municipal corporations - introduction

PUBLIC CORPORATION AND LOCAL GOVERNMENTAlman-Najar NamlaXavier University - College of Law Zamboanga

A. PUBLIC CORPORATION

1.CONCEPTPHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS V. COA, GR 169752, SEPTEMBER 25, 2007

PUBLIC CORPORATION V. GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS

2.CLASSIFICATIONSA) 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

3. REQUISITES FOR CREATION, CONVERSION, DIVISION, MERGER OR DISSOLUTION

COVERAGE OF THE DISCUSSION

PUBLIC CORPORATION

Q: What is a Public Corporation?

A: PUBLIC CORPORATION—one 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, 2007Q: 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 petitioner’s office to conduct a survey. PSPCA demurred on the ground that it was a private entity and not under the CoA’s 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 doesn’t 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.

PSPCA’s 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. GOVERNMENT-OWNED 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 non‐stock 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 municipality’s undertaking. Whether it is a governmental/public or private/proprietary function will depend heavily on the context.

McQuillin’s 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.


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)


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.


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 cities—must 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.


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



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



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:


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).

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, 2011Q: At the end of the 11th Congress’s 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, it’s legal personality should be given judicial affirmation.

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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. Camid’s 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. Petitioner’s 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 unit’s 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.

municipal corporations - introduction

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