PUBLIC

CORPORATIONS
as lectured by Atty. Rodolfo Lapid
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA

DISCLAIMER

The following are the materials used for this work:

1. Lectures and syllabus of Atty. Rodolfo Lapid

Some of the contents of the above have been paraphrased and questions propounded differently in
order to tailor the author’s learning method.

Answers to some questions are likewise tailored to the personal preference of the author

I do not guaranty the absolute correctness of this work due to human errors and failure to
understand the question or concept perfectly. I apologize in advance for any error you may
encounter in this work.

However, please see to it that the error is an opportunity to learn, as Dean Jose Sundiang puts it
“The beauty of an error is to correct it, and not to perpetuate it.”

2|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA

TABLE OF CONTENTS
CONSTITUTIONAL BASIS …………………………………………………………... 1
Sec.25, Art. II, 1987 Constitution …………………………………………………………... 1
Sec.2, Art. X, 1987 Constitution ……………………………………………………………. 1

SEC.1. TITLE ……………………………………………………………………………. 1

Landmark legislation ………………………………………………………………………...1
Who are the authors of the LGC? …………………………………………………………...1
What is LGC’s date of promulgation? ……………………………………………………… 1
When did the LGC take effect? …………………………………………………………….. 1

SEC.2. DECLARATION OF POLICY ……………………………………………….. 1

SEC.4. SCOPE OF APPLICATION ………………………………………………….. 1

Where shall the LGC apply? ………………………………………………………………... 2

SEC.5. RULES OF INTERPRETATION ……………………………………………. 2

Interpretation of provision on a power of LGU ……………………………………………. 2
Interpretation of tax ordinance or revenue measure ………………………………………... 2
Interpretation of tax exemptions …………………………………………………………… 3
Interpretation of general welfare provision …………………………………………………. 3
Where is the general welfare provision/clause found? ……………………………………… 3
Governing law as to rights and obligations already existing
at the time of the LGC or those arising out of contracts involving LGUs ………………….. 3
In case there is an absence of legal provision or jurisprudence
regarding the controversy, what may be resorted to resolve the issue? ……………………… 3

SEC.6. AUTHORITY TO CREATE LOCAL GOVERNMENT UNITS ……………. 3

How are public corporations created? ……………………………………………………… 3
Who may create local government units (LGUs) …………………………………………… 3
Can the sanggunian panlalawigan or panlungsod create provinces, cities, or municipalities …. 3
Power to create and power to destroy ……………………………………………………… 3
Corporations for profit v. quasi corporations and quasi-public corporations ………………. 3
Examples of corporations for profit ………………………………………………………... 4
Examples of quasi-public corporations ……………………………………………………... 4

SEC.7. CREATION AND CONVERSION ……………………………………………. 4

Economic indicators ………………………………………………………………………... 4
Judicial amendment ………………………………………………………………………… 4

SEC.8. DIVISION AND MERGER ……………………………………………………. 4

SEC.9. ABOLITION OF LOCAL GOVERNMENT UNITS ………………………... 5

Can an LGU be abolished ………………………………………………………………….. 5
Ground to abolish LGU ……………………………………………………………………. 5

SEC.10. PLEBISCITE REQUIREMENT ……………………………………………… 5

Who shall participate in a plebiscite? ………………………………………………………...5

3|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
Manila has six (6) districts. A seventh (7th) district is to be created,
who must participate in the plebiscite? ……………………………………………………... 5

SEC.11. SELECTION AND TRANSFER OF LOCAL GOVERNMENT SITE,

OFFICES AND FACILITIES …………………………………………………………... 5

SEC.12. GOVERNMENT CENTERS …………………………………………………. 6

SEC.13. NAMING OF LOCAL GOVERNMENT UNITS

AND PUBLIC PLACES, STREETS AND STRUCTURES ………………………….. 6
Vote needed ………………………………………………………………………………... 7
Philippine Historical Commission ………………………………………………………….. 7
X, a sanggunian member, objected to the change of name.
Will the change of name have effect? ………………………………………………………. 7

SEC.14. BEGINNING OF CORPORATE EXISTENCE ……………………………. 7

Effectivity clause …………………………………………………………………………… 7
Rule as to commencement of existence of LGU …………………………………………… 7

SEC.15. POLITICAL AND CORPORATE NATURE

OF LOCAL GOVERNMENT UNITS ………………………………………………… 8
Dual nature ………………………………………………………………………………… 8
Rule as to liability for damages ……………………………………………………………... 8
Due to a manhole which was not maintained in good condition by the City of Manila,
Teotico fell in it and suffered injury. May the City be held liable? …………………………... 8

SEC.16. GENERAL WELFARE ………………………………………………………… 8

Purpose …………………………………………………………………………………….. 8

SEC.17. BASIC SERVICES AND FACILITIES ……………………………………… 8

Devolution ………………………………………………………………………………… 9

SEC.18. POWER TO GENERATE AND APPLY RESOURCES …………………… 9

SEC.19. EMINENT DOMAIN …………………………………………………………. 9

When eminent domain cannot be exercised ………………………………………………... 9
If refused, what remedy may the LGU interpose? …………………………………………... 9
Effect of expropriation proceeding ………………………………………………………… 9
Who determines the value to be paid? ……………………………………………………… 9

SEC. 20. RECLASSIFICATION OF LANDS ………………………………………….. 10

SEC. 21. CLOSURE AND OPENING OF ROADS …………………………………… 10

Required vote in permanently closing streets ……………………………………………11
Effect of permanently closing streets ……………………………………………………….. 11

SEC. 22. CORPORATE POWERS ……………………………………………………… 11

Can the mayor enter into contracts by himself? …………………………………………….. 12
What is the status of the contract in the above question? …………………………………... 12

4|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
SEC. 24. LIABILITY FOR DAMAGES ………………………………………………... 12

MIDTERM POINTERS ………………………………………………………………… 13

MIDTERM SAMPLEX ………………………………………………………………….. 17

5|Page
CONSTITUTIONAL BASIS
Sec. 25, Art. II;
The State shall ensure the autonomy of local
governments
Sec. 2, Art X;
The territorial and political subdivisions shall
enjoy local autonomy
The above provisions encouraged the
creation of the Local Government
Code of 1991.
Sec.1. Title;
This act shall be known and cited as the
“Local Government Code of 1991”.
Landmark legislation
Prior to the enactment of the Local
Government Code (LGC), public
officers must go to Manila in order to
approve or follow-up their project.
Hence, the term “Imperial Manila”
was coined.
Due to the LGC, local government
units now have the capacity to
approve its own projects without the
necessity of approval from
Malacanang.
Q: Who are the authors of the LGC?
In the upper house, it is then Senator
Aquilino “Nene” Pimentel.
In the lower house, it is
Q: What is LGC’s date of promulgation?
10 October 1991
Q: When did the LGC take effect?
January, 1992 (Sec. 536, LGC)
Sec.2. Declaration of Policy;
a) It is hereby declared the policy of the
State that the territorial and political
subdivisions of the State shall enjoy
genuine and meaningful local
autonomy to enable them to attain
their fullest development as self-reliant
communities and make them more
effective partners in the attainment of
national goals. Toward this end, the
State shall provide for a more
responsive and accountable local
government structure instituted
through a system of decentralization
whereby local government units shall
be given more powers, authority,
responsibilities, and resources. The
process of decentralization shall
proceed from the National
Government to the local government
units.
b) It is also the policy of the State to
ensure the accountability of local
government units through the
institution of effective mechanisms of
recall, initiative, and referendum.
c) It is likewise the policy of the State to
require all national agencies and
offices to conduct periodic
consultations with appropriate local
government units, non-governmental
and people’s organizations, and other
concerned sectors of the community
before any project or program is
implemented in their respective
jurisdictions.
Sec.4. Scope of Application;
This Code shall apply to all provinces, cities,
municipalities, barangays, and other political
subdivisions as may be created by law, and, to
the extent herein provided, to officials,
offices, or agencies of the national
government.
1|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
Q: Where shall the LGC apply?
It is applicable to:
a) Provinces;
b) Cities;
c) Municipalities;
d) Barangays;
e) Other political subdivisions;
f) National government
a. Officials;
b. Offices; or
c. Agencies
Sec.5. Rules of Interpretation;
In the interpretation of the provisions of this
Code, the following rules shall apply:
a) Any provision on a power of a local
government unit shall be liberally
interpreted in its favor, and in case of
doubt, any question thereon shall be
resolved in favor of devolution of
powers and of the lower local
government unit. Any fair and
reasonable doubt as to the existence
of the power shall be interpreted in
favor of the local government unit
concerned;
b) In case of doubt, any tax ordinance or
revenue measure shall be construed
strictly against the local government
unit enacting it, and liberally in favor
of the taxpayer. Any tax exemption,
incentive, or relief granted by any local
government unit pursuant to the
provisions of this Code shall be
construed strictly against the person
claiming it;
c) The general welfare provisions in this
Code shall be liberally interpreted to
give more powers to local government
units in accelerating economic
development and upgrading the
PJA
quality of life for the people in the
community;
d) Rights and obligations existing on the
date of effectivity of this Code and
arising out of contracts or any other
source of presentation involving a
local government unit shall be
governed by the original terms and
conditions of said contracts or the law
in force art the times such rights were
vested; and
e) In the resolution of controversies
arising under this Code where no legal
provision or jurisprudence applies,
resort may be had to the customs and
traditions in the place where the
controversies take place.
Interpretation of provision on a power of
LGU
It shall be interpreted in favor of the
LGU.
In case of doubt, it shall be resolved in
favor of:
a) Devolution of powers; and
b) Lower LGU
As to doubt on the existence of such
power, it shall be interpreted in favor
of the LGU
Interpretation of tax ordinance or revenue
measure
It shall be interpreted against the
enacting LGU, and in favor of the
taxpayer.
The reason for this is that taxes are
burdens imposed on the taxpayer.
2|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
Interpretation of tax exemptions
It shall be interpreted strictly against
the taxpayer, and in favor of the LGU.
Interpretation of general welfare provision
It shall be interpreted to give more
powers to the LGU
Q: Where is the general welfare
provision/clause found?
It is found under Sec. 16 of the LGC
Governing law as to rights and obligations
already existing at the time of the LGC or
those arising out of contracts involving
LGUs
It shall be governed by:
a) Said contract; or
b) Law existing at the time the right
was vested
Q: In case there is an absence of legal
provision or jurisprudence regarding the
controversy, what may be resorted to
resolve the issue?
It may be resolved by customs or
traditions where the controversies
took place.
Sec.6. Authority to create local
government units;
A local government unit may be created,
divided, merged, abolished, or its boundaries
substantially altered either by law enacted by
Congress in the case of a province, city,
municipality, or any other political
subdivision, or by ordinance passed by the
sanggunian panlalawigan or sangguniang
panlungsod concerned in the case of a
barangay located within its territorial
PJA
jurisdiction, subject to such limitations and
requirements prescribed in this Code.
Q: How are public corporations created?
Public corporations are created by law
Q: Who may create local government
units (LGUs)
As a general rule, LGUs are created
by Congress.
As an exception, barangays may be
created by ordinance passed by:
a) Sanggunian panlalawigan; or
b) Sanggunian panlungsod
Q: Can the sanggunian panlalawigan or
panlungsod create provinces, cities, or
municipalities.
No, they may only create barangays.
The creation of provinces, cities, or
municipalities, are powers exclusive to
Congress.
Power to create and power to destroy
The power to create necessarily
includes the power to destroy
Corporations for profit v. quasi
corporations and quasi-public
corporations
Corporations for profit are those
formed or organized for the sole
purpose of business undertaking for
the benefit of those composing the
corporation themselves.
Quasi corporations on the other
hand are those formed by a statute or
by immemorial usage such as
3|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
townships, counties, and school
districts.
Quasi-public corporations are those
formed for the benefit of the public,
which are private corporations which
has accepted or have been given a
grant or franchise by the State.
Necessarily, to enable them to exercise
their public purpose, they are given
authority to exercise state powers.
Examples of corporations for profit
a) Jollibee
b) San Miguel
Examples of quasi-public corporations
a) PLDT (has power of eminent domain)
b) MERALCO (has power of eminent
domain
Sec.7. Creation and conversion;
As a general rule, the creation of a local
government unit or its conversion from one
level to another level shall be based on
verifiable indicators of viability and projected
capacity to provide services, to wit:
a) Income. – It must be sufficient, based
on acceptable standards, to provide
for all essential government facilities
and services and special functions
commensurate with the size of its
population, as expected of the local
government unit concerned;
b) Population. – It shall be determined as
the total number of inhabitants within
the territorial jurisdiction of the local
government unit concerned; and
c) Land areas. – It must be contiguous,
unless it comprises two (2) or more
islands or is separated by a local
government unit independent of the
PJA
others; properly identified by metes
and bounds with technical
descriptions; and sufficient to provide
for such basic services and facilities to
meet the requirements of its populace.
Compliance with the foregoing indicators
shall be attested to by the Department of
Finance (DOF), the National Statistics Office
(NSO), and the Lands Management Bureau
(LMB) of the Department of Environment
and Natural Resources (DENR).
Economic indicators
Under Sec. 7, the following must be
met:
1. Sufficient income;
2. Population; and
3. Contiguous land Area
Judicial amendment
In one case, the Court ruled that an
area or population may be substituted
with each other, hence, the economic
indicators for an LGU are as follows:
1. Sufficient income, as the
indispensable requirement;
and
2. Area OR population
Sec.8. Division and Merger;
Division and merger of existing local
government units shall comply with the same
requirements herein prescribed for their
creation: Provided, however, that such division
shall not reduce the income, population, or
land area of the local government unit or units
concerned to less than the minimum
requirements prescribed in this Code: Provided,
further, that the income classification of the
original local government unit or units shall
not fall below its current income classification
prior to such division.
4|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
The income classification of local government
units shall be updated within six (6) months
from the effectivity of this Code to reflect the
changes in their financial position resulting
from the increased revenues as provide
herein.
Sec.9. Abolition of Local Government
Units;
A local government unit may be abolished
when its income, population, or land area has
been irreversibly reduced to less than the
minimum standards prescribed for its creation
under Book III of this Code, as certified by
the national agencies mentioned in Section 7
hereof to Congress or to the sanggunian
concerned, as the case may be.
The law or ordinance abolishing a local
government unit shall specify the province,
city, municipality, or barangay with which the
local government unit sought to be abolished
will be incorporated or merged.
Q: Can an LGU be abolished?
Yes
Ground to abolish LGU
When the income, population, or land
area has been irreversibly reduced to
less than the minimum standards
prescribed for its creation
Sec.10. Plebiscite Requirement;
No creation, division, merger, abolition, or
substantial alteration of boundaries of local
government units shall take effect unless
approved by a majority of the votes cast in a
plebiscite called for the purpose in the
political unit or units directly affected. Said
plebiscite shall be conducted by the
Commission on Elections (Comelec) within
one hundred twenty (120) days from the date
of effectivity of the law or ordinance affecting
PJA
such action, unless said law or ordinance fixes
another date.
Q: Who shall participate in a plebiscite?
Those who are registered voters of an
LGU which will be affected by the
creation, division, merger, abolition or
alteration of an LGU (Tan v.
COMELEC and Padilla v.
COMELEC)
Q: Manila has six (6) districts. A seventh
(7th) district is to be created, who must
participate in the plebiscite?
It must be the registered voters of the
other six (6) districts.
Sec.11. Selection and Transfer of Local
Government Site, Offices and Facilities;
a) The law or ordinance creating or
merging local government units shall
specify the seat of government from
where governmental and corporate
services shall be delivered. In selecting
said site, factors relating to
geographical centrality, accessibility,
availability of transportation and
communication facilities, drainage and
sanitation, development and economic
progress, and other relevant
considerations shall be taken into
account.
b) When conditions and developments in
the local government unit concerned
have significantly changed subsequent
to the establishment of seat of
government, its sanggunian may, after
public hearing and by a vote of two-
thirds (2/3) of all its members transfer
the same to a site better suited to its
needs. Provided, however, that no such
transfer shall be made outside the
territorial boundaries of the local
government unit concerned.
5|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
recommendation of the
The old site together with the sanggunian concerned;
improvements thereon may be 2. Provincial roads, avenues,
disposed of by sale or lease or boulevards, thoroughfares,
converted to such other use as the and bridges;
sanggunian concerned may deem 3. Public vocational or technical
beneficial to the local government unit schools and other post-
concerned and its inhabitants. secondary and tertiary schools;
4. Provincial hospitals, health
c) Local government offices and facilities centers, and other health
shall not be transferred, relocated, or facilities; and
converted to other uses unless public 5. Any other public place or
hearings are firs conducted for the building owned by the
purpose and the concurrence of the provincial government
majority of all the members of the b) The sanggunians of highly urbanized
sanggunian concerned is obtained. cities and of component cities whose
charters prohibit their voters from
Sec.12. Government Centers; voting for provincial elective officials,
Provinces, cities, and municipalities shall hereinafter referred to in this Code as
endeavour to establish a government center independent component cities, may, in
where offices, agencies, or branches of the consultation with the Philippines
National Government, local government Historical Commission, change the
units, or government-owned or –controlled name of the following within its
corporations may, as far as practible, be territorial jurisdiction:
located. In designating such a center, the local
government unit concerned shall take into 1. City barangays, upon the
account the existing facilities of national and recommendation of the
local agencies and offices which may serve as sangguniang barangay
the government center as contemplated under concerned;
this Section. The National Government, local 2. City roads, avenues,
government unit or government-owned or – boulevards, thoroughfares,
controlled corporation concerned shall bear and bridges;
the expenses for the construction of its 3. Public elementary, secondary
buildings and facilities in the government and vocational or technical
center. schools, community colleges
and non-chartered colleges;
Sec.13. Naming of Local Government 4. City hospitals, health centers
Units and Public Places, Streets and and other health facilities; and
Structures; 5. Any other public place or
building owned by the city
a) The sangguniang panlalawigan may, in government.
consultation with the Philippine
Historical Commission (PHC), change
the name of the following within its c) The sanggunians of component cities
territorial jurisdiction: and municipalities may, in
consultation with the Philippine
1. Component cities and Historical Commission, change the
municipalities, upon the

6|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
name of the following within its
territorial jurisdiction:
1. City and municipal barangays,
upon recommendation of the
sangguniang barangay
concerned;
2. City, municipal and barangay
roads, avenues, boulevards,
thoroughfares, and bridges;
3. City and municipal public
elementary, secondary and
vocational or technical
schools, post-secondary and
other tertiary schools;
4. City and municipal hospitals,
health centers and other health
facilities; and
5. Any other public place or
building owned by the
municipal government
d) None of the foregoing local
government units, institutions, places,
or buildings shall be named after a
living person, nor may a change of
name be made unless for a justifiable
reason and, in any case, not oftener
than once every ten (1) years. The
name of a local government unit or a
public place, street, or structure with
historical, cultural, or ethnic
significance shall not be changed,
unless by a unanimous vote of the
sanggunian concerned and in
consultation with the PHC.
e) A change of name of a public school
shall be made only upon the
recommendation of the local school
board concerned.
f) A change of name of public hospitals,
health centers, and other health
facilities shall be made only upon the
recommendation of the local health
board concerned.
PJA
g) The change of name of any local
government unit shall be effective
only upon ratification in a plebiscite
conducted for the purpose in the
political unit directly affected.
h) In any change of name, the Office of
the President, the representative of the
legislative district concerned, and the
Bureau of Posts shall be notified.
Vote needed
It must be unanimous
Philippine Historical Commission
Consultation with the PHC is required
to avail a change of name
Q: X, a sanggunian member, objected to
the change of name. Will the change of
name have effect?
No, the vote required is unanimous
Sec.14. Beginning of Corporate Existence;
When a new local government unit is created,
its corporate existence shall commence upon
the election and qualification of its chief
executive and a majority of the members of its
sanggunian, unless some other time is fixed
therefor by the law or ordinance creating it.
Effectivity clause
This provision declares when the
LGU would be deemed to exist
Rule as to commencement of existence of
LGU
GR: Upon the election of:
1. Chief executive;
and
7|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
2. Majority of
sanggunian
members
ER: Fixed by law or ordinance
Sec.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.
Dual nature
An LGU exercises two powers as a:
1. Body politic; and
2. Corporate entity
Rule as to liability for damages
As a body politic:
GR: NOT liable
ER: When negligent in performing
(Art. 2189, Civil Code of the
Philippines)
As a corporate entity, liable for
damages
Q: Due to a manhole which was not
maintained in good condition by the City
of Manila, Teotico fell in it and suffered
injury. May the City be held liable?
Yes, as the City was negligent in
maintain the good condition of the
road or public works (City of Manila
v. Teotico)
Sec.16. General Welfare;
PJA
Every local government unit shall exercise the
powers expressly granted, those necessarily
implied therefrom, as well as powers
necessary, appropriate, or incidental for its
efficient and effective governance, and those
which are essential to the promotion of the
general welfare. Within their respective
territorial jurisdictions, local government units
shall ensure and support, among other things,
the preservation and enrichment of culture,
promote health and safety, enhance the right
of the people to a balanced ecology,
encourage and support the development of
appropriate and self-reliant scientific and
technological capabilities, improve public
morals, enhance economic prosperity and
social justice, promote full employment
among their residents, maintain peace and
order, and preserve the comfort and
convenience of their inhabitants.
Purpose
The General Welfare clause or
provision expressly provided for the
grant of police power to LGUs.
Prior to the enactment of the LGC,
police power is only implied and led
to numerous questions on such
authority.
Sec.17. Basic Services and Facilities;
xxx
(e) National agencies or offices concerned
shall devolve to local government units the
responsibility for the provision of basic
services and facilities enumerated in this
Section within six (6) months after the
effectivity of this Code.
As used in this Code, the term "devolution"
refers to the act by which the national
government confers power and authority
upon the various local government units to
8|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
perform specific functions and
responsibilities.
xxx
Devolution
Act by which the national government
confers power and authority upon the
various LGUs to perform specific
functions and responsibilities
Sec. 18. Power to Generate and Apply
Resources;
Local government units shall have the power
and authority to establish an organization that
shall be responsible for the efficient and
effective implementation of their
development plans, program objectives and
priorities; to create their own sources of
revenues and to levy taxes, fees, and charges
which shall accrue exclusively for their use
and disposition and which shall be retained by
them; to have a just share in national taxes
which shall be automatically and directly
released to them without need of any further
action; to have an equitable share in the
proceeds from the utilization and
development of the national wealth and
resources within their respective territorial
jurisdictions including sharing the same with
the inhabitants by way of direct benefits; to
acquire, develop, lease, encumber, alienate, or
otherwise dispose of real or personal property
held by them in their proprietary capacity and
to apply their resources and assets for
productive, developmental, or welfare
purposes, in the exercise or furtherance of
their governmental or proprietary powers and
functions and thereby ensure their
development into self-reliant communities
and active participants in the attainment of
national goals.
Sec. 19. Eminent Domain;
A local government unit may, through its
chief executive and acting pursuant to an
ordinance, exercise the power of eminent
PJA
domain for public use, or purpose or welfare
for the benefit of the poor and the landless,
upon payment of just compensation, pursuant
to the provisions of the Constitution and
pertinent laws: Provided, however, That the
power of eminent domain may not be
exercised unless a valid and definite offer has
been previously made to the owner, and such
offer was not accepted: Provided, further,
That the local government unit may
immediately take possession of the property
upon the filing of the expropriation
proceedings and upon making a deposit with
the proper court of at least fifteen percent
(15%) of the fair market value of the property
based on the current tax declaration of the
property to be expropriated: Provided, finally,
That, the amount to be paid for the
expropriated property shall be determined by
the proper court, based on the fair market
value at the time of the taking of the property.
When eminent domain cannot be
exercised
The LGU cannot exercise eminent
domain under the following instances:
1) No valid and definite offer
made; and
2) Rejected offer
Q: If refused, what remedy may the LGU
interpose?
Expropriation proceedings
Effect of expropriation proceeding
The LGU may immediately take
possession of the property upon
deposit of fifteen percent (15%) of the
fair market value to the proper court
Q: Who determines the value to be paid?
The court
9|Page
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
Sec. 20. Reclassification of Lands;
a) A city or municipality may, through an
ordinance passed by the sanggunian
after conducting public hearings for
the purpose, authorize the
reclassification of agricultural lands
and provide for the manner of their
utilization or disposition in the
following cases: (1) when the land
ceases to be economically feasible and
sound for agricultural purposes as
determined by the Department of
Agriculture or (2) where the land shall
have substantially greater economic
value for residential, commercial, or
industrial purposes, as determined by
the sanggunian concerned: Provided,
That such reclassification shall be
limited to the following percentage of
the total agricultural land area at the
time of the passage of the ordinance:
1) For highly urbanized and
independent component cities,
fifteen percent (15%);
2) For component cities and first
to the third class
municipalities, ten percent
(10%); and
3) For fourth to sixth class
municipalities, five percent
(5%): Provided, further, That
agricultural lands distributed
to agrarian reform
beneficiaries pursuant to
Republic Act Numbered Sixty-
six hundred fifty-seven (R.A.
No. 6657). otherwise known
as "The Comprehensive
Agrarian Reform Law", shall
not be affected by the said
reclassification and the
conversion of such lands into
other purposes shall be
PJA
governed by Section 65 of said
Act.
b) The President may, when public
interest so requires and upon
recommendation of the National
Economic and Development
Authority, authorize a city or
municipality to reclassify lands in
excess of the limits set in the next
preceding paragraph.
c) The local government units shall, in
conformity with existing laws,
continue to prepare their respective
comprehensive land use plans enacted
through zoning ordinances which shall
be the primary and dominant bases
for the future use of land resources:
Provided. That the requirements for
food production, human settlements,
and industrial expansion shall be taken
into consideration in the preparation
of such plans.
d) Where approval by a national agency
is required for reclassification, such
approval shall not be unreasonably
withheld. Failure to act on a proper
and complete application for
reclassification within three (3)
months from receipt of the same shall
be deemed as approval thereof.
e) Nothing in this Section shall be
construed as repealing, amending, or
modifying in any manner the
provisions of R.A. No. 6657.
Sec. 21. Closure and Opening of Roads;
a) A local government unit may,
pursuant to an ordinance, permanently
or temporarily close or open any local
road, alley, park, or square falling
within its jurisdiction: Provided,
however, That in case of permanent
closure, such ordinance must be
10 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
approved by at least two-thirds (2/3)
of all the members of the sanggunian,
and when necessary, an adequate
substitute for the public facility that is
subject to closure is provided.
b) No such way or place or any part
thereof shall be permanently closed
without making provisions for the
maintenance of public safety therein.
A property thus permanently
withdrawn from public use may be
used or conveyed for any purpose for
which other real property belonging to
the local government unit concerned
may be lawfully used or conveyed:
Provided, however, That no freedom
park shall be closed permanently
without provision for its transfer or
relocation to a new site.
c) Any national or local road, alley, park,
or square may be temporarily closed
during an actual emergency, or fiesta
celebrations, public rallies, agricultural
or industrial fairs, or an undertaking of
public works and highways,
telecommunications, and waterworks
projects, the duration of which shall
be specified by the local chief
executive concerned in a written
order: Provided, however, That no
national or local road, alley, park, or
square shall be temporarily closed for
athletic, cultural, or civic activities not
officially sponsored, recognized, or
approved by the local government
unit concerned.
d) Any city, municipality, or barangay
may, by a duly enacted ordinance,
temporarily close and regulate the use
of any local street, road, thoroughfare,
or any other public place where
shopping malls, Sunday, flea or night
markets, or shopping areas may be
established and where goods,
PJA
merchandise, foodstuffs,
commodities, or articles of commerce
may be sold and dispensed to the
general public.
Required vote in permanently closing
streets
At least 2/3 vote from the sanggunian
members
Effect of permanently closing streets
It reverts to patrimonial property
capable of private acquisition.
A street formerly known as Pancho
Villa St. was originally in from of a
temple. As said street was not actually
in use by the public, the sanggunian
decided to close said street. At
present, the said street is being used as
a parking lot.
Sec. 22. Corporate Powers;
a) Every local government unit, as a
corporation, shall have the following
powers:
1) To have continuous
succession in its corporate
name;
2) To sue and be sued;
3) To have and use a corporate
seal;
4) To acquire and convey real or
personal property;
5) To enter into contracts; and
6) To exercise such other powers
as are granted to corporations,
subject to the limitations
provided in this Code and
other laws.
b) Local government units may continue
using, modify, or change their existing
corporate seals: Provided, That newly
established local government units or
11 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
those without corporate seals may
create their own corporate seals which
shall be registered with the
Department of the Interior and Local
Government: Provided, further, That
any change of corporate seal shall also
be registered as provided hereon.
PJA
agreement or deed of donation, report the
nature, amount, and terms of such assistance
to both Houses of Congress and the
President.
Q: Can the mayor enter into contracts by
himself?

c) Unless otherwise provided in this No, it must be authorized by the

Code, no contract may be entered into sanggunian.
by the local chief executive in behalf
of the local government unit without Q: What is the status of the contract in the
prior authorization by the sanggunian above question?
concerned. A legible copy of such
contract shall be posted at a Void
conspicuous place in the provincial
capitol or the city, municipal or Sec. 24. Liability for Damages;
barangay hall. Local government units and their officials are
not exempt from liability for death or injury
d) Local government units shall enjoy to persons or damage to property.
full autonomy in the exercise of their
proprietary functions and in the
limitations provided in this Code and
other applicable laws,

Sec. 23. Authority to Negotiate and Secure

Grants;
Local chief executives may, upon authority of
the sanggunian, negotiate and secure financial
grants or donations in kind, in support of the
basic services or facilities enumerated under
Section 17 hereof, from local and foreign
assistance agencies without necessity of
securing clearance or approval therefor from
any department, agency, or office of the
national government of from any higher local
government unit: Provided, That projects
financed by such grants or assistance with
national security implications shall be
approved by the national agency concerned:
Provided, further, That when such national
agency fails to act on the request for approval
within thirty (30) days from receipt thereof,
the same shall be deemed approved.

The local chief executive shall, within thirty

(30) days upon signing of such grant

12 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
MIDTERM POINTERS b) Cities;
c) Municipalities;
Sec.2. Declaration of Policy; d) Barangays;
e) Other political subdivisions;
a) It is hereby declared the policy of the f) National government
State that the territorial and political a. Officials;
subdivisions of the State shall enjoy b. Offices; or
genuine and meaningful local c. Agencies
autonomy to enable them to attain
their fullest development as self-reliant Interpretation of provision on a power of
communities and make them more LGU
effective partners in the attainment of
national goals. Toward this end, the It shall be interpreted in favor of the
State shall provide for a more LGU.
responsive and accountable local
government structure instituted In case of doubt, it shall be resolved in
through a system of decentralization favor of:
whereby local government units shall
be given more powers, authority, a) Devolution of powers; and
responsibilities, and resources. The b) Lower LGU
process of decentralization shall
proceed from the National As to doubt on the existence of such
Government to the local government power, it shall be interpreted in favor
units. of the LGU

b) It is also the policy of the State to Interpretation of tax ordinance or revenue

ensure the accountability of local
government units through the
institution of effective mechanisms of
recall, initiative, and referendum.
c) It is likewise the policy of the State to
require all national agencies and
offices to conduct periodic
consultations with appropriate local
government units, non-governmental
and people’s organizations, and other
concerned sectors of the community
before any project or program is
implemented in their respective
jurisdictions.
measure
It shall be interpreted against the
enacting LGU, and in favor of the
taxpayer.
The reason for this is that taxes are
burdens imposed on the taxpayer.
Interpretation of tax exemptions
It shall be interpreted strictly against
the taxpayer, and in favor of the LGU.
Interpretation of general welfare provision

It shall be interpreted to give more

Q: Where shall the LGC apply?
powers to the LGU
It is applicable to:
Q: How are public corporations created?
a) Provinces;
Public corporations are created by law
13 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
Q: Who may create local government
units (LGUs)
As a general rule, LGUs are created
by Congress.
As an exception, barangays may be
created by ordinance passed by:
a) Sanggunian panlalawigan; or
b) Sanggunian panlungsod
Q: Can the sanggunian panlalawigan or
panlungsod create provinces, cities, or
municipalities.
No, they may only create barangays.
The creation of provinces, cities, or
municipalities, are powers exclusive to
Congress
Economic indicators
Under Sec. 7, the following must be
met:
1. Sufficient income;
2. Population; and
3. Contiguous land Area
Judicial amendment
In one case, the Court ruled that an
area or population may be substituted
with each other, hence, the economic
indicators for an LGU are as follows:
1. Sufficient income, as the
indispensable requirement;
and
2. Area OR population
Q: Who shall participate in a plebiscite?
Those who are registered voters of an
LGU which will be affected by the
PJA
creation, division, merger, abolition or
alteration of an LGU (Tan v.
COMELEC and Padilla v.
COMELEC)
Q: Manila has six (6) districts. A seventh
(7th) district is to be created, who must
participate in the plebiscite?
It must be the registered voters of the
other six (6) districts..
Dual nature
An LGU exercises two powers as a:
1. Body politic; and
2. Corporate entity
Rule as to liability for damages
As a body politic:
GR: NOT liable
ER: When negligent in performing
(Art. 2189, Civil Code of the
Philippines)
As a corporate entity, liable for
damages
Q: The LGU decided to create an
executive committee for purposes of
organizing a town fiesta.
During the performance of sarsuela, one
of the performers fell and pinned down
under the stage and eventually died.
Due to the incident, damages was filed
against the LGU. For the latter’s defense,
it argued that it is in the exercise of a
governmental function hence no damages
may be recovered against it. Is the LGU
correct?
No, the LGU is incorrect.
14 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
The Court held that the conduct of a
fiesta is not a governmental function
but rather a proprietary or corporate
function.
As it is corporate in nature, damages
may be recovered from the LGU.
(Torio v. Fontanilla)
Q: Due to a manhole which was not
maintained in good condition by the City
of Manila, Teotico fell in it and suffered
injury. May the City be held liable?
Yes, as the City was negligent in
maintain the good condition of the
road or public works.
As an exception, an LGU may be held
liable for damages even if the function
is governmental if there is negligence
involved. (City of Manila v.
Teotico)
Sec.16. General Welfare;
Every local government unit shall exercise the
powers expressly granted, those necessarily
implied therefrom, as well as powers
necessary, appropriate, or incidental for its
efficient and effective governance, and those
which are essential to the promotion of the
general welfare. Within their respective
territorial jurisdictions, local government units
shall ensure and support, among other things,
the preservation and enrichment of culture,
promote health and safety, enhance the right
of the people to a balanced ecology,
encourage and support the development of
appropriate and self-reliant scientific and
technological capabilities, improve public
morals, enhance economic prosperity and
social justice, promote full employment
among their residents, maintain peace and
order, and preserve the comfort and
convenience of their inhabitants.
Purpose
PJA
The General Welfare clause or
provision expressly provided for the
grant of police power to LGUs.
Prior to the enactment of the LGC,
police power is only implied and led
to numerous questions on such
authority.
Devolution
Act by which the national government
confers power and authority upon the
various LGUs to perform specific
functions and responsibilities
When eminent domain cannot be
exercised
The LGU cannot exercise eminent
domain under the following instances:
1) No valid and definite offer
made; and
2) Rejected offer
Q: If refused, what remedy may the LGU
interpose?
Expropriation proceedings
Effect of expropriation proceeding
The LGU may immediately take
possession of the property upon
deposit of fifteen percent (15%) of the
fair market value to the proper court
Q: Who determines the value to be paid?
The court
Required vote in permanently closing
streets
At least 2/3 vote from the sanggunian
members
15 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
Effect of permanently closing streets Control v. supervision

It reverts to patrimonial property Control refers to the power to alter,

capable of private acquisition. modify, nullify, and set aside an act of
subordinates.
A street formerly known as Pancho
Villa St. was originally in from of a On the other hand, supervision, is to
temple. As said street was not actually see to it that the subordinates are
in use by the public, the sanggunian doing their duties.
decided to close said street. At
present, the said street is being used as
a parking lot.

Q: The LGU decided to issue an

ordinance to close some streets.

In lieu of its being streets, the LGU

contracted with a private person to
establish a flea market.
A police officer confiscated the products
being sold as he argued that it is a public
property where no market may be
established. The LGU argued that as there
is an ordinance allowing for such, the
market should be allowed. Is the LGU
correct?

No, the LGU is incorrect.

Public property in continuous use by

the public as such cannot be subjected
to private acquisition or closure.

The said ordinance is without legal

force, as it is null and void.
(Macasiano v. Diokno)

Q: Can the mayor enter into contracts by

himself?

No, it must be authorized by the

sanggunian.

Q: What is the status of the contract in the

above question?

Void

16 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
MIDTERM SAMPLEX
1) An ordinance of the Municipality
of Virac, Catanduanes, was passed
classifying the warehouse of Mr. X,
as a public nuisance because of the
disturbances caused by the
operations of a abaca boiling
machine inside the warehouse.
It allegedly affected the tranquility
and health of the neighborhood
due to the smoke.
Mr. X moved for a reconsideration
but the council denied it, hence he
went to court raising the issue
whether the warehouse is a
nuisance or not. Decide.
Yes, it is a nuisance.
The Court held that storage of abaca is a
nuisance under Art. 694 of the Civil Code of
the Philippines.
The ordinance in this case must be upheld as
the purpose for such is to avoid the loss of
property and life in cases of fire. (Tatel v.
Virac)
(NOTE: Under the same case, the following
are requisites for a valid municipal ordinance,
it must:
a. NOT contravene the
Constitution or law;
b. NOT unfair or oppressive;
c. NOT partial or discriminatory;
d. NOT prohibit, but may
regulate;
e. NOT unreasonable; and
f. Be general in application and
consistent with public policy)
2) PAGCOR decided to operate a
casino in Baguio City under the
authority of PD 1869, it leased a
PJA
portion of a building owned by Mr.
A, renovated and equipped it in
preparation for its inauguration.
The City Council enacted an
ordinance prohibiting the
operation of casinos in the City and
providing penalty for its violation.
Mr. A and PAGCOR assailed the
validity of the ordinance in court.
How would you resolve the issue?
Discuss.
The ordinance must be struck down.
Ordinances, to be valid, must not contravene
the Constitution or any law.
In this case, the ordinance contravened PD
1869 which allows the operation of casino
gambling.
If the said ordinance is allowed, then it has the
effect of amending or nullifying a law.
(Magtajas v. Pryce)
3) The municipal council of the
Municipality of Betis, Pampanga,
passed an ordinance penalizing
any person or entity engaged in the
business of selling tickets to
movies or other public exhibitions,
games or performances which
would charge children between
seven (7) and twelve (12) years of
age the full price of admission
tickets instead of only one half of
the amount thereof.
Would you hold the ordinance a
valid exercise of legislative power
by the Municipality?
No, the ordinance must be struck down for
being unconstitutional.
17 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid
The exercise of police powers must not be
oppressive, to the extent of intervening with
private rights.
In a similar case, the Court held that the
proprietors of a theatre has the right to
manage as to determine the prices to which
they may be availed. (Balacuit v. CFI of
Agusan)
4) An ordinance was passed by the
Municipality of Bocaue, Bulacan,
prohibiting the operation of
nightclubs, cabarets and dance hall
in the Municipality of the renewal
of their licenses to operate them.
Petitioners, owners and operators
of nightclubs in Bocaue filed a
petition questioning the validity of
the ordinance and to prohibit said
Municipality from enforcing the
same. The RTC of Bulacan
dismisses the petition and upheld
the validity of the ordinance.
Thereafter a petition for certiorari
was filed by the petitioners before
the Supreme Court. Will it prosper?
Why?
Yes, the petition will prosper.
Order 48 allows for the regulation of places of
amusement, but not to prohibit them.
In this case, the ordinance is unreasonable for
absolutely prohibiting such establishments.
Hence, the ordinance contravened a statute
and must be struck down. (Dela Cruz v.
Paras)
5) Mapayo is a Municipality
composed of 80 Barangays. The 30
western Barangays, feeling left out
of economic initiatives, wish to
constitute themselves into a new
PJA
and separate town to be called
MASIGLA.
Granting that MASIGLA’s
proponents succeed in securing a
law in their favor, would a
plebiscite be necessary or not? If
it’s necessary who should vote or
participate in the plebiscite?
Discuss briefly.
Yes, a plebiscite would still be necessary.
Under the Local Government Code, it is
necessary for a majority vote via a plebiscite
from the affected political units before a new
LGU is created.
All registered voters of the other 50 barangays
must participate as they will be affected by the
creation. (Tan v. COMELEC and Padilla v.
COMELEC)
6) An Ordinance of Quezon City
required memorial park operators
to set aside at least 2% of the land
area of their cementery for charity
burial of deceased pauper
residents.
Discuss the constitutional validity
of the ordinance.
The ordinance is unconstitutional.
In reality, the taking amounts to an exercise of
the power of eminent domain, which, before a
valid exercise, just compensation must be
given to the public.
In this case, the LGU takes the property for
public use without any just compensation to
the private owners.
Hence, as no just compensation was given,
the property cannot be taken. (Quezon City
v. Ericta)
18 | P a g e
PUBLIC CORPORATION 2019-2020, 2nd Sem
Atty. Rodolfo Lapid PJA
7) May Local Government Units
exercise the power of eminent
domain? If so, under what
conditions?

Yes, an LGU may exercise the power of

eminent domain.

In exercising, an valid and definite offer must

be made to the private person which must be
accepted.

In case of expropriation proceedings, the

LGU may immediately take possession of the
property upon deposit of fifteen percent
(15%) of the fair market value to the proper
court.

The court shall determine the fair market

value.

8) What is the meaning of Devolution

and its implications?

Act by which the national government

confers power and authority upon the various
LGUs to perform specific functions and
responsibilities

9) State the basic principles

governing the effective
implementation of the local
government code.

See Sec.2

19 | P a g e