CHAPTER 2 – GENERAL PRINCIPLES

WHAT IS A CORPORATION?

 A corporation is an artificial being created by operation of law, having the right of succession and
the powers, attributes, and properties expressly authorized by or incident to its existence.
 A legal institution devised to confer upon individuals of which it is composed of powers. Privileges,
and immunities which they would not otherwise possess.
 An artificial being, invisible, intangible and existing, in contemplation of law.

CLASSIFICATION OF CORPORATIONS

• Public = organized for government of a portion of a state. created for gov't use

quasi- corporation

municipal corporation

• Private = formed for some private purpose

• Quasi-Public = a private corporation that renders public service, it has both elements of a public
and private corporation. They are compelled by law to render public service.

SPECIAL CLASSES OF CORPORATION

• de facto corporation = the consent of the state is implies even though the conditions of
incorporation are not substantially complied with; they acted in good faith and the court treats
the defective corporation as if it was properly incorporated under special circumstances.

• corporation by prescription = under the principle of common law, a body of men, without formal
incorporation, has claimed to be one , exercising corporate powers for a long period of time with
the tolerance of the state.

• corporation by estoppel = it is not recognized by the state. The parties in a given transaction are
estopped to deny corporate existence to protect the rights of innocent third persons.
PUBLIC CORPORATIONS AND PRIVATE CORPORATIONS, DISTINGUISHED

Public Corporations Private Corporations

As to their purpose
Established for the purposes connected with the Created for the private aim, gain, or benefits of
administration of civil and local governments its members
As to their creation
Creations of the State either by general or special Created by the will of the incorporators with the
act recognizance of the State
As to their effect from creation
Voluntary agreement by and among the
involuntary consequence of legislation
members thereof
Test in determining the classification of corporation
Primary : if created as an agent of the State to
carry out governmental functions
Secondary: if created by the State as its own
agency or instrumentality in carrying out
governmental function

MUNICIPAL CORPORATIONS AND QUASI-CORPORATION, DISTINGUISHED

Municipal Corporations Quasi-Corporation

A body politic and corporate constituted by the

incorporation of the inhabitants for the purposes Created by the State for a limited purpose
of local government; a perfect public corporation
As to the object or purpose
For the public, although incidents connected with Of private nature and object with incidents only
it may be of private nature that are public.
How it is established
By an act of legislation
Governing rules
Subject to the rules of liability controlling private
corporations in the ownership of property

ELEMENTS OF MUNICIPAL CORPORATIONS – formulated by Lord Coke of England, adopted by the States
and in the PH

 Legal creation/incorporation
o The law/statute creating the LGUs
o In the case of barangays = ordinance of a province or a highly urbanized city, although a
barangay may be created through a statute
 Corporate name
 o The name of the municipal corporation by which it is incorporated and known and in
which all corporate acts are done (ex: City of Cagayan de Oro)
o Under §13 of the LGC, the Sangguniang Panlalawigan may, in consultation with the
Philippine Historical Institute, CHANGE the name of component cities and municipalities,
upon the recommendation of the Sanggunian concerned.
 It shall be effective only if ratified in a plebiscite conducted for the purpose in the
political unit concerned
o A change of name will not destroy nor dissolve the identity of the municipal corporation
nor affect its rights, privileges, or liabilities
o Prohibited to use the names of living persons EXCEPT for justifiable reasons, such as the
use of the family name in a particular community whose members significantly
contributed to the welfare of the Filipino people
 Inhabitants
o Refers to the natural persons, the constituents who compose the municipal corporation
o No inhabitants = no municipal corporation
o A municipal corporation is created for the civil govt of the inhabitants and the regulation
& administration of their local affairs
o Under the LGC, there is a certain number of inhabitants required for the creation of an
LGU
 Territory
o The land mass where the inhabitants reside, together with the waters, and the air space
above land and water
o Refers to the jurisdiction of a municipal corporation in the discharge of its powers and
functions, subject to constitutional and statutory limitations.
o Territorial boundaries of municipal corporations must be definite, fixed, or certain.
o An incorporation is void where the boundaries of the municipal corporation are not
described with certainty

DUAL NATURE AND FUNCTIONS OF MUNICIPAL CORPORATION (MUNCORP)

 Governmental and proprietary functions

 §15 of LGC
o Section 15. Political and Corporate Nature of Local Government Units. - Every local
government unit created or recognized under this Code is a body politic and corporate
endowed with powers to be exercised by it in conformity with law. As such, it shall
exercise powers as a political subdivision of the national government and as a corporate
entity representing the inhabitants of its territory.

Governmental (public or political) Proprietary (private, patrimonial, or corporate)

Involves the administration of the power of the Exercised for the special benefit and advantage of
State and promoting public welfare the community and for the attainment of their
collective needs
Agents of the State An entity representing the inhabitants
Passage of traffic ordinances, preservation of Maintenance of parks, cemeteries, and fiesta
public and other regulatory measures celebrations
IMPORTANCE OF THE DISTINCTION:

1.) The liability of municipalities for their acts and those of their officers; and
2.) The extent of legislative control over the same.

WHAT ARE THE SOURCES OF MUNICIPAL CORPORATION?

1.) The 1987 Constitution

a. Article II, Section 25
b. Article X, Sections 5-7
2.) The LGC of 1991 – RA 7160
3.) The City Charters
4.) Other laws, decrees, executive orders, proclamations, and administrative regulations

CLASSIFICATION OF POWERS

- Express or implied, inherent (powers necessary and proper for governance

- Public/governmental or private/propriety
- Intramural or extramural
- Mandatory or directory
- Ministerial or discretionary
- Under the LGC and its implementing rules:
 Those that are expressly granted to them;
 Those that are implied from those that are granted to them;
 Those that are necessary, appropriate, or incidental for their efficient and effective
governance, and
 That are essential to the promotion of the general welfare of the inhabitants

-END OF CHAPTER 2-
 CHAPTER 3 – THE CONCEPTS OF LOCAL AUTONOMY, DECENTRALIZATION, DEVOLUTION AND
DECONCENTRATION

LOCAL AUTONOMY

 Article II, Sec. 25 – “… ensure the autonomy of local gov’t”,

 Article X, Sec. 2 – “the territorial and political subdivisions shall enjoy local autonomy”
 According to Pimentel = LGUs enjoy a greater measure of self-government compared to their very
limited powers in the past

CASES

1. Limbona vs Mangelin
170 SCRA 794-795 (1989)

- Under the old Local Government law

- Autonomy is either decentralization of administration or decentralization of power
- Decentralization of administration
 the central government delegates administrative powers to make LGUs more responsive
and accountable & ensure the fullest development as self-reliant communities and make
them more effective partners in the pursuit of national development and social progress.
 Relieves the central government of the burden of managing local concerns and focusing
on national matters
 The President exercises general supervision over the LGUs to see that local affairs are
administered according to law, he has no control over their acts in a sense that he can
substitute their judgments with his own
- Decentralization of power
 Involves the abdication of political power in favor of LGUs declared autonomous
 An autonomous government can act freely without or with minimum supervision from
the central authorities
 However, decentralization of power amounts to self-immolation, meaning the
autonomous government becomes accountable not to central authorities but to its
constituency
 The autonomous government under decentralization of power is subject alone to the
decree of the organic act creating it and accepted principles on the effects and limits of
autonomy
 The autonomous government under decentralization of administration is subject to the
supervision of the national government through the President and the DILG
2. Ganzon vs CA
200 SCRA 271 (1991)
- The national government has not completely relinquished all its powers over local and
autonomous governments.
- Only administrative powers over local affairs are delegated to political subdivisions
 - Purpose: to make LGUs more responsive and effective at the local levels, to propel social and
economic growth and development in the local level
- The activities of the LGUs must be integrated and coordinated with the goal of the national
government.
- Policy setting still lies with the Congress and the President
3. San Juan vs CSC
194 SCRA 69 (1991)
- The Governor appointed someone to become the PBO of the Province of Rizal, however the
Secretary of Budget and Management insisted on someone more qualified.
- Issue: whether or not the Secretary of Budget and Management has supervision of appointing the
Provincial Budget Officer over the Governor of the province?
- The SC held that the Governor is allowed to nominate another applicant qualified to the position
because he was seen to be in a much better position than the Secretary in determining local needs.
- Where the law is capable of two or more interpretations, one in favour of centralized power of
Malacanang and the other beneficial to the local autonomy, the scales should be in favour of the
local government
- When the CSC interpreted the recommending power of the Governor to be purely directory, it
went against the letter and spirit of the constitutional provisions in local autonomy
4. LLDA vs CA
GR Nos. 120865-71, December 7, 1995
- Issue: whether or not the LLDA had the authority to order LGUs along the Laguna Bay to cease
and desist from issuing fishing privileges, which the power supposedly should belong the LGUs
themselves (as provided by the LGC of 1991)
- The SC held that the purpose of issuing fishing privileges by the LGUs is for revenue purposes
while to grant the same fishing privileges by the LLDA is for the purpose of effectively regulating
and monitoring activities in Laguna Bay, as well as the lake quality control and management
- The charter of LLDA embodies a valid exercise of police power and thus should prevail over the
LGC of 1991 on matters affecting the Laguna Bay

FISCAL AUTONOMY

- the LGUs have the power to create their own sources of revenue in addition to their equitable
share in national taxes, and also allocate the same in accordance with their own priorities.
- LGUs prepare the budget and must work within the constraints thereof.
- Not formulated at the national level and not imposed on local government.

CREATION OF AUTONOMOUS REGIONS

- Grant of political autonomy, as well as fiscal and administrative autonomy

- Because each autonomous region has a regional government composed of an executive,
legislative, and special courts with personal, family, and property law.
SYSTEM OF DECENTRALIZATION

- From the national government to the local government unit

- The State is mandated to provide for a more responsive and accountable local government
structure instituted through a system of decentralization; The purpose of such is make local
government units be given more powers , authority, responsibilities, and resources

Section 3. Operative Principles of Decentralization. - The formulation and implementation of policies and
measures on local autonomy shall be guided by the following operative principles:

(a) There shall be an effective allocation among the different local government units of their
respective powers, functions, responsibilities, and resources;

(b) There shall be established in every local government unit an accountable, efficient, and
dynamic organizational structure and operating mechanism that will meet the priority needs and
service requirements of its communities;

(c) Subject to civil service law, rules and regulations, local officials and employees paid wholly or
mainly from local funds shall be appointed or removed, according to merit and fitness, by the
appropriate appointing authority;

(d) The vesting of duty, responsibility, and accountability in local government units shall be
accompanied with provision for reasonably adequate resources to discharge their powers and
effectively carry out their functions: hence, they shall have the power to create and broaden their
own sources of revenue and the right to a just share in national taxes and an equitable share in
the proceeds of the utilization and development of the national wealth within their respective
areas;

(e) Provinces with respect to component cities and municipalities, and cities and municipalities
with respect to component barangays, shall ensure that the acts of their component units are
within the scope of their prescribed powers and functions;

(f) Local government units may group themselves, consolidate or coordinate their efforts, services,
and resources commonly beneficial to them;

(g) The capabilities of local government units, especially the municipalities and barangays, shall
be enhanced by providing them with opportunities to participate actively in the implementation
of national programs and projects;

(h) There shall be a continuing mechanism to enhance local autonomy not only by legislative
enabling acts but also by administrative and organizational reforms;

(i) Local government units shall share with the national government the responsibility in the
management and maintenance of ecological balance within their territorial jurisdiction, subject
to the provisions of this Code and national policies;
 (j) Effective mechanisms for ensuring the accountability of local government units to their
respective constituents shall be strengthened in order to upgrade continually the quality of local
leadership;

(k) The realization of local autonomy shall be facilitated through improved coordination of
national government policies and programs an extension of adequate technical and material
assistance to less developed and deserving local government units;

(l) The participation of the private sector in local governance, particularly in the delivery of basic
services, shall be encouraged to ensure the viability of local autonomy as an alternative strategy
for sustainable development; and

(m) The national government shall ensure that decentralization contributes to the continuing
improvement of the performance of local government units and the quality of community life.

DEVOLUTION

- The act by which the National Government confers power and authority upon the various LGUs
to perform specific functions and responsibilities
- LGUs shall exercise these powers and discharge such functions and responsibilities that are
necessary, appropriate, or incidental to efficient provision of the basic services and facilities
enumerated in the LGC
- Public works and infrastructures are not included in the devolution of powers unless the LGU
concerned is duly designated as the implementing agency for such projects, facilities, programs,
and services.
- However, devolution does prohibit the National Government or the next higher of local gov’t from
providing basic services and facilities assigned to a lower level of LGU when the same are not
available or if available, the resources are inadequate to meet the requirements

DECONCENTRATION

- The transfer of authority and power to the appropriate regional offices whose major functions
are not devolved to LGUs
- The National Gov’t is mandated to effect deconcentration within six months from the effectivity
of the LGC

SUMMARY

 Local autonomy refers to the degree of self–determination exercised by the LGU vis-à-vis the
central gov’t
 A system of decentralization is a PRE-REQUISITE to achieve local autonomy
 To effect the decentralization, we use the process of devolution
 If the process involves the transfer of functions from the national office to the regional & local
office involving administrative functions but not to LGUs, then it is properly called
deconcentration