Public Corporation

by
AO Rodolfo M. Elman, CESO lll
Ateneo de Davao Law School
 Syllabus
in Public Corporations
1. Public Corporations
* Distinguished from GOCCs
* Classification: Quasi Corps. &
Municipal Corps.
2. Municipal Corporations
a. Elements
b. Nature and Functions
c. Requisites for creation, conversion, division,
merger or dissolution
3. Principles of Local Autonomy
4. Powers of LGUs
a. Police Power
b. Eminent Domain
c. Taxing Power
d. Closure and Opening of Roads
e. Legislative Power
~ Requisites for valid ordinance
f. Corporate Powers
* To sue and be sued
* To acquire and sell property
* To enter into contracts: requisites & ultra
vires contracts
g. Liability of LGUs
h. Settlement of Boundary Disputes
i. Discipline of Local Elective Officials
a. Grounds
b. Jurisdiction
c. Preventive Suspension
d. Removal
e. Administrative Appeal
f. Doctrine of Condonation
j. Recall
k. Term Limits
• Public Corporations: those formed or
organized for the government of a portion of
the State for the accomplishment of parts of
its own public works.
• True test to determine whether a corporation
is public or private is in the relation of the
corporation to the State. If created by State
as its own agency to help carry out
governmental function, corporation is public.
• Distinguishing feature from GOCC: exercised
delegated sovereign powers of government;
take charge of some public or state work
other than community work for gen. welfare.
• Classification of Public Corps.
1. Quasi-Corporations: those created as
agencies of the State for a narrow & limited
purpose. They are not possessed of powers
& liabilities of self-governments.
2. Municipal Corporations: a body politic and
corporate constituted by the incorporation of
the inhabitants for the purpose of local
government thereof. They are established
partly as an agency of the state to assist in
civil government, but chiefly to regulate &
administer the local or internal affairs.
 Municipal Corporations
• Nature and status: They are a subordinate
branch of government exercising delegated
powers of government; an arm of state
• Elements (legal creation, corporate name,
inhabitants and territory)
• Purposes
a. to serve as an instrumentality of state in
carrying on functions of government w/c the
state cannot conveniently exercised…
b. to act as an agency of the inhabitants in
the regulation & operation of local affairs.
• Dual nature and functions (BQ)
* governmental and private
• Power to create municipal corporations is
essentially legislative. It is exclusive &
practically unlimited, subject only to
constitutional restrictions.
• When a new LGU is created, corporate
existence commences upon qualification
of its executive and a majority of the
members of its sanggunian, unless some
other time is fixed by law or ordinance
creating it (Sec. 14 RA 7160).
 Creation of Municipal Corp.
• Sec. 6, RA 7160
• Sec. 10, Art. X ’87 Constitution (’04 BQ)
• The authority to create, divide, merge or
abolish a barangay, or its boundary
substantially altered, belongs to the
Sangguniang Panlalawigan or
Sangguniang Panlungsod, and not to the
Sangguniang Bayan, thru passage of an
ordinance.
• The authority to create, divide, merge or
abolish … a province, city, municipality or
other political subdivision belongs to
Congress thru enactment of law.
• Limitations for creation
*verifiable indicators of viability and
projected capacity to provide services,
namely: income, population & land area
(Sec. 7 RA 7160)
• 3 conditions for creation of LGU
*must follow criteria fixed in LGC (or
amendatory law) [ex. 16 cities]
*must not conflict w/ any Constitutional
provision
*must conduct a plebiscite in the political
unit(s) directly affected.
 Cases
• The President has no power to create the
Municipality of Sto. Tomas. Sto. Tomas
has no right to assert, no cause of action,
no corporate existence. Also, the
settlement of boundary conflict is
administrative in nature (Kapalong vs.
Moya, 166 SCRA 71)
• The voters of the whole province have to
participate and give their approval in the
plebiscite, not merely those voters of the
proposed new province (Patricio Tan vs.
Comelec, 142 SCRA 727).
• RA 9355 creating the Province of Dinagat
Islands is unconstitutional for its failure to
comply w/ either the territorial or population
requirement in Sec. 461 of LGC w/c provides
for a contiguous territory of 2,000 sq. km. and
a population of not less than 250,000 as
certified by NSO. The province contains only
a land area of 802.12 sq. km. and population
of 106,951 based on NSO 2000 census. The
special census done by the Province of
Surigao Norte stating a population of 371,000
was not certified by NSO (Navarro vs. Ermita,
612 SCRA 161).
• Under Sec. 461 of LGC, the only instance
when the territorial or land area
requirement need not be complied with is
when there is already compliance w/the
population requirement. The Constitution
requires that the criteria for creation of a
province, including any exemption from
such criteria, must all be written in the
LGC. (Navarro vs. Ermita).
• Sec. 19, Art. Vl of RA 9054 (ARMM Organic Act)
delegated to the ARMM Regional Assembly the
power to create provinces, cities, municipalities
and barangays within the ARMM. Is this
provision constitutional? Yes, insofar as the
delegation of the power to create municipalities
& barangays, provided Sec. 10 Art. X is
followed. However, insofar as it grants to ARMM
Regional Assembly the power to create
provinces and cities, it is against Sec. 5, Art. Vl
and Sec. 20, Art. X of Constitution. The power to
create a province or city inherently involves the
power to create a legislative district, which is a
power only Congress can exercise. Hence, the
creation of Shariff Kabunsuan Province is
unconstitutional (Sema vs. Comelec, 16 July ’08)
• R.A. No. 9371 increasing CDO’s legislative district
from one to two does not require ratification in a
plebiscite by voters affected. Art. VI, Sec. 5 & Art.
X, Sec. 10 of 1987 Constitution are distinct. The
latter expressly requires a plebiscite to carry out
any creation, division, merger, abolition or
alteration of boundary of a local political
subdivision, but the first does not. The legislative
district under Art. VI, Sec. 5, is not a political
subdivision through which functions of government
are carried out. Neither is it a corporate unit. A
legislative district merely delineates the areas
occupied by the people who will choose a
representative in their national affairs. (Bagabuyo
vs. COMELEC, 573 SCRA 290)
• The Cordillera Autonomous Region (CAR)
was not abolished with the reduction of its
budgetary allocation. What took place was
only a discontinuance of its programs and
activities (Atitiw vs. Zamora, 471 SCRA
330).
• A barangay may officially exist on record
and the fact that nobody resides in the
place does not result in its automatic
cessation as a unit of local government
(Saranggani vs. Comelec, 06/26/00).
• RA No. 9009 which amended Section 450 of the LGC
increased the annual income requirement for conversion
into a city from P20 million to P100 million. Five years
later, 16 new cities were created by Congress,
exempting them from the P100M income requirement in
RA 9009. Considering Sec. 10, Art. X requiring the LGU
created to be in accord with the criteria established “in
the local government code, is the exemption valid?
• Held: Yes. Consistent with its plenary legislative power,
Congress can impose the said verifiable criteria of
viability which need not be embodied in the local
government code. Congress can even, after making a
codification, enact an amendatory law, like in this case.
The passage of amendatory laws is no different from the
enactment of laws. The cityhood laws specifically
exempted the 16 from the criteria earlier mentioned.
(League of Cities vs. COMELEC, 2/15/11)
• IRA is included in the computation of
average annual income of the municipality
(Santiago, Isabela) for conversion into an
independent component city. IRA forms
part of gross accretion of funds of LGU
(Alvarez vs. Guingona, 01/31/96).
• Territory must be identified by metes and
bounds to reasonably ascertain territorial
jurisdiction of newly created LGU under
RA 7854 (Mariano vs. Comelec, 03/07/95)
• Settlement of Boundary Dispute (Secs.
118 & 119, RA 7160, ’99BQ)
De Facto Municipal Corp.
• Requisites (’04 BQ)
1. valid law authorizing incorporation;
2. attempt in good faith to organize under
it;
3. colorable compliance with the law;
4. assumption of corporate powers.
• The validity of incorporation and corporate
existence of municipal corporations cannot
be attacked collaterally, unless the
corporation is an absolute nullity.
• The validity of incorporation and corporate
existence of a municipal corporation may
be challenged by the State in a quo
warranto proceeding within 5 years.
• Though created under EO 353 by Pres.
Garcia, the Municipality of San Andres has
attained the status of a de facto municipal
corporation. San Narciso can no longer
questioned it after 30 years. Also, San
Andres was reclassified 5 years after as a
5th class municipality (Municipality of San
Narciso, Quezon vs. Mendez, 239 SCRA
12).
• Sinacaban, w/c was created under EO
258, has been conferred de facto status as
its legal existence is recognized. Jimenez
itself entered into an agreement with
Sinacaban settling their boundary dispute.
It is already a de jure municipal
corporation. Sec. 442 of LGC provides that
municipalities existing as of effectivity of
LGC shall continue to exist and operate
(Mun. of Jimenez, Misamis Occ. vs. Baz,
265 SCRA 183)
• Q. May courts order the dissolution of
municipal corporations?
 Legislative Control Over
Municipal Corporations (MCs)
• MCs are under control of legislature subject
only to such limitations as Constitution may
impose.
• Limitations on legislative control
• Legislature has complete control over
property acquired by MC in its governmental
capacity & devoted to public governmental
use; no control over property acquired by MC
in its private capacity, except thru police
power or xxx
• Legislature has complete control over
public revenue of municipality except over
public funds in w/c creditors or LGU have
already acquired vested right.
• Legislature has control over city streets,
hospital and capitol sites etc. but not over
public markets and cemeteries.
• Municipality has control over operation of
water, light, gas or other like supply.
However, the service and rates of the
public utility may be subject to state
control.
 Relation of President to LGUs
• General supervision (Sec. 4 Art. X and
Sec. 16 Art. X, Constitution)
• No investigation shall be held within 90
days immediately prior to any local election
and no preventive suspension imposed w/in
said period (Sec. 62).
• Preventive suspension may be issued after
issues are joined when evidence of guilt is
strong & there is great probability that
respondent could influence witnesses or
pose a threat …. (Sec. 63).
 Grounds for Disciplinary Action (sec.60)
• Disloyalty to the Republic
• Culpable violation of the Constitution
• Dishonesty, oppression, misconduct in office,
gross negligence or dereliction of duty
• Commission of any offense involving moral
turpitude or an offense punishable by at least
prision mayor
• Abuse of authority
• Unauthorized absence for 15 consecutive working
days, except Sanggunian members
• Application for or acquisition of foreign citizenship
• Such other grounds…
• Respondent preventively suspended shall
receive no compensation during such
suspension; but upon subsequent
exoneration & reinstatement, he shall be
paid full emoluments accruing during such
suspension (Sec. 64).
• Respondent has right to appear & defend
himself, to confront & cross-examine
witnesses vs. him & to require attendance
of witnesses xxx (Sec. 65).
• Penalty of suspension not a bar to
candidacy of respondent as long as he
meets qualifications; Removal is a bar to
candidacy (Sec. 66)
• Administrative Appeals w/in 30 days
(Sec. 67)
• An appeal does not prevent a decision
from becoming final or executory.
Respondent is considered having been
placed under preventive suspension
during the pendency of appeal in case he
wins such appeal (Sec. 68).
 CASES
• When petitioner Governor is in default, issues
are joined (Joson vs. Torres, 290 SCRA 279)
• Governor has no power to preventively
suspend city elective officials under Sec. 63
LGC. The admin case vs. them should have
been filed w/DILG (Regidor vs. Chiongbian,
173 SCRA 507).
• Proper remedy to challenge SP decision
under Sec. 67 (Malinao vs. Reyes, 255
SCRA 616)
• Stay of execution pending appeal allowed
under AO 18 (Berces vs. Guingona & Mayor
Corral, 241 SCRA 439).
• The Sangguniang Panlungsod or
Sangguniang Bayan cannot order the
removal of an erring elective barangay
official from office, as the courts are
exclusively vested with this power under
Sec. 60 of LGC. The most extreme penalty
that the SP or SB may impose on him is
suspension; if it deems that his removal
from the service is warranted, then it can
resolve that the proper charges be filed in
court (Sangguniang Barangay of Don
Mariano Marcos, Bayombong, Nueva
Viscaya vs. Martinez, 03/03/08).
• The phrase “final and executory” in the LGC
simply means that administrative appeals will
not prevent the enforcement of decisions.
The decision is immediately executory but the
respondent may still appeal the adverse
decision to the Office of the President (OP) or
to Sangguniang Panlalawigan, as the case
may be (Don vs. Lacsa, 529 SCRA 327). The
decision of the OP are immediately executory
pending appeal (Calingin vs. CA, 7/12/04).
On appeal, the OP may stay the execution
thereof (Berces vs. Guingona, 241 SCRA
539).
 Local Autonomy
• 2 Kinds of Autonomy
a. Administrative Autonomy (Sec. 2 Art. X)
- transfer of power from the central gov’t
to the LGUs; synonymous with
decentralization of administration.
b. Political Autonomy (Sec. 18 Art. X)
- encompasses not only administrative
autonomy but includes power to set up
basic structures xxx
 Police Power
• Not inherent in LGUs; most essential, insistent
and the least limitable of powers; liberal
interpretation of general welfare clause
• Sec. 16 RA 7160: 2 branches of general welfare
clause
a. general legislative power – enact laws as may
be necessary to carry out & discharge
the responsibilities conferred to MCs by law.
b. police power proper – enact such ordinance as
shall be necessary & proper to promote health &
safety, prosperity & general welfare, improve
morals & maintain peace and order.
• Requisites for exercise of police power
1.exercisable in territorial limits of LGU
2. interest of the public vs. those of a
particular class requires such interference
3. means used is reasonably necessary for
accomplishment of purpose & not unduly
oppressive upon individuals
4. must not be contrary to Constitution and
law
• Tests of a valid ordinance
 Cases
• Opening of road/demolition of gates in Bel-Air
to decongest traffic is valid. Police power
consists of an imposition of restraint on liberty
or property for the common good. (Sangalang
vs. IAC, 176 SCRA 720)
• Ordinance legalizing occupancy by squatters
of public lands is void. Squatting fosters
moral decadence & does not promote public
welfare (Baguio Citizens Action vs. City
Council)
• Memorial parks to set aside 6% of their
cemetery for charity burial (QC vs. Ericta)
• While mayor has power to inspect &
investigate commercial establishments for
violation of conditions of their licenses &
permits, he has no power to order a police
raid on these establishments in guise of
inspecting or investigating them & ordering
their closure arbitrarily/despotically. While
he has power to grant & refuse licenses &
business permits as provided in LGC,
such power is premised on violation of
conditions therein (Lim vs. CA, 387 SCRA
149).
• Mun. Res. for closure or transfer of
petitioner’s gasoline station supposedly w/in
100 meters from church must comply w/ due
process. Gasoline station is not a nuisance
per se (Parayno vs. Jovellanos, 495 SCRA
85).
• Use of LGU funds for maintenance & repair
of subd road lots & open spaces (Albon vs.
Fernando, 494 SCRA 143). cf Sec. 335 LGC:
No public fund or property shall be
appropriated or applied for private purpose.
• A police measure aimed at safeguarding
public morals (Ermita Malate Hotel Operators
vs Mayor of Manila, 7/31/67).
• An ordinance prohibiting short-time
admission, short-time rates in hotels, inns,
lodging houses & similar establishments to
prevent illicit activities was struck down as
an arbitrary intrusion into private rights
(White Light Corp. vs Manila City, 1/20/09)
• A Manila ordinance that banned the
operation of motels and inns within what
was then a red light district in Ermita-
Malate was struck down as
unconstitutional (City of Manila vs. Laguio
Jr., 455 SCRA 308).
• Massage parlors in barbershops (Velasco vs.
Villegas, 120 SCRA 568)
• Exclusive jurisdiction of LLDA to issue
permits xxx in Laguna de Bay under RA
4850 although RA 7160 grants to LGUs
authority to grant fishery privileges in
municipal waters. A special law cannot be
repealed by subsequent general law (LLDA
vs. CA, 251 SCRA 42).
• Ordinance 640 prohibiting full payment for
admission of children between 7-12 years
old. Admission ticket is a property right of
owner ; no direct link bet. ordinance &
general welfare clause (Balacuit vs. CFI, 163
SCRA 182; ’03 BQ).
• Cockfighting is a valid matter of police power
regulation as it’s a form of gambling vs. aims
of enhancing national productivity & self-
reliance. Limitation in number of cockpits is a
reasonable necessary means for
accomplishing the purpose of regulating
cockfighting. While sanggunian has power to
authorize & license establishment &
operation of cockpits, its discretion is limited
in that it cannot authorize more than one
cockpit per city or municipality, unless such
LGUs have more than 100T population (Tan
vs. Perena, 452 SCRA 53).
• The SP can only disapprove the municipal
resolution if said resolution is beyond the
power of the Sangguniang Bayan.
Moviehouses are not w/in enumeration of
entertainment places which cannot be
established within 200 meters of public
buildings, schools, hospitals & churches
under RA 1224. Nightclubs, bars, saloons,
cabarets, dancing schools & cockpits are
prohibited because of their noise. The
disapproval by SP of SB Reso (of Silang,
Cavite) allowing respondent to build the
moviehouse w/in 40 m of petitioner’s clinic is
illegal (Dr. Velasco vs. Blas, 115 SCRA 540)
 BQ
• Barangay Assembly under Sec. 398 LGC:
initiates legislative processes by
recommending to the Sangguniang
Barangay adoption of measures for
welfare of barangay.
• Liga ng mga Barangay under Sec. 491
LGC: determine the representation of the
liga in the Sanggunians for ventilating,
articulating & crystallizing issues affecting
barangay government administration.
• Ordinance prohibiting nightclub operation
was declared invalid because of its
prohibitory, not merely regulatory,
character. (Dela Cruz vs. Paras, 123
SCRA 569; BQ)
• Quarantine, isolation & slaughter of
animals with contagious diseases
• Suppression of sale of alcoholic drinks
• Posse comitatus
• Ordinance prohibiting the construction of
warehouses that stored inflammable
materials w/in 200 meters from any block
of houses is a valid exercise of police
power. The purpose is to avoid loss of life
and property in case of fire (Tatel vs. Mun.
of Vigan, 207 SCRA 157).
• A LGU may in exercise of police power
under the general welfare clause in BP
337 order the closure of a bank. But here,
the order of closure for failure to pay the
appropriate mayor’s permit & business
licenses violated petitioner’s right to due
process. The violation of mun. ordinance
does not empower a mayor to avail of
extrajudicial remedies. It should have
observed due process before ordering the
bank’s closure ( RB of Makati vs. Mun. of
Makati, 433 SCRA 362).
• The ordinances – banning the shipment of
all live fishes except bass, catfish … for 5
years and prohibiting the catching of live
marine corral dwelling organisms – are a
valid exercise of police power. The
centerpiece of the LGC is decentralization
as mandated by the Constitution. One of
the devolved powers is the enforcement of
fishery laws in municipal waters. This
includes the enactment of ordinances to
carry out such fishery laws ( Tano vs.
Socrates, 278 SCRA 144).
• An ordinance requiring anyone who
wanted to work in Manila to obtain a
mayor’s permit is void. It does not contain
any standard to guide the issuance of
permits. Requiring permit from the mayor
who may withhold or refuse it at will is
tantamount to denial of the right of the
people to engage in a means of livelihood
(Villegas vs. Hiu Pao Ho, 86 SCRA 270).
• Lotto is a game of chance authorized by
the national government thru RA 1169 as
amended by BP 42. What the national
legislature expressly allows by law such as
lotto, the Sanggunian cannot disallow by
resolution. Sections 26 & 27 of the LGC
which provide for prior consultations with
and approval of SP apply only to national
programs or projects to be implemented in
a particular local community. Lotto is not a
program/project of the national
government but of a charitable institution,
PCSO (Lina vs. Pano, 364 SCRA 76).
• Before concluding the MOA on Ancestral
Domain (MOA-AD), the GRP Peace Panel
should have conducted periodic
consultations with appropriate LGUs, non-
governmental and people’s organization, &
other concerned sectors of affected
communities and obtained prior approval
from the concerned sanggunian (Province
of North Cotabato vs. GRP Peace Panel
on AD, 10/14/08).
• Ordinance prohibiting the sale of
perishable foodstuff outside public markets
and Ordinance prohibiting anyone other
than the city to operate a public market are
valid regulatory ordinances. Petitioner’s
claim that her market is not public but
privately owned is w/o merit. The test of
public market is its dedication to the
service of general public and not
ownership (Javellana vs. Kintanar, 119
SCRA 627).
• A city ordinance granting an exclusive
franchise for 25 years, renewable for another
25 years, to 1 entity for operation of one
common bus & jeepney terminal is
unreasonable. While purpose is to ease
traffic congestion due to presence of many
bus & jeepney terminals w/in the city, the
ordinance is beyond what is reasonably
necessary to solve traffic problem in the city.
Also, compulsory use of terminal operated by
petitioner would subject the users to fees,
rentals & charges, thus unduly oppressive
(Lucena Grand Central Terminal Inc. vs. JAC
Liner Inc., 452 SCRA 174).
• The LGU cannot enact an ordinance or
approve a resolution in violation of a
general law. Since EO 205 (a general law)
mandates that the regulation of CATV
operations shall be exercised by the NTC,
Res. # 210 of the SP contravenes said EO
insofar as it permits respondent SP to
usurp a power exclusively vested in the
NTC, i.e. power to fix the subscriber rates
charged by CATV operators (Batangas
CATV vs. SP of Batangas, 439 SCRA
327).
• Abatement of Nuisance
• Monteverde vs. Generoso
• A LGU cannot impose an absolute ban on
public assemblies. BP 880 is not an
absolute ban of public assemblies but a
restriction that simply regulates time, place
& manner of assemblies. A mayor can
deny issuance of a rally permit on ground
of clear and present danger to public
order, public safety, public convenience,
public morals or public health and
designate public parks. Under BP 880
LGUs must establish freedom parks. No
prior permit is needed to hold assembly
therein (Bayan vs. Ermita, 04/25/06).
 Power of Eminent Domain
• Sec. 9 Art. lll: Private property shall not be
taken for public use w/o just
compensation.
• Eminent domain is essentially lodged in
the legislature. Strictly speaking, the
power of eminent domain delegated to a
LGU is in reality not eminent but “inferior”
since it must conform to the limits imposed
by the delegation & thus partakes only a
share in eminent domain (Beluso vs. Mun.
of Panay, 498 SCRA 113).
• Requisites for its exercise under Sec. 19
RA 7160
1. Ordinance is enacted by local
sanggunian authorizing the chief executive
to pursue expropriation proceedings over
a particular private land.
2. It is exercised for public use, purpose or
welfare, or for benefit of the poor & the
landless.
3. There is payment of just compensation.
4. A valid & definite offer made to property
owner but said offer was not accepted
(Beluso vs. Mun. of Panay, 498 SCRA
114).
• Two legal provisions which limit the
exercise of power of eminent domain
1. No person shall be deprived of xxx
property w/o due process of law nor shall
he be denied the equal protection of the
laws.
2.Private property shall not be taken for
public use without just compensation.

• Purposes of expropriation
• When municipal property is taken by state,
should there be compensable taking?
• Eminent domain, being a derogation of
private property rights, is justified only by
clear public necessity of an urgent public
policy.
• Sangguniang Panlalawigan is without
authority to disapprove a municipal ordinance
authorizing the mayor to initiate expropriation
since the municipality has the power to
exercise the right of eminent domain. The
only ground to disapprove is when the
resolution or ordinance is beyond the power
of the Sangguniang Bayan or the Mayor
(Moday vs. CA, 268 SCRA 587).
• Condemnation of small property is not for
public purpose, i.e. condemnation in
behalf of 20 or 50 persons & their families
does not enure to public benefit to give the
use a public character (Guido vs. Rural
Administration).
• Private lands rank last in the order of
priority for purposes of socialized housing.
Expropriation proceedings may be
resorted to only after the other modes of
acquisition are exhausted (Lagcao vs.
Labra, 440 SCRA 279).
• The clearance of slums & erections of
houses for low income families are
considered public purpose. The reason is
that the destruction of congested areas &
unsanitary dwellings diminishes
potentialities of epidemics, crimes &
wastes. However, the areas must be so
extensive that they involve numerous
persons & the public will be generally
benefited by such action.
• Expropriation pursuant to SB Resolution
(Mun. of Paranaque vs. VM Realty, 292
SCRA 677).
• Distinction bet. Ordinance and Resolution
• Sec. 20 of LGC provides that the city or
municipality can reclassify agricultural land
only thru the enactment of an ordinance.
Here, the reclassification of the real
properties of Polo Coconut Plantation Co.
from agricultural to mixed res., commercial
& industrial lands by the Sangguniang
Panglunsod of Tanjay City was by mere
resolution, thus, it was invalid. For this
reason, the property was still subject to
CARP (DAR vs. PCPI, 564 SCRA 81).
• Expropriation of 7,270 sq.m. lot intended
as university site is not for public purpose
since only a few families will be benefited.
It fades into insignificance in comparison
to the preparation of young people for
service to the community (City of Manila
vs. Arellano Colleges).
• Mandamus is a remedy available to
property owner to compel enactment of
appropriation ordinance to satisfy the
unpaid just compensation. In case of
failure to pay w/in 5 yrs, owner has right to
recover possession of property (Yujuico
vs. Atienza, 472 SCRA 466).
 Power of Taxation

• Sec. 5 Art. X
• Effect of Sec. 5 Art. X on fiscal position of
municipal corporations: It does not change
the doctrine that MCs do not possess
inherent power of taxation. What it does is
to confer on MCs a general power to levy
taxes & otherwise create sources of
revenues. They no longer have to wait for
a statutory grant of this power.
 Conditions for its exercise (Sec. 130)
• Taxation shall be uniform in each LGU;
• Taxes, fees & charges shall
~ be equitable & based as far as practicable
on taxpayer’s ability to pay;
~ be levied & collected only for public
purposes;
~ not be unjust, excessive, oppressive or
confiscatory;
~ not be contrary to law, public policy or in
restraint of trade;
~ collection shall not be let to any person
~ LGU to evolve progressive taxation system
• The ordinance levying such taxes, fees or
charges shall not be enacted without any
prior public hearing conducted (Sec. 186
LGC).
• Under Sec. 187 of LGC, it authorizes the
DOJ Secretary to review, w/in 30 days
from effectivity of ordinance, its
constitutionality & if warranted to revoke it.
Such appeal does not have the effect of
suspending the effectivity of the ordinance.
This authority is not an exercise of the
power of control over LGU (Drilon vs. Lim,
235 SCRA 135).
 Fundamental Principles governing
LGUs’ Financial Affairs/Operations
(Sec. 305, LGC)
• No money shall be paid out of local
treasury w/o appropriation ordinance/law.
• LG funds shall be spent solely for public
purposes.
• Local revenue is generated only from
sources expressly authorized by law or
ordinance, & collection thereof shall be
acknowledged at all times.
• Trust funds shall be paid only in fulfillment
of the purpose.
• MIAA Airport lands and buildings are
exempt from real estate tax imposed by
LGUs; reasons (MIAA vs. CA, 495 SCRA
591)
• Gen. Rule: LGUs cannot impose any kind
of tax on national government
instrumentalities (like the MIAA) under
Sec. 234 LGC.
Exception: if instrumentality gives
beneficial use of its real properties to a
taxable entity under Sec. 133.
• Publication of tax ordinance for 3
consecutive days in a newspaper of local
circulation under Sec. 188 LGC (Coca
Cola vs. Manila City, 493 SCRA 279)
• The mere failure of the LGU to enact a
budget did not make all the disbursements
illegal. Sec. 323 of the LGC provides for
automatic reenactment of the budget of
the preceding year, in case the
Sanggunian fails to enact one w/in the first
90 days of the fiscal year. Thus, the
contention that money was paid out of the
local treasury without any valid
appropriation must fail (Villanueva vs.
Mayor Ople of Hagonoy, Bulacan, 475
SCRA 540).
• Requisites for validity of municipal
contracts (BQ)
• Under Sec. 23 LGC, the local chief
executive, upon Sanggunian authority,
may negotiate & secure financial grants or
donations, local or foreign, in support of
basic services w/o getting approval from
national government, unless there is
national security implication. He shall
report it to Congress & the President w/in
30 days upon signing of such grant.
 Sec. 21 [Code: R A P S]
• LGU, thru ordinance, can temporarily or
permanently close or open any local road,
alley, park or square. If permanent closure,
ordinance must be approved by 2/3 of all
members of sanggunian & when necessary,
an adequate substitute is provided.
• Property permanently withdrawn from public
use may be used or conveyed for any
purpose. No freedom park shall be closed
permanently w/o provision for its relocation.
• Any national or local RAPS may be
temporarily closed during actual emergency,
fiesta, public rallies, fairs, or public works
undertaking xxx
• Municipality has no power to withdraw a
part of its public plaza from public use and
lease it for private use. It is outside the
commerce of man & cannot be the object
of contract (Mun. of Cavite vs. Rojas, BQ).
• Charter of Cebu empowers city to
withdraw a city road from public use. After
withdrawal, it becomes patrimonial
property & may be a valid object of
contract of sale (Cebu Oxygen &
Acetylene vs. Bercilles).
 Legal Counsel of LGUs
• Under Sec. 481 LGC, City Legal Officer is to
represent the city in civil actions & special
proceedings wherein the city or any of its
officials is a party. Where post is vacant, City
Prosecutor remains the city’s legal adviser &
officer for civil cases.
• LGU cannot be represented by private counsel
as only public officers may act in behalf of public
entities & public funds should not be spent to
hire private lawyers. The RTC should not have
allowed Lazaro Law Firm vice the City
Prosecutor as counsel for Urdaneta City (Asean
Pacific vs. Urdaneta City, 566 SCRA 221).
• The municipality cannot be represented by a
private attorney. Only the Provincial Fiscal or
Municipal Attorney can represent a province
or municipality in lawsuits. This is mandatory.
LGU’s authority to employ a private lawyer is
limited to situations where the Fiscal is
disqualified to represent it, & the fact of
disqualification must appear on record. The
Fiscal’s refusal to represent the LGU is not a
legal justification for employing private
counsel; the LGU should request DOJ
Secretary to appoint an acting Provincial
Fiscal in place of the one who declined (Mun.
of Pililla, Rizal vs. CA, 233 SCRA 484).
 Liability of MCs
• Liability on contracts
• Not liable for ultra vires contracts, whether
or not the other party has fully carried out
his part of the contract
• If beyond the agent’s authority, MC is not
liable although within its corporate powers,
unless there is ratification by the
Sanggunian.
• MC cannot ratify a contract which it has no
power to enter into (invalid contracts).
 Liability for Torts
• MC is not liable for torts committed by its
officers in performance of governmental
functions.
*Palafox vs. Province of Ilocos Norte
• Exceptions; instances MC is liable even in
performance of governmental functions:
a. Art. 2189 CC (City of Manila vs. Teotico)
b. special agent
c. Sec. 24 LGC
• MC is not liable for torts arising from
performance of its proprietary functions
[Respondeat superior] (Torio vs. Fontanilla)
 LGU liability even in exercise of
governmental functions
• Sec. 2189 CC: Provinces, cities and
municipalities shall be liable for damages
for the death or injuries suffered by any
person by reason of the defective
conditions of roads, streets, bridges, public
buildings and other public works under
their control or supervision.
• Sec. 24 LGC: LGUs and their officials are
not exempt from liability for death or injury
to persons or damage to property.
• MC is not liable for failure of its officers to
suppress disorder.
• Petitioners leased a lot at North Cemetery
for 50 yrs. & buried in it the deceased.
Caretaker exhumed the bones of the
deceased & placed them in a sack & in a
depository, making it impossible to identify
the bones. MC is liable for damages.
Cemetery is a property in its proprietary
function ( City of Manila vs. IAC, 179
SCRA 428).
• Petitioner stepped into an uncovered
opening at Sta. Ana Public Market. A large
nail pierced his leg and he sustained
injuries. The City is liable under Art. 2189
CC. Although the public market had been
turned over to a private corporation under
a contract, MC retained supervision/
control (Jimenez vs. City of Manila, 150
SCRA 510).
Good Luck!