippine Islands, or of any political or municipal subdivision thereof, or by any State, or by any county, municipality, or other municipal subdivision of any State or Territory of the United States, or by the District of

Columbia, pursuant to which act, as well as to said act of Congress approved July first, nineteen hundred and two, and to this act these bonds are issued; which facts shall be stated upon their face."

The Secretary of War is further authorized by this act (sec. 2) to sell these bonds on terms most favorable to the municipality, and to deposit the proceeds of such sale or sales with an authorized depository of the Government of the Philippine Islands, provided, "that no bond or bonds shall be sold at less than par or face value." The act provides (sec. 3) that the amount of bonds so issued and sold, the amount realized from the sale or sales, the numbers and denominations of the bonds sold, the date of such deposit of the proceeds and the name of the depository shall be made a matter of record by the auditor and treasurer of the Philippine Islands, upon report being made to them by the Secretary of War, and "immediately thereafter shall be reported by said auditor to the municipal council of the municipality of Cebu." The proceeds of the sale is directed (sec. 4) to be placed by the treasurer of the Philippines to the credit of the "public-works bond issue of the municipality of Cebu," and "shall only be withdrawn therefrom by appropriation by the municipal council of Cebu, approved by the Governor General of the Philippine Islands, for the purposes mentioned in the act." Commencing with the fiscal year ending June 30, 1911, and each succeeding year thereafter, until the bonds shall have been paid (sec. 5), the act makes a continuing annual appropriation out of the funds of the insular treasury, "of such sum as may be necessary to meet the annual interest payments upon the bonds." Commencing with the fiscal year ending June 30, 1913, and each succeeding year thereafter until the bonds shall have been paid, the act (sec. 6) makes a continuing annual appropriation from the funds of the insular treasury of $1,937, "money of the United States," for each $100,000, "and proportionally for each fraction thereof, of bonds issued in accordance with this act," the sum so appropriated and the interest thereon to be "invested by the insular treasurer in such

manner as may be approved by the Governor General," and to "constitute a sinking fund for the payment of said bonds," the funds so appropriated (sec. 7) to be reimbursed by the municipality of Cebu from its current revenues "within ninety days after the same shall have been so paid as interest or placed in said sinking fund." In case of failure to make such reimbursement, the provincial treasurer of the Province of Cebu is authorized and directed (sec. 7) to withhold from the revenues of the municipality that may come into his possession an amount sufficient to make any reimbursement provided for and to deposit the same with the treasurer of the islands for that purpose.

It is apparent that, in accordance with the above-quoted provisions of section 66 of the Philippine civil government act, as that section is amended, this act of the Philippine Legislature authorizes the issuance of these bonds to provide funds for the municipal purposes therein specified, and I assume that current taxation is inadequate for that purpose, as provided in said section.

The provision of the act of the Philippine Legislature (sec. 2) "that no bond or bonds shall be sold at less than par or face value," should be construed in connection with and as limited by the provision of section 66 that such bonds are to be issued and sold "at not less than par value in gold coin of the United States," and especially so in view of the provision in section 1 of the act of the Philippine Legislature that the bonds are issued pursuant to the Act of July 1, 1902, of which section 66 is a part, which fact is directed to be stated upon their face. So, construing the two provisions together, the bonds should be issued and sold at not less than their par value in gold coin of the United States.

As to the proviso in section 66 "that the entire indebtedness of any municipality shall not exceed five per centum of the assessed valuation of the real estate in said municipality," you state in your letter that

"The city of Cebu has no bonded indebtedness, and the assessed valuation of its real estate is more than $3,500,000,

so that the bond issue provided for is well within the prescribed limitation."

Considering the other statutory requirements, the interest on the bonds, in accordance with sections 66 and 67, does not "exceed five per centum per annum," and is payable quarterly. In accordance with section 67, the bonds are to be in denominations which are multiples of $50 and are to be payable at the pleasure of the Philippine Government after dates therein named, which are within the periods prescribed by that section.

Evidently the provision of the act of the Philippine Legislature that the bonds and interest thereon shall be payable "in gold coin," was intended to comply with the direction of section 67 that such bonds and interest are to be payable "in gold coin of the United States of the present standard value, or its equivalent in value in money of the said islands." Analogously with what has been said as to the provision for sale at par or face value, the act of the legislature is properly to be considered as limited and governed by the provision of section 67 as to the meaning of the words "in gold coin."

The act of the legislature provides, as directed by section 68, that all moneys realized from the issue and sale of the bonds shall be utilized for the purpose mentioned in the act. As directed by section 69, the act of the legislature makes adequate provision to meet the obligation of the bonds and creates a sinking fund sufficient to retire them. The bonds are to be exempt from taxation, as provided by the clause quoted above from the act of February 6, 1905, which fact is to be stated upon their face.

I beg to advise you, therefore, that in my opinion the bonds, when issued in accordance with the provisions of the act of the Philippine Legislature as herein construed, will be valid and binding obligations.

Respectfully,

GEORGE W. WICKERSHAM.

The SECRETARY OF WAR.