LAW ON PUBLIC CORPORATION USA LAW LECTURE NOTES (2 nd Semester - A.Y.

2015-2016)
Remember, law is a demanding lover.

N=CORPORATION
It is a juridical person with separate and distinct
personality.
An artificial being created by law, having the right of
succession and the powers, attributes and properties expressly
authorized by law or incident to its existence. (Sec 2, Corporation
Code)
PRIVATE CORPORATION
Definition:
It is created for private purpose, benefit, aim or end. Created
by will of the incorporators as recognized by the State (SEC)
through a voluntary agreement by and among its members.
General Law:
Regulation:

Corporation Code and By Laws

Securities and Exchange Commission
Bureau of Internal Revenue
EE-ER Relationship:
Labor Code
Liabilities:
Civil & Criminal
Courts:
Cases are usually filed with the courts and
NLRC
PUBLIC CORPORATION
Definition:
It is one created by the state either by general or specific act
for purposes of administration of local government or rendering
service in the public interest.
General Law:

Charter or through a legislative act mandating

its creation
Regulation:
Commission on Audit
EE-ER Relationship:
Civil Service Commission
Liabilities:
Civil, Criminal, and Administrative
Courts:
Cases are usually filed with the Ombudsman
** Cases filed cannot be withdrawn
** Accepts cases from anonymous complaints
** Decisions are immediately final and
executory
QUASI CORPORATION
Definition:
A private corporation that deals with public service general
welfare (e.g. nature)
It is created as agencies of the state for narrow and limited
purpose without the powers and liabilities of self-governing
corporations. They render public service or supply public wants.
QUASI-PUBLIC CORPORATION
Definition:
One that is created for profit in pursuance of public welfare.
(e.g. PCSO, PAGCOR) almost the same as GOCC
GOVERNMENT OWNED OR CONTROLLED CORPORATION
(GOCC)
Definition:
GOCC LAW
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 of the Republic of the Philippines directly or through
its instrumentalities either wholly or, where applicable as in the
case of stock corporations, to the extent of at least a majority of
its outstanding capital stock.
ADMINISTRATIVE CODE OF 1987
It refers to 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 through its instrumentalities either wholly,
or, where applicable as in the case of stock corporations, to the
extent of at least fifty-one (51) per cent of its capital stock:
Provided, That government owned or controlled corporations may
be further categorized by the Department of the Budget, the Civil
Service Commission, and the Commission on Audit for purposes of
the exercise and discharge of their respective powers, functions
and responsibilities with respect to such corporations.
BOY SCOUTS OF THE PHILIPPINES VS. COA
<INSERT>
With Charter:
Pre-Audit
Without Charter:Post Audit
PIERCING THE VIEL OF CORPORATE FICTION DOCTRINE
Definition:
The court looks at the corporation as a mere collection of
individuals or an aggregation of persons underlying business as a
group, disregarding the separate juridical personality of the
corporation unifying the group.
When two business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when
necessary to protect the rights of the third parties, disregard the
legal fiction that two corporations are distinct entities and treat
them as identical or as one and the same. (PEA-PTGWO vs. NLRC)
AGUINALDO CONDONATION
Santos, 1992)
Definition:

DOCTRINE

(Aguinaldo

vs.

The court held that offenses committed, or acts done, during

a previous term are generally held not to furnish cause for
removal and this is specially true where the Constitution provides
that the penalty in the proceeding for removal shall not extend
beyond removal from office, and disqualification from holding
office for a term for which the officer was elected or appointed.
The SC reiterated the doctrine that court should never
remove from office the official for acts done prior to his present
term. To do otherwise would be to deprive the people of their right
to elect their officers.
The court ruled that a public official cannot be removed for
administrative misconduct committed during a prior term, since
his reelection to office operates as a condonation to the officers
previous misconduct to the extent of cutting off the right to
remove him therefor.
PUBLIC CORPORATION
(1) AGENCY
Definition:
This 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 district unit
therein. (Sec 3(k), RA 10149)
** DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES is
applicable to agencies but not with government instrumentalities
DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES
Definition:
The doctrine is a cornerstone of the judicial system. The
thrust of the rule is that courts must allow administrative agencies
to carry out their functions and discharge their responsibilities
within the specialized areas of their respective competence. It
entails lesser expenses and provides for a speedier resolution or
controversies. Comity and convenience also impel courts of
justice to shy away from a dispute until the system of
administrative redress has been completed. (Universal Robina
Corporation (Corn Division) v. Laguna Lake Development
Authority, G.R. No. 191427)
(2) GOVERNMENT INSTRUMENTALITIES (with corporate
powers)
Definition:
This refers to instrumentalities or agencies of the
government, which are neither corporations not agencies
integrated within the departmental framework, but vested by law
with special functions or jurisdiction, endowed with some if not all
corporate powers, administering special funds, and enjoying
operational autonomy usually through a charter. (Sec 3(n), RA
10149)
** Separate and Distinct from the department. (e.g PAGCOR, GSIS,
SSS, Philhealth)
Purpose:
Generally, for profit
MUNICIPALITY CORPORATION VS. LOCAL GOVERNMENT
UNIT
RA 7160 coined the word Local Government Unit. Prior to the
enactment of RA 7160 or the Local Government Code, LGUs are
being referred as Municipality Corporations. By essence they are
the same, but the usage of the terms has significantly changed
since then.
Definition:
A body politic and corporate constituted by the incorporation
of the inhabitants for the purposes of local government thereof.
It is establishes partly as an agency of the state to assist in
the civil government of the country.
CASES: Pelaez
Jimenez
San Andres
FOCUS: de facto and de jure municipalities
MUNICIPAL CORPORATION / LOCAL GOVERNMENT UNIT
Mode of creation:
General Rule:
By LAW (Congress)
Except:
Through a CHARTER (Spanish and American
Era)
ARTICLE X, 1987 CONSTITUTION (21 SECTIONS)
The Local Government Code existed because they were
granted with a constitutional right. Thus, it can be invoked by an
interested LGU who seeks to be recognized as a political
subdivision.
LOCAL GOVERNMENT UNIT
Definition:
It is created in pursuance of a constitutional mandate. It
is an entity itself with rights, clothed with governmental powers:
(1) Governmental (or Political) Powers; and
(2) Proprietary (or Corporate) Powers
Nota Bene: Prior to LGC of 1991, some acts of the mayor are
considered valid even without the concurrence of the sanggunian.
ULTRA VIRES beyond ones legal capacity or authority

LAW ON PUBLIC CORPORATION USA LAW LECTURE NOTES (2 nd Semester - A.Y. 2015-2016)
Remember, law is a demanding lover.

LOCAL GOVERNMENT UNIT

It may invoke their constitutional rights (Article X, 1987
Constitution). Reason:
Since LGC itself is constitutionally
mandated.
The Local Government Code of 1991 prevails over any laws
because Article X is embedded in the 1987 Constitution.
BAR:
If there are laws conflicting in their provisions for example:
COA, Ombudsman vs. LGC. Which provision will prevail?
The provisions in the Local Government Code prevail.
ARTICLE X, 1987 CONSTITUTION
SECTION 1
POLITICAL
SUBDIVISIONS
(exclusive
enumeration)
Expressio unios est exclusio alterius:
(1) Provinces
(2) Cities
(3) Municipalities
(4) Barangays
(5) Autonomous Region Cordillera Administrative Region
Autonomous
Region
of
Muslim
Mindanao
NATURE OF LGU
LGU is a (1) political subdivision of the State which is (2)
constituted by law and (3) possessed of substantial control over
its own affairs. It is not an imperium in imperio (a state within a
state), the LGU is autonomous in the sense that it is given more
powers, authority, responsibility and resources.
SECTION 2
LOCAL AUTONOMY
It covers two concepts:
(1) More Responsive and Accountable Local Government
Structure;
(2) System of Decentralization
The local governments, under the Constitution, are subject to
regulation, however limited, to enhance self-governance.
DECENTRALIZATION
Definition:
It is a delegated power, wherein a larger government chooses
to delegate certain authority to more local governments. Only
administrative powers over local affairs are delegated to political
subdivisions. The purpose of delegation is to make governance
more directly responsive and effective at the local levels.
SECTION 3
ENACTMENT OF LOCAL GOVERNMENT CODE
The LGC was enacted by Congress to establish the system of
decentralization with the people being empowered to recall,
initiate and approve local legislation and voice their stand through
a referendum. (Recall, Initiative, Referendum)
It also allocated the LGU their powers, responsibilities and
management of resources.
Further, it provides the qualifications of local elective officials,
manner of election, term and other matters pertaining the
organization and operation of the LGUs.
BAR:
Differentiate Referendum, Initiative, Recall and Plebiscite,
(1) REFERENDUM
Submission of a law passed by the national/local legislative
body to the registered voter at an election called for the purposes
of ratification or rejection.
(2) INITIATIVE
The power of the people to propose amendments to the
Constitution to propose and enact legislation through an election
called for the purpose.
(3) PLEBISCITE
An election at which any proposed amendments to or
revisions of the Constitution is submitted to the people for their
ratification.
(4) RECALL
An election itself by means of which voters decide whether
they should retain their local official or elect his replacement. The
only ground is loss of confidence.
SECTION 4
GENERAL SUPERVISION OF THE PRESIDENT
The LGUs are subject to the general supervision of the
president, not control. It means that the president has to ensure
that the local affairs are administered according to the law. The
power of supervision means overseeing or the authority of an
officer to see that the subordinate officers perform their duties.
The power of supervision includes:
(1) POWER TO DISCIPLINE
Authority to administer disciplinary actions against
elective officials
(2) POWER TO INVESTIGATE
Authority to inquire into facts and conditions in order to
render the power real and effective
SECTION 5
SOURCES OF REVENUE

The constitution granted LGUs to have the power (1) to

create their own revenues and (2) taxing powers.
BAR:
Can an LGU provide a source of revenue?
YES. The LGU may create its own sources of revenue
provided that it is subject to guidelines and limitations created by
Congress. For example, Tariff, National Tax.
Revenues by the LGU are for its own exclusive use.
SECTION 6
FISCAL AUTONOMY
Definition:
It means that the local government have the power to create
their own sources of revenue in addition to their just share in the
national taxes released by the national government, as well as
the power to allocate their own resources according to their own
priorities.
The LGUs shall have their own just share in the national taxes
which shall be AUTOMATICALLY RELEASED to them.
The LGC specifies that the release shall be made directly to
the LGU concerned within 5 days after every quarter of the year
and shall not be subject to any lien or holdback that may be
imposed by the national government for whatever purpose.
INTERNAL REVENUE ALLOTMENT
The funds generated from local taxes, IRAs and national
wealth utilization proceeds accrue to the general fund of the local
government unit and are used to finance its operations subject to
specified modes of spending as provided by the LGC and its
implementing rules and regulations.
SECTION 7
USE OF NATURAL RESOURCES (NATIONAL WEALTH) AND
GENERATION OF INCOME
The LGUs now have a share in the wealth generated in the
utilization and development of natural resources.
SECTION 8
THREE YEAR TERM RULE
The rule is determined by the law which shall be three years
and no official shall serve for more than three consecutive terms.
The term limit for elective officials must also include the right
to be elected as well as the right to serve in the same elective
position. Thus, those who succeeded the vacant office by
operation of law for the purpose of serving the remainder of the
term, the term will not be considered as to have fully served one
term.
VOLUNTARY RENUNCIATION
It is not considered as an interruption in the continuity of
service for the full term for which he was elected.
SECTION 9
SECTORAL REPRESENTATIONS
The Constitution mandates a system of governance where all
sectors of the community can participate.
SECTION 10
CREATION OF LGUs
General Rule:
No province, city, municipality, or barangay
may be
created, divided, merged, abolished
or its boundary
substantially
altered
(CDMAA)
Except:
In accordance with the criteria established in
the LGC
and subject to the approval of the
majority through a
plebiscite
where
voted are casted by political units
directly
affected.
The manner of creating LGUs is dealt in Section 6, 7, and 8 of
the Local Government Code.
SECTION 11
SPECIAL METROPOLITAN POLITICAL SUBDIVISION
Not another political subdivision as state in section 1 thereof.
SECTION 12
HIGHLY URBANIZED AND COMPONENT CITIES
HUCCs whose charters prohibit their voters from voting
provincial elective officials SHALL be independent of the province.
Except, when theres no prohibition, the voters shall not be
deprived of their right to vote for elective provincial officials.
SECTION 13
GROUPING OF LGUs FOR BENEFICIAL PURPOSES
This is for the benefit of their constituents.

SECTION 14
REGIONAL DEVELOPMENT COUNCIL
The RDC serves as specific machinery in the giving of life and
meaning to administrative decentralization and to accelerate the
economic and social growth and development of the LGUs
SECTION 15-20
CREATION OF AUTONOMOUS REGIONS

LAW ON PUBLIC CORPORATION USA LAW LECTURE NOTES (2 nd Semester - A.Y. 2015-2016)
Remember, law is a demanding lover.

Autonomous Regions are political subdivisions sharing

common and distinctive historical and cultural heritage, economic
and social structures and other relevant characteristics.
ORGANIC ACT FOR AUTONOMOUS REGION
It defines the basic structure of government for the region.
SECTION 21

PRESERVATION OF PEACE AND ORDER; DEFENSE AND

SECURITY
Peace and Order: It shall be the responsibility of the local police
agencies.
Defense and Security:
It shall be the responsibility of the
National Government