NOTES ON PUBLIC CORPORATION

A. CORPORATION Case: Torio v. Fontanilla

B.P BLG. 68, SECTION 2 Facts:

- A corporation is an artificial being
created by operation of law, having
the right of succession and the
powers, attributes and properties
expressly authorized by
law/incident to its existence
Tortio v. Fontanilla
- Municipal corporations has a public
character as regards to the state at
large in so far as it is its agent in
government and private insofar as
it is to promote local necessities
and conveniences for its own
community
- The distinction of powers become
important for purposes of
dteermining the liability of the
municipality for the acts of its
agents which result in an injury to
third persons
- With respect to proprietary
functions, the settles rule is that a
municipality corporation can be
held liable to thrid persons ex
contractu or ex delicto (contacts
and in tort) Case: Municipality of Tangkal, Province of Lanao
- Section 2282 of the Chapter of del Norte v. Hon. Balindong
Municipal Law of Revised
Administrative code simply gives Facts:
authority to the municipality to
accelebrate a yearly fiesta but it
does not impose upon it a duty to
observe one
- It is a special benefit of the
community and not for the general
welfae of the public
- The celebration as claimed was not
to secure profit or gain but merely
to provide entertainment was not a
conclusive tet
- No government or public policy of a
state is involved in celebration of a
town fiesta

Characteristics of a corporation
- Artificial being
- Invisible
- Intangible
- Existing only in contemplation of
law

Composed of powers, privileges and immunities

which they would not otherwise possess,
the most important of which are continuous
legal identity/unity and perpetual or indefinite
succession under the corporate name
 CLASSIFICATIONS Test determining whether a corporation is
- Public private/public
- Private
- Quasi-public corporation - Purpose of its creation and relation
of the corporation to the State
1. Public corporation – one that is organized for
governemnt of a portion of a state such as LGU Note: If the corporation is created as an agent of the
- Created for public use State to carry out Governmental Functions, then it is
2. Private corp – formed for some private purpose, public, OW it is private
benefit, aim/end, such as business corp formed
and organized under a general law on
corporation CLASSIFICATIONS OF PUBLIC CORPORATION
- Created for private objects
3. Quasi-public corp – private corp that renders 1. Quasi Corporation – created by the States for a
public service or supplies wpublic wants, such limited purpose
as utility companies 2. Municipal Corporation/LGU – body politic and
- Combines the elements of both corporate constitutes by the incorporation of
private and public the inhabitants for the purpose of local
- Compelled by law /contract to government
render public service
MUNICIPAL CORPORATIONS
Special Classes of Corporation - Delegated authority to administer
the local/internal affairs of a
1. De facto – consent of a state is implied rather city/town or distinct which is
than expressed, by the general consent to that incorporated
kinds of corp, even though the conditions of
incorporation are not substantially complied
with Case: Philippine Society for the Prevention of Cruelty to
2. Corporation by prescription – body of men have Animals v. Commission on Audit
been for a long time in the exercise of corporate
powers, a presumption arises of an ancient Facts
character
- Granted by predecessors, making
the exercise of corp powers by
them lawful and rightful
3. Corporation by estoppel – created between
private litigants they may by their agreements,
admissions, or conduct, place themselves where
they would not be permitted to deny the fact of
existence of the corporation

PUBLIC CORPORATION VS. PRIVATE

CORPORATION

PUBLIC PRIVATE

1. Established for 1. Created for

purpose private aim, gain
connected with or benefits of its
the administration members
of civil/local
government
2. Created by the will
2. Creations of a of the
state either by incorporators with
general or special the recognizance
act, hence of thr state, hence
involuntary constitute
consequence of voluntary
legislation agreement by and
among members
 Municipal Corp Quasi-public corp
Case: Boy Scouts of the Philippines v. COA
Public, although Private nature and
Facts:
incidents connected object with
with it may be of oncidents only that
private nature and so are public
far as it is subject to
the rules and liability
controlling private
corporation in
ownership or
property

B. MUNICIPAL CORPORATIONS

Elements of Municipal Corporation

1. Legal creation/incorporation
- Law creating/authorizing the
creation or incorporation of a
municipal corporation
- Statute creating LGU/brgy
(ordinance from the Province)
2. Corporate name
- Name of the municipal corp by
which it is incorporated and known
and which all corp act are done
Note: change of name will not dissolve nor destroy the
identity of the municipalcorp nor afeect its rights and
privileges

- The use of names of living persons

are prohibited
Exception:

For justifiable reasons such as use

of name of a family in a part of a
community whose members
significantly contribute to the
welfare of the Filipino People

3. Inhabitants
- Natural persons, the constituents
who compose it
4. Territory
- Land mass where inhabitants
reside, together with waters and air
Public corp Quasi-public Corp sace above the land and water
- Territorial boundaries must be
Corporation Private corp which definite, fixed or certain
created as an render public
agent of the State service, supply
to carry out public wants DUAL NATURE AND FUNCTIONS OF MUNICIPAL
Governmental CORPORATION
Functions
1. Governmental functions
- Involves the administration of the
power of the State and promoting
the public welfare
2. Proprietary functions
- Exercised for the special benefit and
advantage of the community and
for the attainment of their
collective needs
 Facts:
Note:
- The LGU exercises governmental
functions as agents of the state
(traffic ordinances, preservation of
public peace and the other
regulatory measure
- The LG exercised proprietary
functions as an entity representing
the inhabitants (maintenance of
parks, cemeteries, fiesta celeb)

IMPORTANCE

- In the liability of municipalities for

their acts and those their offices
- In the extent of legislative control
over the same

Cases:

Bara Lidasan v Comelec

Relevent issue:
- WON a cluster o just nine barangay
after the 12 barangay of a 21-
barangay proposed municipality,
can compose a municipality
Held: Surigao Electric Co, Inc v Municipality of Surigao

- SC in effect states that because of
the second function of the LGU (it
serves As agency of the community
in the administration of local affairs,
an LGU must be “self-sufficient” to
enable it to exercise its corporate
powers and serve its constituents)
- In this case, the SC found that the
remaining barangay was insufficient
to constitute a separate
municipality
- It was said that the municipal
corporation perform twin functions
1. It serve as an instrumentality of
the state in carrying out the
functions of the government
2. They act as an agency of the
community in the administrtion
of local affairs
Note:
It is in the latter character that they are separate entity
acting for their own purpose and not a subdivision of a
State
Issue: WON a local government unit can be considered
as an instrumentality of the national government
Note: it was relevant in determining whether or not an
LGU wanting to operate Utility company (Electric
company) was exempt from obtaining a certificate of
public convenience as provided for in the law, the Public
Service Act
Held: SC ruled that “as early as 1916, in Mendoza v de
leon, there has been a recognition by this Court of the
dual character of a municipal corp, one as government
being a branch of general administration of the state,
and the other as quasi-private and corporate
Note: Government affairs do not lose their
governmental character by being delegated to the
municiapl government
The state allows the municipality to select, change their
character, to preserve the peace, protect the morals
and health of the community and so on is to administer
government, whether it be done by the central
government or shifted to a local organization

Case: Surigao electric co inc v. Municipality of Surigao

Case: Bara Lidasan v Comelec

 Sources of powers of Philippine Local
Government
1. 1987 Consti – Section 25, Article 11
2. Sections 5-7, Article 10 of the LGC of 1991 (RA
Municipality of San fernando v Firme 7160)
3. Other laws, decrees, EO, Proclamations,
Note: Municipality is answerable only when it is acting Administrative rules
in a proprietary capacity

Section 24, RA 7160 makes an LGU not exempt from Classification of powers
liability for death/injury to person or damage to
property. But the provision does not contain any - Express
qualification, that’s why the ruling in this case is still - Implied
applicable - Inherent (powers necessary and
proper for governance, ex. Promote
health and safety, enhance
Case: Municipality of San Fernando v. Firme prosperity, improve morals of the
inhabitants

- Public/government

- Private/proprietary

- Intramural/extramural

- Mandatory/directory

- Ministerial/discretionary

UNDER CODE AND RULES AND REGULATIONS

IMPLEMENTING THE LGC,

LGU, may exercise 4 general kinds of powers:

1. Those that are expressly granted to them

2. Those that are implied from those that are
granted to them
3. Those that are necessary, appropriate, or
incidental for their efficient and effective
governance
4. Those that are essential to the promotion of the
genera welfare of their inhabitants

KINDS OF MUNICIPAL CORPORATION

DE FACTO DE JURE
When not all requirements If its creation perfectly
were complied within its complies with all the
incorporation, but there requirements of
are at least, the following: incorporation

Valid law
authorizing
incorporation
Attempt in good
faith to organize it
Colorable
compliance with
law
Assumption of
corporate powers

 In determining the existence of a de facto

municiapl corportation, an early article from
Yale Law Journal offer the ff analysis:
 Absence of any legislative act to give vitality to
its creation
 Principles deduced reconciling the conflicting
decisions:
1. The color of authority requisite to the
organization of a de facto municipal
corporation may be:
a. A valid law enacted by the legislature
b. An unconstitutional law, valid in its face, which
has either (1) been upheld for a time by the
courts or (2) not yet been declared void;
provided that a warrant for its creation can be
found in some other valid law or in general laws
or consitution of the state

2. There can be now de facto municipal

corporation unless either directly or
potentially, such a de jure corporation is
authorized by some legislative flat
3. There can be no color of authority in an
unconstitutional stature alone,
invalidity of which is apparent on its face
4. There can be no de facto corporation
created to take place of an existing de jure
corporation, as such organiation would
clearly be an usurper
Case: Malabanag v Benito
 In Pelaez v Auditor General, the Sc denied the
president the power to create a local
government unit because the creation of local
the govt is essentially legislative
 Thus the EO in this case which created certain
municipalities, were declared unconstitutional
 Administrative power is thus limited to
implementing the law creating municipality
 Recognition od a de facto municipal corporation
as such is primarily based on the premise that
municiapl corporations can exixst by
prescription
 Hence, a de facto municipal corp, will be
respected and will be recognized as valid and
binding as if it is a de jure corporation
Case: Pelaez v Auditor General
 Case: Municipality of San Narciso v. Mendez,Sr.

Case: Municipality of Jimenez v Baz, Jr

Case: Municipality of Candijay v. CA

In Sultan Osop case, the Supreme court confirmed that
municipal corp may exist by prescription where it is
shown that the community has claimes and exercised
corporate functions, with the knowledge and
acquiescence of the legislature, and without
interruption or objection for period long enough to
afford title by prescription
 What is essential is a factual demonstration of
the continuous exercise by the municipal corp
of its corporate powers, as well as the
acquiescence thereto by the other
instrumentalities of the state
Case: Sultan Osop Camid v. Office of the President
METHOD OF CHALLENGING EXISTENCE OF
MUNICIPAL CORPORATION
- An inquiry into the legal existence
of a municipal corporation is
reserved to the State in direct
proceeding for quo warranto
- This rule naturally results from the
source and nature of municipal
power
Note: The prohibition on collateral attack applies only
when the municipal corporation is at least a de facto
corporation
Whenever the question of the validity of incorporation
is raised, there is a strong tendency by the courts, in
recognition of the status quo, to uphold the validity and
power of the municipality
CASE: Malabang v. Benito

C. OVERWIEW OF THE PHILIPPINE
GOVERNMENT SYSTEM
1. Distribution of powers to local governments as
limitation to political authority
- Vertical
- Horizontal
 Horizontal Distribution of government powers
- The powers of government,
namely: Legislative, executive, and
judicial
- The distribution of these powers
may be complete or partial
Most Parliamentary systems, there is only partial
distribution of these powers as both legislative and
executive branches are fused in one agency, resulting in
having a Chief Executive and Prime Minister as the head
of the Legislative Department
 Vertical Distribution of governmental powers
- Powers are distributed among at
least 2 levels of government
- Upper and lower levels
- Upper level consist of national
government, the government of the
whole country
- Lower level are the local
governments, the government of
the parts
- The distribution of governmental
powers among at least 2 levels of
government guarantees liberty and
democracy
2. Local Governments as Political and Territorial
Subdivision of the State
- In a case, a Local Government is
defined as a political subdivision of
a nation or state which is
constituted by law and has
substantial control of local affairs.
- Sec 16, LGC 1991 “ body politic and
corporate endowed with powers to
be exercised by it in conformity
with law
Note: Recognizing at least 2 levels of government also
signify that local governments are political and
territorial subdivisions of the state
 UNITARY V. FEDERAL
Unitary Federal
National government Local governments are
supervises local supreme within their own
government affairs, as the spheres such that they
local government derives actually become quasi-
their existence and sovereign” states althoigh
powers from the national still subordinate to the
government national government in
some respects, such as in
the area of foreign affairs,
LOCAL defense, currency, and
commerce
By nature, local governments are subordinate entities,
having no inherent powers and must look up to the
higher governmental level for delegation of authority
UN defines local government as political subdivisions of
a nation or state
Note:
However, the concept of local government also includes
territorial boundaries of governance
- International Union of Local
Authorities refers local gov’t as
“geographic subdivisions”
2 elements of local government:
- presence of higher authority
- territorial boundary
Local Governments as Municipal Corporations
 Municipal Corporations are established by law
partly as an agent of the state to assist in the
civil government of the country, but chiefly to
regulate and administer the local internal affairs
of the city, town, or district incorporated
 In the Philippines, dual functuon of LG’s are
expressly granted by the LGC underSec., 15 to
wit: “it shall exercise powers as a political
subdivision of the national govt and as a
corporate entity representing the inhabitants of
its territory
 As a result, the corporation is therfore legally
considered distinct from its members
HISTORY OF THE LOCAL GOVT IN THE PHIL
Ancient govt headed by the datu who exercised 3 govt
powers (Ececutive, legislative, judicial powers) upon
consultation with a council of elders
During spanish colonization, the Barangay were reduced
into barrios, and the Datu’s were demoted into Cabeza
de Barangay, whose only function is to assist the higher
levels of the govt in collecting tribute
Aguinaldo and Mabini organized the Philippine republic
which give more attention to the local units. Autonomy
by this time cannot be given to the local govt, thus
centralism remained
When the americans came, centralization was
continued. Provincias were renames ad provinces,
cabildoes to cities, and pueblos to municipalities
Classifications of Cities
1. Highly urbanized – those which are considered
viable enough to perform their functions and
services, and thus allowed to retain their
autonomy from the province
2. Component cities- under the supervision of the
municipalities
UNITARY SYSTEM OF GOVERNMENT
- Municipal govt are only agents of
the national govt
- Local councils exercise only
delegated legislative powers
conferred upon them by Congress
as the national lawmaking body
- Delegate cant be superios to the
principal or exercise powers higher
than those of the latter
LOCAL AUTONOMY AND DECENTRALIZATION
Local Autonomy signifies a more responsive and
accountable local government structure
instituted through a system of decentralization
The grant of autonomy is intended to break up
the monopoly of the national government over
the affairs of local governments
There is decentralization of administration when the
central government delagates administrative powers to
political subdivisions in order to broaden the base of
government power and in the process to make local
governments “more responsive and accountable, and
ensure their fullest development as self reliant
communities and make them more effective partners in
the pursuit of national development and social progress
- Under the supervision of the
national govt acting through the
ores and the DILG
Decentralization of powers involves an abdication of
political power in favor of local government units
declared to be autonomous. It also amounts to self-
immolation, since in that evernt, the autonomous govt
becomes accountable not to the central authorities but
to its constituency
- Subject alone to the decree of the
organic art creating it and accepted
principles on the effewcts and limits
of autonomy
Note: The national govt has not completely relinquished
all its powers over LG. including autonomous regions.
Only administrative powers over local affairs are
delegated to political subdivision
Purpose: to make governance more directly responsive
and effective at the local levels
Fiscal autonomy – LG’s have the power to create their
own sources of revenuue in addition to ther equitable
share in the national taxes released by the national
govt,a s awell as the power to allocate their resources in
accordance with their own priorities.
- Extend in the preparation of their
budgets, and local officials in turn
have to work within the constraints
thereof
SYSTEM OF DECENTRALIZATION
- LGU’s shall be given powers,
authority, responsibilities, and
resources
- Process of decentralization shall
proceed from the national govt to
the LGUs
CHAPTER 4
LOCAL GOVERNMENTS IN THE PHILIPPINES
- Provinces
- Cities
- Municipalities
- Barangays
- Autonomous regions in Muslim
Minadano
- Cordillera
Barangay
- Serves as a primary planning and
implementing unit of government
policies, plans, programs, projects
And activities in the community and
where disputes may be amicably
settled
Municipality
- Consisting of group of barangays
- Serves as a general purpose
govenrment for the coordination
and delivery of basic, regular and
direct services and effective
governance of the inhabitants
within its territorial jurisdiction
City
- Consisting of more urbanized and
developed barangays
- Serve as a general purpose
government for the coordination
and delivery of basic, regular and
direct services and effective
governance of inhabitants withtin
the territorial jurisdiction
Province
- Composed of a cluster of
municipalities or municipalities and
component cities and as a political
and corporate unit of government,
serves as a dynamic mechanism for
developmental process and
effective governance of local
government units withtin its
territorial jurisdiction
Further classification of cities
- Highly Urbanized cities are cities
that comply with statutory
requirements on income 50 Million
- Independent Component Cities
whose charters prohibit their voters
from voting and be voted for
provincial elective officials and
shallbe independent from the
province
SPECIAL METROPOLITAN POLITICAL SUBDIVISIONS
Congress may by law, create this, subject to a plebiscite
as set forth in Section 10, Article X of the 1987
constitution
Component cities shall retain their basic autonomy and
shall be entitled to their own local executives and
legislative assemblies.
The jurisidiction of the metropolitan authority that will
be created shall be limited to basic services requiring
coordination
LOOSE FEDERATION
- LGUs may group themselves,
consolidate or coordinate their
efforts, services, and resources for
purposes commonly beneficial to
them in accordance with law
- May be created therough
approrpritae ordinance encated by
the LGUs
CHAPTER 5
THE LOCAL GOVERNMENT CODE OF 1991
Constitutional Mandate
- Mandates congress to enach local
govt code ehich shall provide for a
more responsive and accountable
local govt structure instituted
though a system of decentralization
with effective mechanisms of recall,
initiative, and referendum, allocate
 among among the diff local govt
units their powers, responsibilities,
and resources, and provide for the
qualifications, election,
appointment and removal, term,
salaries, powers, and functions and
duties of local officials and all other
matters relating o organization and
operation od local units
- RA 7160 was enacted into law in
1991 and became effective on Jan
1, 1992

Scope of application

Shall apply to all provinces, cities, municipalities,

barangays and other political subdivisions as may be
created by law and to the extent provided to officials,
offices, agencies, and nationl govt

As for autonomous regions, P, C, M, and B in the A.R

until such time as the regional govt concerned shall
have enacted its own LGC

Rules of interpretation

-shall be interpreted liberally in its favor, and in case of

doubt, any question thereon shall be resolved in favor
of devolution of powers and the lower LGU

- In case of doubt, tx ordinance or

revenie measure shall be construed
strictly against the LGU enacting it
and liberally in favor of taxpayer