AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
SESSION 1
1987 Constitution
ARTICLE XII
NATIONAL ECONOMY AND
PATRIMONY
Sec. 16 The Congress shall not, except
by general law, provide for the
formation, organization, or regulation
of private corporations. Government-
owned or controlled corporations
may be created or established by
special charters in the interest of the
common good and subject to the test
of economic viability. (ALARCON)
GOCC Governance Act
CHAPTER I
GENERAL PROVISIONS
Sec 1. Short Title. - This Act shall be
known as the "GOCC Governance Act
of 2011". (ALARCON)
Sec. 2 Declaration of Policy. - The
State recognizes the potential of
government-owned or -controlled
corporations (GOCCs) as significant
tools for economic development. It is
thus the policy of the State to actively
exercise its ownership rights in GOCCs
and to promote growth by ensuring
that operations are consistent with
national development policies and
programs.
Towards this end, the State shall
ensure that:
LOCAL GOVERNMENT
GR: Congress cannot provide for the:
(FOR)
1. Formation
2. Organization
3. Regulation
of Private Corporations
XPN: by General Law
GOCCs- may be created or established by
special charters in the interest of
common good AND subject to the test of
economic viability. (CONSTI, Art 12, §16)
Short title of RA 10149 - “GOCC
Governance Act of 2011” (RA10149 § 1)
Declaration of Policy
The State recognizes GOCCs as
significant tools for economic
development
It is the policy of the State to:
o actively exercise its
ownership rights in
GOCCs and to
o promote growth by
ensuring
operations
consistent
national development
policies and programs
(a) The corporate form of Towards this end, the State shall ensure
organization through which that: (GO-GRO-CR)
government carries out activities is
utilized judiciously; (a) The corporate form of Organization is
(b) The operations of GOCCs are utilized judiciously;
rationalized and monitored centrally
in order that government assets and (b) The Operations of GOCCs are
resources are used efficiently and the rationalized and monitored centrally
government exposure to all forms of such that assets and resources of
liabilities including subsidies is gov’t are used efficiently and the
warranted and incurred through government exposure to all
prudent means; forms of liabilities including
(c) The governance of GOCCs is subsidies is warranted and
carried out in a transparent, incurred through prudent
responsible and accountable manner means;
and with the utmost degree of
professionalism and effectiveness; (c) The Governance of GOCCs is carried
(d) A reporting and evaluation out in a (RAT)
system, which will require the transparent,
periodic disclosure and examination responsible and
of the operations and management of accountable manner
the GOCCs, their assets and finances, with the utmost degree of
revenues and expenditures, is professionalism and effectiveness;
enforced;
(e) The governing boards of every (d) A Reporting and evaluation system,
GOCC and its subsidiaries are which will require:
competent to carry out its functions, periodic disclosure and
fully accountable to the State as its examination of the operations
fiduciary, and acts in the best interest and management of the GOCCs,
of the State; o their assets and
(f) Reasonable, justifiable and finances, revenues and
appropriate remuneration schemes expenditures,
are adopted for the
directors/trustees, officers and (e) The Governing boards of every GOCC
employees of GOCCs and their and its subsidiaries are (ICA)
subsidiaries to prevent or deter the
competent to carry out its
that granting of unconscionable and
functions,
are excessive remuneration packages;
fully accountable to the State as
with and
its fiduciary, and
(g) There is a clear separation
acts in the best interest of the
between the regulatory and State;
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proprietary activities of GOCCs, in
order to achieve a level playing field
with corporations in the private
sector performing similar commercial
activities for the public. (ALARCON)
(2) In the case of nonchartered
(f) Adopt Remuneration schemes for the GOCCs, members of its Board of
(DOE) Directors/Trustees whom the State is
directors/trustees, entitled to nominate, to the extent of
officers and its percentage shareholdings in such
employees GOCC; and
(3) In the case of subsidiaries and
of GOCCs and their subsidiaries that are: affiliates, members of its Board of
(JAR) Directors/Trustees whom the GOCC is
reasonable, entitled to nominate to the extent of
justifiable and its perrcentage shareholdings in such
appropriate subsidiary or affiliate.
State is entitled to nominate, to the
extent of its percentage shareholdings in
such GOCC; and
(3) subsidiaries and affiliates - members
of its Board of Directors/Trustees whom
the GOCC is entitled to nominate to the
extent of its percentage shareholdings in
such subsidiary or affiliate.
Board of Directors/Trustees or Board –
the governing body that exercises the
corporate powers of a GOCC.

Sec. 3 Definition of Terms.—
(a) Affiliate refers to a corporation
fifty percent (50%) or less of the
outstanding capital stock of which is
owned or controlled, directly or
indirectly, by the GOCC.
(b) Appointive Director refers to:
(1) In the case of chartered GOCCs, all
members of its Board of
Directors/Trustees who are not ex
officio members thereof;
to prevent or deter the granting of (c) Board of Directors/Trustees or Breakthrough Results - the achievement
unconscionable and excessive Board refers to the governing body of corporate goals or other performance
remuneration packages; and that exercises the corporate powers indicators as determined by the GOCC or
of a GOCC. its supervising department.
(g) There is a Clear separation between
the regulatory and proprietary activities (d) Breakthrough Results refer to the Charter Statement - a statement of the
of GOCCs, achievement of corporate goals or GOCC’s vision, mission and core values.
in order to achieve a level other performance indicators as
playing field with corporations in determined by the GOCC or its Chartered GOCC - a GOCC, including
the private sector supervising department. Government Financial Institutions,
o performing similar created and vested with functions by a
commercial activities (e) Charter Statement refers to a special law.
for the public. (RA statement of the GOCC’s vision,
10149, §2) mission and core values. Chief Executive Officer (CEO) - the
highest ranking corporate executive, who
Definition of Terms (f) Chartered GOCC refers to a GOCC, could be:
including Government Financial 1. the President or
Affiliate – a corporation fifty percent Institutions, created and vested with 2. the General Manager,
(50%) or less of the outstanding capital functions by a special law. 3. Chairman or
stock of which is owned or controlled, 4. the Administrator of a GOCC.
directly or indirectly, by the GOCC. (g) Chief Executive Officer (CEO) refers
to the highest ranking corporate Department - an executive department
Appointive Director executive, who could be the created by law.
(1) chartered GOCCs - all members of its President or the General Manager, This shall include any
Board of Directors/Trustees who are not Chairman or the Administrator of a instrumentality having or
ex officio members thereof; GOCC. assigned the rank of a
(2) nonchartered GOCCs - members of its department, regardless of its
Board of Directors/Trustees whom the name or designation.

LOCAL GOVERNMENT 2

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(h) Department refers to an executive
department created by law. This shall
include any instrumentality having or
assigned the rank of a department,
regardless of its name or designation.
(i) Ex Officio Board Member refers to
any individual who sits or acts as a
member of the Board of Directors/
Trustees by virtue of one’s title to
another office, and without further
warrant or appointment.
(j) Fit and Proper Rule refers to the
standard for determining whether a
member of the Board of Directors/
Trustees or CEO is fit and proper to
hold a position in a GOCC which shall
include, but not be limited to,
standards on integrity, experience,
education, training and competence.
(k) Government Agency refers to any
of the various units of the
Government of the Republic of the
Philippines, including a department,
bureau, office, instrumentality or
GOCC, or a local government or a
distinct unit therein.
(l) Government Corporate
Governance Standards refer to a set
of principles derived from law and
practices, rules and standards
prescribed by the Governance
Commission for Government-Owned
or -Controlled Corporations (GCG)
that generate long-term arid
desirable economic value for the
State. It shall also refer to a system
whereby shareholders, creditors, and
other stakeholders of a corporation
LOCAL GOVERNMENT
AGRA // 2A LOCAL GOVERNMENT REVIEWER
Ex Officio Board Member - ELEMENTS ensure that management enhances desirable economic value for the
1. any individual who sits or acts as the value of the corporation as it State.
a member of the Board of competes in an increasingly global also refer to a system whereby
Directors/ Trustees market place. shareholders, creditors, and
2. by virtue of one’s title to another other stakeholders of a
office, and (m) Government Financial Institutions corporation ensure that
3. without further warrant or (GFIs) refer to financial institutions or management enhances the
appointment. corporations in which the value of the corporation as it
government directly or indirectly competes in an increasingly
Fit and Proper Rule - the standard for owns majority of the capital stock global market place.
determining whether a member of the and. which are either: (1) registered
Board of Directors/ Trustees or CEO is fit with or directly supervised by the Government Financial Institutions (GFIs)
and proper to hold a position in a GOCC Bangko Sentral ng Pilipinas; or (2) – ELEMENTS
which shall include, but not be collecting or transacting funds or 1. financial institutions or
limited to, standards on (CITEEd) contributions from the public and corporations in which the
o competence places them in financial instruments government directly or indirectly
o Integrity, or assets such as deposits, loans, owns majority of the capital
o training bonds and equity including, but not stock and
o Experience, limited to, the Government Service 2. which are either:
o Education, Insurance System and the Social a. registered with or
o Security System. directly supervised by
the BSP (Bangko
Government Agency - any of the various Sentral ng Pilipinas); OR
units of the Government of the Republic b. collecting or
of the Philippines, including a transacting funds or
department, contributions from the
bureau, public and places them
office, in financial instruments
instrumentality or GOCC, or or assets
a local government or a distinct i. such as
unit therein. deposits,
loans, bonds
Government Corporate Governance and equity
Standards – including,
a set of principles derived from ii. but not limited
law and practices, rules and to, the GSIS
standards prescribed by the (Government
Governance Commission for Service
Government-Owned or - Insurance
Controlled Corporations (GCG) System) and
that generate long-term aid the SSS.
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(n) Government Instrumentalities Government Instrumentalities with i. Cagayan de Oro Port

with Corporate Powers Corporate Powers (GICP)/Government Authority,
(GICP)/Government Corporate Corporate Entities (GCE) – ELEMENTS j. San Fernando Port
Entities (GCE) refer to 1. instrumentalities or agencies of Authority,
instrumentahties or agencies of the the government, k. Local Water Utilities
government, which are neither 2. which are neither corporations Administration (LWUA)
corporations nor agencies integrated nor agencies integrated within and
within the departmental framework, the departmental framework, l. Asian Productivity
but vested by law with special 3. but vested by law with special Organization (APO)
functions or jurisdiction, endowed functions or jurisdiction,
with some if not all corporate powers, 4. endowed with some if not all (o) Government-Owned or - Government-Owned or -Controlled
administering special funds, and corporate powers, administering Controlled Corporation (GOCC) refers Corporation (GOCC) – ELEMENTS
enjoying operational autonomy special funds, and enjoying to any agency organized as a stock or 1. any agency
usually through a charter including, operational autonomy usually nonstock corporation, vested with 2. organized as a stock or nonstock
but not limited to, the following: the through a charter functions relating to public needs corporation,
Manila International Airport 5. including, but not limited to, the whether governmental or proprietary 3. vested with functions relating to
Authority (MIAA), the Philippine Ports following: in nature, and owned by the public needs whether
Authority (PPA), the Philippine a. Manila International Government of the Republic of the governmental or proprietary in
Deposit Insurance Corporation Airport Authority Philippines directly or through its nature, and
(PDIC), the Metropolitan Waterworks (MIAA), instrumentahties either wholly or, 4. owned by the Government of the
and Sewerage System (MWSS), the b. Philippine Ports where applicable as in the case of Republic of the Philippines
Laguna Lake Development Authority Authority (PPA), stock corporations, to the extent of at a. directly or through its
(LLDA), the Philippine Fisheries c. Philippine Deposit least a majority of its outstanding instrumentalities
Development Authority (PFDA), the Insurance Corporation capital stock: Provided, however, That b. Either
Bases Conversion and Development (PDIC), for purposes of this Act, the term 1. wholly or,
Authority (BCDA), the Cebu Port d. Metropolitan “GOCC”- shall include GICP/GCE and 2. where
Authority (CPA), the Cagayan de Orb Waterworks and GFI as defined herein. applicable as
Port Authority, the San Fernando Port Sewerage System in the case of
Authority, the Local Water Utilities (MWSS), stock
Administration (LWUA) and the Asian e. Laguna Lake corporations, -
Productivity Organization (APO). Development Authority to the extent
(LLDA), of at least a
f. Philippine Fisheries majority of its
Development Authority outstanding
(PFDA), capital stock:
g. Bases Conversion and 5. Provided, however, That for
Development Authority purposes of this Act, the term
(BCDA), “GOCC”- shall include GICP/GCE
h. Cebu Port Authority and GFI as defined herein
(CPA),

LOCAL GOVERNMENT 4

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(p) Nonchartered GOCC refers to a
GOCC organized and operating under
Batas Pambansa Bilang 68, or “The
Corporation Code of the Philippines”.
(q) Officers refer to the corporate
officers of the GOCC as provided in its
charter or bylaws, such as the CEO,
Chief Financial Officer, Chief
Investment Officer, President, Vice
President, General Manager,
Treasurer and Corporate Secretary.
(r) Ownership Manuals refer to
guidelines and rules pertaining to the
ownership by the State or
corporations and enterprises or the
exercise of such ownership governing
the GOCCs or any classification
thereof.
(s) Per Diems refer to the
compensation granted to members of
the Board of Directors or Trustees of
a GOCC for actual attendance in
meetings.
(t) Performance Evaluation System
refers to the process of appraising the
accomplishments of GOCCs in a given
fiscal year based, on set performance
criteria, targets and weights.
(u) Performance Scorecard refers to a
governance and management tool
forming part of the performance
evaluation system which consists of a
set of measures, targets and.
initiatives that facilitate the
achievement of breakthrough results
and performance through the
LOCAL GOVERNMENT
AGRA // 2A LOCAL GOVERNMENT REVIEWER
Nonchartered GOCC - a GOCC organized
and operating under the Corporation
Code
Officers - the corporate officers of the
GOCC as provided in its charter or by-
laws,
· such as the CEO, Chief Financial
Officer, Chief Investment Officer,
President, Vice President, General
Manager, Treasurer and Corporate
Secretary.
Ownership Manuals - guidelines and
rules pertaining to the ownership by the
State or corporations and enterprises or
the exercise of such ownership governing
the GOCCs or any classification thereof.
Per Diems - the compensation granted to
members of the Board of Directors or
Trustees of a GOCC for actual attendance
in meetings.
Performance Evaluation System - the
process of appraising the
accomplishments of GOCCs in a given
fiscal year based, on set performance
criteria, targets and weights.
Performance Scorecard - a governance
and management tool forming part of the
performance evaluation system which
consists of a set of measures, targets and.
initiatives that facilitate the achievement
of breakthrough results and performance
through the effective and efficient
monitoring and coordination of the
strategic objectives of the GOCC.
effective and efficient monitoring and
coordination of the strategic
objectives of the GOCC.
(v) President refers to the President of
the Republic of the Philippines.
(w) Related Corporation refers to a
subsidiary or affiliate of a GOCC.
(x) Secretary refers to the person
vested with the authority and
responsibility for the exercise of the
mandate of the Department, for the
discharge of its powers and functions,
and who shall have supervision and
control of the Department.
(y) Strategy Map refers to an
integrated set of strategic choices or
objectives drawn by the governing
body, the successful execution of
which results in the achievement of
the GOCC’s vision in relation to its
mission or purpose for having been
created.
(z) Subsidiary refers to a corporation
where at least a majority of the
outstanding capital stock is owned or
controlled, directly or indirectly,
through one or more intermediaries,
by the GOCC. (AUSTRIA)
Sec. 4 Coverage.—This Act shall be
applicable to all GOCCs, GICPs/GCEs,
and government financial
institutions, including their
subsidiaries, but excluding the
Bangko Sentral ng Pilipinas, state
universities and colleges,
President - President of the Republic of
the Philippines.
Related Corporation - a subsidiary or
affiliate of a GOCC.
Secretary - the person vested with the
authority and responsibility for the
exercise of the mandate of the
Department, for the discharge of its
powers and functions, and who shall have
supervision and control of the
Department.
Strategy Map - an integrated set of
strategic choices or objectives drawn by
the governing body, the successful
execution of which results in the
achievement of the GOCC’s vision in
relation to its mission or purpose for
having been created.
Subsidiary - a corporation where at least
a majority of the outstanding capital stock
is owned or controlled, directly or
indirectly, through one or more
intermediaries, by the GOCC. (GOCCGA,
§3)
This Act is applicable to all: (GGG)
GOCCs (Government Owned or
Controlled Corporations)
GICPs/GCEs
o (Government
Instrumentalities with
Corporate Powers/
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cooperatives, local water districts, Government Corporate

economic zone authorities and Entities)
research institutions: Provided, That Government financial
in economic zone authorities and institutions
research institutions, the President o Including their
shall appoint one-third (1/3) of the subsidiaries
board members from the list
submitted by the GCG. Excluding: (CUBLER)
Banko Sentral ng Pilipinas
State Universities and Colleges
Cooperatives
Local Water Districts
Economic Zone Authorities
Research Institutions

Provided that:
In Economic Zone Authorities
and Research Institutions
o The President shall
appoint ⅓ of the board
members
o From the list submitted
by GCG (Governance
Commission for
Government-Owned or
-Controlled
Corporations)

LOCAL GOVERNMENT 6
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
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MIAA v. CA (Cheng)
[G.R. No. 155650; July 20, 2006]
“Tax ng tax ang government, tingnan muna kung pedeng i-tax.
Doctrine: As MIAA is a government instrumentality and not a GOCC nor a non-
stock corporation, it is not subject to real property tax.
Recit-Ready:
Facts: Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) Complex in Paranaque City under
Executive Order No. 903. MIAA administers land, improvements and
equipment within the NAIA complex. On March 21, 1997. The Office of the
Government Corporate Counsel (OGCC) issued Opinion No. 061 which
withdrew the real estate tax exemption under section 21 of the Local
Government Code of 1991 granted to MIAA. MIAA then had to pay the tax
imposed by the City. On 2001, MIAA received Final Notices of Real Estate
Tax Delinquency from the City of Parañaque for the taxable years 1992 to
2001 which amounted to P624,506,725.42. The City of Parañaque
threatened to levy the land and sell it at a public auction. After failing to win
the case at the Commission on Audit on January 2003, Paranaque
announced public auction sale of Airport Lands and Buildings on barangay
halls and the Philippine Daily Inquirer.
Issue/s:
1) WON MIAA is an instrumentality of the government and not a
government owned and controlled corporation and as such
exempted from tax.—YES
2) WON the land and buildings of MIAA are part of the public
dominion and thus cannot be the subject of levy and auction sale.
—YES
Held:
1) Under the Local government code, government owned and controlled
corporations are not exempted from real estate tax. MIAA is not a
government owned and controlled corporation, for to become one
MIAA should either be a stock or non-stock corporation. MIAA is not a
stock corporation for its capital is not divided into shares. It is not a
non-stock corporation since it distributes income to the National
Treasury. MIAA is an instrumentality of the government vested with
corporate powers and government functions.
LOCAL GOVERNMENT
2) Yes, the Airport Lands and Buildings of MIAA are exempt from real
estate tax imposed by Parañaque City. MIAA is a government
instrumentality vested with corporate powers to perform efficiently
government functions, not a government owned or controlled
corporation (GOCC). It is not organized as a stock or non-stock
corporation; no capital stock dividends. Airport Lands and Buildings of
MIAA are owned by the Republic of the Philippines. MIAA is a property
of public dominion.
Facts:
The Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) Complex in Parañaque City under
Executive Order No. 903 (MIAA Charter), as amended. As such operator,
it administers the land, improvements and equipment within the NAIA
Complex.
In March 1997, the Office of the Government Corporate Counsel (OGCC)
issued Opinion No. 061 to the effect that the Local Government Code of
1991 (LGC) withdrew the exemption from real estate tax granted to MIAA
under Section 21 of its Charter.
Thus, MIAA paid some of the real estate tax already due. In June 2001, it
received Final Notices of Real Estate Tax Delinquency from the City of
Parañaque for the taxable years 1992 to 2001. The City Treasurer
subsequently issued notices of levy and warrants of levy on the airport
lands and buildings.
At the instance of MIAA, the OGCC issued Opinion No. 147 clarifying
Opinion No. 061, pointing out that Sec. 206 of the LGC requires persons
exempt from real estate tax to show proof of exemption.
According to the OGCC, Sec. 21 of the MIAA Charter is the proof that
MIAA is exempt from real estate tax. MIAA, thus, filed a petition with the
Court of Appeals seeking to restrain the City of Parañaque from imposing
real estate tax on, levying against, and auctioning for public sale the airport
lands and buildings, but this was dismissed for having been filed out of
time.
Hence, MIAA filed this petition for review, pointing out that it is exempt
from real estate tax under Sec. 21 of its charter and Sec. 234 of the LGC.
It invokes the principle that the government cannot tax itself as a
justification for exemption, since the airport lands and buildings, being
devoted to public use and public service, are owned by the Republic of the
Philippines.
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On the other hand, the City of Parañaque invokes Sec. 193 of the LGC, o Section 87 of the Corporation Code defines a non-stock corporation
which expressly withdrew the tax exemption privileges of government- as "one where NO PART OF ITS INCOME IS DISTRIBUTABLE as
owned and controlled corporations (GOCC) upon the effectivity of the dividends to its members, trustees or officers."
LGC. Non-stock corporations cannot distribute any part of their income
It asserts that an international airport is not among the exceptions to their members. Section 11 of the MIAA Charter mandates
mentioned in the said law. Meanwhile, the City of Parañaque posted and MIAA to remit 20% of its annual gross operating income to the
National Treasury.11 This prevents MIAA from qualifying as a
published notices announcing the public auction sale of the airport lands
non-stock corporation.
and buildings.
o Furthermore, Section 88 of the Corporation Code provides that non-
stock corporations are "organized for charitable, religious,
Issue/s:
educational, professional, cultural, recreational, fraternal, literary,
1) WON MIAA is an instrumentality of the government and not a
scientific, social, civil service, or similar purposes, like trade, industry,
government owned and controlled corporation and as such exempted
agriculture and like chambers."
from tax. (GOCCs are not subject to real property taxes)
MIAA is not organized for any of these purposes. MIAA, a public
—YES
utility, is organized to operate an international and domestic
2) WON the land and buildings of MIAA are part of the public dominion and
airport for public use.
thus cannot be the subject of levy and auction sale.
MIAA is a government instrumentality vested with corporate powers to
—YES
perform efficiently its governmental functions.
o Section 2(10) of the Introductory Provisions of the Administrative
Held/Ratio:
Code defines a government "instrumentality" as “an agency of the
National Government, not integrated within the department
1) Yes, MIAA is an Instrumentality of the Government. The Court tested the
framework, vested with special functions or jurisdiction by law,
charter and the characteristics of MIAA against the definition of a GOCC, non-
endowed with some if not all corporate powers, administering special
stock Corporation and an instrumentality. MIAA failed to fall under the
funds, and enjoying operational autonomy, usually through a charter.”
definition of a GOCC and a non-stock corporation.
MIAA exercises the governmental powers of eminent domain,
MIAA is not a GOCC
police authority and the levying of fees and charges. At the same
o The Administrative Code of 1987 defines GOCC’s as “any agency
time, MIAA exercises "all the powers of a corporation under the
organized as a stock or non-stock corporation, vested with functions
Corporation Law, insofar as these powers are not inconsistent
relating to public needs whether governmental or proprietary in
with the provisions of this Executive Order."
nature, and owned by the Government directly or through its
Likewise, when the law makes a government instrumentality
instrumentalities either wholly, or, where applicable as in the case of
operationally autonomous, the instrumentality remains part of the
stock corporations, to the extent of at least fifty-one (51) percent of
National Government machinery although not integrated with the
its capital stock”
department framework. The MIAA Charter expressly states that
MIAA is not a government owned and controlled corporation, for
transforming MIAA into a "separate and autonomous body" will
to become one MIAA should either be a stock or non-stock
make its operation more "financially viable."
corporation. MIAA is not a stock corporation for its capital is not
Many government instrumentalities are vested with corporate
divided into shares. It is not a non-stock corporation since it has
powers but they do not become stock or non-stock corporations,
no members. MIAA is an instrumentality of the government
which is a necessary condition before an agency or
vested with corporate powers and government functions.
instrumentality is deemed a government-owned or controlled
MIAA is also not a non-stock corporation.
corporation

LOCAL GOVERNMENT 8
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ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
2) Yes, the Airport Lands and Buildings of MIAA are exempt from real estate tax
imposed by Parañaque City.
Under the civil code, property may either be under public dominion or
private ownership. Those under public dominion are owned by the State
and are utilized for public use, public service and for the development of
national wealth. The ports included in the public dominion pertain either to
seaports or airports. When properties under public dominion cease to be
for public use and service, they form part of the patrimonial property of the
State.
o The court held that the land and buildings of MIAA are part of the
public dominion. Since the airport is devoted for public use, for the
domestic and international travel and transportation.
o Even if MIAA charge fees, this is for support of its operation and for
regulation and does not change the character of the land and
buildings of MIAA as part of the public dominion.
o As part of the public dominion the land and buildings of MIAA are
outside the commerce of man.
o To subject them to levy and public auction is contrary to public policy.
Unless the President issues a proclamation withdrawing the airport
land and buildings from public use, these properties remain to be of
public dominion and are inalienable. As long as the land and buildings
are for public use the ownership is with the Republic of the
Philippines.
The airport lands and buildings of MIAA are exempt from real estate tax
imposed by local governments. Sec. 243(a) of the LGC exempts from real
estate tax any real property owned by the Republic of the Philippines.
o This exemption should be read in relation with Sec. 133(o) of the
LGC, which provides that the exercise of the taxing powers of local
governments shall not extend to the levy of taxes, fees or charges of
any kind on the National Government, its agencies and
instrumentalities.
o As discussed earlier, MIAA was held by the Court as an
instrumentality of the Government and NOT a GOCC. Thus, MIAA
should not be subject to real property tax.
These provisions recognize the basic principle that local governments
cannot tax the national government, which historically merely delegated
to local governments the power to tax.
o The rule is that a tax is never presumed and there must be clear
language in the law imposing the tax. This rule applies with greater
force when local governments seek to tax national government
LOCAL GOVERNMENT
instrumentalities. Moreover, a tax exemption is construed liberally in
favor of national government instrumentalities.
However, portions of the airport lands and buildings that MIAA leases to
private entities are not exempt from real estate tax. In such a case, MIAA
has granted the beneficial use of such portions for a consideration to a
taxable person.
FUNA v. MECO (Coloquio)
[GR. No. 193462; February 4, 2014]
“Just because an entity performs public functions, does not necessarily make it a
governmental instrumentality/ GOCC”
Doctrine: A GOCC has 3 attributes: (1) its organization as a stock or non-stock
corporation (2) the public character of its function (3) government ownership over
the same.
Recit-Ready:
Facts: China underwent a civil war, leading to a competition for
sovereignty between 2 governments: PROC and ROC. The
Philippines recognized PROC as the legitimate government of
China, and terminated all of its diplomatic relations with ROC.
Despite the termination, the Philippines continued relations with
Taiwan on a people-to-people basis, outside government offices to
ensure the respect for the recognition of PROC. MECO was
established to serve that purpose, to maintain and promote
unofficial relations with Taiwan, as well as protect Filipinos in
Taiwan. Petitioner Funa sought to subject the accounts of MECO
to the audit jurisdiction of COA, arguing that it is a GOCC, and
subject to the supervision of DTI.
Issue/s:
1) WON MECO is a GOCC or a governmental instrumentality
2) WON certain accounts of MECO may be subjected to the audit
jurisdiction of COA.
Held:
1) NO. MECO serves public functions, not promoting a specific line of
business but promoting and protecting the interest of Filipinos in
general, but that alone does not make it a government entity. It is a non-
governmental entity for it was organized under the laws of the
Corporation Code, and subject to its own articles and by-laws. Its
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DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
members and directors are not government officials so the government
does not have controlling interest over it, though subject to policy
supervision of the government just to ensure that it performs its
functions not contrary to our recognition of PROC as the legitimate
government of China.
2) YES. MECO collects verification fees and consular fees. These
accounts are subject to the audit jurisdiction of COA for these are
collected only by the authority of the government and are in fact
receivables of the government. Therefore these are subject to the audit
jurisdiction of the COA.
Background:
The aftermath of the Chinese civil war left China with 2 governments
competing for sovereignty: communist People’s Republic of China
(PROC) and nationalist Republic of China (ROC). [ROC is based in
Taiwan]
Both PROC and ROC adhered to a policy of “One China”, only differing in
their interpretation as to which that government is.
ROC used to enjoy diplomatic recognition from a majority of the world’s
states, for being a UN member. However, the number of states
recognizing PROC increased, after the UN General Assembly adopted a
monumental resolution in 1971.
Since then almost all of the states, including the Philippines, terminated
their official relations with ROC in favor of establishing diplomatic relations
with the PROC.
The Philippines expressed recognition of the PROC through the Joint
Communique of the Government of the Republic of the Philippines and
the Government of the People’s Republic of China. Through this, the
Philippines also terminated its diplomatic relations with ROC.
Even with the Joint Communique, the Philippines kept unofficial relations
with Taiwan on a people-to-people basis, but of course not through official
or governmental organs.
MECO was then established entrusted by the Philippine Government to
foster friendly and unofficial relations with the People of Taiwan. It was
authorized by the government to perform certain consular and other
functions relating to the promotion and protection of Philippine interests in
Taiwan.
LOCAL GOVERNMENT
Facts:
Petitioner Funa, in this case seeks to compel COA, through a mandamus
petition, to audit the accounts of MECO.
o It started with Funa sending a letter to COA requesting for a copy
of the latest financial and audit report of MECO, arguing that the
latter is under the operational supervision of DTI, and a GOCC.
o The COA responded by releasing a memorandum stating that
MECO was not among the agencies audited by any of the 3
clusters of the Corporate Government Sector.
o Funa took the memorandum as an admission that the COA never
audited the accounts of MECO – so he filed the instant case for
mandamus in his capacities as a taxpayer, concerned citizen,
member of the Philippine Bar and a law book author.
According to Funa, MECO is a GOCC/ instrumentality for it is a non-stock
corporation relating to public needs, controlled by the Government
through a board appointed by the President, and under the operational
and policy supervision of the DTI.
o Funa mentioned that the President actually appoints the directors
of MECO, through “desire letters” addressed to MECO. He gave
one instance when Mr. Basilio, who acted as chairman of the
board in 2001, was elected when President Macapagal-Arroyo
sent a memorandum to MECO expressing her desire for Mr.
Basilio to be elected as chairman.
MECO argued that it is not a GOCC, and its funds are actually private
funds.
o The “desire letters” of the President in appointing the directors
were actually merely recommendatory and not binding on the
corporation. The members elect the directors.
o It was organized under the Corporation Code, so governed by
that law, its articles and its by-laws.
o The government merely has policy supervision over it, only to
ensure that its activities are in tune with the country’s
commitments under the One China Policy of the PROC.
COA also prayed for the dismissal of the petition.
o Is also already deemed moot when COA issued Office Order No.
2011-698, directing the audit the accounts of MECO.
o It was argued that Funa has no locus standi to bring the suit, and
violated the doctrine of hierarchy of courts for going straight to
the SC.
o In conceding that it has audit jurisdiction over the accounts of
MECO, however COA clarified that it does not consider MECO
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ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
as a GOCC or a government instrumentality, but it may still be
audited with respect to verification fees it collects from Taiwanese
employers on behalf of DOLE.
Issue/s:
1) WON MECO is a GOCC or a government instrumentality
- NO.
2) WON certain accounts of MECO may be audited by COA.
- YES.
Held/Ratio: Petition partially granted. MECO is declared a non-governmental
entity however the verification fees and consular fees it collects on behalf of the
government are subject to the audit jurisdiction of COA.
1) NO. MECO is a non-governmental entity, though sui generis.
Government instrumentalities are agencies of the national government,
that by reason of some “special function or jurisdiction” they perform or
exercise, are allotted operational autonomy and are not integrated within
the department framework.
GOCCs on the other hand are stock or non-stock corporations vested with
functions relating to public needs that are owned by the Government
directly or through its instrumentalities.
o 3 attributes of a GOCC: (1) its organization as a stock or non-
stock corporation (2) the public character of its function (3)
government ownership over the same.
o There is no dispute that MECO has the 1st and 2nd attributes, but
it certainly lacks the 3rd attribute.
MECO was organized as a non-stock corporation, under the Corporation
Code, as proved by its articles and records pertaining to its organization.
However, it performs functions with a public aspect.
o One of its purposes is to establish and develop the commercial
and industrial interests of Filipino nationals here and abroad, and
assist to maintain and promote trade relations of the country with
the citizens of other countries.
o Instead of furthering the interests of a particular line of business,
it seeks to promote the general interests of the Filipino people in
a foreign land.
o It is authorized to perform certain consular and other functions to
facilitate the interests of the Philippines in Taiwan.
LOCAL GOVERNMENT
However, the mere performance of functions with a public aspect, are not
by themselves sufficient to consider MECO as a GOCC. More importantly,
a corporation must actually be owned by the government.
o If stock corporation – government must have controlling interest
or at least 51% of the capital stock.
o If non-stock – at least majority of the members must be
government officials placed through appointment or designation.
The Court agrees with the contention of MECO that the “desire letters”
were only recommendatory, and its own members still appoint the
directors.
o None of the members, directors or officers of MECO, from its
incorporation up to the present, were government appointees or
public officers.
Also, the fact that it was organized under the Corporate Code, governed
by its by-laws and its articles, it is deemed a non-government entity.
It is placed under the policy supervision of DTI only because of the
functions it performs and the possibility of violating the One China policy.
It is uniquely situated as compared with other private corporations- it is a
non-governmental entity, but sui generis.
2) YES – with regard to the verification fees and consular fees.
Accounts of MECO pertaining to the collection of verification fees is
subject to the audit by COA.
o These fees are for verification services performed on overseas
employment documents it collects on behalf of DOLE.
o Originally, these fees were collected by DOLE, but MECO was
specifically authorized to perform tasks pertaining to Taiwan due
to the termination of official relations with the latter.
o The fees are actually receivables of the DOLE.
MECO also collects consular fees in the exercise of its delegated consular
functions, which would also be subject to audit by COA.
o Certain functions such as issuance of visas, visa services,
issuance or renewal of passports of Filipino Citizens, certification
of documents, translation services and other more.
o These functions are performed only through special authority
from the government, so the latter ultimately has control over
these fees.
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ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK

Boy Scouts of the Philippines v. Commission on Audit (Cualoping)
[GR. No. 177131; June 7, 2011]
“Boy Scout Binay”
Doctrine:
BSP is considered a government instrumentality (public corporation) because it is
an agency of the national government vested with a special function by law
endowed with some corporate power, and operational autonomy.
Recit-Ready:
Facts:
The Boy Scouts of the Philippines was created by charter (CA 111) to serve
a public interest/purpose of training boys to become leaders. Later
organizational changes were made to reduce government
participation. The COA issued a resolution stating that the BSP
falls within its jurisdiction and that it would conduct an annual
financial audit. This was contested by the BSP via a letter signed
by the BSP national president (Binay).
Issue/s:
WON the Boy Scouts of the Philippines falls under the jurisdiction of the
Commission on Audit?
Held: YES.
The court held that the BSP was created for a public purpose and that the
subsequent amendments to its charter did not change the character of the
BSP as a public corporation. Although much of the governmental presence
was removed, this was pursuant to its objectives. In addition, it is still a
recognized attachment of DECS pursuant to its charter as well as the
administrative code of 1987.
Facts:
Boy Scouts of the Philippines (BSP)
Created by charter (Commonwealth Act 111) to serve the following public
interest or purpose:
Sec. 3. The purpose of this corporation shall be to promote through
organization and cooperation with other agencies, the ability of boys to do
Issue/s:
useful things for themselves and others, to train them in scoutcraft, and to
WON the Boy Scouts of the Philippines falls under the jurisdiction of the
inculcate in them patriotism, civic consciousness and responsibility,
Commission on Audit?
courage, self-reliance, discipline and kindred virtues, and moral values,
using the method which are in common use by boy scouts.
Amended by PD 460 which provided changes in its organization structure.
RA 7278 strengthened volunteer and democratic character of BSP by
reducing government representation.
BSP v NLRC – case which ruled BSP is a GOCC.
COA issued Resolution No. 99-011 which stated that the BSP was created
as a public corporation under Commonwealth Act No. 111, as amended by
Presidential Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of
the Philippines v. National Labor Relations Commission, the Supreme Court
ruled that the BSP, as constituted under its charter, was a GOCC within the
meaning of Article IX(B)(2)(1) of the Constitution; and that the BSP is
appropriately regarded as a government instrumentality under the 1987
Administrative Code. Therefore the COA resolves to conduct annual financial
audit of the BSP.
BSP sought reconsideration of the COA Resolution in a letter dated November
26, 1999 signed by the BSP National President Jejomar C. Binay, who is now
the Vice President of the Republic.
BSP Arguments
It is not a GOCC; neither is it an instrumentality, agency, or subdivision of
the government.
Republic Act No. 7278 introduced crucial amendments to its charter
Republic Act No. 7278 suggest that governance of BSP has come to be
overwhelmingly a private affair or nature, with government participation
restricted to the seat of the Secretary of Education, Culture and Sports.
COA Arguments
BSP is a public corporation created under Commonwealth Act No.
111 dated October 31, 1936, and whose functions relate to the
fostering of public virtues of citizenship and patriotism and the
general improvement of the moral spirit and fiber of the youth. The
manner of creation and the purpose for which the BSP was created
indubitably prove that it is a government agency.
Being a government agency, the funds and property owned or held
in trust by the BSP are subject to the audit authority of respondent
Commission on Audit pursuant to Section 2 (1), Article IX-D of the
1987 Constitution.
Republic Act No. 7278 did not change the character of the BSP.

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ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
Held/Ratio: Petition DISMISSED.
YES. The Court ruled that the BSP is a public corporation subject to the
Jurisdiction of COA.
o The BSP is a public corporation under the civil code, which falls under the
classification of “Other corporations, institutions and entities for public
interest or purpose created by law; their personality begins as soon as they
have been constituted according to law;”
o Public, rather than private, character of the BSP is recognized by the fact
that, along with the Girl Scouts of the Philippines, it is classified as
an attached agency of the DECS under Executive Order No. 292, or
the Administrative Code of 1987
o A review of the Record of the 1986 Constitutional Convention reveals the
intent of the framers of the highest law of our land to distinguish
between government corporations performing governmental
functions and corporations involved in business or proprietary
functions.
o As presently constituted, the BSP still remains an instrumentality of
the national government. It is a public corporation created by law for
a public purpose, attached to the DECS pursuant to its Charter and the
Administrative Code of 1987. It is not a private corporation which is
required to be owned or controlled by the government and be
economically viable to justify its existence under a special law.
o Even though the amended BSP charter did away with most of the
governmental presence in the BSP Board, this was done to more strongly
promote the BSPs objectives, which were not supported under Presidential
Decree No. 460.The BSP objectives, as pointed out earlier, are consistent
with the public purpose of the promotion of the well-being of the youth, the
future leaders of the country. The amendments were not done with the view
of changing the character of the BSP into a privatized corporation. The BSP
remains an agency attached to a department of the government, the DECS,
and it was not at all stripped of its public character.
o Since the BSP, under its amended charter, continues to be a public
corporation or a government instrumentality, we come to the inevitable
conclusion that it is subject to the exercise by the COA of its audit jurisdiction
in the manner consistent with the provisions of the BSP Charter.
VETERAN’S FEDERATION OF THE PHILIPPINES v. REYES (Dayao)
[GR. No. 155027; February 28, 2008]
“VFP is a public corporation.”
LOCAL GOVERNMENT
Doctrine: The assailed DND Department Circular No. 04 does not supplant nor
modify and is, on the contrary, perfectly in consonance with Rep. Act No. 2640.
Petitioner VFP is a public corporation. As such, it can be placed under the control
and supervision of the Secretary of National Defense, who consequently has the
power to conduct an extensive management audit of petitioner corporation.
Recit-Ready:
Facts: The VFP received a letter from respondent Reyes (Secretary of
National Defense) requesting information and a report about the
VFP and the Philippine Veterans Bank. Subsequently, Reyes
issued the assailed DND Department Circular, which basically
placed the VFP under the control and supervision of the Secretary
of National Defense. VFP didn’t like this. Reyes later said that and
Audit Committee was going to conduct an extensive management
audit of the VFP. VFP didn’t like this either. So VFP went to the SC
seeking to declare the Department Circular null and void for being
ultra vires. They wanted to do this by having themselves declared
as a private corporation.
Issue/s:
1) WON VFP is a private corporation
2) WON Department Circular No. 04 is void
Held:
1) NO. Looking at the elements of a public corporation, the SC held that
VFP was actually a public corporation. It had been delegated some
portion of the sovereignty of the country to be exercised for the public
benefit; its funds were public funds; etc.
2) NO. The definition of the power of control and supervision under Section
2 of the assailed Department Circular are synonymous with the
foregoing definitions. And Even assuming that the assailed circular was
not published, its validity is not affected by such non-publication
because it falls under two of the exceptions enumerated in Tañada v.
Tuvera
Facts:
VFP is a corporate body organized under RA 2640 dated June 18 1960, as
amended
o duly registered with SEC
Respondent Reyes was Secretary of National Defense who issued the assailed
Department Circular No. 04 in June 10, 2002
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DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
In April 2002, VFP received a letter from Reyes
o requesting information and a report about the VFP and Philippine
Veterans Bank
Reyes then issued assailed DND Department Circular No. 04 entitled Further
Implementing the Provisions of Section 1 and 2 of RA 2640
VFP received another letter from Reyes reiterating the first letter and requesting
for a briefing and for documents on personnel, ongoing projects, and VFP’s
financial condition
o letter ended by stating that after the briefing the support staff of
the Audit Committee would being their work to meet the one-
month target within which to submit a report
Letter dated August 28. 2003 informed VFP President that the Management
Audit Group headed by the Undersecretary would be paying VFP a visit on
August 30, 2002 for an update on VFPs different affiliates and the financial
statement of the Federation
Secretary General of VFP sent undated letter to Reyes complaining about the
alleged broadness of scope of management audit
o also requested for the suspension of the audit until such time that
specific areas of the audit shall have been agreed upon
Request was denied by Undersecretary on the grounds that a specific
timeframe had been set for the activity
VFP filed this petition for certiorari with prohibition praying for the following
reliefs:
o SC to issue TRO and a writ of preliminary prohibitory and
mandatory injunctions to enjoin Reyes from:
implementing DND Department Circular No. 04
continuing with the ongoing management audit of VFP’s
books of account
o Declare DND Department Circular No. 04 as null and void for
being ultra vires
o Covert writ of prohibition, preliminary prohibitory and mandatory
injunction as a permanent one
Issue/s:
1) WON VFP is a private corporation?
— NO
2) WON Department Circular No. 04 is void?
— NO
LOCAL GOVERNMENT
Held/Ratio: Petition DISMISSED for lack of merit. The validity of the Department
of National Defense Department Circular No. 04 is AFFIRMED.
1) YES. The SC cites evident reasons why VFP is a public corporation:
RA 2640 is entitled An Act to Create a Public Corporation to be Known
as the Veterans Federation of the Philippines, Defining its Powers, and for
Other Purposes.
Any action or decision of the Federation or of the Supreme Council shall
be subject to the approval of the Secretary of Defense.
VFP is required to submit annual reports of its proceedings for the past
year, including a full, complete and itemized report of receipts and
expenditures of whatever kind, to the President of the Philippines or to the
Secretary of National Defense.
Under Executive Order No. 37 dated 2 December 1992, the VFP was
listed as among the government-owned and controlled corporations that
will not be privatized.
In Ang Bagong Bayani OFW Labor Party v. COMELEC, the SC held in a
minute resolution that the VFP [Veterans Federation Party] is an adjunct
of the government, as it is merely an incarnation of the Veterans
Federation of the Philippines
Note: the SC goes ahead to answer each of VFP’s arguments. I’ve decided to
break format a little and follow that discussion just because it’s easier to
understand that way. Think of each item as a sub-issue.
3) Has VFP been delegated some portion of the sovereignty of the country
to be exercised for the public benefit? YES.
Laurel v. Diserto – SC adopts Mechem’s definition of public office and
views regarding delegation
o Public Office -- right, authority and duty, created and conferred
by law, by which, for a given period, either fixed by law or
enduring at the pleasure of the creating power, an individual is
invested with some portion of the sovereign functions of the
government, to be exercised by him for the benefit of the public.
o Delegation view -- delegation to the individual of some of the
sovereign functions of government is the most important
characteristic in determining whether a position is a public office
or not
The most important characteristic which distinguishes an
office from an employment or contract is that the creation
and conferring of an office involves a delegation to the
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individual of some of the sovereign functions of
government, to be exercised by him for the benefit of the
public; that some portion of the sovereignty of the
country, either legislative, executive or judicial, attaches,
for the time being, to be exercised for the public
benefit. Unless the powers conferred are of this nature,
the individual is not a public officer.
SC has previously upheld the public sovereign nature of operations
needed either to:
o Promote social justice
o To simulate patriotic sentiments and love of country
Functions of VFP as enshrined in Sec 4 of RA No. 2640 clearly falls within
the category of sovereign functions
o The protection of the interests of war veterans is not only meant
to promote social justice, but is also intended to reward
patriotism.
o The functions of the VFP are executive functions, designed to
implement not just the provisions of Rep. Act No. 2640, but also,
and more importantly, the Constitutional mandate for the State to
provide immediate and adequate care, benefits and other forms
of assistance to war veterans and veterans of military campaigns,
their surviving spouses and orphans.
4) Are VFP funds public funds? YES.
VFP claims that its funds are not public funds because no budgetary
appropriations or government funds have been released to the VFP
directly or indirectly from the Department of Budget and Management and
because VFP funds come from membership dues and lease rentals
earned from administering government lands reserved for VFP.
SC: The fact that no budgetary appropriations have been released to
the VFP does not prove that it is a private corporation.
o DBM did not propose budgetary appropriations to the VFP having
also believed that VFP was a private corporation
o But previous assertions of the DBM will not prevent future
budgetary appropriations to the VFP
Nevertheless, funds in the hands of the VFP from whatever source are
public funds, and can be used only for public purposes as mandated by
RA No. 2640:
o Sec 2: VFP can only invest its funds for the exclusive benefit of
the Veterans of the Philippines;
LOCAL GOVERNMENT
o Sec 2: any action or decision of the Federation or of the Supreme
Council shall be subject to the approval of the Secretary of
National Defense. Hence, all activities of the VFP to which the
Supreme Council can apply its funds are subject to the approval
of the Secretary of National Defense;
o Sec 4: Federation shall exist solely for the purposes of a
benevolent character, and not for the pecuniary benefit of its
members;
o Sec 6: all funds of the VFP in excess of operating expenses are
reserved for disbursement, as the Supreme Council may
authorize, for the purposes stated in Section two of this Act;
o Sec 10: any donation or contribution which from time to time may
be made to the Federation by the Government of the Philippines
or any of its subdivisions, branches, offices, agencies or
instrumentalities shall be expended by the Supreme Council only
for the purposes mentioned in this Act.;
o Sec 12: requires the submission of annual reports of VFP
proceedings for the past year, including a full, complete and
itemized report of receipts and expenditures of whatever kind, to
the President of the Philippines or to the Secretary of National
Defense.
Regarding membership funds collected from individual members of
VFPs affiliate organizations: they do not become public funds while they
are still funds of the affiliate organizations
o Close reading of Sec 1 of RA No. 2640: what has been created
as a body corporate is not the individual membership of the
affiliate organizations but merely the aggregation of the
heads of affiliate organizations
Republiv v. COCOFED – even if the money is allocated for a special
purpose and raised by special means, it is still public in character
5) Is VFP a civilian federation where membership is voluntary?
VFP claims that the Secretary of National Defense historically did not
indulge in the direct or micromanagement of the VFP precisely because it
is essentially a civilian organization where membership is voluntary
SC: argument is erroneous since laws are not repealed by disuse,
custom, or practice to the contrary
The civilian nature of the VFP is not relevant to this case
o Constitution does not contain any prohibition, express or implied,
against the grant of control and/or supervision to the Secretary of
National Defense over a civilian organization.
15
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
o Office of the Secretary of National Defense is itself a civilian
office, its occupant being an alter ego of the civilian Commander-
in-Chief.
Argument that membership is voluntary is erroneous
o Membership of the VFP is not the individual membership of the
affiliate organizations, but merely the aggregation of the heads of
such affiliate organizations.
o These heads forming the VFP then elect the Supreme Council
and the other officers, of this public corporation.
6) Is the fact that the VFP is not provided for as an attached agency under
the Administrative Code of 1987 matter? NO.
The Administrative Code, by giving definitions of various entities
covered by it, acknowledges that the enumeration is not exclusive
The Administrative Code could not be said to have repealed nor
enormously modified Rep. Act No. 2640 by implication, as such repeal
or enormous modification by implication is not favored in statutory
construction
7) Does the DBM’s opinion that VFP is a non-government organization
matter? It should but it does not matter in this case.
Reyes claims that the supposed declaration of the DBM that petitioner
is a non-government organization is not persuasive, since DBM is not
a quasi-judicial agency.
o Reyes claims that PLDT v. City of Davao doctrine is that only
quasi-judicial agencies’ determination can be considered
persuasive
SC: PLDT v. City of Davao actually says that for an administrative
agency’s opinion to be persuasive, the administrative agency involved
(whether it has quasi-judicial powers or not) must be an expert in the
field they are giving their opinion on.
DBM is an expert in determining what various government agencies
and corporations are.
But the persuasiveness of the DBM’s opinion has been overcome by
all the above explanations.
Note: In case you got lost, we’re at main issue #2.
LOCAL GOVERNMENT
2) NO. DND Circular No. 04 is valid.
Return to the definition of "Power of supervision” and “power of
control”
Under the Administrative Code of 1987:
o Supervision and control shall include the authority to act directly
whenever a specific function is entrusted by law or regulation to
a subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify acts and
decisions of subordinate officials or units; determine priorities in
the execution of plans and programs; and prescribe standards,
guidelines, plans and programs. x x x
The definition of the power of control and supervision under Section 2 of
the assailed Department Circular are synonymous with the foregoing
definitions.
o Consequently, and considering that petitioner is a public
corporation, the provisions of the assailed Department Circular
No. 04 did not supplant nor modify the provisions of Republic Act
No. 2640
o Department Circular did not violate settled rule that all
administrative issuances must not override, but must remain
consistent and in harmony with the law they seek to apply or
implement.
o Administrative rules and regulations are intended to carry
out, neither to supplant nor to modify, the law.
Assailed provisions of the Circular are merely consequences of both the
power of control and supervision granted by Rep. Act No. 2640
Re: publication. Even assuming that the assailed circular was not
published, its validity is not affected by such non-publication
because it falls under two of the exceptions enumerated in Tañada
v. Tuvera
o Circular No. 04 is an internal regulation mean to regulate a public
corporation under the control of the DND and not the public in
general
o Sections 2, 3 and 6 of the assailed circular are additionally merely
interpretative in nature. They add nothing to the law.
They do not affect the substantial rights of any person,
whether party to the case at bar or not
16
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v. CENTRAL
BOARD OF ASSESSMENT APPEALS (De Luis)
[GR. No. 178030; December 15, 2010]
“Akala mo GOCC pero instrumentality, akala mo makukuhanan mo pero exempt
pala. Maraming nalalagot sa Supreme Court dahil sa maling akala.”
Doctrine: The Philippine Fisheries Development Authority (PFDA) is a
government instrumentality and not a GOCC and is thus exempt from the payment
of real property tax. LGUs have no power to tax instrumentalities of the national
government like the PFDA.
Recit-Ready:
Facts: The Philippine Fisheries Development Authority (PFDA) was
created by P.D. 977 as amended by E.O. 772, with functions and
powers to manage, operate, and develop fishing port complexes
that it may establish. Pursuant to its charter, PFDA took over the
management and operation of the Lucena Fishing Port Complex
(LFPC), a fishery infrastructure project undertaken by the National
Government. In 1999 and 2000, the City Government of Lucena
demanded from PFDA the payment of real property taxes on LFPC
property. The total amount of real property taxes assessed were
P39, 397, 880 from 1993 to 1999 and the subsequent assessment
yield to P45, 660,080 real property taxes from 1993 to 2000.
Procedural facts: PFDA appeal to Local Board of Assessment Appeals of
Lucena City (denied), MR (denied)
PFDA appeal to Central Board of Assessment Appeals (denied),
MR(denied)
PFDA petition for review to the Court of Tax Appeals (denied)
The CTA ruled that PFDA is a GOCC and is therefore subject to
real property tax imposed by LGUs and that it failed to prove its tax
exemption pursuant to Section 234 of the LGC.
Issue/s:
1) WON the Philippine Fisheries Development Authority is government-
owned and controlled corporation or a government instrumentality
2) WON the City Government of Lucena City can impose real property
taxes on Philippine Fisheries Development Authority (PFDA)
3) WON the City Government of Lucena City can impose real property
taxes on the Lucena Fishing Port Complex
LOCAL GOVERNMENT
Held:
1) NO. The Philippine Fisheries Development Authority is a government
instrumentality and not a government-owned or controlled corporation,
as ruled by the Court in various cases.
2) NO. As a government instrumentality, the PFDA is exempt from real
property tax imposed on the Lucena Fishing Port Complex. Howeve,
said exemption do not apply to the portions of the LFPC, which the
PFDA leased to private entities.
3) NO. The Lucena Fishing Port Complex is a property of public dominion
intended for public use, and it is therefore exempt from real property tax
under Section 234(a) of the Local Government Code.
Facts:
The Philippine Fisheries Development Authority (PFDA) was created by virtue
of P.D. 977 as amended by E.O. 772, with functions and powers to manage,
operate, and develop the Navotas Fishing Port Complex and such other
fishing port complexes that may be established by the Authority. Pursuant
thereto, PFDA took over the management and operation of the Lucena Fishing
Port Complex in February 1992.
The Lucena Fishing Port Complex is a fishery infrastructure project
undertaken by the National Government under the Nationwide Fish Port-
Package. The fish port is constructed on a reclaimed land.
On October 26, 1999, in a letter addressed to PFDA, the City Government
of Lucena demanded payment of real property taxes on the LFPC property
from 1993 to 1999 in the total amount of P39,397,880.00.
On October 17, 2000, another demand letter was sent by the Government
of Lucena City to PFDA regarding the same LFPC property, this time the
amount of P45,660,080.00 was imposed, covering the years 1993 to 2000.
On December 18, 2000 PFDA filed an appeal before the Local Board of
Assessment Appeals of Lucena City. Said appeal was dismissed for lack of
merit. On November 6, 2001 PFDA filed a motion for reconsideration, which
was also denied on December 10, 2001.
PFDA appealed to the Central Board of Assessment Appeals (CBAA). In its
Decision dated 5 October 2005, the CBAA dismissed the appeal for lack of
merit. The CBAA ruled that:
o By virtue of P.D 977, ownership of LFPC was passed from the
Republic to PFDA. PFDA is the beneficial user of LFPC and it is a
taxable person.
o PFDA’s Charter, P.D. 977, only provided for exemption from income
tax.
17
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
PFDA moved for reconsideration, which the CBAA denied in its Resolution
dated 7 June 2006.
On appeal, the Court of Tax Appeals denied PFDAs petition for review and
affirmed the decision of the CBAA. The Court of Appeals ruled that:
o The PFDA is a government-owned and controlled corporation, and
is therefore subject to real property tax imposed by local
government units pursuant to Section 2321 in relation to Sections
1932 and 2343 of the Local Government Code.
o PFDA failed to prove that it is exempt from real property tax
pursuant to Section 234 of the LGC.
Issue/s:
1) WON the Philippine Fisheries Development Authority is government-
owned and controlled corporation or a government instrumentality
2) WON the City Government of Lucena City can impose real property taxes
on Philippine Fisheries Development Authority (PFDA)
3) WON the City Government of Lucena City can impose real property taxes
on the Lucena Fishing Port Complex
Held/Ratio: Petition GRANTED. In ruling for PFDA, the Court declared it as a
government instrumentality, which is generally exempt from paying of real property
tax. The Court also declared Lucena Fishing Port Complex exempt from real
property tax because it is a property of public dominion intended for public use.
1) NO. The Philippine Fisheries Development Authority is a government
instrumentality and not a government-owned or controlled corporation.
o The Court resolved in various cases (Iloilo Fishing Port Complex, Navotas
Fishing Port Complex)4 that the PFDA is a government instrumentality and
thus exempt from the payment of real property tax. However, said
1
Section 232. Power to Levy Real Property Tax. —A province or city or a municipality within the
Metropolitan Manila Area my levy an annual ad valorem tax on real property such as land, building,
machinery, and other improvement not hereinafter specifically exempted.
2
Section 193. Withdrawal of Tax Exemption Privileges. —Unless otherwise provided in this Code,
tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this Code.
3
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment
of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person;
LOCAL GOVERNMENT
exemption does not apply to the portions of the LFPC, which the PFDA
leased to private entities.
o A national government instrumentality is defined as an agency of
the national government, not integrated within the department
framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through
a charter.
o When the law vests corporate powers to a government
instrumentality, the instrumentality does not become a
corporation. Unless the government instrumentality is organized
as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also
corporate powers.
2) NO. As a government instrumentality, the PFDA is exempt from real
property tax imposed on the Lucena Fishing Port Complex, except those
portions, which are leased to private persons or entities.
o The exercise of the taxing power of local government units is subject to
the limitations enumerated in Sec. 133 of the Local Government Code.
Under the said provision, LGUs have no power to tax instrumentalities of
the national government like the PFDA.
Sec. 133 LGC. Common Limitations on the Taxing Power of Local
Government Units: xxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units.
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A.
No. 6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including
all government-owned or controlled corporations are hereby withdrawn upon the
effectivity of this Code.
4
Philippine Fisheries Development Authority v. CA (July 31, 2007); Philippine Fisheries
Development Authority v. CA (Oct. 2, 2007)
18
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
3) NO. The Lucena Fishing Port Complex is a property of public dominion
intended for public use, and it is therefore exempt from real property tax
under Section 234(a) of the Local Government Code.
o Sec. 234 LGC. Exemptions from Real Property Tax: The following are
exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivision except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person;
o Properties of public dominion are owned by the State or the Republic of
the Philippines.
Article 420 of the Civil Code. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports, and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character.
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the
national wealth.
o The LFPC is devoted for public use and falls within the term “ports.” It
serves as PFDAs commitment to continuously provide post-harvest
infrastructure support to the fishing industry, especially in areas where
productivity among the various players in the fishing industry need to be
enhanced.13 As property of public dominion, the Lucena Fishing Port
Complex is owned by the Republic of the Philippines and thus exempt
from real estate tax.
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA)5
About: The Philippine Fisheries Development Authority (PFDA) is the
government agency mandated to strengthen the government’s
developmental thrusts in the fisheries through a program that would balance
production ventures with adequate post-harvest support facilities.
Created on August 1, 1976, PFDA is vested with powers and
responsibilities of promoting growth of the fishing industry and improving
efficiency in the handling, preserving, marketing and distribution of fish and
fishery products through the establishment and administration of fish ports,
fish markets and other infrastructure necessary for the progressive
advancement of the fishing industry. Its establishment signaled the thrust of
the government at providing modern organizational and marketing
5
http://www.pfda.da.gov.ph/
LOCAL GOVERNMENT
framework to supplement current and future infrastructure development
programs in the fishing industry.
Mandate: A government owned and controlled corporation (labo, this was
published in the PFDA website on Dec. 11, 2013) attached to the
Department of Agriculture, created to promote the development of the
fishing industry through the provision of post-harvest infrastructure facilities
and essential services that improve efficiency in the handling and
distribution of fish and fishery products and enhance their quality.
Powers and Functions:
o Management, operations, and development of regional
commercial fish port complexes located in strategic areas in the
Philippines;
o Establishment of ice plants and cold storages, municipal fish ports,
warehouses, factory buildings and other structures necessary for
the development of the fishing industry;
o Lease of commercial and industrial areas within the fish port
complexes;
o Conduct of training on Hazard Analysis Critical Control Points and
Good Manufacturing Practices and on the operation and
management of municipal fish port; and
o Monitoring, compilation, and dissemination of fishery statistics and
information necessary in the conduct of business activities and
policy formulation.
FELICIANO V. COA (Diploma)
[G.R. No. 147402; January 14, 2004]
“Local water districts, akin ka and kontrolado kita dahil may special charter ka. –
government”
Doctrine: The Sangguniang Bayan may establish a waterworks system only in
accordance with the provisions of Presidential Decree No. 198. The Sangguniang
Bayan has no power to create a corporate entity that will operate its waterworks
system. However, the Sangguniang Bayan may avail of existing enabling laws, like
P.D. No. 198, to form and incorporate a local water district. The Sangguniang
Bayan resolution is not the special charter of local water districts since the
resolution merely implements said decree. The National Government owns and
controls local water districts. The government organizes local water districts.
19
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
Unlike private corporations, which derive their legal existence and power from the
Corporation Code, local water districts derive their legal existence and power from
P.D. No. 198. Sections 6 and 25 of P.D. No. 198 provide that a local water district
is a quasi-public corporation. Local water districts are government-owned and
controlled corporations with a special charter. [From Agra Case Compendium]
Recit-Ready:
Facts: The general manager of LMWD, Feliciano, is asking for a refund
for the auditing fees it paid to COA, citing PD 198 as his basis. He argues
that LWDs are not government-owned and controlled corporations with
original charters and that they are private corporations. He wants the
Court to consider certain interpretations of the applicable laws, which
would give a new perspective to the issue of the true character of water
districts.
Issue/s: WON LWD’s are GOCC’s – YES
Held: LWDs are GOCC’s. LWDs exist by virtue of PD 198, which
constitutes their special charter. Since under the Constitution only
government-owned or controlled corporations may have special
charters, LWDs can validly exist only if they are government-
owned or controlled. To claim that LWDs are private corporations with
a special charter is to admit that their existence is constitutionally infirm.
Without PD 198, LWDs would have no corporate powers. Thus, PD 198
constitutes the special enabling charter of LWDs. The ineluctable
conclusion is that LWDs are government-owned and controlled
corporations with a special charter.
Facts:
A Special Audit Team from COA audited the accounts of Leyte Metropolitan
Water District (LMWD). Subsequently, LMWD received a letter from COA
requesting payment of auditing fees.
As General Manager of LMWD, Feliciano sent a reply informing COA’s
Regional Director that the water district could not pay the auditing fees based
Sec. 6 and 20 of PD198 (Local Water Utilities Administration) as well as
Section 18 of RA6758 (Compensation and Position Classification Act of 1989),
which was then forwarded to the COA Chairman.
Feliciano thereafter asked for a refund of all auditing fees LMWD previously
paid to COA. However, COA Chairman Gangan’s Resolution denied his
requests.
LOCAL GOVERNMENT
Feliciano filed this petition attaching resolutions of the Visayas Association of
Water Districts (VAWD) and the Philippine Association of Water Districts
(PAWD) supporting the petition.
COA ruled that the Court has already settled COA’s audit jurisdiction over local
water districts in Davao City Water District v. Civil Service Commission
and Commission on Audit.
o Section 3(b) PD 198 definitely disproves petitioner’s contention that
they are private corporations.
The power to appoint the members who will comprise the
members of the Board of Directors belong to the local
executives of the local subdivision unit where such
districts are located.
In contrast, the members of the Board of Directors or the
trustees of a private corporation are elected from among
members or stockholders thereof.
o But this is not the case here and this clearly indicates that petitioners
are not private corporations.
Petitioner‘s arguments:
o LWDs are not government-owned and controlled corporations with
original charters and that they are private corporations. He wants the
Court to consider certain interpretations of the applicable laws, which
would give a new perspective to the issue of the true character of
water districts.
o What PD 198 created was the Local Waters Utilities Administration
("LWUA") and not the LWDs. Petitioner claims that LWDs are created
"pursuant to" and not created directly by PD 198. Thus, petitioner
concludes that PD 198 is not an "original charter" that would place
LWDs within the audit jurisdiction of COA as defined in Section 2(1),
Article IX-D of the Constitution. Petitioner elaborates that PD 198
does not create LWDs since it does not expressly direct the creation
of such entities, but only provides for their formation on an optional or
voluntary basis.8 Petitioner adds that the operative act that creates
an LWD is the approval of the Sanggunian Resolution as specified in
PD 198.
Issue/s: WON a Local Water District ("LWD") created under PD 198, as
amended, is a government-owned or controlled corporation subject to the
audit jurisdiction of COA
—YES
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ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
Held/Ratio: The Resolution of the Commission on Audit dated 3 January 2000 and
the Decision dated 30 January 2001 denying petitioner’s Motion for
Reconsideration are AFFIRMED. The second sentence of Section 206 of
Presidential Decree No. 198 is declared VOID for being inconsistent with Sections
2 (1) and 3, Article IX-D of the Constitution.
YES. LWD’s are GOCC’s subject to the audit jurisdiction of COA.
The Constitution recognizes private corporations created under a general law,
and government-owned or controlled corporations created by special charters.
Section 16, Article XII of the Constitution provides: Sec. 16. The Congress
shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic
viability.
o Congress cannot enact a law creating a private corporation with a
special charter. Such legislation would be unconstitutional. Only
corporations created under a general law can qualify as private
corporations and that general law is the Corporation Code.
o Since private corporations cannot have special charters, it follows that
Congress can create corporations with special charters only if such
corporations are government-owned or controlled.
Obviously, LWDs are not private corporations because they are not created
under the Corporation Code.
o LWDs are not registered with the Securities and Exchange
Commission.
o LWDs have no articles of incorporation, no incorporators and no
stockholders or members. There are no stockholders or members to
elect the board directors of LWDs as in the case of all corporations
registered with the Securities and Exchange Commission.
o The local mayor or the provincial governor appoints the directors of
LWDs for a fixed term of office. This Court has ruled that LWDs are
6 7
SEC.20. System of Business Administration. The Board shall, as soon as practicable, prescribe
and defined by resolution a system of business administration and accounting for the district, which
shall be patterned upon and conform to the standards established by the Administration. Auditing
shall be performed by a certified public accountant not in the government service. The
Administration may, however, conduct annual audits of the fiscal operations of the district to be
performed by a auditor retained by the Administration. Expenses incurred in connection therewith
shall be borne equally by the district and the Administration.
LOCAL GOVERNMENT
not created under the Corporation Code, thus it is clear that what has
been excluded from the coverage of the CSC are those corporations
created pursuant to the Corporation Code. Significantly, petitioners
are not created under the said code, but on the contrary, they
were created pursuant to a special law and are governed
primarily by its provision.
LWDs exist by virtue of PD 198, which constitutes their special charter. Since
under the Constitution only government-owned or controlled corporations may
have special charters, LWDs can validly exist only if they are government-
owned or controlled. To claim that LWDs are private corporations with a
special charter is to admit that their existence is constitutionally infirm.
o LWDs derive their legal existence and power from PD 198. Sections
67 and 258 of PD 198.
Clearly, LWDs exist as corporations only by virtue of PD 198,
which expressly confers on LWDs corporate powers.
Without PD 198, LWDs would have no corporate powers.
Thus, PD 198 constitutes the special enabling charter of
LWDs. The ineluctable conclusion is that LWDs are
government-owned and controlled corporations with a
special charter.
LEAGUE OF CITIES v. COMELEC (Fajardo, M)
[GR. No. 176951; April 11, 2011]
“Cityhood Laws are constitutional, P100M income requirement arbitrary”
Doctrine: Congress intended that the local government units covered by the
Cityhood Laws be exempted from the coverage of RA 9009.
Recit-Ready:
Facts: RA 9009 was enacted, amending the LGC, increasing the income
requirement for conversion of municipalities into cities from P20M
to P100M. This was enacted so municipalities wouldn’t rush to
Section 6. Formation of District. — This Act is the source of authorization and power to form
and maintain a district. For purposes of this Act, a district shall be considered as a quasi-public
corporation performing public service and supplying public wants. As such, a district shall exercise
the powers, rights and privileges given to private corporations under existing laws, in addition to
the powers granted in, and subject to such restrictions imposed, under this Act.
8
Sec. 25. Authorization. — The district may exercise all the powers which are expressly
granted by this Title or which are necessarily implied from or incidental to the powers and
purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is
hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to
review by the Administration. (Emphasis supplied)
21
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
convert just to secure a larger share in the IRA. Congress enacted
a Joint Resolution to exempt 24 municipalities with pending
cityhood bills but this did not materialize. 16 of the municipalities
filed individual cityhood bills which were approved by Congress.
This case is the 2nd MR. Petitioners are inggitero cities (hehe jk.
but really).
Issue/s:
1) WON the MR may still be entertained
2) WON the Cityhood Laws violate the Constitution
3) WON the Cityhood Laws violate the Equal Protection Clause
4) WON the P100M income requirement was arbitrary
5) WON the Cityhood Laws violated petitioners’ right to a just share
in the national taxes
Held:
1) NO. A 2nd MR is a prohibited pleading under the Rules of Court. It may
only be entertained for extraordinarily persuasive reasons and after an
express leave has been first obtained.
2) NO. The exemption clauses incorporated in the Cityhood Laws are
but the express articulations of the clear legislative intent to
exempt the respondents, without exception, from the coverage of
RA 9009. While the Constitution mandates the creation of LGUs
must comply with the criteria laid down in the LGC, it cannot be
justified that the Constitution must yield to every amendment to
the LGC.
3) NO. The LGUs covered by the laws belong to a class of their own.
4) YES. When the sponsor of the law chose the specific figure of P100M,
no research or empirical data buttressed the figure.
5) NO. The share of LGUs is a matter of percentage, not a specific
amount. With every newly converted city becoming entitled to
share the allocation for cities, the percentage of IRA entitlement of
each city will decrease, although the actual amount received may
be more than that received in the preceding year.
Facts:
The 12th Congress enacted RA 9009, amending the LGC, by increasing the
annual income requirement for conversion of a municipality into a city from
P20M to P100M.
LOCAL GOVERNMENT
This was enacted so municipalities wouldn’t be in a rush to convert into cities
in order to secure a larger share in the Internal Revenue Allotment (IRA).
But Congress adopted a Joint Resolution which sought to exempt from the
P100M income requirement the 24 municipalities whose cityhood bills were
pending in the 11th Congress.
Said Resolution failed to materialize.
16 of the municipalities filed individual cityhood bills, exempting them from the
P100M income requirement, which were approved by Congress.
The Cityhood Laws directed the COMELEC to hold plebiscites to determine
whether the voters in each municipality approve of the conversion.
Petitioners claim that the 16 Cityhood Laws violated Sec. 6 and 10 of Art. X
of the Constitution, as well as the Equal Protection Clause.
They also sought to enjoin COMELEC and respondent municipalities from
conducting plebiscites pursuant to the Cityhood Laws.
The present case is the 2nd MR to the Resolution of the SC which held that
the Cityhood Laws were constitutional.
Issue/s:
1) WON the MR may still be entertained
—NO
2) WON the Cityhood Laws violate Sections 6 and 10 of Article X of the
Constitution
—NO
3) WON the Cityhood Laws violate the Equal Protection Clause
—NO
4) WON the P100M income requirement is arbitrary
—YES
5) WON WON the Cityhood Laws violated petitioners’ right to a just share in
the national taxes
—NO
Held/Ratio: Motion DENIED. For not violating the Constitution, the Equal
Protection Clause, nor the petitioners’ right to a just share in the national taxes, the
Cityhood Laws are
1) NO. The Motion for Reconsideration may not be entertained. (not really
relevant)
o The MR was actually a second MR, which is a prohibited pleading under the
Rules of Court.
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o It may be entertained only for extraordinarily persuasive reasons and after o Nor was there proof that the proposal took into account the after-effects that
an express leave has been first obtained. were likely to arise.

2) NO. The Cityhood laws do not violate Sections 6 and 10 of Article X of the
Constitution.
o Congress clearly intended that the LGUs covered by the Cityhood Laws be
exempted from the coverage of RA 9009.
o The deliberations show that RA 9009 would not apply to the conversion bills
then pending in the Senate during the 11th Congress.
o The conversion bills of the respondent municipalities were individually filed
in the House of Representatives and Senate, and were all unanimously and
favorably voted upon by the respective Members of each.
o The exemption clauses incorporated in the Cityhood Laws are but the
express articulations of the clear legislative intent to exempt the
respondents, without exception, from the coverage of RA 9009.
o RA 9009, and by necessity, the LGC, were amended, not by repeal but by
way of the express exemptions being embodied in the exemption clauses.
o While the Constitution mandates the creation of LGUs must comply with the
criteria laid down in the LGC, it cannot be justified to insist that the
Constitution must have to yield to every amendment to the LGC despite
such amendment imminently producing effects contrary to the original
thrusts of the LGC to promote autonomy, decentralization, countryside
development, and the concomitant national growth.
o If a strict of the Constitution would be followed, two of the conversion laws
would have to be struck down for being unconstitutional (laws converting
the municipalities of San Juan and Navotas) since the President had not
classified both municipalities as highly urbanized cities upon proper
application and ratification in a plebiscite, as required by Section 453 of the
LGC.
5) NO. The Cityhood Laws violated the petitioners’ right to a just share in
the national taxes.
o The share of LGUs is a matter of percentage, not a specific amount.
o Specifically, the share of the cities is 23%, determined on the basis of
population (50%), land area (25%), and equal sharing (25%).
o This share is also dependent on the number of existing cities, such that
when the number of cities increases, then more will divide and share the
allocation for cities.
o The allocation by the National Government is not a constant and can either
increase or decrease.
o With every newly converted city becoming entitled to share the allocation
for cities, the percentage of IRA entitlement of each city will decrease,
although the actual amount received may be more than that received in the
preceding share.
o The respondents are entitled to their just share in the IRA allocation for
cities.

3) NO. The Cityhood Laws do not violate the EPC.

o The LGUs covered by the Cityhood Laws belong to a class of their own.
o They have proven themselves viable and capable to become component
cities of their respective provinces. They are and have been centers of trade
and commerce, points of convergence of transportation, rich havens of
agricultural, mineral and other natural resources, and flourishing tourism
spots.

4) YES. The P100-million income requirement is arbitrary.

o When the sponsor of the law chose the specific figure of P100M, no
research or empirical data buttressed the figure.

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PART I – AGRA’s REVIEWER GOCC

Vested with a legal personality separate and distinct from those acting
Nature of Local Government Units for and in its behalf and, in general, from the people comprising it (MIAA
v. CA).
I. What is a Local Government Unit? GOCC created through a special charter must meet 2 conditions:
“Territorial and political subdivisions” (Sec. 1, Art. X, 1987 Constitution) 1) It must be established for the common good
2) It must meet the test of economic viability
It is a public Office, a public corporation, and is classified as a municipal
corporation proper. Three attributes that make an entity a GOCC:
1) It is a stock or non-stock corporation
Established for the government of a portion of the State
2) Public character of its function
An administrative agency and an agency of Government
3) Government ownership
o Agency of the Government - Any of the various units of the
Examples of GOCCs:
central government (e.g. department, bureau, office,
1) Government Financial Institutions (GFIs)
instrumentality, GOCC, LGU)
2) Water Districts
Compare with - National Government: refers to the entire machinery of
3) Government-acquired asset corporation
the central government.
4) GOCCs incorporated under the Corporation Code
5) Subsidiaries of GOCCs
4 elements of an LGU (CLIP):
1. Corporate name
GOVERNMENT INSTRUMENTALITY
2. Legal creation
Neither a stock nor a non-stock corporation
3. Inhabitants
4. Place or territory Operationally autonomous
Remains part of the National Government machinery although not
Powers of an LGU integrated with the department framework
INTRAMURAL: It can only exercise its powers within its territorial Examples:
boundary or jurisdiction. o BSP
o EXCEPTIONS: It has EXTRAMURAL powers (outside the o Philippine Rice Research Institute
subdivision) in 3 occasions: o Laguna Lake Development Authority
1) Protection of water supply o Fisheries Development Authority
2) Prevention of nuisance o BCDA
3) Police purposes o Philippine Ports Authority
o Forestlands, although under the management of DENR are not o Other port authorities: Cagayan de Oro Port Authority, San
exempt from the territorial application of municipal laws (Aquino Fernando Port Authority, Cebu Port Authority
v. Municipality of Malay). o Philippine National Railways

QUASI-MUNICIPAL CORPORATIONS Manila Economic and Cultural Office (MECO)

Public corporations created by local governments SUI GENERIS
o Since it has corporate objectives, special duty and authority to
QUASI-CORPORATIONS exercise certain consular functions, and the executive
Created by the State, either by law or by authority of law, for a specific department has oversight over its operations
governmental purpose. It is a non-stock, non-profit corporation under the Corp. Code, not owned
GOCCs and Government Instrumentalities or controlled by the Republic.
To be a GOCC, it must be owned by the government. Mere performance
of functions with a public aspect are not by themselves sufficient to
consider MECO as a GOCC.
The “desire letters” that the President transmits is merely
recommendatory and not binding to MECO.

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II. Two-fold Character of LGU’s Congress provides for a system of checks and balances
Governmental/Public Powers Statutorily provided
Proprietary/Private Powers 1983 LGC allowed the local chief executive to perform both executive and
legislative powers.
Governmental Powers 1991 LGC DISALLOWED such union
Exercised in administering the powers of the state
Promoting public warfare LGU has delegated legislative powers
Legislative, judicial, public, and political types Exception to the doctrine of non-delegation of legislative powers
Ex: Power to create, divide, merge, abolish, or substantially alter boundaries
o Delivery of sand for a municipal road (1991 LGC, Sec. 6)
o Local legislation Ex: Conversion to a highly-urbanized city is an example of alteration of
o Control over police boundaries (1987 Constitution, Art. X, Sec. 10 and 1991 LGC, Sec. 453)
o Abatement of nuisance
IV. Types of LGUs (CAMP-B)
Proprietary Powers 1. Cities;
Exercised for the special benefit and advantage of the community 2. Autonomous Regions;
Ministerial, private, and corporate types 3. Municipalities;
Ex: 4. Provinces;
o Public cemeteries 5. Barangays (Sec 1, Art X, 1987 Constitution)
o Markets
o Ferries A. On Autonomous Regions
o Waterworks General Characteristics
Consist of provinces, cities, municipalities, and geographical areas
Therefore, the LGU’s are: sharing common and distinctive:
Agents of the STATE, when exercising governmental powers o Historical and cultural heritage;
Agents of the COMMUNITY and PEOPLE, when exercising proprietary o Economic and social structures;
powers o Other relevant characteristics;
o Within the framework of this Constitution and the national
III. Corporate Succession sovereignty as well as territorial integrity of the Republic of the
LGU’s have the power of continuous succession (1991 LGC, Sec. 22) Philippines. (Sec 15, Art X, 1987 Constitution)
Ex: The later Governor cannot revoke/renounce the [validly] perfected 2 Regions Provided for by Constitution
contract executed by the former Governor
o Muslim Mindanao; and
o Cordilleras. (Sec 15, Art X, 1987 Constitution)
IV. 1991 Local Government Code Has not been incorporated since in the plebiscite held,
the creation had been rejected by all covered provinces
Enacted by Congress (1987 Constitution, Art. X, Sec. 3)
and cities, save for one province. There can be no
Allocates LGU’s powers, responsibilities, and resources autonomous region consisting of only one province.
Provides for the qualifications, election, appointment, removal, salaries, (Badua vs. Cordillera Bodong Administration)
and all other matters relating to the organization and operation of the LGU o Note: Congress CANNOT create other autonomous regions
Example: power to appoint officials other than Muslim Mindanao or Cordilleras under the 1987
o Governor has authority to appoint officials and employees Constitution.
o However, Vice-Gov has power to appoint officials of the
Sangguniang Panlalawigan Delegation of Powers, Functions, and Responsibilities as Provided by Law
Under the President
o General supervision over Autonomous Regions. (Sec 16, Art X,
1987 Constitution)

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National Government
o Defense and Security; (Sec 21, Art X, 1987 Constitution)
o Residual regional powers; (Sec 17, Art X, 1987 Constitution)
o All other powers not vested on autonomous regions.
Local Police Agencies
o Regional peace and order
Exempt from Devolution
o Nationally-funded:
Projects
Facilities;
Programs; and
Services. (Imbong vs. Ochoa)
On the Organic Acts
Constitution enumerates the irreducible legislative powers of autonomous
regions to be provided for in the Organic Acts:
o Administrative Organization;
o Creation of Sources of Revenues;
o Ancestral Domain and Natural Resources;
o Personal, Family, and Property Relations;
o Economic, Social, and Tourism Development;
o Educational Policies;
o Preservation and Development of the Cultural Heritage;
o Other matters as may be authorized by law for the promotion of
the general welfare of the people of the region.
Provisions of the Organic Acts CANNOT be amended by an ordinary
statute without being approved in a plebiscite.
o While classified as statutes, Organic Acts are more than ordinary
statutes because they enjoy affirmation by a plebiscite.
(Disomangcop vs. Sec. of Public Works and Highways)
o Similarly, the Organic Act cannot be amended by a mere act of
the Regional Assembly of ARMM, the LGC, or the Administrative
Code. (Pandi vs. Court of Appeals)
Other Jurisprudence:
o Organic Act of Muslim Mindanao is constitutional and not violative
of the Tripoli Agreement since the former is a later enactment.
The Tripoli Agreement must conform with national laws such as
the Organic Act. (Abbas vs. COMELEC)
o While the Autonomous Region of the Cordilleras has not been
incorporated, the President has the power to create the Cordillera
Administrative Region (CAR). The executive order does not
create the autonomous region for the Cordilleras.
The CAR is:
Not a territorial and political subdivision;
Not a public corporation;
Does not have a separate juridical personality;
LOCAL GOVERNMENT
Is subject to control and supervision of the
President;
Merely a regional consultative and coordinative
council. (Cordillera Board Coalition vs. COA)
B. On Cities
3 Sub-Types of Cities
1. Highly-Urbanized Cities (HUC)
2. Independent Cities;
3. Component Cities.
Importance of Classifications: Presidential/Provincial Supervision
HUCs and Independent Cities are NOT under the supervision of provinces
and their voters are NOT qualified to vote for provincial officials. (Sec 12,
Art X, 1987 Constitution)
o These cities are under the direct supervision of the President and
are independent of provinces. (Sec 25, 1991 LGC)
o Rationale:
Due to the larger population and greater economic
activity in HUCs, they require greater autonomy.
o Implications:
Provincial government does not have the power to
review executive orders issued by the city mayor nor
does it have the power to approve resolutions and
ordinances enacted by the city council.
Provincial government does not have jurisdiction over
disciplinary cases concerning the elected city officials of
HUCs. (Umali vs. COMELEC)
Registered voters of the city cannot vote for nor be voted
upon as provincial officials.
Component cities are under the supervision of provinces and their voters
elect provincial officials.
o XPN: Charter prohibits their voters from voting for provincial
elective officials, in which case they shall be independent of the
province. (Sec 12, Art X, 1987 Constitution)
A city’s classification is determined by law.
V. Creation of Local Government Units
Only Congress and, by authority of law, local legislative councils can
create specific Local Governments.
Creation is a legislative act and the enabling law is referred to as the
charter of the LGU.
A. On the Executive Branch
The President has NO power to create local governments. (Camid vs.
Office of the President)
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o Municipalities created by executive fiat but whose existence were Only provinces, cities, and geographic areas voting
not judicially nullified and which continued to operate and exist favorably in such plebiscite shall be included in the
after 1992 are considered regular municipalities. autonomous region.
Municipality by prescription. (Municipality of Jimenez vs. Note: the 1987 Constitution set a timeframe for the passage of the organic
Baz) acts for the two identified autonomous regions to be 18 months from the
It is in this way that the 1991 LGC is considered as time of organization of both Houses.
curative legislation.
BUT, if judicially annulled in a quo warranto C. Creation of LGUs by Congress (BarMu-CiPro)
case, the 1991 LGC has no curative effect. Congress can create:
The President CANNOT create a “state.” Barangays
o Requisites of Statehood: Municipalities
Permanent Population; Cities
Defined Territory; Provinces
Government;
Capacity to Enter into relations with other states. Subject to the criteria specified by the (91-S):
o Thus, the BJE established under the MOA-AD, characterized by 1991 LGC
shared authority and responsibility with the government, was
Special laws
declared unconstitutional. (North Cotabato vs. GRP)
o i.e. RA No. 9009 on the conversion of municipalities to
The President CAN, however, merge administrative regions and transfer component cities
regional centers. o Congress, by special law, can provide for different requirements
o These are powers that have traditionally been lodged with the other than those specified in the 1991 LGC (League of Cities v.
President to facilitate the exercise of the power of general COMELEC)
supervision, as found in the Constitution and the Local o The IRRs cannot provide different requirements other that what
Government Code. (Republic vs. Bayao) is provided by law
B. On the Creation of Autonomous Regions Constitutional Provision: Article X, in relation to the LGC
Congress can provide for the incorporation of Autonomous Regions but it
cannot create other Autonomous regions other than in Muslim Mindanao Provision Notes
and Cordilleras.
Congress shall enact an Organic Act for each autonomous region with the Section 10. No province, city, No BarMu-CiPro shall be (SCAMD):
assistance and participation of the regional consultative commission municipality, or barangay may Created
composed of representatives appointed by the President from a list of be created, divided, merged, Divided
nominees from multi-sectoral bodies. abolished, or its boundary Merged
The Organic Acts: substantially altered, except in Abolished
o Defines the basic structure of governments, consisting of the accordance with the criteria
Its boundary Substantially
executive and legislative department, both of which shall be established in the local
altered
elective and representative of the constituent political units. government code and subject
Except (LGC-P):
o Provides for special courts with personal, family, and property law to approval by a majority of the
1. In accordance with the criteria
jurisdiction. votes cast in a plebiscite in the
established in the LGC
o Consistent with the constitution and national laws. political units directly affected.
2. Subject to the approval by a
majority of the votes cast in a
When is the Creation of an Autonomous Region Deemed Effective? Plebiscite in the political units
The creation of the autonomous region shall be effective when approved directly affected
by a majority of the votes cast by the constituent units in a plebiscite called
for the purpose.
o Provided:

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D. Creation of LGUs by Sangguniang Panlalawigan and Sangguniang F. Requirements for creation of local governments (PLAY)*
Panglungsod 1) Population
2) Land Area
Provision Notes
3) Yncome
SEC. 6. Authority to Create Local The sangguniang panlalawigan *We shall use this mnemonic because that is what Sir uses
Government Units. - A local and sangguniang panlungsod
government unit may be created, can create barangays. The
Requirement Province City Municipality Barangay
divided, merged, abolished, or its sangguniang bayan has no
Income 20 million 20 million CC 2.5 million ---
boundaries substantially altered either such authority under the 1991
by law enacted by Congress in the LGC.
50 million HUC
case of a province, city, municipality,
or any other political subdivision, or
100 million
by ordinance passed by the
M to CC
sangguniang panlalawigan or
sangguniang panlungsod Population 250,000 150,000 CC 25,000 2,000
concerned in the case of a Outside Metro
barangay located within its 200,000 HUC Manila
territorial jurisdiction, subject to
5,000
such limitations and requirements
Metro Manila
prescribed in this Code.
Land Area 2,000 km2 100 km2 50 km2 Contiguous

E. WHEN are LGUs deemed created? For purposes of creation, only the land area is material.
On the day its charter takes effect. Excludes the aggregate territory which includes the waters (section 131
On the day its charter is approved by a majority of the votes cast in a [r], LGC)
plebiscite in the political units directly affected (Sec. 10, Article X, Consti; Areas or barangays not included in the charter are excluded (Municipality
Sec. 10, LGC) of Nueva Era v. Municipality of Marcos)
Its corporate existence shall commence upon the election and A charter need not mention the population census (Tobias v. Abalos)
qualification of its chief executive and a majority of the members of its Failure to state the seat of government in the charter is not fatal (Samson
sanggunian, unless some other time is fixed therefor by the law or v. Aguirre)
ordinance creating it (Sec. 14, LGC) Income in the LGC means ALL funds of the LGU including the INternal
Revenue Allotment (Alvarex v. Guingona)
Case doctrines:
The funds must be internally-generated (R 9009)
1. When a municipality is split into two, all the barangays of the original
municipality must vote. (Padilla v. COMELEC)
PRESENCE of the requirements depends on the type of LGU created (Secs. 461,
2. The plebiscite electorate includes those who will be economically
450, 442, 386, LGC):
dislocated and based on plurality of units.
3. A plebiscite is required when a municipality is converted into an Barangay P and LA
independent component city. (Miranda v. Aguirre)
4. A boundary dispute presents a prejudicial question to a plebiscite and Province P and Y / Y and LA
must be resolved prior to the conduct of any plebiscite. (City of Pasig v.
COMELEC) City P and Y / Y and LA
5. The COMELEC has the jurisdiction over plebiscite protest cases. (Buac
v. COMELEC) Municipality P and LA and Y

Highly urbanized city (HUC) P and Y

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The requirements for the creation of a component city and an independent

component city are the same.

When a municipality becomes a city, the latter acquires a distinct personality from
the former, both as to political and economic rights. (Latasa v. COMELEC)

An examination of the charters of LGUs would however reveal that municipal

ordinances, debts, assets and properties are transferred to and absorbed by the
city.

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RUPERTO MARTIN, PUBLIC CORPORATIONS

CHAPTER I and II

Corporation Criteria to determine whether a corporation is public or private

an artificial being created by operation of law, having the right of What are NOT tests
succession and the powers, attributes, and properties expressly Purpose alone cannot be taken as a safe guide
authorized by law or incident to its existence. o Why? Almost all corporations are nowadays created to
It is also an artificial being that is invisible, intangible, and existing only in promote the interest, good, or convenience of the public
contemplation of law. o For example: a bank is a private corporation yet created for
public benefit; private schools and universities are likewise
I. CLASSIFICATIONS OF CORPORATIONS private corporations yet, they render public service
(1) Public Control or ownership of the State alone cannot also be the test
(2) Private o For example:
(3) Quasi-public (some authors consider) GOCCs are owned by the government, but are
actually private corporations in the strict sense of the
1. Public Corporation word
Those formed or organized for the government of a portion of the state, Likewise, a corporation may be public in nature
for the accomplishment of parts of its public works. although it receives gifts or donations from private
They are created by the states as its own device and agency for the individuals
accomplishment of its public works.
Examples: Provinces, municipalities, chartered cities, and barrios, and What then is the true test to determine the public or private nature of a
barangays corporation?
The true criterion is found in the RELATION of the corporation to
2. Private Corporations the State.
Those formed for some private purpose, benefit, aim or end. o PUBLIC: If created by the State as its own agency or
They are organized wholly for the profit and advantage of their own instrumentality to help the state in carrying out its
members and cannot be constitutionally granted governmental powers. governmental functions
E.g. towns, provinces, chartered cities
3. Quasi-public Corporations o PRIVATE: all others
Private corporations that render public service or supply public wants
While organized for the gain or benefit of the members, they are Private Corporation vs. Quasi-Public Corporation
REQUIRED BY LAW to discharge functions for public benefit Main difference: By the service it renders to the public
Example: utility companies o If it performs public sovereign functions, even though they
intend to obtain profits it will be classified as Quasi-Public
Public Corporations vs. Private Corporations Corporation
Public Corporations o Examples:
Established for purposes connected with the administration of civil or Railroad
local governments Warehouse
Telephone
Creations of the State either by general or special act
Electric Light Companies
Water Supply Corporation
Private Corporations
Transportation
Created for private aim, benefit, or purpose of their members (Act
1459, Sec. 3)
Created by the will of the incorporators with the recognizance of the
State

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II. CLASSES OF PUBLIC CORPORATIONS A. Nature and Status of a Municipal Corporation (BILDS)
1. Quasi-Corporation Charter is granted for the better government
2. Municipal Corporation Municipal Administration - instrumentality of state administration
Exercises legated powers of government
(A). QUASI CORPORATION - are public corporations created as agencies of the Political division of the state
State for a narrow and limited purpose. They do not possess the powers and
Subordinate branch of government of the State
liabilities of self-governing corporations.
Examples: B. Elements of a Municipal Corporation (CLIP)
o In the Philippines - Barrios (before)
A legal creation or incorporation;
o In the United States - countries and school districts
Corporate name by which the artificial personality of legal entity is known,
A. Nature and in which all corporate acts are done;
Public in nature, but cannot strictly be considered municipal Inhabitants constituting the population who are invested with the political
corporations and corporate powers, which are executed through duly constituted officer
and agents;
Limited number of corporate powers
Place or territory within which the local civil government and corporate
Low grade of corporate existence
functions are exercised
They consist of various local government areas established to aid in
administration of public functions C. Kinds of Municipal Corporations
o Countries 1. Municipal Corporation Proper - generally refers to incorporated cities,
o Drainage districts
towns or villages invested with legislative power
o Irrigation districts
o Governed by a charter
o Levee districts
o Invested with the power of local government
o Reclamation districts
2. Quasi-municipal corporation - another term for “quasi-corporation”
o Sanitary districts
o Operates directly as an agency of the state
o School districts
o Aids in the administration of public functions
o Water districts
Criterion to determine whether municipal corporation proper or quasi-
B. Purpose of their creation
municipal corporation (VCP)
To aid the State
Voluntary or involuntary nature of the corporation
To take charge of, some public or state work other than the
Existence or non-existence of a charter
government, for general welfare
Purpose of the corporation (governmental agency or self-
(B). MUNICIPAL CORPORATION government)
Dillon - “a body politic and corporate constituted by the incorporation
D. Purposes of Municipal Corporations
of the inhabitants of a city or town for the purpose of local government
Two-fold purpose: (SA)
thereof; it is establishing by law partly as an agency of state to assist
1. To serve as an agency or instrumentality of the state in carrying on the
in the civil government of the country, but chiefly to regulate and
functions of the government which the state cannot conveniently exercise
administer the local or internal affairs of the city, town, or district, which
(e.g. collection of taxes, assessment of property and enforcement of
is incorporated”.
police regulations); and
Provinces, Municipalities, and Chartered Cities 2. To act as agency of the inhabitants of the community in the regulation and
the operation of municipal franchises and public utilities, the promotion
and management of their local affairs, such as maintenance of water
system, ferries, wharves, etc.

LOCAL GOVERNMENT 31
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK
Municipal Corporations distinguished from Public Corporations
ALL Municipal Corporations are Public Corporations, BUT NOT ALL
Public Corporations are Municipal Corporations.
Examples of municipal corporations are villages, towns, and cities
WITH the power of local administration.
Municipal corporations proper distinguished from quasi-corporations
Municipal Corporations Proper
o Agents of the State
o Have the powers and liabilities of self-government.
o Its existence is formed by either direct solicitation or by the
free consent of the persons composing them.
Quasi-Corporations
o Agents of the State for a LIMITED and NARROW
PURPOSE.
o Do NOT have the powers and liabilities of self-government
o Its existence is CREATED by the sovereign legislative power
of its own sovereign will and W/O any particular solicitation,
consent of the people who inhabit them.
For the purpose of civil administration, they are
invested with A FEW of the characteristics of a
corproate existence.
E. Distinguishing feature of municipal corporations
The distinctive purpose and the distinguishing feature of a municipal
corporation proper is the power of local government.
F. Dual nature of municipal corporations.
Municipal corporations BOTH HAVE governmental and private character.
Public or Governmental
o It acts as the agent of the State for the government of the territory
and the inhabitants within the municipal limits.
o It exercises by delegation a part of the sovereignty of the State.
Private
o It acts in a similar category as a business corporation, performing
functions not strictly governmental or political.
o It stands for the community in the administration of local affairs
which is wholly beyond the sphere of public purpose.
G. Dual Functions of Municipal Corporations
1. 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 administration of local
affairs. (acting as separate entities and not as subdivisions of the State)
LOCAL GOVERNMENT
H. Origin and History of Municipal Corporations
In England
Traced to the farmer commonwealths of the early Teutons.
Each wick, ham, stead or tun took its name from the winsmen who dwelt
together therein.
In the US
Prior to the revolution, local governments in the nature of municipalities
existed in American colonies:
1. by prescription or;
2. under sovereign recognition or;
3. under special charters from the sovereign
Early municipalities were like those of the British - with a number of
differences from the latter but with the same corporate character and
attributes
In the Philippines under the Spanish Regime
Unit of local administration = pueblo, with an area of many square miles
and with numerous barrios/villages.
Spaniards in the beginning continued the title of cabeza de barangay.
Towns were headed by capitan and with a native official called the
gobernadorcillo (“little governor”) who represented the provincial governor
as the arbiter of local questions except for serious legal aspects, collected
taxes, assisted the parish priest and entertained visiting officials.
The gobernadorcillo was assisted by tenientes (deputies), alguaciles
(subordinate employees) and chiefs of police.
Elections for municipal offices were held annually by the outgoing
gobernadorcillo and 12 cabezas de barangay, with the parish present
being allowed to be present.
o 3 candidates nominated for the office of gobernadorcillo by
plurality vote, but only 1 is selected.
o Other officers were chosen directly by the convention.
The municipality was divided into barangays of about 50 families.
o Barangays were administrated by cabezas de barangay who
were agents for collecting taxes.
These cabezas paid no tribute on their own account and
became members of the principalia, the voting and
privileged class.
The position is originally hereditary, and breaks in the
family line were filled by through appointments by
Spanish officials. Eventually the position became
generally elective with service compulsory.
Maura Law - constituted a Municipal Council of 5, the captain and 4
lieutenants.
o It was given charge of active work of governing the municipality.
(administering public works, details of taxation etc.)
32
 AGRA // 2A LOCAL GOVERNMENT REVIEWER
ALARCON • ANDRES • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • CHENG • COLOQUIO • CUALOPING • DAYAO • DE LUIS
DIPLOMA • FAJARDO • GO • LIM, J. • LUNA • ONG • ORQUINAZA • PASCUAL• REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK

o Each member was required to have special qualifications.

o Positions were honorary, filled by persons who had held offices
or paid a land tax of 50 pesos.
o Governor General and Provincial Governor still retained
disciplinary jurisdiction over the council and its members.
o The Provincial Council had supervision over the Municipal
Council.
The City of Manila as well as other principal cities like Cebu, followed
closely what prevailed in Spanish-American cities, as derived from Spain.
o Manila was founded by Legaspi in 1871 as a Spanish City, and
given recognition.
o Had Spanish officials, 2 alcaldes (mayor and vice-mayor) and
regidores (councilors) and virtually became self-perpetuating.

Under the American Regime

The government of municipalities was first provided for in General Order
43 (1899), which was later superseded by General Order 40 (1900).
o This law was to “urge the people in the path of true progress,”
and to help them understand their duties and privileges as free
citizens. Filipinos for the first time are to exercise the right of
suffrage in the election of municipal officers.
President Mckinley urged the Second Philippine Commission to devote
attention to establishing municipal government so that the natives would
be provided with the opportunity to manage their own local affairs with
limited supervision and control. In response two acts were promulgated:
o Act 82 on January 31, 1901 provided the organization and
government of municipalities.
o Act 83 on February 5, 1901 provided for organization of
provinces (which was later embodied in the Administrative Code).

LOCAL GOVERNMENT 33
Administrative Law results from the fusion of different types of governmental powers in
CHAPTER I certain public officers which are part of the executive branch of the
INTRODUCTION government

Distinguished from International law

Concept of Administrative Law
ADMIN LAW INTERNATIONAL LAW
a. Belongs to the field of PUBLIC LAW; involves Constitutional law, Criminal
lays down rules which shall guide cannot be regarded as binding upon the
law, and International law. the officers of the administration officers of ANY government in their
b. Widest sense: entire system of laws under which the machinery of the in their action as AGENTS OF THE relation to their own government
state works and by which the state performs all government acts. GOVERNMENT EXCEPT: insofar as it has been adopted
c. Broad definition: law which provides the structure of government and into the ADMIN LAW OF THE STATE
prescribes its processes and procedures.
d. Less comprehensive sense: part of public law which fixes the organization
Distinguished from Constitutional law
and determines the competence of the administrative Authorities and
ADMIN LAW CONSTITUIONAL LAW
indicates to the individuals remedies for the violation of his rights.
carries out the plan in the prescribes the general plan or framework
e. Branch of modern law under which the executive department interferes minutest detail of the governmental organization
with the conduct of the individual for promoting the well-being of the
community; law concerning powers and procedures of administrative stress upon the right of individual treats of the rights of individuals
agencies. and emphasizes the power of
government and duties of the
Scope of Administrative law citizens
It is:
a. The law which fixes the administrative organization and indicates to individual remedies prescribes limitations on the powers of
structure of the government. for the violation of their rights the government to protect the rights of
b. The law, the execution or enforcement of which is entrusted to individuals against abuse in their exercise
administrative authorities (all those public officers and organs of
the government charged with amplification, application, and execution administrative law is necessary supplement of the constitution
of the law). since it fixes or regulates administrative organization of the
c. The law which governs public officers government
d. The law which creates administrative agencies, defines their also, administrative law complements the Constitution
powers and functions, prescribes their procedures
e. The law which provides the remedies to those aggrieved by Distinguished from Criminal Law
administrative actions or decisions Criminal law: consists of body of penal sanctions which are applied to ALL
f. The law which governs judicial review or relief against branches of the law including administrative law
administrative actions Note that: the mere affixing of a penalty to the violation of a rule of
g. The rules, regulations, orders and decisions made by administrative law DOES NOT deprive such rule of its administrative
administrative authorities. character
h. The body of judicial decisions/doctrines on any of the above.
Distinguished from the Law of Public Administration
Concerns of administrative law PUBLIC ADMINISTRATION ADMINISTRATIVE LAW
1. PRIVATE RIGHTS has to do with practical the subject matter of administrative
protection of private rights management and direction of law is PUBLIC ADMINISTRATION
includes nature and the mode of administrative power and system of the various organs of the State The true field of Administrative law
relief against administrative actions execution of state policies by refers only to the EXTERNAL ASPECT of
2. Delegated Powers and Combined powers executive and administrative public administration
concerned with officers and agencies exercising delegated powers and officers so, NARROWER BRANCH
not with the exercise of the constitutional powers of the President

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Principal subdivisions of administrative law Classification of administrative law
( note that the distinction is relative rather than absolute) AS TO ITS SOURCE 1. the law that controls administrative agencies
constitution
1. The law of internal administration statutes
treats of the legal relations between judicial decisions
o the GOVERNMENT and its ADMINISTRATIVE OFFICERS executive order
o administrative officer or organ to another administrative order
institutional side (going concern) 2. the law made by administrative authorities
o includes the legal structure or organization of public general regulations and particular determinations
administration personnel, material, fiscal and planning
activities, over-all management activities AS TO ITS PURPOSE 1. adjective or procedural administrative law
o legal qualification for office, disqualifications of officers, establishes the procure which an agency must or may
appointment, tenure. Compensation, and pensioning of allow in the pursuit of its legal purpose
officers, etc.
derived from consti, statutes or agency regulations
2. The law of external administration
2. substantive administrative law
concerned with the legal relations between:
establishment of primary rights and duties
o administrative authorities and private interests
(a) survey of powers and duties of adm. Authorities that relate to
AS TO ITS 1. general administrative law
private interest directly
APPLICABILITY general in nature and common to all or most
(b) analysis of SCOPE and LIMITS of such powers
(c) some account of the SANCTIONS attached as well as the government agencies
MEANS of ENFORCEMENT chiefly procedural law
(d) examination of the REMEDIES against official action includes due process clauses
note: administrative law is principal concerned with administrative regulation 2. special or particular administrative law
rather than administrative management pertains to particular agencies
proceeds from particular statue creating the individual
agency
has little application in connection with other agencies
mostly substantive law

Origin and development of administrative law

1. Recognition as a distinct category of law
Rapid expansion of administrative agencies and their increased
functions that a substantial body of jurisprudence has developed in the
field and general recognition has been given to ADMINISTRATIVE LAW
as distinct category of law

2. Multiplication of government functions

as modern life became more complex, the subject of government
regulations correspondingly increased which, in turn, caused a
multiplication of government functions, necessitating an enormous
expansion of public administration
specialization

3. Growth and utilization of administrative agencies

administrative law developed as the natural accompaniment of the
growth of administrative agencies and their utilization in the response
to the needs of a changing society
developed in response to the need for broad social or governmental
control over COMPLEX CONDITNOS and activities which in their detail
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 CANNOT BE DEALT with directly in an EFFECTIVE manner by the
legislature or judiciary.
4. Fusion of different powers of government in administrative agencies
administrative law, resulted from the increased functions of the
government, the recent tremendous growth in administrative agencies
and the fact that the agencies created in this period where much more
conventional
3 powers of the government fused in one body
5. A law in the making
In our jurisdiction, administrative law is still in its formative years
Advantages of the Administrative Process
1. Advantages of administration as compared with executive action
insures greater uniformity and impersonality of action
examples:
o patents
o public lands
o social security
o tax administration
o labor relations
2. Limitations upon the Powers of the Courts
issuances of rules an regulations of general applicability
fixing of rates or prices
o involves future conduct
3. Trend towards preventive legislation
desire for more effective and more flexible preventive remedies
example: licensing as form of regulation
4. Limitations upon Effective Legislation
lack of time and specialized knowledge,
lack of staff for securing expert information,
complexity of problems which arise even within the framework of a
general policy,
and harmful rigidity which would result from attempting to anticipate
in a statue the variety and changing character of the situations which
emerge in every aspect of life
5. Limitations upon exclusively judicial enforcement
many courts would vary their application of the law
since the courts could not take the initiative in enforcement, that
initiative would fall to many prosecutors or law enforcement agencies
and not to private individuals
NO UNIFORMITY in the policy
6. Advantages of continuity of attertion and clearly allocated responsibility
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administrative agencies have the time and facilities to become and to
remain continuously informed and they can be given unified
responsibility for effectuating the broad policies laid by congress
7. Need for organization to dispose of volume of business and to provide the
necessary records
specialized staffs and machinery to keep and make available the
records upon the judgment on thousands of applications as in licensing
Criticisms against administrative action
1. Tendency towards ARBITRARINESS
2. LACK OF KNOWLEDGE AND APTITUDE in sound judicial technique
3. Susceptibility to POLITICAL BIAS OR PRESSURE (uncertainty of tenure)
4. Disregard for SAFEGUARDS in full and fair hearing
5. Absence of STANDARD RULES OF PROCEDURE
6. Dangerous combination of the 3 functions/powers of the government
Relation between administrative agencies and courts
1. Collaborative
Courts may entertain action brought before them,
But they should call to their aid appropriate administrative agency on
questions within administrative competence
2. Role of Courts
a. Accommodate the administrative process to the traditional judicial
system
b. Accommodate private rights and public interest
c. Reconcile democratic safeguards and standards of fair play
3. Discharge of judicial role
Courts must aim to:
Maintain the Constitution by seeing that powers are NOT unlawfully
vested in Administrative agencies
Give due deference to the role of administrative agencies> > not to
usurp unwarrantedly nor limit their functions
Lend the powers of the court to proper attainment of the valid
objectives of the agency
Leave to the legislature or the peoples the remedy for administrative
action
o Courts are not advisers of administrative agencies
Administration of government distinguished from administration of
justice
Administration of government Administration of justice
determine what the law is in order to decision of controversies between
determine whether they are competent to individuals and government officers
act and they must decide whether in case as to applicability in the cases in
they are competent to acts if it wise for question of a particular rule of law
them to act
Administration as a separate power When the purpose of a statute is to abolish a
In the traditional classification of governmental power, no recognition is department/office/organization and replace it with another, the lawmaking
given to administration as a separate function of government authority says so.
It was, and still is confused with and treated as a part of the executive
A conversion of a state college into a university does not abolish the
function
It cannot be so plainly defined because it may slightly overlap the original entity if the law does not specify that the entity was being
legislative or the judicial field abolished. The change in name and curriculum should be considered a
1. As a function change in the academic status
“Administration” is the execution (in non-judicial matters) of the law Congress can delegate to the president the power to create positions,
o In this narrow but proper sense, administration is the activity create, abolish and merge offices in the executive department to but the
of the executive officers of the government reorganization must be made in accordance with the law and it must
Legislation: laying down rules or laws for the future
also be made in good faith
2. As an organization
The administration: the most important administrative authority Meaning of administrative agency
The group or aggregate of persons in whose hands the reins of the Administrative agency – the term used generally to describe an agency
government are for the time being exercising some significant combination of executive, legislative, and judicial
BOTH THE FUNCTION OF EXECTION OF LAW AND TOTALITY OF powers. It is a government body charged with administering and implementing
EXECUTIVE AND ADMINISTRATIVE AUTHORITIES particular legislation

Administration as an organization distinguished from government

o Includes boards, commissions, divisions, bureaus, departments, and even
government: institution or aggregate of institutions by which an
“office”  and  “authority”
independent society makes and carries out rules of action which are
necessary to enable men to live in a civilized state o Term is usually employed to denote the functionaries with which
administration: aggregate of those persons in whose hands the reins administrative law is concerned
of government are entrusted by the people for the time being o Embraces   “administrator”   or   “administrators”   or   “administrative  
tribunal”
o Does not preclude the referring to only a single officer
CHAPTER II o Agency of the government – any of the various units of the
NATURE AND ORGANIZATION OF ADMINISTRATIVE AGENCIES Government, including a department, bureau, office, instrumentality of
GOCC,  or  an  LGU  or  a  distinct  unit  therein.  “National  agency”  refers  to    unit  
A. Status and Characteristics of   the   national   Government   while   “local   agency”   refers   to   a   unit   of   the  
Creation, reorganization and abolition of administrative agencies Local Government. (Administrative Code of 1987)
Administrative Agencies may be created by or receive their powers from:
1. Constitutional provisions (May or may not be self-executing) Administrative Agency A Court
2. Legislative enactments
a. Administrative agencies of statutory origin are subject to A large organization (generally) A tribunal presided by one or more
expansion and contraction of their powers and functions staffed by men who are deemed jurists learned in the law
b. Subject to reorganization or abolition at the will of Congress experts in their particular field
c. Congress may vest in the President the power to reorganize
the administrative agencies and redistribute functions Performs a variety of functions: Only function is Judicial
3. The Executive may also create administrative agencies Quasi-legislative, quasi-judicial,
a. Particularly under statutes so providing executive.
In the creation/establishment of administrative agencies, Constitutional
restrictions that apply to legislative acts also apply Uses varying degree of discretion in More or less governed by fixed rules
Duly executed acts of administrative agencies have valid effects beyond arriving at decisions and often in arriving at its decisions and bound
the lifespan of the agency proceeds without being bound by by the rules that no final adjudication
technical rules of evidence or is to be made until after due notice to
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 procedure the parties with a full and fair hearing
Status or character of particular administrative agencies
Status and character of the agencies depend on the Constitutional and
statutory provisions creating them and the rights/duties/functions
conferred on them
1. As Public or governmental agencies
a. Agencies of the state or government
b. Represent no private interests, but functioning within the scope of
their powers in behalf of the government
c. Possess real power to act for the government
2. As judicial bodies or courts
a. Not actual courts nor part of the judicial system
b. Not courts in the strict sense
i. Cannot exercise purely judicial functions
ii. Not bound in their proceedings by all the rules applicable
to judicial proceedings
c. Their function is not to adjudicate impartially but to represent a
public interest
i. because of their investigatory and inquisitorial powers or
because
ii. or because they exercise commingled legislative,
executive and judicial functions
d. Courts in the broad sense
i. They exercise powers adjudicatory and judicial in nature
ii. Proceedings may partake of the nature of judicial
proceedings
iii. Commonly referred to as the quasi-judicial power
3. As legislative or executive agencies
Certain administrative agencies are deemed agents of the legislative
branch and NOT of the executive branch
In other cases, the agencies are deemed agents of the executive
department
a. Administrative agencies are said to be the arms and
instrumentalities of the legislative
i. May perform functions of a legislative or quasi-legislative
character
ii. But without legislative power in the strict sense
b. Also viewed as part of the executive branch, especially competent
to deal with matters within their authority by reason of
experience, information, careful study and expertise
4. As independent or subordinate bodies
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a. Independent bodies – an agency independent of the executive
branch. One not subject to a superior head of department
i. CSC, Comelec, COA
b. Subordinate bodies – a body whose action is subject to
administrative review or revision
5. As corporate bodies or legal entities
a. Some administrative agencies are corporate bodies with legal
capacity to sue and be sued
b. Other agencies have also been held to constitute legal entities
with perpetual existence apart from their members, thus
empowered to bring suit
Main Characteristics of administrative agencies
1. Size
Many administrative agencies are necessarily large
The size reflects the jurisdiction of the agency and the character of their
work
The staff includes many people performing a variety of tasks which are
coordinated,  supervised,  and  directed  toward  the  fulfillment  of  the  agency’s  
functions
2. Specialization
Administrative agencies specialize and their personnel includes ersons with
technical or professional training in their particular field
o A central problem of organization is how to utilize these skills of
training and experience best
o This does not mean that the members of a regulatory board or
commission need to be specialist
Rather it means that the expertise and available technical
resources are made available to them to come up with the
proper decision
Specialization has a bearing upon procedure
o An   agency’s   background of knowledge and experience and its
equipment for investigation enable it to do much of its work by
informal methods without the necessity of formal hearings
This also has an impact upon its procedures for formal
adjudication and for rule-making
3. Responsibility for Results
A particular administrative agency is charged by Congress with
accomplishing a particular statutory end
a. The various agencies, taken together, are charged with the
responsibility for making good to people a major part of the ends
of the democratic government
i. The agencies cannot take a wholly passive attitude
toward the issues that come before them
 ii. They cannot take a purely neutral attitude toward
accomplishment of the task which they are charged
iii. They must take the initiative
b. Administrative agencies supply the motive power of the
government, but at the same time, motive power calls for brakes
i. This gives rise to the problem of combining prosecution
and adjudication in the same agency;
ii. They must combine the responsibility of effective
enforcement of public policy with fair play to the private
interests being regulated
4. Variety of administrative duties
May be seen within a single agency as well as between different agencies
This makes generalization in description difficult
o Even more difficult is generalization in prescription
There is a variety in their functions; as well as a variety in the
circumstances and conditions under which their activities impinge upon
private individuals
Consequence of characteristics
Each of the four characteristics contributes and necessitates an important
characteristic of administrative procedure: delegation of function and
authority.
1. Internal organization which involves allocation of functions among the
members and staff of the agency
a. Necessitated by:
i. Large staff
ii. Many duties of the agency
iii. Necessity of harmonizing the responsibility for results
iv. Duty of deciding correctly in adjudication
v. Practical need for the fullest utilization of its special skills
and expertise
2. The Major work of the heads of an agency is normally supervision and
direction
a. They cannot themselves be specialists in all phases
b. But specialists must be readily available
c. Other persons must do bulk of the daily work
d. The heads function like CEOs, they should not be consumed by
the small details
i. Delegation is key
Delegation of function and authority
1. The 4 types of delegation
a. Delegation of internal management
b. Delegation of authority to dispose of routine matters
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c. Delegation of authority to dispose of matters informally, or to
initiate formal proceedings
d. Delegation of authority and function in formal proceedings
i. Includes delegation of authority and function in formal
proceedings
2. Degree
Delegation may be a matter of degree
Delegation may be combined with supervision and control
Such supervision and control may call for:
a. The statement by agency heads of policies which have crystallized
for routine application by subordinates
b. The consideration by agency heads of cases in which the
application of established policy is difficult, or in which policy has
not crystallized
c. The requirement of weekly or even dally reports to agency heads
Under like safeguards, delegation may involve decentralization by
delegation to field offices
Types of administrative agencies
1. Government is offering some gratuity, grant, or special privilege
a. Philippine   Veterans   Administration,   GSIS,   Public   Attorney’s  
Office, etc
2. Government is seeking to carry on certain functions of government
a. BIR, LRA, Bureau of Customs
3. Government is performing some business service for the public
a. Philippine Postal Corp., PNR, MWSA, NFA, NHA
4. Government seeks to regulate businesses affected with public interest
a. Insurance Commission, LTFRB, HLURB, ERB, Bureau of Mines
and Geo-Sciences
5. Government is seeking under police power to regulate private
businesses and individuals
a. SEC, MTRCB, GAB, Dangerous Drugs Board, Bureau of Trade
Regulation and Consumer Protection
6. Government is seeking to adjust individual controversies because of
some strong social policy involved
a. NLRC, Employees Compensation Commission, Social Security
Commission, SEC, DAR, Commission on Audit
An agency may fall under more than one type
B. Administrative Organization
Distribution of Powers of government
Administrative organization – the administrative structure of the
government including its political subdivisions and the allocation of powers,
functions, and duties to its various units or agencies.
1. Traditional Branches (under the Constitution and the Administrative Code)
1) Legislative power – vested in Congress, except to the extent
retained by the people under the provisions on initiative and
referendum
2) Executive power – vested in the President
3) Judicial power – vested in the Supreme Court, and such lower
courts as may be established by law
Powers expressly vested in any branch of government shall not be
exercised by, nor delegated to ay other branch of Government except to
the extent authorized by the Constitution
2. Special Bodies and Agencies
Three independent Constitutional Commissions
o Civil Service Commission
o Commission on Elections
o Commission on Audit
Exercise the powers and functions conferred upon by the Constitution and
the law
Other independent agencies include the office of the Ombudsman, and the
Commission on Human Rights
The state is mandated to establish an independent central monetary
authority and a national police commission
Organization of the office of the President
1. Office of the President Proper
a. Private office
Personal services for him and his family
b. Executive Office
Headed by the Executive Secretary
Fully responsive to the specific needs and requirements of
the President to fulfill the objectives of his office
c. Common Staff Support System
Offices or units under the general categories of development
and management, general government administration and
internal administration
d. Presidential Special Assistants/Advisers
Special assistants/advisers as needed by the President
Provide consultative services in such fields/conditions as
determined by the President
2. Agencies under the Office of the President
a. Under the chairmanship of the president
b. Under the supervision and control of the president
c. Under the administrative supervision of the office of the president
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d. Those attached to it for policy and proper coordination
e. Those that are not placed by the law/order creating them under
any special department
3. The President:
a. subject to the policy in the executive office,
b. and in order to achieve simplicity, economy, and efficiency
shall have continuing authority to organize the administrative structure of the
Office of the President.
For this purpose, he may:
a. Restructure the internal organization of the Office of the President
Proper by abolishing, consolidating, or merging units thereof or
transferring functions from one unit to another
b. Transfer any function under the Office of the President to any other
Department or Agency
a. As well as transfer functions to the Office of the President
from other Departments and Agencies
c. Transfer agency under the Office of the President to any other
department or agency as well as transfer agencies to the Office of the
President from other departments or agencies
Organization of Departments
Department – refers to an executive department created by law. It includes
any instrumentality having or assigned the rank of a department regardless of
its name or designation.
(1) Number, purpose, and decentralization:
(a) The Executive Branch shall have such Departments as are necessary
for the functional distribution of the work of the President and for the
performance of their functions
(b) The Departments shall be organized and maintained to insure their
capacity to plan and implement programs in accordance with
established national policies
(c) Bureaus and offices under each Department shall be grouped primarily
on the basis of major functions to achieve simplicity, economy and
efficiency in government operations and minimize duplication and
overlap of activities
(d) The functions of the different Departments shall be decentralized in
order to reduce red tape, free central officials from administrative
details concerning field operations and relieve them from unnecessary
involvement in routine and local matters.
(2) Department Proper
(a) Unless provided by the RAC or law, the Department proper shall
include the Office of the Secretary and the staff units directly under it.
The Office of the Secretary shall consist of the Secretary and the
 Undersecretary(ies), together with the personnel in their immediate
offices
(b) Every Secretary shall be assisted by such number of Undersecretaries
as may be provided by the RAC/law
(c) Whenever necessary, Assistant Secretary position(s) may be created
to form part of the Department proper
(d) In the absence of special provisions, the major staff units of each
department shall be the services which shall include:
1. Planning Service
2. Financial and Management Service
3. Administrative Service
4. Technical and Legal Service (when necessary)
(3) Jurisdiction Over Bureaus
Each Department shall have jurisdiction over bureaus, offices,
regulatory agencies, and government corporations assigned to it by
law
(4) Assignment of offices and agencies, etc.
The President shall, by EO, assign offices and agencies not otherwise
assigned by law to any department, or indicate to which department a
government corporation or board may be attached
Secretaries, Undersecretaries, and Assistant Secretaries
The authority and responsibility for the exercise of the mandate of the
Department and for the discharge of its powers and functions shall be
vested in the Secretary
o He shall have Supervision and Control of the Department
The Undersecretary shall advise and assist the Secretary in the Formulation
and implementation of department objectives and policies
o He shall Temporarily discharge the duties of the Secretary in case
of  the  latter’s  absence  or  inability  to  do  so
The Assistant Secretary shall perform such duties and functions as may be
provided by law or assigned to him by the Secretary
Department Services
1. Planning Service
Provides the department with economical, efficient, and effective
services relating to planning, programming and project development
Also discharges other functions provided by law
2. Financial and Management Service
Advise and assist the Secretary on budgetary, financial, and
management matters
3. Administrative Service
Provide the Department with economical, efficient, and effective
services relating to personnel legal assistance, information, records,
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delivery, and receipt of correspondence, supplies, equipment,
collections, disbursement, security and custodial work
4. Technical Service
Take charge of technical staff activities essential to a department
which cannot be allocated to the three other services or to the bureaus
5. Legal Service
Provided where the operations of the department involve substantial
legal work
o In such a case, the Administrative Service will not have a
Legal Division
It shall provide legal advice to the department
Where the workload of the department does not warrant a Legal
Service or a Legal Division:
o There shall be one or more legal assistants in the Office of the
Secretary
Organization of Bureaus
Bureau – refers to any principal subdivision or unit of any department. It shall
include any principal subdivision or unit of any instrumentality given or
assigned the rank of a bureau, regardless of actual name or designation (as in
the case of department-wide regional offices)
Performs a single major function or closely related functions. Each Bureau
shall be headed by a Director who may have one or more Assistant
Directors as provided by law.
Powers and duties of heads of bureaus or offices
1. The head of the bureau or office shall be its chief executive officer. He shall
exercise   overall   authority   in   matters   within   the   bureau   or   office’s  
jurisdiction, including those relating to its operations. He shall enforce all
laws and regulations pertaining to it
2. He shall appoint personnel to all positions in his bureau or office in
accordance with law.
a. In case of line bureaus, the head shall also appoint the second
level personnel of the regional offices unless the power has been
delegated.
b. He may discipline employees in accordance with Civil Service Law
3. He may, in the interest of economy, designate the assistant head to act as
chief of any division or unit within the organization, in addition to his duties
but without additional compensation
4. He shall - consistent with law, rules and regulations – prescribe the form
and fix the amount of all bonds executed by private parties to the
government under the laws pertaining to I bureau or office.
a. He shall pass on the sufficiency of the security and retain
possession of the bond
5. He shall prescribe forms and issue circulars or orders to secure the
harmonious and efficient administration of his bureau or office and to carry
into full effect the laws relating to matters within his jurisdiction.
a. Penalties shall not be prescribed in any circular or order for its
violation unless expressly allowed by law
6. He is authorized to issue orders regarding the administration of its internal
affairs for the guidance of or compliance by its officers and employees
Staff Bureau – shall primarily perform policy, program development and
advisory functions. It shall avail itself of the planning, financial and
administrative services in the department proper, if circumstances so warrant
The Director of a staff bureau shall:
1. Advise and Assist he Office of the Secretary on matters pertaining to the
Bureau’s  area  of  specialization
2. Provide consultative and advisory services to the regional offices of the
department
3. Develop plans, programs, operating standards, and administrative
techniques for the attainment of the objectives and functions of the bureau
4. Perform such other duties as provided by law
Line Bureau – shall directly implement programs adopted pursuant to
department policies and plans. It may have staff units, as may be necessary,
corresponding to the services of the department proper. If the Bureau is small,
only a single unit performing combined staff functions may be provided
The Director of a line bureau shall:
1. Exercise supervision and control over all division and other units, including
regional offices, under the bureau
2. Establish policies and standards for the operations of the bureau pursuant
to the plans and programs of the department
3. Promulgate rules and regulations necessary to carry out bureau objectives,
policies and functions
4. Perform such other duties as may be provided by law
Organization of Field Offices
1. Regional Offices
o They shall be established according to law defining field service areas
o The administrative regions shall be composed of the NCR and Regions I to
XII. Provincial and district offices may be established only by law when
necessary
o Except as otherwise provided by law and when the needs of the service
require, the department or agency shall organize on an integrated regional
office on a department or agency-wide basis
2. Administration
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o The regional office shall be headed by a Regional Director who may be
assisted by 1 assistant Regional unless provided for by law
o The Regional Director shall be responsible for department or agency
functions performed in the region under his jurisdiction
3. Supervision
o Whenever the function or activity of a department or agency requires
central or inter-regional action, the function may be performed by the
regional offices under the supervision and control of the department proper
or line bureau concerned
o The staff bureau or division shall perform primarily advisory or auxiliary
functions and exercise in behalf of the department or agency functional
supervision over the regional offices.
4. Organization
o Regional offices organized on a department-wide basis shall have units or
personnel in which the functional areas of the staff bureaus and services in
the department shall be represented.
o Regional offices of a line bureau may have units or personnel in which the
functional areas of the primary units of the bureau are represented.
o Related functions of regional units shall be consolidated
5. Functions of a Regional Office
a. Implement laws, policies, plans, programs, rules and regulations of the
department/agency in the regional area
b. Provide economical, efficient and effective service to the people in the
area
c. Coordinate with the regional offices of other departments, bureaus,
and agencies in the area
d. Coordinate with the local government units in the area
e. Perform such other functions as provided by law
o District offices may be established only in cases of clear necessity
Definition of an Administrative Relationship
Supervision and Control
Includes the authority to:
a. Act directly whenever a specific function is entrusted by law or regulation
to a subordinate
b. Direct the performance of a duty; restrain the commission of acts
c. Review, approve, reverse, or modify acts and decisions of subordinates
d. Determine priorities in the execution of plans and programs
e. Prescribe standards, guidelines, plans and programs
Unless a different meaning is explicitly provided by specific law governing
the  relationship  of  particular  agencies,  “control”  shall  encompass  the  above  
definition
Administrative Supervision
It shall govern the administrative relationship between a department or its
equivalent and regulatory agencies or other agencies as may be provided
for by law
1. To generally oversee the operations of such agencies and to insure that
they are managed effectively, efficiently, and economically without
interference with day-to-day activities
2. To require the submission of reports and cause the conduct of
management audit, performance evaluation, and inspection to determine
compliance with policies, standards and guidelines of the department
3. To take such action as may be necessary for the proper performance of
official functions, including rectification of violations, abuses and other
forms of maladministration
4. To review and pass upon budget proposals of such agencies but my not
increase or add to them
o However, such authority shall not extend to:
1. Appointments and other personnel actions in accordance with the
decentralization of personnel functions under the code
a. Except when appeal is made from an action of the appointing
authority, in which case the appeal shall be initially sent to the
department or its equivalent, subject to appeal
2. Contracts entered into by the agency in the pursuit of its objectives, the
review of which and other procedures related thereto shall be governed by
appropriate laws, rules and regulations
3. The power to review, reverse, revise, or modify the decisions of regulatory
agencies in the exercise of their regulatory or quasi-judicial functions
1. Unless a different meaning is explicitly provided by specific law governing
the   relationship   of   particular   agencies,   “supervision”   shall   encompass   the  
above definition
Attachment
2. Lateral relationship between the department or its equivalent and the
attached agency or corporation for the purpose of policy and program
coordination
3. How coordination may be accomplished?
1. have the department represented in the governing board of attached
agency
2. have attached corporation or agency comply with a system of periodic
reporting reflecting the progress of the programs
3. have the department provide general policies through its
representatives in the board which will be the framework for internal
policies
matters of day-to-day administration or internal operations:
o shall be left to the discretion or judgment of the executive officer of
the agency
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o if Secretary or head of Board strongly disagrees on the interpretation
and application of policies, he shall bring matter to the PRESIDENT for
resolution
GOCCs
o if attached to a department shall submit to the Secretary concerned
their audited financial statements within 60 days after the close of the
fiscal year
should any GOCCs incur an operating deficit at close of fiscal year
o it shall be subject to administrative supervision of the department and
the   corporation’s   operating   and   capital budget shall be subject to the
department’s  examination
Functions and powers of the Department Secretary
1. Advise the President in issuing orders, regulations or promulgations
relative to matters under the jurisdiction of his Department
2. Establish the policies and standards for the operation of the
Department pursuant t the approved programs of governments
3. Promulgate rules and regulations necessary to carry out the
department objectives, plans, policies or projects
4. Promulgate administrative issuances necessary for administration of
the offices under the Secretary and proper execution of related laws.
5. Exercise disciplinary powers over officers and employees under the
Secretary in accordance with law
a. Includes the investigation and designation of a committee to
conduct the investigation
6. Appoint all officers and employees of the Department except those
whose appointments are vested in the President of another authority.
a. If the department is regionalized on a department-wide basis:
the Secretary shall appoint employees to the positions in the
second level in the regional offices
7. Exercise jurisdiction over all bureaus, offices, agencies and
corporations under the Department
8. Delegate   authority   to   officers   and   employees   under   the   Secretary’s  
direction in accordance with the RAC
9. Other functions provided by law
Authority of Department Secretary
He shall have supervision and control over the bureaus, offices, and agencies
under him subject to the following:
1. initiative and freedom of action on part of subordinates shall be
encouraged and promoted
2. with respect to functions involving DISCRETION, experienced
judgment or expertise vested by the law upon a subordinate he shall
exercise control over that subordinate in accordance with the law
3. regulatory functions of an agency subject to departmental control:
governed by this code
a. (not applicable to chartered institutions and GOCCs)
 2) heads or regulatory agencies shall submit ANUALLY (for approval of
Delegation of Authority the Secretary) their budgets, operating costs and work plans
The Secretary has authority and responsibility over the operation of his agency. 3) Regulatory agencies may avail of the common auxiliary and
management services of the department as may be convenient and
He may delegate such authority to the bureau and regional directors as may be
economical for their operations
necessary.
Delegation shall be to the extent necessary for economical, efficient
and effective implementation of national/ local programs
delegation shall be IN WRITING
indicate to which officer or officers the delegation is made
vest sufficient authority to enable the delegate to DISCHARGE
his assigned responsibility

Line Bureau Authority

Line Bureaus of a Department exercise supervision and control over
REGIONAL AND FIELD OFFICES
o They shall be directly responsible for the development and
implementation of plans and programs
The Regional and other field offices shall constitute the OPERATING ARMS
of the bureau for DIRECT IMPLEMENTATION OF PLANS
o Undertakes bureau operations within their respective jurisdiction
o Directly responsible to their bureau director

Relationships  of  GOCC’s  to  the  Department

Government-owned or –controlled corporations – refer to an agency
organized as a stock or non-stock corporation, vested with functions relating to
public needs whether governmental or proprietary in nature, owned by the
government directly or through its instrumentalities, either wholly or at least to
the extent of 50% of its capital stock

1. May be categorized further by the DBM, CSC, and the COA for
purposes of the exercise and discharge of their respective powers and
responsibilities
2. Shall be attached to the appropriate department with which they have
allied functions or as provided by executive order for policy and
program coordination
3. To fully protect the interests of the government, at least 1/3 of the
members   of   the   Boards   of   GOCC’s   should   either   be   a   Secretary,   an  
Undersecretary, or an Assistant Secretary

Relationship of Regulatory agencies to the department

Regulatory Agency – refers to any agency expressly vested with jurisdiction
to regulate, administer or adjudicate matters affecting substantial rights and
interests of private persons, the principal power of which are exercised by a
collective body, such as a commission, board, or council
1) subject to the administrative supervision of the department under
which  they  are  placed  (except  for  GOCC’s)

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