DUAL NATURE & FUNCTIONS OF MUNICIPAL CORPORATIONS:

Every local government unit created/organized under the Local Government Code is a BODY
POLITIC and CORPORATE endowed with powers to be exercised by it in conformity with law. As
such it shall exercise powers as a political subdivision ofthe National Government and as a corporate
entity representing t h e i n h a b i t a n t s o f t h e t e r r i t o r y ( S e c t i o n 1 5 , R A 7 1 6 0 ) . Accordingly, it
has dual functions –

(i) Public or governmental – acts as an agent of the State for the government of the territory and the
inhabitants; and

(ii) Private or proprietary – acts as an agent of the community in the administration of local affairs, as
such, acts as a separate entity for its own purposes and not as a subdivision of the State
Municipality of San Fernando vs. Firme

FACTS: A passenger jeepney, a sand truck and a dump truck of the Municipality of San Fernando, La
Union collided. Due to the impact, several passengers of the jeepney including Laureano Baniña Sr. died.
The heirs of Baniña filed a complaint for damages against the owner and driver of the jeepney, who, in turn,
filed a Third Party Complaint against the Municipality and its dump truck driver, Alfredo Bislig. Municipality
filed its answer and raised the defense of non-suability of the State. After trial, the court ruled in favor of the
plaintiffs and ordered Municipality and Bislig to pay jointly and severally the heirs of Baniña.

ISSUES:

1. Are municipal corporations suable?

2. Is the Municipality liable for the torts committed by its employee who was then engaged in the
discharge of governmental functions?

HELD:

1. Municipal corporations, like provinces and cities, are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they
are subject to suit even in the performance of such functions because their charter provided that they can
sue and be sued.

2. Municipal corporations are suable because their charters grant them the competence to sue and be
sued. Nevertheless, they are generally not liable for torts committed by them in the discharge
of governmental functions and can be held answerable only if it can be shown that they were acting in
a proprietary capacity. In permitting such entities to be sued, the State merely gives the claimant the right
to show that the defendant was not acting in its governmental capacity when the injury was committed or
that the case comes under the exceptions recognized by law. Failing this, the claimant cannot recover.

In this case, the driver of the dump truck of the municipality insists that "he was on his way to the
Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal streets." In the
absence of any evidence to the contrary, the regularity of the performance of official duty is presumed.
Hence, the driver of the dump truck was performing duties or tasks pertaining to his office.

Decision of the lower court modified. Petitioner municipality was absolved of any liability. (Municipality of
San Fernando vs. Firme, No. L-52179, April 8, 1991)

 The principle enshrined in Section 3, Article XVI of the Constitution that the “State may not be
sued without its consent” reflects nothing less than a recognition of the sovereign character of the
State and an express affirmation of the unwritten rule effectively insulating it from the jurisdiction
of courts. It is based on the very essence of sovereignty. A sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on the logical and practical ground that
there can be no legal right as against the authority that makes the law on which the right
depends.
 The principle of state immunity from suit also rests on reasons of public policy—that public
service would be hindered, and the public endangered, if the sovereign authority could be
subjected to lawsuits at the instance of every citizen and consequently controlled in the uses and
dispositions of the means required for the proper administration of the government.
 This rule is, however, subject to exception, such as when the official is sued in his personal or
private capacity for acts done with malice or in bad faith, or when the official does unauthorized or
illegal acts or goes beyond the scope of his authority, or commits a crime, in which case, the
principle of state immunity from suit does not apply and the official concerned may be held
personally liable therefor.
  A governmental function includes services that only the government does, such as restaurant
inspection, animal control, health and safety permits and licenses, sanitation, vital statistics, and
related functions. A proprietary function is one that a private entity can perform, and is not
uniquely for the benefit of the general public. The discretionary function defense applies to
discretionary governmental functions, but not for proprietary (or ministerial) functions.

DACANAY vs. ASISTIO

May 6, 1992Griño-Aquino, J.Mica Maurinne M. Adao
SUMMARY:
Pursuant to
Ordinance No. 79-02
enacted by theMetropolitan Manila Commission, City Mayor of Caloocan open up 7flea markets in the
city and issued licenses to several stall owners forthe conduct of vending activities. One of the streets
affected was the
“Heroes del ‘96” where Dacanay lives. In 1987, OIC City Mayor Martinez
caused the demolition of the market stalls, The stall-owners who wereissued licenses filed an action for
prohibition against the city officials.Initially the trial court issued a writ of preliminary injunction but
suchwas subsequently lifted. It ruled that the streets were public dominionand hence, outside the
commerce of men. It also cited the case of
Municipality of Cavite vs. Rojas
where it was held that
properties for public use may not be leased to private individuals
. There was a change of city officials and such order was never implemented. Dacanay wroteto the city
officials asking that they implement the trial court decision but there was no response. Dacanay filed a
petition for mandamus to compel city officials to enforce the decision of trial court. The Supreme Court
ruledin favor of Dacanay and ordered the demolition of the market stalls inthe public streets.
DOCTRINE:
A public street is property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code).
Being outside the commerce of man, it may not be the subject of lease or other contract.T he right of the
public to use the city streets may not be bargained away through contract. Thus, leases or licenses
issued by the City Government for the right to occupy portions of the public street are null and void for
being contrary to law Executive Order may not infringe upon the vested right of the public to use city
streets for the purpose they were intended to serve:
i.e.,
as arteries of travel for vehicles and pedestrians. On January 5, 1979, Metro Manila Commission
Ordinance No. 79-02
was enacted by the Metropolitan Manila Commission, designating certain city and municipal streets,
roads and open spaces as
sites for flea markets
. Pursuant, thereto, the Caloocan City mayor opened up 7flea markets in that city. One of those streets
was the "Heroes del '96"where the Francisco U. Dacanay lives. Upon application of severalvendors, the
respondents City Mayor Asistio and City Engineer Sarne,Jr. , issued them licenses to conduct vending
activities on said street.In 1987, Antonio Martinez, as OIC city mayor of Caloocan City, causedthe
demolition of the market stalls on Heroes del '96, V. Gozon andGonzales streets. To stop Mayor Martinez'
efforts to clear the citystreets, the stall-owners who were issued licenses filed an action forprohibition
against the City of Caloocan, the OIC City Mayor and the CityEngineer and/or their deputies in the RTC of
Caloocan City praying forthe issuance of a writ of preliminary injunction ordering these cityofficials to
discontinue the demolition of their stalls during thependency of the action. The court issued the writ
prayed for. However,on December 20, 1987, it dismissed the petition and lifted the writ ofpreliminary
injunction which it had earlier issued.The trial court found that Heroes del '96, Gozon and Gonzales
streetsare of public dominion, hence, outside the commerce of man. It citedthe case of
Municipality of Cavite vs. Rojas
where it was heldthat
properties for public use may not be leased to private individuals
.
The occupation and use of private individuals of sidewalks and

other public places devoted for public use constitute both public and privatenuisances and nuisance per
se
, and this applies to even case involvingthe use or lease of public places under permits and licenses
issued bycompetent authority, upon the theory that such holders could not takeadvantage of their
unlawful permits and license and claim that the landin question is a part of a public street or a public place
devoted topublic use, hence, beyond the commerce of man.The trial court opines that City of Caloocan
has the right to demolishthe subject stalls of the plaintiffs, more so when
Section 185, par. 4 ofBP 337
, otherwise known as the Local Government Code provides thatthe City Engineer shall: (c) Prevent the
encroachment of privatebuildings and fences on the streets and public places; (j) Inspec

supervise the construction, repair, removal and safety of privatebuildings; (k) With the previous approval
of the City Mayor in eachcase, order the removal of materials employed in the construction orrepair of any
building or structures made in violation of law orordinance, and cause buildings and structures dangerous
to the publicto made secure or torn down. Furthermore, the
Charter of the City ofCaloocan, RA 5502
, Article VII, Sec. 27, par. g, 1 and m, grants the City Engineer similar powers. However, shortly after
the decision came out, the city administration in Caloocan City changed hands. City Mayor Macario
Asistio, Jr., as successor of Mayor Martinez, did not pursue the latter's policy ofclearing and cleaning up
the city streets. Invoking the trial court's decision in prior Civil Case, Francisco U.Dacanay, a concerned
citizen, taxpayer and registered voter of Caloocan City, who resides on Heroes del '96 Street, one of the
affected streets, wrote two letters to Mayor Asistio, Jr., and city engineer, Luciano Sarne,Jr. calling their
attention to the illegally-constructed stalls on Heroes del'96 Street and asked for their demolition. There
was no response.Dacanay sought President Corazon C. intervention by writingher a letter on the matter.
His letter was referred to the city mayor for appropriate action. The acting Caloocan City secretary,
AsuncionManalo, in a letter informed the Presidential Staff Director that the cityofficials were still studying
the issue of whether or not to proceed withthe demolition of the market stalls.Dacanay filed a complaint
against Mayor Asistio and Engineer Sarne inthe Office of the OMBUDSMAN. In their letter-comment
dated said cityofficials explained that in view of the huge number of stallholdersinvolved, not to mention
their dependents, it would be harsh andinhuman to eject them from the area in question, for their
relocationwould not be an easy task. In reply, Dacanay maintained thatrespondents have been derelict in
the performance of their duties andthrough manifest partiality constituting a violation of Section 3(e)
ofR.A. 3019, have caused undue injury to the Government and givenunwarranted benefits to
the stallholders.After conducting a preliminary investigation, the OMBUDSMANrendered a final evaluation
and report, finding that the city officials'inaction is purely motivated by their perceived moral and
socialresponsibility toward their constituents, but "the fact remainsthat
there is an omission of an act which ought to be performed, in clearviolation of Sections 3(e) and (f) of
Republic Act 3019
."

The OMBUDSMAN recommended the filing of the corresponding information in court.As the stallholders
continued to occupy Heroes del '96 Street, through the tolerance of the city officials, and in clear violation
of the trial court decision, Dacanay filed the present petition for
mandamus
on, praying that the city officials be ordered to enforce the final decision of the trialcourt which upheld the
city mayor's authority to order the demolition of market stalls on V. Gozon, Gonzales and Heroes del '96
Streets and toenforce P.D. No. 772 and other pertinent laws. As Comment, the City Legal Officer alleged
that the vending area was transferred to Heroes del '96 Street to decongest Alonzo Street, whichis
comparatively a busier thoroughfare; that the transfer was made by virtue of Barangay Resolution No.
30 s'78; that while the resolution wasawaiting approval by the Metropolitan Manila Commission, the
latterpassed
Ordinance No. 79-2
, authorizing the use of certain streets andopen spaces as sites for flea markets and/or vending areas;
thatpursuant thereto, Acting MMC Mayor Virgilio P. Robles issued
Executive Order No. 135
dated January 10, 1979, ordering theestablishment and operation of flea markets in specified areas
andcreated the
Caloocan City Flea Market Authority
as a regulatorybody; and that among the sites chosen and approved by the MetroManila Commission,
Heroes del '96 Street has considered "most viableand progressive, lessening unemployment in the city
and servicing theresidents with affordable basic necessities."
ISSUE
: May public streets or thoroughfares be leased or licensed tomarket stallholders by virtue of a city
ordinance or resolution of theMetro Manila Commission?
RULING: NO

RATIO:
There is no doubt that the disputed areas from which the private respondents' market stalls are sought to
be evicted are public streets, as found by the trial court. A public street is property for public use hence
outside the commerce of man (Arts. 420, 424, Civil Code). Being outside the commerce of man, it may
not be the subject of lease or other contract As the stallholders pay fees to the City Government for the
right to occupy portions of the public street, the City Government, contrary to law, has been leasing
portions of the streets to them. Such leases or licenses are null and void for being contrary to law. The
right of the public to use the city streets may not be bargained away through contract. The interests of a
few should not prevail over the good of the greater number in the community whose health, peace, safety,
good order and general welfare, the respondent city officials are under legal obligation to protect. The
Executive Order issued by Acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending
area for stallholders who were granted licenses by the city government contravenes the general law that
reserves city streets and roads for public use. Mayor Robles's Executive Order may not infringe upon the
vested right of the public to use city streets for the purpose they were intended to serve:
i.e.,
as arteries of travel for vehicles and pedestrians. WHEREFORE, it having been established that the
petitioner and the general public have a legal right to the relief demanded and that the public respondents
have the corresponding duty, arising from public office, to clear the city streets and restore them to their
specific public purpose , the respondents City Mayor and City Engineer of Caloocan City or their
successors in office are hereby ordered to immediately enforce and implement the decision of the trial
court declaring that Heroes del '96, V. Gozon, and Gonzales Streets are public streets for public use, and
they are ordered to remove or demolish, or cause to bere moved or demolished, the market stalls
occupying said city streets with utmost dispatch within thirty (30)days from notice of this decision. This
decision is immediately executor.

HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P. YAPHA, HON. VICTORIA G.COROMINAS,
HON. RAUL D.
, vs.
HON. GWENDOLYN F. GARCIA, HON. DELFIN P. AGUILAR, HON. HELEN S. HILAYO, andHON. ROY
L. URSAL

G.R. No. 175527, December 8, 2008

FACTS:
The subject COA report stated "Several contracts in the total amount ofP102,092,841.47 were not
supported with a
Sangguniang Panlalawigan
resolution
authorizing the Provincial Governor to enter into a contract, as required under Section 22of R.A. No.
7160."Gov. Garcia sought for reconsideration from COA but without waiting for itsresolution, she instituted
an action for Declaratory Relief where she alleged that theinfrastructure contracts

complied with R.A. No. 9184 bidding procedures and were entered into pursuant to the general and/or
supplemental appropriation ordinances passed by the Sangguniang Panlalawigan
, hence a separate authority to enter into such contracts was no longer necessary. The trial court
declared that Gov. Garcia need not secure prior authorization from the Sangguniang Panlalawigan
. It further declared that the
Sangguniang Panlalawigan
does not have juridical personality nor is it vested by R.A. No. 7160 withauthority to sue and be sued. It
also ruled that it is only when the contract (entered into bythe local chief executive) involves obligations
which are not backed by prior ordinancesthat the prior authority of the
sanggunian
concerned is required.Petitioners insisted that prior authorization from the
Sangguniang Panlalawigan
should be secured before Gov. Garcia could validly enter into contractsinvolving monetary
obligations.The Province of Cebu was operating under a
reenacted budget
in 2004. Gov. Garcia entered into contracts on behalf of the province
while this reenacted budget was in force.

ISSUE:
Whether or not prior approval by the
Sangguniang Panlalawigan
is required before Gov. Garcia could have validly entered into the questioned contracts.
RULING:
The Court held that the case should be
remanded to the lower court
and treated asan ordinary civil action rather than as a declaratory relief action. The lower court
wasdirected to admit further evidence in order to determine the nature of the questionedcontracts entered
into by Gov. Garcia, and the existence of ordinances authorizing her acts.

Nonetheless, the Supreme Court

laid out the

framework for the lower court’s guidance

in resolving the issue.
Requirement of prior authorization by the Sanggunian
Sec. 22(c) of R.A. No. 7160 provides:
Sec. 22.
Corporate Powers
.
–
(a) Every local government unit, as a corporation, shall have thefollowing powers:x x x(c) Unless
otherwise provided in this Code, no contract may be entered into by the localchief executive in behalf of
the local government unit without prior authorization bythe
sanggunian
concerned. A legible copy of such contract shall be posted at a conspicuousplace in the provincial capitol
or the city, municipal or barangay hall.
Prior authorization by the
sanggunian
 concerned is required before the local chiefexecutive may enter into contracts on behalf of the local
government unit.Gov. Garcia argued that Sections 306 and 346 of R.A. No. 7160 are the exceptions
toSec. 22(c) and operate to allow her to enter into contracts on behalf of the Province of Cebuwithout
further authority from the
Sangguniang Panlalawigan
.However, the Court noted that Sec. 306 of R.A. No. 7160 merely contains a definitionof terms. Read in
conjunction with Sec. 346, Sec. 306 authorizes the local chief executive tomake disbursements of funds
in accordance with the ordinance authorizing the annual orsupplemental appropriations. The "ordinance"
referred to in Sec. 346 pertains to thatwhich enacts the local governme
nt unit’s budget, for which reason no further authorization
from the local council is required, the ordinance functioning, as it does, as the legislativeauthorization of
the budget.To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec. 22(c) wouldrender
the requirement of prior
sanggunian
authorization superfluous, useless andirrelevant. There would be no instance when such prior
authorization would be required.Yet, this is obviously not the effect Congress had in mind when it required
the priorauthorization of the
sanggunian
concerned.Sec. 323 of R.A. No. 7160 provides that in case of a
reenacted budget
,"
only
theannual appropriations for salaries and wages of existing positions, statutory andcontractual
obligations, and essential operating expenses authorized in the annual andsupplemental budgets for the
preceding year shall be deemed reenacted and
disbursement
of funds shall be in accordance therewith."As indicated by the word "
only
" preceding the above enumeration, the items forwhich disbursements may be made under a reenacted
budget are exclusive. Clearly,
contractual obligations which were not included in the previous year’s annual and
supplemental budgets cannot be disbursed by the local government unit. New contractsentered into by
the local chief executive require the prior approval of the
sanggunian
.

To give life to the intendment of the law and to avoid a construction which wouldrender Sec. 22(c) of R.A.
No. 7160 meaningless,
disbursement
should be understood topertain to payments for statutory and contractual obligations which the
sanggunian
has

already authorized thru ordinances enacting the annual budget and are therefore already

subsisting obligations of the local government unit.

Contracts
are those which bind thelocal government unit to new obligations for which the local chief executive
needs prior

authority from the

sanggunian
.Following are other provisions of R.A. No. 7160 which support
petitioners’ stand:
(a) Sec. 465, Art. 1, Chapter 3 states that the provincial governor shall "[r]epresent theprovince in all its
business transactions and
sign in its behalf all bonds, contracts, andobligations, and such other documents upon authority
of the
SangguniangPanlalawigan
or pursuant to law or ordinances;" (b) Sec. 468, Art. 3 also establishesthe
sanggunian
’s
power
, as the province’s legislative body,
to authorize
the provincialgovernor to negotiate and contract loans, lease public buildings held in a
proprietarycapacity to private parties, among other things.
What the trial court should have done
As things stand, the declaration of the trial court to the effect that no priorauthorization is required when
there is a prior appropriation ordinance enacted does notput the controversy to rest. The question which
should have been answered by the trialcourt was whether, during the period in question, there did exist
ordinances (authorizingGov. Garcia to enter into the questioned contracts) which rendered the obtention
ofanother authorization from the
Sangguniang Panlalawigan
superfluous. It should also havedetermined the character of the questioned contracts, i.e., whether they
were, as Gov.Garcia claims, mere disbursements pursuant to the ordinances supposedly passed bythe
sanggunian
or, as petitioners claim, new contracts which obligate the province without
the provincial board’s authority.

Resort to appropriation ordinance is necessary

The question of whether a
sanggunian
authorization separate from theappropriation ordinance is required should be resolved depending on the
particularcircumstances of the case. Should the appropriation ordinance, for instance, alreadycontain in
sufficient detail the project and cost of a capital outlay such that all that the localchief executive needs to
do after undergoing the requisite public bidding is to execute thecontract, no further authorization is
required, the appropriation ordinance already beingsufficient.On the other hand, should the appropriation
ordinance describe the projects ingeneric terms such as "infrastructure projects," "inter-municipal
waterworks, drainage andsewerage, flood control, and irrigation systems projects," "reclamation projects"
or "roadsand bridges," there is an obvious need for a covering contract for every specific project thatin
turn requires approval by the
sanggunian
. Specific
sanggunian
approval may also berequired for the purchase of goods and services which are neither specified in
theappropriation ordinance nor encompassed within the regular personal services andmaintenance
operating expenses.
Torio vs. Fontanilla
Facts:
On October 21, 1978, the municipal council of Malasiqui, Pangasinan passed 2 resolutions: one for
management of the town fiesta celebration and the other for the creation of the Malasiqui Town Fiesta
Executive Committee. The Executive Committee, in turn, organized a sub-committee on entertainment and
stage with Jose Macaraeg as Chairman. The council appropriated the amount of P100.00 for the
construction of 2 stages, one for the "zarzuela" and another for the cancionan. While the zarzuela was
being held, the stage collapsed. Vicente Fontanilla was pinned underneath and died in the afternoon of the
following day. Fontanilla’s heirs filed a complaint for damages with the CFI of Manila. The defendants were
the municipality, the municipal council and the municipal council members. In its Answer, defendant
municipality argued that as a legally and duly organized public corporation it performs sovereign functions
and the holding of a town fiesta was an exercise of its governmental functions from which no liability can
arise to answer for the negligence of any of its agents. The defendant councilors, in turn, maintained that
they merely acted as agents of the municipality in carrying out the municipal ordinance providing for the
management of the town fiesta celebration and as such they are likewise not liable for damages as the
undertaking was not one for profit; furthermore, they had exercised due care and diligence in implementing
the municipal ordinance. CFI held that the municipal council exercised due diligence in selecting the person
to construct the stage and dismissed the complaint. CA reversed the decision and held all defendants
solidarily liable for damages.

Issues:

1. Is the celebration of a town fiesta authorized by a municipal council a governmental or a corporate

function of the municipality?

2. Is the municipality liable for the death of Fontanilla?

3. Are the municipal councilors who enacted the ordinance and created the fiesta committee liable for the
death of Fontanilla?

Held:

1. The holding of the town fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a
private or proprietary function of the municipality.

Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code simply gives authority
to the municipality to celebrate a yearly fiesta but it does not impose upon it a duty to observe one.
Holding a fiesta even if the purpose is to commemorate a religious or historical event of the town is in
essence an act for the special benefit of the community and not for the general welfare of the
public performed in pursuance of a policy of the state. The mere fact that the celebration, as claimed was
not to secure profit or gain but merely to provide entertainment to the town inhabitants is not a conclusive
test. For instance, the maintenance of parks is not a source of income for the nonetheless it is private
undertaking as distinguished from the maintenance of public schools, jails, and the like which are for
public service. No governmental or public policy of the state is involved in the celebration of a town fiesta.

Municipal corporations exist in a dual capacity, and their functions are two fold. In one they exercise the
right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts
are political and governmental Their officers and agents in such capacity, though elected or appointed by
the are nevertheless public functionaries performing a public service, and as such they are officers,
agents, and servants of the state. In the other capacity, the municipalities exercise a private, proprietary
or corporate right, arising from their existence as legal persons and not as public agencies. Their officers
and agents in the performance of such functions act in behalf of the municipalities in their corporate or
individual capacity, and not for the state or sovereign power.
2. Under the doctrine of respondent superior, petitioner-municipality is liable for damages for the death of
Vicente Fontanilla because the accident was attributable to the negligence of the municipality's officers,
employees, or agents.
Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for
one's own acts or omission, but also for those of persons for whom one is responsible.
It was found that the stage was not strong enough considering that only P100.00 was
appropriate for the construction of two stages and while the floor of the "zarzuela" stage
was of wooden planks, the post and braces used were of bamboo material. The collapse
of the stage was also attributable to the great number of onlookers who mounted the
stage. The municipality and/or its agents had the necessary means within its command
to prevent such an occurrence. But they failed take the necessary steps to maintain the
safety of the stage, particularly, in preventing non-participants or spectators from
mounting and accumulating on the stage.

Municipality cannot evade ability and/or liability under the fact that it was Jose Macaraeg
who constructed the stage. The municipality acting through its municipal council
appointed Macaraeg as chairman of the sub-committee on entertainment and in charge
of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the
Municipality. Under the doctrine of respondent superior mentioned earlier, petitioner is
responsible or liable for the negligence of its agent acting within his assigned tasks.

3. The celebration of a town fiesta by the Municipality of Malasiqui was not a

governmental function. The legal consequence thereof is that the Municipality stands on
the same footing as an ordinary private corporation with the municipal council acting as
its board of directors. It is an elementary principle that a corporation has a personality,
separate and distinct from its officers, directors, or persons composing it and the latter
are not as a rule co-responsible in an action for damages for tort or negligence culpa
aquilla committed by the corporation's employees or agents unless there is a showing of
bad faith or gross or wanton negligence on their part. The records do not show
that municipal councilors directly participated in the defective construction of the
"zarzuela" stage or that they personally permitted spectators to go up the platform. Thus,
they are absolved from liability. (Torio vs. Fontanilla, GR No. L-29993, October 23, 1978)
THE LOCAL GOVERNMENT CODE OF THE PHILIPPINES BOOK I
GENERAL PROVISIONS TITLE ONE. - BASIC PRINCIPLES CHAPTER 1. - THE CODE, POLICY AND APPLICATION
SECTION 1. Title. - This Act shall be known and cited as the "Local Government Code of 1991". SECTION 2.
Declaration of Policy. - (a) It is hereby declared the policy of the State that the territorial and political
subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain
their fullest development as self-reliant communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization whereby local
government units shall be given more powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the national government to the local government units. (b) It is also
the policy of the State to ensure the accountability of local government units through the institution of
effective mechanisms of recall, initiative and referendum. (c) It is likewise the policy of the State to require
all national agencies and offices to conduct periodic consultations with appropriate local government
units, non-governmental and people's organizations, and other concerned sectors of the community
before any project or program is implemented in their respective jurisdictions. SECTION 3. Operative
Principles of Decentralization. - The formulation and implementation of policies and measures on local
autonomy shall be guided by the following operative principles: (a) There shall be an effective allocation
among the different local government units of their respective powers, functions, responsibilities, and
resources; (b) There shall be established in every local government unit an accountable, efficient, and
dynamic organizational structure and operating mechanism that will meet the priority needs and service
requirements of its communities; 1 (c) Subject to civil service law, rules and regulations, local officials and
employees paid wholly or mainly from local funds shall be appointed or removed, according to merit and
fitness, by the appropriate appointing authority; (d) The vesting of duty, responsibility, and accountability
in local government units shall be accompanied with provision for reasonably adequate resources to
discharge their powers and effectively carry out their functions; hence, they shall have the power to create
and broaden their own sources of revenue and the right to a just share in national taxes and an equitable
share in the proceeds of the utilization and development of the national wealth within their respective
areas; (e) Provinces with respect to component cities and municipalities, and cities and municipalities with
respect to component Barangays, shall ensure that the acts of their component units are within the scope
of their prescribed powers and functions: (f) Local government units may group themselves, consolidate
or coordinate their efforts, services, and resources for purposes commonly beneficial to them; (g) The
capabilities of local government units ,especially the municipalities and Barangays, shall been enhanced
by providing them with opportunities to participate actively in the implementation of national programs
and projects; (h) There shall be a continuing mechanism to enhance local autonomy not only by legislative
enabling acts but also by administrative and organizational reforms; (i) Local government units shall share
with the national government the responsibility in the management and maintenance of ecological
balance within their territorial jurisdiction, subject to the provisions of this Code and national policies; (j)
Effective mechanisms for ensuring the accountability of local government units to their respective
constituents shall be strengthened in order to upgrade continually the quality of local leadership; (k) The
realization of local autonomy shall be facilitated through improved coordination of national government
policies and 2 programs and extension of adequate technical and material assistance to less developed
and deserving local government units; (l) The participation of the private sector in local governance,
particularly in the delivery of basic services, shall be encouraged to ensure the viability of local autonomy
as an alternative strategy for sustainable development; and (m) The national government shall ensure
that decentralization tributes to the continuing improvement of the performance of local government
units and the quality of community life. SECTION 4. Scope of Application. - This Code shall apply to all
provinces, cities, municipalities, Barangays, and other political subdivisions as may be created by law, and,
to the extent herein provided, to officials, offices, or agencies of the national government. SECTION 5.
Rules of Interpretation. - In the interpretation of the provisions of this Code, the following rules shall apply:
(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower
local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted
in favor of the local government unit concerned; (b) In case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the local government unit enacting it, and liberally in favor of
the taxpayer. Any tax exemption, incentive or relief granted by any local government unit pursuant to the
provisions of this Code shall be construed strictly against the person claiming it. (c) The general welfare
provisions in this Code shall be liberally interpreted to give more powers to local government units in
accelerating economic development and upgrading the quality of life for the people in the community;
(d) Rights and obligations existing on the date of effectivity of this Code and arising out of contracts or any
other source of prestation involving a local government unit shall be governed by the original terms and
conditions of said contracts or the law in force at the time such rights were vested; and 3 (e) In the
resolution of controversies arising under this Code where no legal provision or jurisprudence applies,
resort may be had to the customs and traditions in the place where the controversies take place. CHAPTER
2. - GENERAL POWERS AND ATTRIBUTES OF LOCAL GOVERNMENT UNITS SECTION 6. Authority to Create
Local Government Units. - A local government unit may be created, divided, merged, abolished, or its
boundaries substantially altered either by law enacted by Congress in the case of a province, city,
municipality, or any other political subdivision, or by ordinance passed by the Sangguniang Panlalawigan
or Sangguniang Panlungsod concerned in the case of a Barangay located within its territorial jurisdiction,
subject to such limitations and requirements prescribed in this Code. SECTION 7. Creation and Conversion.
- As a general rule, the creation of a local government unit or its conversion from one level to another
level shall be based on verifiable indicators of viability and projected capacity to provide services, to wit:
(a) Income. - It must be sufficient, based on acceptable standards, to provide for all essential government
facilities and services and special functions commensurate with the size of its population, as expected of
the local government unit concerned; (b) Population. - It shall be determined as the total number of
inhabitants within the territorial jurisdiction of the local government unit concerned; and (c) Land Area. -
It must be contiguous, unless it comprises two or more islands or is separated by a local government unit
independent of the others; properly identified by metes and bounds with technical descriptions; and
sufficient to provide for such basic services and facilities to meet the requirements of its populace.
Compliance with the foregoing indicators shall be attested to by the Department of Finance (DOF), the
National Statistics Office (NSO), and the Lands Management Bureau (LMB) of the Department of
Environment and Natural Resources(DENR). SECTION 8. Division and Merger. - Division and merger of
existing local government units shall comply with the same requirements herein prescribed for their
creation: Provided however, That such division shall not reduce the income, population, or land area of
the local government unit or units concerned to less than the minimum requirements prescribed 4 in this
Code: Provided, further, That the income classification of the original local government unit or units shall
not fall below its current income classification prior to such division. The income classification of local
government units shall be updated within six (6) months from the effectivity of this Code to reflect the
changes in their financial position resulting from the increased revenues as provided herein. SECTION 9.
Abolition of Local Government Units. - A local government unit may be abolished when its income,
population, or land area has been irreversibly reduced to less than the minimum standards prescribed for
its creation under Book III of this Code, as certified by the national agencies mentioned in Section 17
hereof to Congress or to the Sanggunian concerned, as the case may be. The law or ordinance abolishing
a local government unit shall specify the province, city, municipality, or Barangay with which the local
government unit sought to be abolished will be incorporated or merged. SECTION 10. Plebiscite
Requirement. - No creation, division, merger, abolition, or substantial alteration of boundaries of local
government units shall take effect unless approved by a majority of the votes cast in a plebiscite called
for the purpose in the political unit or units directly affected. Said plebiscite shall be conducted by the
Commission on Elections (Comelec) within one hundred twenty (120) days from the date of effectivity of
the law or ordinance effecting such action, unless said law or ordinance fixes another date. SECTION 11.
Selection and Transfer of Local Government Site, Offices and Facilities. (a) The law or ordinance creating
or merging local government units shall specify the seat of government from where governmental and
corporate services shall be delivered. In selecting said site, factors relating to geographical centrality,
accessibility, availability of transportation and communication facilities, drainage and sanitation,
development and economic progress, and other relevant considerations shall be taken into account. (b)
When conditions and developments in the local government unit concerned have significantly changed
subsequent to the establishment of the seat of government, its Sanggunian may, after public hearing and
by a vote of two-thirds (2/3) of all its members, transfer the same to a site better suited to its needs.
Provided, 5 however, That no such transfer shall be made outside the territorial boundaries of the local
government unit concerned. The old site, together with the improvements thereon, may be disposed of
by sale or lease or converted to such other use as the Sanggunian concerned may deem beneficial to the
local government unit concerned and its inhabitants. (c) Local government offices and facilities shall not
be transferred, relocated, or converted to other uses unless public hearings are first conducted for the
purpose and the concurrence of the majority of all the members of the Sanggunian concerned is obtained.
SECTION 12. Government Centers. - Provinces, cities, and municipalities shall endeavor to establish a
government center where offices, agencies, or branches of the national government, local government
units, or government-owned or -controlled corporations may, as far as practicable, be located. In
designating such a center, the local government unit concerned shall take into account the existing
facilities of national and local agencies and offices which may serve as the government center as
contemplated under this Section. The national government , local government unit or government-owned
or -controlled corporation concerned shall bear the expenses for the construction of its buildings and
facilities in the government center. SECTION 13. Naming of Local Government Units and Public Places,
Streets and Structures. (a) The Sangguniang Panlalawigan may, in consultation with the Philippine
Historical Commission (PHC), change the name of the following within its territorial jurisdiction: (1)
Component cities and municipalities, upon the recommendation of the Sanggunian concerned; (2)
Provincial roads, avenues, boulevards, thorough-fares, and bridges; (3) Public vocational or technical
schools and other postsecondary and tertiary schools; (4) Provincial hospitals, health centers, and other
health facilities; and (5) Any other public place or building owned by the provincial government. 6 (b) The
Sanggunian of highly urbanized cities and of component cities whose charters prohibit their voters from
voting for provincial elective officials, hereinafter referred to in this Code as independent component
cities, may, in consultation with the Philippine Historical Commission, change the name of the following
within its territorial jurisdiction: (1) City Barangays, upon the recommendation of the Sangguniang
Barangay concerned; (2) City roads, avenues, boulevards, thorough fares, and bridges; (3) Public
elementary, secondary and vocational or technical schools, community colleges and non-chartered
colleges; (4) City hospitals, health centers and other health facilities; and (5) Any other public place or
building owned by the city government. (c) The Sanggunians of component cities and municipalities may,
in consultation with the Philippine Historical Commission, change the name of the following within its
territorial jurisdiction: (6) city and municipal Barangays, upon recommendation of the Sangguniang
Barangay concerned; (7) city, municipal and Barangay roads, avenues, boulevards, thorough fares, and
bridges; (8) city and municipal public elementary, secondary and vocational or technical schools, post-
secondary and other tertiary schools; (9) city and municipal hospitals, health centers and other health
facilities; and (5)Any other public place or building owned by the municipal government. (d) None of the
foregoing local government units, institutions, places, or buildings shall be named after a living person,
nor may a change of name be made unless for a justifiable reason and, in any case, not oftener than once
every ten (10) years. The name of a local government unit or a public place, street or structure with
historical, 7 cultural, or ethnic significance shall not be changed, unless by a unanimous vote of the
Sanggunian concerned and in consultation with the PHC. (e) A change of name of a public school shall be
made only upon the recommendation of the local school board concerned. (f) A change of name of public
hospitals, health centers, and other health facilities shall be made only upon the recommendation of the
local health board concerned. (g) The change of name of any local government unit shall be effective only
upon ratification in a plebiscite conducted for the purpose in the political unit directly affected. In any
change of name, the Office of the President, the representative of the legislative district concerned, and
the Bureau of Posts shall be notified.