PUBLIC CORPORATION AND LOCAL

GOVERNMENT
Alman-Najar Namla
Xavier University - College of Law Zamboanga

COVERAGE OF THE
DISCUSSION
A. PUBLIC CORPORATION
1.CONCEPT
PHILIPPINE SOCIETY FOR THE
PREVENTION OF CRUELTY TO
ANIMALS V. COA, GR 169752,
SEPTEMBER 25, 2007
PUBLIC CORPORATION V.
GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS
2.CLASSIFICATIONS
A) QUASI-CORPORATION:
CREATED BY THE STATE FOR A
NARROW OR LIMITED PURPOSE.

COVERAGE OF THE
DISCUSSION

B. MUNICIPAL
CORPORATIONS
1. ELEMENTS: LEGAL
CREATION OR
INCORPORATION,
CORPORATE NAME,
INHABITANTS AND
TERRITORY.
2. NATURE AND FUNCTIONS

PUBLIC CORPORATION

Q: What is a Public Corporation?

A: PUBLIC CORPORATIONone formed and organized
for the government of a portion of the State.

PHILIPPINE SOCIETY FOR THE PREVENTION

OF CRUELTY TO ANIMALS V. COA, GR
169752, SEPTEMBER 25, 2007
Q: PSPCA was incorporated as a juridical entity by virtue of Act No. 1285 by the
Philippine Commission in order to enforce laws relating to the cruelty inflicted upon
animals and for the protection of and to perform all things which may tend to alleviate
the suffering of animals and promote their welfare.
In order to enhance its powers, PSPCA was initially imbued with (1) power to apprehend
violators of animal welfare laws and (2) share 50% of the fines imposed and collected
through its efforts pursuant to the violations of related laws.
However, Commonwealth Act No. 148 recalled the said powers. President Quezon then
issued Executive Order No. 63 directing the Commission of Public Safety, Provost
Marshal General as head of the Constabulary Division of the Philippine Army, Mayors of
chartered cities and every municipal president to detail and organize special officers to
watch, capture, and prosecute offenders of criminal-cruelty laws.
On December 1, 2003, an audit team from the Commission on Audit visited petitioners
office to conduct a survey. PSPCA demurred on the ground that it was a private entity
and not under the CoAs jurisdiction, citing Sec .2(1), Art. IX of the Constitution. Is the
PSPCA a public corporation?

PHILIPPINE SOCIETY FOR THE PREVENTION

OF CRUELTY TO ANIMALS V. COA, GR
169752, SEPTEMBER 25, 2007
A: No. The charter test cannot be applied. It is predicated on the legal regime established by the
1935 Constitution, Sec.7, Art. XIII. Since the underpinnings of the charter test had been introduced
by the 1935 Constitution and not earlier, the test cannot be applied to PSPCA which was
incorporated on January 19, 1905. Laws, generally, have no retroactive effect unless the contrary is
provided.
There are a few exceptions: (1) when expressly provided; (2) remedial statutes; (3) curative
statutes; and (4) laws interpreting others.
None of the exceptions apply in the instant case.
The mere fact that a corporation has been created by a special law doesnt necessarily qualify it as
a public corporation. At the time PSPCA was formed, the Philippine Bill of 1902 was the applicable
law and no proscription similar to the charter test can be found therein. There was no restriction on
the legislature to create private corporations in 1903. The amendments introduced by CA 148 made
it clear that PSPCA was a private corporation, not a government agency.
PSPCAs charter shows that it is not subject to control or supervision by any agency of the State.
Like all private corporations, the successors of its members are determined voluntarily and solely
by the petitioner, and may exercise powers generally accorded to private corporations.

PUBLIC CORPORATION V. GOVERNMENTOWNED OR CONTROLLED

CORPORATIONS
Purpose - Public corporations are
established for purposes connected
with the administration of civil or local
governments. GOCCs are for the
performance of functions relating to
public needs whether governmental
or proprietary in nature.
Who creates - PubCorps are created
by either a general or special act.
GOCCs are by congress or by
incorporators.
How created - PCs are by legislation.
GOCCs are by original charters or
special laws or general corporation
law as a stock or non-stock
corporation.

Q: What is a Government Owned and Controlled

Corporation (GOCC)?
A: any agency organized as a stock or nonstock
corporation vested with functions relating to public
needs whether governmental or proprietary in
nature, and owned by the government directly or
indirectly through its instrumentalities either wholly,
or where applicable as in the case of stock
corporations to the extent of at least 51% of its
capital stock. (Section 2 (13) of Executive Order No.
292 (Administrative Code of 1987)

CLASSIFICATIONS
a) Quasi-corporation: created by the State for a narrow
or limited purpose.

b) Municipal corporation: a body politic and corporate

constituted by the incorporation of the inhabitants for
purposes of local government.

ELEMENTS OF A MUNICIPAL
CORPORATION
legal creation or incorporation
corporate name
inhabitants and
territory

NATURE OF LGU
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.

TORIO VS. FONTANILLA, 85

SCRA 599
A town fiesta is considered a private/proprietary function. But
the Supreme Court concedes that there is no hard and fast
rule in determining the nature of a municipalitys undertaking.
Whether it is a governmental/public or private/proprietary
function will depend heavily on the context.
McQuillins rule is: A municipal corporation proper has...a
public character as regards the state at large insofar as it is its
agent in government, and private (so-called) insofar as it is to
promote local necessities and conveniences for its own
community. Thus, a town fiesta clearly falls under
private/proprietary function.

CITY OF MANILA VS. INTERMEDIATE

APPELLATE COURT, 179 SCRA 428

The North Cemetery is a patrimonial property of the

City of Manila; Lease; A lease contract executed by the
lessor and lessee remains as the law between them;
Breach of contractual provision entitles the other party
to damages.

CITY OF MANILA VS. INTERMEDIATE

APPELLATE COURT, 179 SCRA 428

The North Cemetery is a patrimonial property of the

City of Manila; Lease; A lease contract executed by the
lessor and lessee remains as the law between them;
Breach of contractual provision entitles the other party
to damages.

3. REQUISITES FOR CREATION,

CONVERSION, DIVISION, MERGER OR
DISSOLUTION
A local government unit may be created, divided,
merged, abolished, or its boundaries substantially
altered by law enacted by Congress in the case of a
province, city, municipality, or other political
subdivisions, or by Sanggunian Panlalawigan or
Sanggunian Panlungsod ordinance in the case of a
barangay. (Sec.6)

3. REQUISITES FOR CREATION,

CONVERSION, DIVISION, MERGER OR
DISSOLUTION
The creation or conversion of a local government unit to another level shall be
based on the following verifiable indicators of viability and projected capacity to
provide services:
a. Sufficient income and
b. Population and/or
c. Land area

NOTE: Compliance with the above-cited indicators shall be attested by the

Department of Finance, the National Statistics Office and the Land Management
Bureau of the DENR, respectively.

3. REQUISITES FOR CREATION,

CONVERSION, DIVISION, MERGER OR
DISSOLUTION

Necessity of Fixing Corporate Limits:

As a matter of general rule, municipal
corporations cannot, without legal authorization,
exercise its powers beyond its own corporate limits

1. CREATION OF
BARANGAYS:
a. Role: serves as the primary planning and implementing unit
of government policies, plans programs, projects and activities
in the community, and as a forum wherein the collective views
of the people may be expressed, crystallized and considered,
and where disputes may be amicably settled.
b. Who creates: a barangay may be created, divided, merged,
abolished or its boundary substantially altered by law or by an
ordinance of the Sangguniang Panlalawigan or Sangguniang
Panlungsod. Where a barangay is created by an ordinance of
the Sangguniang Panlalawigan, the recommendation of the
Sangguniang Bayan concerned shall be necessary.

1. CREATION OF
BARANGAYS:
c. Substantive Requisites:
1. Population- at least 2000 inhabitants
Except in cities and municipalities within Metro Manila or in
highly urbanized citiesmust be at least 5000 inhabitants
2. Income- no minimum income requirement
3. Land Area- no minimum requirement, but it must be contiguous
but it need not be contiguous if the barangay is comprised with
two or more islands.

1. CREATION OF
BARANGAYS:
c. Substantive Requisites:
1. Population- at least 2000 inhabitants
Except in cities and municipalities within Metro Manila or in
highly urbanized citiesmust be at least 5000 inhabitants
2. Income- no minimum income requirement
3. Land Area- no minimum requirement, but it must be contiguous
but it need not be contiguous if the barangay is comprised with
two or more islands.

2. CREATION OF
MUNICIPALITIES
a. Role: serves primarily as a general purpose government for the coordination and
delivery of basic, regular and direct services and effective governance of the
inhabitants within its territorial jurisdiction.
b. Who creates: may be created, divided, merged, abolished or its boundary
substantially altered only by an act of Congress subject to the criteria established by
the Code.
c. Substantive Requisites:
1. Population- at least 25,000 inhabitants
2. Income- average annual income of at least P2.5 million for the last two
consecutive years based on the 1991 constant prices.
3. Land Area- a contiguous territory of 50 square kilometers.

2. CREATION OF
MUNICIPALITIES
c. Substantive Requisites:
1. Population- at least 25,000 inhabitants
2. Income- average annual income of at least P2.5
million for the last two consecutive years based on the
1991 constant prices.
3. Land Area- a contiguous territory of 50 square
kilometers.

3. CREATION OF
COMPONENT CITIES
a. Role- serves primarily as a general purpose
government for the coordination and delivery of basic,
regular and direct services and effective governance of
the inhabitants within its territorial jurisdiction.

b. Who creates- may be created, divided, merged or

abolished, or its boundary substantially altered only by an
act of Congress subject to the criteria provided in the
Code.

3. CREATION OF
COMPONENT CITIES
c. Substantive Requisites:
1. Population- at least 150,000 inhabitants
2. Income- at least P100 million for the last two
consecutive years
3. Land Area- contiguous territory of at least 100
square kilometers

4. CONVERSION OF A
COMPONENT CITY INTO A HIGHLY
URBANIZED CITY
a. If a component city shall have met the minimum
requirements for a highly urbanized city, it shall be the
duty of the President to declare the city as highly urbanized
city upon: (1) proper application and (2) upon ratification in
a plebiscite by the majority of registered voters therein.
b. Substantive Requisites:
1. Population- at least 200,000 inhabitants
2. Income- at least P50 million

5. CREATION OF PROVINCES
a. Role- as a political and corporate unit of government, it
serves as a dynamic mechanism for development
processes and effective governance of local government
units within its territorial jurisdiction.
b. Who creates- may be created, divided, merged, or
abolished, or its boundary substantially altered, only by an
act of Congress, subject to the satisfaction of the criteria
set forth by the LGC.

5. CREATION OF PROVINCES
c. Substantive Requirements:
1. Population- not less than 250,000 inhabitants
2. Income- average annual income of at least P20 million
3. Land Area- a contiguous territory of at least 2000 square kilometers
NOTE:
BP 885, which created the Province of Negros del Norte was
declared unconstitutional because it did not comply with the land area
criterion prescribed under the LGC. The use of the word territory in Sec. 17
of the LGC refers only to the physical mass of land area, not to the waters
comprising a political entity. It excludes the waters over which the political
unit exercises control (Tan vs. Comelec, 142 SCRA 727).

5. CREATION OF PROVINCES
c. Substantive Requirements:
1. Population- not less than 250,000 inhabitants
2. Income- average annual income of at least P20 million
3. Land Area- a contiguous territory of at least 2000 square kilometers
NOTE:
BP 885, which created the Province of Negros del Norte was
declared unconstitutional because it did not comply with the land area
criterion prescribed under the LGC. The use of the word territory in Sec. 17
of the LGC refers only to the physical mass of land area, not to the waters
comprising a political entity. It excludes the waters over which the political
unit exercises control (Tan vs. Comelec, 142 SCRA 727).

SUMMARY OF
REQUIREMENTS

DIVISION AND MERGER

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 in this Code: Provided, further,
That the income classification of the original local government
unit or units shall not fall below its current 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.

ABOLITION OF LOCAL
GOVERNMENT UNITS
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 7 hereof to Congress or to the
sangguniang 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.

PLEBISCITE REQUIREMENT
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 10, ARTICLE X,

PHILIPPINE CONSTITUTION
Section 10. No province, city, municipality, or
barangay may be created, divided, merged, abolished,
or its boundary substantially altered, except in
accordance with the criteria established in the local
government code and subject to approval by a
majority of the votes cast in a plebiscite in the political
units directly affected.

LEAGUE OF CITIES V.
COMELEC, GR 176951, APRIL
12, 2011
Q: At the end of the 11th Congresss existence, several bills aiming to convert certain
municipalities into cities were pending. The same were not entered into law.

The 12th Congress enacted R.A. No. 9009, amending the Local Government Code (LGC)
by increasing the income requirement for conversion of municipalities into cities.
Congress deliberated on exempting the municipalities mentioned earlier from the new
income requirement; however, no concrete action came out of such deliberations.
The municipalities filed, through their respective sponsors, individual cityhood bills
containing a common proviso exempting them from the new income requirement. The
Congress approved the same. Concerned parties protested such laws allowing a
wholesale conversion of municipalities as being unconstitutional. Decide.
1. Are the cityhood laws valid?
2. The challenged cities claim that it was the intent of Congress anyway to grant them
exemption from the income requirement, as per the deliberations of the 11th Congress.
What became of the cityhood bills and their deliberations that were pending at the
adjournment of the 11th Congress?

ARE THE CITY HOOD LAWS

VALID?
A: 1. Yes, The 16 cities covered by the Cityhood Laws not
only had conversion bills pending during the 11th
Congress, but have also complied with the requirements
of the LGC prescribed prior to its amendment by R.A. No.
9009. Congress undeniably gave these cities all the
considerations that justice and fair play demanded.
Hence, this Court should do no less by stamping its
imprimatur to the clear and unmistakable legislative
intent and by duly recognizing the certain collective
wisdom of Congress. (League of Cities of the Philippines
(LCP) v. COMELEC, G.R. No. 176951, April 12, 2011)

2. THE CHALLENGED CITIES CLAIM THAT IT WAS THE INTENT OF

CONGRESS ANYWAY TO GRANT THEM EXEMPTION FROM THE INCOME
REQUIREMENT, AS PER THE DELIBERATIONS OF THE 11TH CONGRESS.
WHAT BECAME OF THE CITYHOOD BILLS AND THEIR DELIBERATIONS
THAT WERE PENDING AT THE ADJOURNMENT OF THE 11TH CONGRESS?

2. Notwithstanding that both the 11th and 12th Congress failed to

act upon the pending cityhood bills, both the letter and intent of
Section 450 of the LGC, as amended by R.A. No. 9009, were carried
on until the 13th Congress, when the Cityhood Laws were enacted.
The exemption clauses found in the individual Cityhood Laws are
the express articulation of that intent to exempt respondent
municipalities from the coverage of R.A. No. 9009. (League of Cities
of the Philippines (LCP) v. COMELEC, G.R. No. 176951, February 15,
2011)
Note: On November 18, 2008, the SC ruled the cityhood laws
unconstitutional. On December 21, 2009, it reversed the ruling.
Then again, on August 24, 2010, it decided to uphold the original
ruling. And finally, last April 12, 2011 it upheld the constitutionality
of the creation of the 16 new cities.

MENDENILLA V. ONANDIA GR L-17803,

JUNE 30, 1962

Q: Who has the power to create or abolish muncipalities and cities?

A: Power of Congress to create or abolish; Creation of municipalities
under the Revised Administrative Code and of cities under special
charters.The power to abolish municipal corporations resides in
Congress which, under the Constitution, is given general legislative
powers (Tiaco vs. Forbes, 228 U.S. 549;.Asuncion vs. Yriarte, 28 Phil.
67). Municipal corporations are created under a general law, i.e.,
pursuant to the Municipal Law embodied in the Revised
Administrative Code, in the case of municipalities proper, and, under
special charters in the case of chartered cities.

CAMID VS. OFFICE OF THE PRESIDENT 448

SCRA 711
Q: The municipality of Andong, Lanao del Sur, is a town that is
not supposed to exist yet is actually insisted by some as alive
and thriving. The creation of the putative municipality was
declared void ab initio by the Supreme Court four decades ago,
but the present petition insists that Andong thrives on and,
hence, its legal personality should be given judicial affirmation.
xxx
The factual antecedents derive from the ruling in Pelaez
vs.Auditor General in 1965. Then President Diosdado Macapagal
issued several Executive Orders creating 33 municipalities in
Mindanao.

CAMID VS. OFFICE OF THE PRESIDENT 448

SCRA 711
A: Municipal corporations may exist by prescription where it is shown that the
community has claimed 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 clearly essential is a factual
demonstration of the continuous exercise by the municipal corporation of its
corporate powers, as well as the acquiescence thereto by instrumentalities of the
state. Camids plaint should have undergone the usual administrative gauntlet and,
once that was done, should have been filed first with the Court of Appeals, which at
least would have had the power to make the necessary factual determinations.
Petitioners seeming ignorance of the principles of exhaustion of administrative
remedies and hierarchy of courts, as well as the concomitant prematurity of the
present petition, cannot be countenanced.
The question as to whether a municipality previously annulled by the Supreme Court
may attain recognition in the absence of any curative/reimplementing statute has
never been decided before. The effect of Sec. 442(d) of the Local Government Code
on municipalities such as Andong warrants explanation.

ALVAREZ VS. GUINGONA,

352 SCRA 695 (ANNUAL
INCOME)

Q: Senator Heherson Alvarez, et. al. filed a petition for prohibition with prayer
TRO and preliminary prohibitory injunction assailing R. A. 7720, Said R. A.
provides for a conversion of the municipality of Santiago, Isabela into a City.
Alvarez said the municipality of Santiago failed to meet the requirement of
Sec. 450 of the LGC that, for a municipality to become a component city, it
must have an annual income of P20M. The reason is that in the computation of
the average annual income, the Internal Revenue Allotments (IRA) should have
been deducted from the total income. Instead, the IRAs were added to the
total income. Is Alvarez wrong?
A: Alvarez is wrong. IRAs are the local government units rightful share to the
national taxes. Section 450(c) of the LGC provides that the average annual
income shall include the income accruing to the general fund, exclusive of
special funds, transfers, and any recurring income. IRAs are a regular,
recurring source of income; they are not special funding transfers since Sec.
17(g) of the LGC gives a technical description for the IRA for purposes of the
LGC

ALVAREZ VS. GUINGONA,

352 SCRA 695 (ANNUAL
INCOME)

Q: Senator Heherson Alvarez, et. al. filed a petition for prohibition with prayer
TRO and preliminary prohibitory injunction assailing R. A. 7720, Said R. A.
provides for a conversion of the municipality of Santiago, Isabela into a City.
Alvarez said the municipality of Santiago failed to meet the requirement of
Sec. 450 of the LGC that, for a municipality to become a component city, it
must have an annual income of P20M. The reason is that in the computation of
the average annual income, the Internal Revenue Allotments (IRA) should have
been deducted from the total income. Instead, the IRAs were added to the
total income. Is Alvarez wrong?
A: Alvarez is wrong. IRAs are the local government units rightful share to the
national taxes. Section 450(c) of the LGC provides that the average annual
income shall include the income accruing to the general fund, exclusive of
special funds, transfers, and any recurring income. IRAs are a regular,
recurring source of income; they are not special funding transfers since Sec.
17(g) of the LGC gives a technical description for the IRA for purposes of the
LGC

SAMSON VS. AGUIRRE, 315 SCRA 53

(POPULATION OR LAND AREA; SEAT OF
GOVERNMENT)
Q: Samson, a councilor in Quezon City, assailed RA 8535 which created the City of Novaliches. According to him, the RA failed to conform
to the requirements of the LGC as to certifications in income, population, and land area. It has not been proved that the mother city would
not suffer adverse effects from the creation of Novaliches. Court held against him. The presence and oral declarations of the government
officials armed with records during the public deliberations and hearings are more effective certifications than mere certificates which are
routinely signed. The representatives all declared that Novaliches exceeded the requirements. The QC mayor was also present, and his
conformity implies that there is no damage done to QC. The non-receipt of copies is too insubstantial to sustain invalidity of a statute. Is
Samson correct?
A: Samson failed to overturn the presumption of constitutionality accorded legislative acts.
d. Province: Section 461, Local Government Code
Section 461. Requisites for Creation.
(a) A province may be created if it has an average annual income, as certified by the Department of Finance, of not less than Twenty
million pesos (P20,000,000.00) based on 1991 constant prices and either of the following requisites:
(i) a contiguous territory of at least two thousand (2,000) square kilometers, as certified by the Lands Management Bureau; or
(ii) a population of not less than two hundred fifty thousand (250,000) inhabitants as certified by the National Statistics Office:
Provided, That, the creation thereof shall not reduce the land area, population, and income of the original unit or units at the time of said
creation to less than the minimum requirements prescribed herein.
(b) The territory need not be contiguous if it comprise two (2) or more islands or is separated by a chartered city or cities which do not
contribute to the income of the province.
(c) The average annual income shall include the income accruing to the general fund, exclusive of special funds, trust funds, transfers
and non-recurring income.