Law on Public Corporation.
1. General Provisions and Principles.
Local Government Unit
à a local government unit which is a political subdivision of the Republic of the Philippines at the provincial, city, municipal, or Barangay level.
Public Corporation
à Public corporations are those formed or organized for the government of a portion of the state.
Private corporations
àPrivate corporations are those formed for some private purpose, benefit, aim, or end, as distinguished from public corporations, which have for their purpose the general good and welfare.
Territorial and Political Subdivision of the Philippines
è Sec. 1, Art. X, 1987 Philippine Constitution: “The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as hereinafter provided.
Agency of the Government
à Refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporations, or a local government or a distinct unit therein. [Sec. 2 (4) Administrative Code].
De Jure vs De Facto vs Estoppel Municipal Corporations
§ De jure municipal corporations –created or recognized by operation of law
§ Municipal corporations by prescription – exercised their powers from time immemorial with a charter, which is presumed to have been lost or destroyed.
§ De facto municipal corporations – where the people have organized themselves, under color of law, into ordinary municipal bodies, and have gone on, year after year, raising taxes, making improvements, and exercising their usual franchises, with their rights dependent quite as much on acquiescence as on the regularity of their origin. (Rodriguez, pages 17‐18, LGC 5th Edition).
Local Autonomy
à Under the 1987 Constitution, it simply means decentralization; it does not make the local governments sovereign within the state or an “imperium in imperio”. (Basco versus PAGCOR, G.R. 91649, May 14, 1991).
Local autonomy / Decentralization
à local autonomy 'means a more responsive and accountable local government structure instituted through a system of decentralization.' The Constitution does nothing more than to break up the monopoly of the national government over the affairs of local governments and as put by political adherents, to "liberate the local governments from the imperialism of Manila." Autonomy, however, is not meant to end the relation of partnership and interdependence between the central administration and local government units, or otherwise, to usher in a regime of federalism. The Charter has not taken such a radical step. Local governments, under the Constitution, are subject to regulation, however limited, and for no other purpose than precisely, albeit paradoxically, to enhance self-government.
[Province of Batangas vs Romulo; G.R. No. 152774]
Art. X, Sec 2, Philippine Constitution
à The territorial and political subdivisions shall enjoy local autonomy.
Art. II, Sec. 25, Philippine Constitution
à The State shall ensure the autonomy of local governments.
Mandanas Doctrine
à In declaring Sec. 284 of LGC unconstitutional; SC held that "Constitution itself set national taxes as the base amount from which to reckon the just share of the LGUs; and Section 6, Article X the 1987 Constitution textually commands the allocation to the LGUs of a just share in the national taxes.
Section 6, when parsed, embodies three mandates, namely:
(1) the LGUs shall have a just share in the national taxes;
(2) the just share shall be determined by law; and
(3) the just share shall be automatically released to the LGUs." [Mandanas vs Ochoa]
Art. X, Sec. 5, Phil. Constitution
Art. X, Sec. 6, Phil. Constitution
àLocal government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.
Distinguish decentralization of administration (DA) from decentralization of power (DP)
à Now, autonomy is either decentralization of administration or decentralization of power.
There is decentralization of administration when the central government delegates 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.' At the same time, it relieves the central government of the burden of managing local affairs and enables it to concentrate on national concerns. The President exercises 'general supervision' over them, but only to 'ensure that local affairs are administered according to law.' He has no control over their acts in the sense that he can substitute their judgments with his own.
è
Decentralization of power, on the other hand, involves an abdication of political power in the favor of local governments units declared to be autonomous. In that case, the autonomous government is free to chart its own destiny and shape its future with minimum intervention from central authorities. According to a constitutional author, decentralization of power amounts to 'self-immolation,' since in that event, the autonomous government becomes accountable not to the central authorities but to its constituency.
[Province of Batangas vs Romulo]
à
Fiscal Autonomy
à A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the National internal revenue. This is mandated by no less than the Constitution. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and "shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose." As a rule, the term "SHALL" is a word of command that must be given a compulsory meaning. The provision is, therefore, IMPERATIVE.
à Local autonomy includes both administrative and fiscal autonomy. The fairly recent case of Pimentel v. Aguirre is particularly instructive. The Court declared therein that local fiscal autonomy includes the power of the LGUs to, inter alia, allocate their resources in accordance with their own priorities. [Province of Batangas vs Romulo]
Police Power
à Police power is the plenary power vested in the legislature to make statutes and ordinances to promote the health, morals, peace, education, good order or safety and general welfare of the people." The State, through the legislature, has delegated the exercise of police power to local government units, as agencies of the State. [Fernando vs St. Scholastica’s College; G.R. No. 161107]
à This delegation of police power is embodied in Section 16 of LGC, known as the General Welfare Clause, which has two branches. "The first, known as the general legislative power, authorizes the municipal council to enact ordinances and make regulations not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon the municipal council by law. The second, known as the police power proper, authorizes the municipality to enact ordinances as may be necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants, and for the protection of their property."
[Fernando vs St. Scholastica’s College; G.R. No. 161107]
à The police power granted to local government units must always be exercised with utmost observance of the rights of the people to due process and equal protection of the law. Such power cannot be exercised whimsically, arbitrarily or despotically as its exercise is subject to a qualification, limitation or restriction demanded by the respect and regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be adversely affected only to the extent that may fairly be required by the legitimate demands of public interest or public welfare. Due process requires the intrinsic validity of the law in interfering with the rights of the person to his life, liberty and property. [City of Manila vs Laguio]
Requisites of the exercise of a valid police power:
à As with the State, local governments may be considered as having properly exercised their police power only if the following requisites are met:
(1) the interests of the public generally, as distinguished from those of a particular class, require its exercise and
(2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals.
è In short, there must be a concurrence of a lawful subject and lawful method. [Fernando vs St. Scholastica’s College; G.R. No. 161107]
Requisite in order that an ordinance will be valid:
à For an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and pass according to the procedure prescribed by law, it must also conform to the following substantive requirements:
(1) must not contravene the Constitution or any statute;
(2) must not be unfair or oppressive;
(3) must not be partial or discriminatory;
(4) must not prohibit but may regulate trade;
(5) must be general and consistent with public policy; and
(6) must not be unreasonable. [Fernando vs St. Scholastica’s College; G.R. No. 161107]
Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable, the law may operate only on some and not all of the people without violating the equal protection clause. The classification must, as an indispensable requisite, not be arbitrary. To be valid, it must conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.
[City of Manila vs Laguio]
Control vs Supervision
à"Control" has been defined as "the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for test of the latter."
à"Supervision" on the other hand means "overseeing or the power or authority of an officer to see that subordinate officers perform their duties. [Ganzon vs Ca, G.R. No. 93252]
General Supervision
à The President exercises "general supervision" over them, but only to "ensure that local affairs are administered according to law." He has no control over their acts in the sense that he can substitute their judgments with his own. [Ganzon vs Ca, G.R. No. 93252]
President's Supervisory Power vs Control Power
à The power of supervision means "overseeing or the authority of an officer to see that the subordinate officers perform their duties." If the subordinate officers fail or neglect to fulfill their duties, the official may take such action or step as prescribed by law to make them perform their duties. The President's power of general supervision means no more than the power of ensuring that laws are faithfully executed, or that subordinate officers act within the law. Supervision is not incompatible with discipline. And the power to discipline and ensure that the laws be faithfully executed must be construed to authorize the President to order an investigation of the act or conduct of local officials when in his opinion the good of the public service so requires.
à Control is said to be the very heart of the power of the presidency. As head of the Executive Department, the President, however, may delegate some of his powers to the Cabinet members except when he is required by the Constitution to act in person or the exigencies of the situation demand that he acts personally. The members of Cabinet may act for and in behalf of the President in certain matters because the President cannot be expected to exercise his control (and supervisory) powers personally all the time. Each head of a department is, and must be, the President's alter ego in the matters of that department where the President is required by law to exercise authority. [Joson vs Torres; G.R. No. 131255]
II. Nature of Local Governments.
Political and corporate nature of LGU
NATURE à “Ours is still a unitary form of government, not a federal state.
è LGUs are Territorial and Political Subdivisions (of 1 unit)
è Not “Imperium in Imperio”, Not Independent Sub- National Units
è “Not impenetrable states”; under supervision of President and may be held accountable
è LGU Dual Capacities:
o Governmental/ Public and
o Proprietary/ Private
è Dual Agency:
o LGUs as Agents of the State and
o LGUs as Agents of the People
è Sources of Powers: Constitution, Law and Charter (No Inherent Powers)
è Legislative (not constitutional but merely delegated in the LGC) Separation of Powers
è Corporate Succession (Contractual Obligations)
è SECTION 15. Political and Corporate Nature of Local Government Units. – Every local government unit created or recognized under this 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 of the national government and as a corporate entity representing the inhabitants of its territory. [LGC or RA 7160]
Agency of the Government
à Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. [Executive Order No. 292, Sec. 2, Par. 4].
Dual Characteristics of a Public Corporation
àJure imperii – governmental in nature
àJure Gestionis – private functions
Levels of LGUs:
àThe local government in the Philippines is divided into three levels: provinces and independent cities, component cities and municipalities, and barangays, all of which are collectively known as local government units (LGUs).
Autonomous Regions
à An autonomous region of the Philippines is a first-level administrative division that has the authority to control a region's culture and economy. The Constitution of the Philippines allows for two autonomous regions: in the Cordilleras and in Muslim Mindanao. Currently, Bangsamoro, which largely consists of the Muslim-majority areas of Mindanao, is the only autonomous region in the country. [https://en.wikipedia.org/]
III. Rules of Interpretation of Local Government Code
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 presentation 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
(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.
IV. Creation, Conversion, Merger and Abolition of LGU.
Creation.
à A Local Government Unit may be created, divided, merged, abolished or its boundaries substantially altered either by:
1. Law enacted by Congress in case of province, city, municipality or any other political subdivision;
2. By an 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 the LGC. (Sec. 6, R.A. 7160)
What are the requisites or limitations imposed on the creation or conversion of municipal corporations?
àPlebiscite requirement – must be approved by majority of the votes cast in a plebiscite called for such purpose in the political unit or units directly affected.
Note: The plebiscite must be participated in by the residents of the mother province in order to conform to the constitutional requirement
à Income requirement – must be sufficient 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. Average annual income for the last consecutive year should be at least:
a. Province – P 20M
b. Highly Urbanized City – P 50M
c. City – P 20M (100M RA. 9009 amending Sec 450 of LGC).
d. Municipality – P 2.5M.
à Population requirement – to be determined as the total number of inhabitants within the territorial jurisdiction of the local government unit concerned. The required minimum population shall be:
a. Barangay – 2K But 5K in:
i. Metro Manila.
ii. Highly urbanized cities.
b. Municipality – 25K.
c. City – 150K.
d. Province – 250K.
à Land requirement – must be contiguous, unless it comprises two or more islands or is separated by a local government unit; properly identified by metes and bounds; and sufficient to provide for such basic services and facilities. Area requirements are:
a. Municipality – 50 sq. km (Sec.442 R.A. 7160).
b. City – 100 sq. km (Sec.450 R.A. 7160).
c. Province – 2,000 sq.km (Sec.461 R.A. 7160).
Corporate existence begin:
à Upon the election and qualification of its chief executive and a majority of the members of its sanggunian, unless some other time is fixed therefor by law or ordinance creating it. (Sec. 14, R.A. 7160).
Rule relative to the merger and division of local government units:
1. Such division or merger shall not reduce the income, population or land area of the LGC concerned to less than the minimum requirement
2. That the income classification of the original LGU/s shall not fall below its current income classification prior to the division
3. A plebiscite must be held in LGUs affected
4. Assets and liabilities of creation shall be equitably distributed between the LGUs affected and new LGU.
Note. When a municipal district of other territorial divisions is converted or fused into a municipality all property rights vested in original territorial organization shall become vested in the government of the municipality. (R.A. 688).
Requirements for division and merger of local government units:
àSame requirements as creation of LGU provided:
1. It shall not reduce the income, population or land area of the LGU/S concerned to less than minimum requirements prescribed;
2. Income classification of the original LGU/S shall not fall below its current income classification prior to division. (Sec.8 R.A. 7160)
3. Plebiscite be held in LGUs affected (Sec.10 R.A. 7160)
4. Assets and liabilities of creation shall be equitably distributed between the LGUs affected and new LGU. (R.A. 688).
When may an LGU be abolished?
àWhen its income, population or land area has been irreversibly reduced to less than the minimum standards prescribed for its creation, as certified by the national agencies mentioned. (Sec. 9, R.A. 7160).
Note: A barangay may officially exist on record and the fact that nobody resides in the place does not result in its automatic cessation as a unit of local government. (Sarangani versus COMELEC, G.R. No. 135927. June 26, 2000).
Who may abolish a LGU?
1. Congress – in case of provinces, city, municipality, or any other political subdivision.
2. Sangguniang Panlalawigan or Sangguniang Panglungsod – in case of a barangay, except in Metropolitan Manila area and in cultural communities. (Sec.9 R.A. 7160).
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