I.

General Principles

A. Corporation

1. Definitions

Question: What is a Corporation?

Answer: 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 law or incident to its existence. (Sec. 2, Corp.
Code; Sec. 2, Act No.1459)

2. Classifications

Question: What are the classifications of public corporations?

Answer: Corporations are classified into:

(i) Public – organized for the government of a portion of the
State;
(ii) Private – formed for some private purpose, benefit, aim or
end;
(iii) Quasi-public – Private Corporation that renders public
service or supplies public wants.

QUESTION: What is a public corporation?

Answer: It is one created by the State either by general or special act for
purposes of administration of local government or rendering service in the
public interest. (Rodriguez, p. 2, LGC 5th Edition)

Question: Define Private Corporation.

Answer: Private Corporation is one formed for some private purpose,

benefit, aim, or end. (Sec. 3, Act No. 1459)

Question: Define Quasi‐public Corporation.

Answer: A quasi-public corporation is a species of private corporations,

but the qualifying factor is the type of service the former renders to the
public: if it performs a public service, then it becomes a quasi-public
corporation. (Philippine Society for the Prevention of Cruelty to
Animals v. COA, supra)

QUESTION: Distinguish public corporation from private corporation.

Answer:

As to PUBLIC PRIVATE

Administration of local
Purpose Private purpose
government
Who By the state either by By incorporators with
Creates general or special act recognizance of the state
How By agreement of members
By law or legislation
Created

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3. Criterion to determine Public Corporation

Question: What is the test in determining a Public Corporation?

Answer: The criterion to determine whether a corporation is public is that

the relationship of the corporation to the Sate, that is, if created by the
State as its own agency to help the State in carrying out its governmental
functions then it is public, otherwise, it is private. (Philippine Society for
the Prevention of Cruelty to Animals v. COA, 2007)

QUESTION: The Commission on Audit (COA), in conformity with

Republic Act 6758 concerning the policy of standardization of
compensation, did not allow the Sangguniang Panlalawigan of
Negros Occidental to implement its Resolution 720A which allocated
the province’s retained earnings to the health care and
hospitalization of provincial officials and employees. COA says
such allocation would require the approval of the President. Is COA
correct?

SUGGESTED ANSWER: NO. Presidential approval is not required as it

applies only to government offices/agencies, government-owned and
controlled corporations and their respective governing boards which are
under the control of the President. LGUs are subject only to the power of
general supervision of the President, and as such, the President's
authority is limited to seeing to it that rules are followed and laws are
faithfully executed. The President cannot lay down the rules, nor can he
modify or replace them. (Province of Negros Occidental v. COA, 2010)

QUESTION: What is a Government Owned and Controlled

Corporation (GOCC)?

Answer: any agency organized as a stock or non‐stock corporation vested

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

QUESTION: What are the requisites of a GOCC?

Answer:
1. Any agency organized as a stock or non‐stock corporation;
2. Vested with functions relating to public needs whether
governmental or proprietary in nature;
3. Owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty‐one (51) of its capital
stock. (Leyson, Jr. v. Office of the Ombudsman 2000)

Question: Distinguish Public Corporation from GOC.

Answer:

As to Public Corporation GOCC

Purpose For the government of a An agency organized as a

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 portion of the state, and the stock or nonstick
general good and welfare corporation, vested with
[Sec. 3, Act. No. 1459] functions relating to public
needs whether
governmental or proprietary
in nature [Sec. 2(13),
Admin. Code]

Who By the state either by By Congress or by

Creates general or special act incorporators

How By law or legislation By special charters or

Created under the Corporation Code

Ownership Formed and organized by Owned by the Government

the state directly or through its
instrumentalities either
wholly, or, where applicable
as in the case of stock
corporations, to the extent
of at least 51% of its capital
stock Sec. 2(13), Admin.
Code]

Nature and Constituted by law and Organized as a stock or

Status possessed of substantial nonstick corporation (Sec.
control over its own affairs; 2(13), Admin. Code)
autonomous in the sense
that it is given more Independent agency of the
powers, authority, Government for
responsibilities, and administrative purposes
resources
Has corporate powers to be
exercised by its board of
directors, and its own
assets and liabilities (Nat’l
Waterworks & Sewerage
Authority v. NWSA
Consolidated Unions,
1964)

4. Classes of Public Corporations

Question: What are the different classes of Public Corporation

Answer:
(i) Quasi‐public corporations – public corporations created as
agencies of the State for narrow and limited purposes
without the powers and liabilities of self‐governing
corporations. (PCSO, etc.) It does not possessed with
powers and liabilities of self-governing corporations and it
takes charge of some public or state work for the general
welfare, other than government of a community) [MARTIN] ;
(ii) Municipal corporations – body politic and corporate
constituted by the incorporation of inhabitants for purposes
of local government. It is established by law partly as an
agency of the State to assist in the civil government of the
country, but chiefly to regulate and administer the local or
internal affairs of the city, town or district which is
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 incorporated. (Dillon, Municipal Corporations, Vol.2, pp. 58‐
59.)

a) Quasi-Corporations

QUESTION: Atty. Garin was issued a traffic violation receipt and his
driver’s license was confiscated for parking illegally pursuant to Sec.
5(f) of Republic Act 7924 granting the MMDA the power to confiscate
and suspend or revoke drivers’ licenses without need of any other
legislative enactment. Garin wrote MMDA Chairman Prospero Oreta
requesting the return of his license and expressed his preference for
case to be filed in Court. Without an immediate reply from the reply
from the Chairman, Garin filed a complaint for preliminary injunction
assailing among other that Sec. 5(f) of RA 7942 violates the
constitutional prohibition against undue delegation of legislative
authority, allowing MMDA to fix and impose unspecified and
unlimited fines and penalties. Is the contention of Atty. Garin
correct?

SUGGESTED ANSWER: YES. The MMDA’s power to confiscate and

suspend or revoke drivers’ licenses is construed to mean enforcing
existing traffic rules and regulations and thus, it can only can only
confiscate or suspend drivers’ licenses pursuant to existing traffic laws
and regulations enacted by Congress or, in this case, the City of Manila
and not “without need of any other legislative enactment.” The MMDA is
not a political unit of government and does not possess police power or
the power to legislate. (MMDA v. Dante Garin, 2005)

b) Municipal Corporation

QUESTION: The City of Davao filed an application for a Certificate of

Non-Coverage (CNC) for its proposed project, the Davao City Artica
Sports Dome, with the Environmental Management Bureau however, was
denied on the ground that the proposed project was within an
environmentally critical area; that the City of Davao must first undergo the
environmental impact assessment (EIA) process to secure an
Environmental Compliance Certificate (ECC). The City claims that it is not
required by law to secure an Environmental Compliance Certificate (ECC)
from the Environmental Management Bureau to construct its Artica Sports
Dome. Are the LGU’s excluded from the coverage of PD 1586, one which
requires an environmental impact assessment (EIA) process to secure an
Environmental Compliance Certificate (ECC)

SUGGESTED ANSWER: NO. Davao is covered by the law which requires

all persons to secure an ECC when they undertake an environmentally-
critical project. Section 4 of PD 1586 provides that “no person, partnership
or corporation shall undertake or operate any such declared
environmentally critical project or area without first securing an
Environmental Compliance Certificate issued by the President or his duly
authorized representative." Notably, the LGU’s are juridical persons. As
the Civil Code defines a person as either natural or juridical and as the
state and its political subdivisions (i.e., local government units) are juridical
persons, the City of Davao, being a local government unit and thus a
juridical person, is not excluded from the coverage of the law requiring
persons to secure an ECC. (Republic v. City of Davao, 2002)

B. Local Autonomy

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1. Principles of Local Autonomy

Question: What is Local Autonomy?

Answer: The principle of local autonomy under the 1987 Constitution

simple means decentralization (Basco v. PAGCOR, G.R. No. 91649, May
14, 1991). Local Government has been described as a political subdivision
of a nation or state which is constituted by law and has substantial control
of local affairs. In a unitary system of government like the Philippines, local
governments can only be an imperium in imperio. Local government in
such a system can only mean a measure of decentralization of the
function of government. (Limbona v. Mangelin,1989)

Question: Define devolution with respect to local government units.

Answer: Devolution is the act by which the national government confers

power and authority upon the various local government units to perform
specific functions and responsibilities [Sec. 17, LGC].

Question: Define deconcentration.

Answer: Deconcentration also known as administrative decentralization is

a decentralization which is administrative in nature. It involves the transfer
of functions or the delegation of authority and responsibility from the
national office to the regional and local office. (Disomancop v. Secretary
of DPWH, 2004)

2. Decentralization and its classification

Question: What is Decentralization?

Answer: Decentralization refers to either (1) decentralization of

administration or to (2) decentralization of power.

Q: What are the kinds of autonomy?

Answer: There are two (2) kinds of autonomy:

1. Decentralization of administration – the central government
delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process
make LGUs more responsive and accountable and ensure their
fullest development as self-reliant communities and make them
effective partners in the pursuit of national development and
social progress; and

2. Decentralization of power – involves abdication of political

power in favor of LGUs declared autonomous and amounts to
“self-immolation”, because the autonomous government
becomes accountable not to the central authorities but to its
constituency (Limbona v. Mangelin, supra)

QUESTION: The Province of Batangas filed a petition for certiorari to

declare unconstitutional and void certain provisos contained in the
General Appropriations Acts (GAA) of 1999, 2000 and 2001
earmarking for said years five billion pesos (P5,000,000,000.00) of the
Internal Revenue Allotment (IRA) for the Local Government Service

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Equalization Fund (LGSEF) and imposed conditions for the release
thereof such as modifying the allocation scheme for such allotment
as prescribed under the Local Government Code and securing
approval for local projects from the Oversight Committee on
Devolution. Rule on the constitutionality of the assailed provisos.

SUGGESTED ANSWER: The assailed provisos in the GAAs of 1999,

2000 and 2001 and the OCD resolutions violate the constitutional precept
on local autonomy. Section 6, Article X of the Constitution provides that
“Local government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them”. When
parsed, it would be readily seen that this provision mandates that (1) the
LGUs shall have a "just share" in the national taxes; (2) the "just share"
shall be determined by law; and (3) the "just share" shall be automatically
released to the LGUs. A basic feature of local fiscal autonomy is the
automatic release of the shares of LGUs in the National internal revenue.
As a rule, the term "SHALL" is a word of command that must be given a
compulsory meaning. The provision is, therefore, IMPERATIVE. To
Court’s mind, the entire process involving the distribution and release of
the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA
or “just share” of the LGUs in the national taxes. To subject its distribution
and release to the vagaries of the implementing rules and regulations,
including the guidelines and mechanisms unilaterally prescribed by the
Oversight Committee from time to time, as sanctioned by the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions,
makes the release not automatic, a flagrant violation of the constitutional
and statutory mandate that the “just share” of the LGUs “shall be
automatically released to them.” (Province Of Batangas vs. Alberto G.
Romulo, 2004)

3. Territorial and Political Subdivision

Question: What are the political subdivisions of local government

called?

Answer: The political subdivisions are enumerated by Article X Section 11

of the Constitution: “The territorial and political subdivisions of the
Republic of the Philippines are the provinces, cities, municipalities, and
barangays. There shall be autonomous regions in Muslim Mindanao and
the Cordilleras as hereinafter provided.” These political subdivisions enjoy
autonomy, especially in local affairs.

Municipal Corporation in the Philippines:

a. Province – cluster of municipalities or municipalities and
component cities, as a political and corporate unit of government
which serves as a dynamic mechanism for developmental
processes and effective governance of LGUs within its territorial
jurisdiction. (Sec. 459, LGC)

b. City – composed of more urbanized and developed barangays,

serves as a general purpose government for coordination and
delivery of basic, regular and direct services and effective
governance of the inhabitants within its jurisdiction. (Sec. 448)

i. Different Kinds of Cities

 Highly Urbanized Cities - Cities with a
minimum population of two hundred thousand
(200,000) inhabitants, as certified by the
National Statistics Office, and with the latest

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 annual income of at least Fifty Million Pesos
(P50,000,000.00) based on 1991 constant
prices, as certified by the city treasurer.

 Independent Component Cities - Cities whose

charters prohibit their voters from voting for
provincial elective officials. Independent
component cities shall be independent of the
province.

 Component Cities - Cities which do not meet

the above requirements shall be considered
component cities of the province in which they
are geographically located. If a component city
is located within the boundaries of two (2) or
more provinces, such city shall be considered
a component of the province of which it used to
be a municipality.

c. Municipality – groups of barangays, serves primarily as a

general purpose government for coordination and delivery of basic,
regular and direct services and effective governance of inhabitants
within its jurisdiction. (Sec. 440, LGC)

d. Barangay – basic political unit, serves as the primary planning

and implementing unit of government policies, plans, programs,
projects and activities in the community and as a forum wherein
collective views of people may be expressed, crystallized and
considered where disputes are also amicably settled. (Sec. 384,
LGC)

e. Special Metropolitan Political Subdivisions - The Congress

may, by law, create special metropolitan political subdivisions,
subject to a plebiscite as set forth in Section 10hereof. The
component cities and municipalities shall retain their basic
autonomy and shall be entitled to their own local executive and
legislative assemblies. The jurisdiction of the metropolitan authority
that will thereby be created shall be limited to basic services
requiring coordination. (Section 11, Article X of the Constitution)

QUESTION: The Metropolitan Manila Development Authority

(MMDA) sent a letter to the Bel-Air Village Association (BAVA)
requesting the latter to open its private road, Neptune Street,
to the public and informing it that its perimeter wall adjacent to
Kalayaan Avenue would be demolished. BAVA instituted an
action against MMDA before the RTC for preliminary injunction
and a temporary restraining order which was issued by the
court the flowing day. RTC denied the issuance of a
preliminary injunction which was reversed by the CA. Does the
MMDA have the mandate to open Neptune Street to public
traffic pursuant to its regulatory and police powers?

SUGGESTED ANSWER: NO. The MMDA’s power is limited to

administration and implementation of metro-wide services in Metro
Manila and is not a Local Government Unit nor a public corporation
endowed with neither legislative power nor police power to enact
ordinances for the closure or opening of roads. It can only lay down
policies and coordinate with various agencies, as well as the private
sector. All its functions are administrative in nature. It is thus
beyond doubt that the MMDA is not a local government unit or a
public corporation endowed with legislative power. It is not even a

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 “special metropolitan political subdivision” as contemplated in
Section 11, Article X of the Constitution. (MMDA v. Bel-Air Village
Association, 2000)

4. Power of the President over LGUs

Question: Are local government units (LGUs) subject to the

supervision of the President?

Answer: Yes. The president exercises the power of general supervision

over LGUs. The President can only interfere in the affairs and activities of
a local government unit if he or she finds that the latter has acted contrary
to law. (Judge Dadole v. Commission on Audit, 2002)

Question: What is the extent of the president’s “general

supervision”?

Answer: The president exercises “general supervision” over the LGUs, but
only to “ensure that local affairs are administered according to law.” It
means “overseeing or the authority of an officer to see that the
subordinate officer perform their duties. If the subordinate officers fail or
neglect to fulfill their duties, the official may take such action or steps as
prescribed by law to make them perform their duties. (The Local
Government Code Revisited, 2011 Ed., p. 14, Aquilino Pimentel Jr.)

QUESTION: Distinguish Power of Supervision from Power of Control.

Answer: (Pimentel v. Aguirre, G.R. No.132988, 2000)

Power of Supervision Power of Control

Overseeing; the power or authority Power of an officer to alter or modify

of an officer to see that or nullify or set aside what a
subordinate officers perform their subordinate officer has done in the
duties performance of his duties

If a subordinate fails, the superior If a subordinate fails, the superior

may take such action or step as may substitute the judgment of the
prescribed by law to make them latter for that of the former
perform their duties.

Supervising officials merely see to Officers in control lay down the

it that the rules are followed, but rules in the performance or
they themselves do not lay down accomplishment of an act. If these
such rules, nor do they have the rules are not followed, they may, in
discretion to modify or replace their discretion, order the act
them. If the rules are not observed, undone or redone by their
they may order the work done or subordinates or even decide to do it
redone, but only to conform to themselves.
such rules. They may not prescribe
their own manner of execution of
the act.