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B. Public corporations

1. Concept; distinguished from Government-Owned or Controlled Corporations

A corporation – is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. (Section 2, R.A. 11232, Revised Corporation Code of the Philippines)

Public corporations – are those formed or organized for the government of a portion of the state. (Section 3, R.A. 1459)

Government-owned or controlled corporation – 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. (Section 2[13], Ibid.)

a. TESTS WHETHER PUBLIC CORPORATION OR GOCC

1) Purpose test

The fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good. This class of corporations may be considered quasi-public corporations, which are private corporations that render public service, supply public wants, or pursue other eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are required by law to discharge functions for the public benefit. (Philippine Society for the Prevention of Cruelty to Animals v. COA, En Banc, G.R. No. 169752, 25 September 2007)

2) Totality test

The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered cities, and barangays can best exemplify public corporations. They are created by the State as its own device and agency for the accomplishment of parts of its own public works. (Philippine Society for the Prevention of Cruelty to Animals v. COA, En Banc, G.R. No. 169752, 25 September 2007)

2. Classifications

a. Quasi-corporations

Quasi-public corporations – are private corporations that render public service, supply public wants, or pursue other eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are required by law to discharge functions for the public benefit. (Philippine Society for the Prevention of Cruelty to Animals v. COA, En Banc, G.R. No. 169752, 25 September 2007)

Examples of these corporations are utility, railroad, warehouse, telegraph, telephone, water supply corporations and transportation companies. It must be stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of service the former renders to the public: if it performs a public service, then it becomes a quasi-public corporation. (Ibid.)

b. Municipal corporations

Municipal corporations are now commonly known as local governments. (Mandanas v. Ochoa, En Banc, G.R. Nos. 199802 and 208488, 03 July 2018)

Municipal corporations, being the mere creatures of the State, are subject to the will of Congress, their creator. Their continued existence and the grant of their powers are dependent on the discretion of Congress. (Ibid.)

Municipal governments are only agents of the national government. Local councils exercise only delegated legislative powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local government units can undo the acts of Congress, from which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute. (Magtajas v. Pryce Properties Corporation, lnc., G.R. No. 111097, 20 July 20, 1994)

Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a wrong, sweep from existence all of the municipal corporations in the State, and the corporation could not prevent it. We know of no limitation on the right so far as to the corporation themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature. (Ibid.)

i. Elements

The following are the elements of a municipal corporation:

1) They are legally created or incorporated;

2) They have a corporate name;

3) They have inhabitants; and

4) They have a territory. (See Rodriguez, The Local Government Code of 1991 Annotated [2003])

Under Philippine laws, the City of Manila is a political body corporate and as such endowed with the faculties of municipal corporations to be exercised by and through its city government in conformity with law, and in its proper corporate name. It may sue and be sued, and contract and be contracted with. Its powers are two-fold in character-public, governmental or political on the one hand, and corporate, private and proprietary on the other. (City of Manila v. IAC, G.R. No. 71159, 15 November 1989)

ii. Nature and functions

1) Dual nature

The dual character of a municipal corporation:

1) Governmental (or political) – being a branch of the general administration of the state; and

2) Quasi-private and corporate. (Surigao Electric, Co., Inc. v. Municipality of Surigao, En Banc, G.R. No. L-22766, 30 August 1968)

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. (Section 15, R.A. 7160)

A municipal corporation proper has a public character as regards the state at large insofar as it is its agent in government, and private (so called) insofar as it is to promote local necessities and conveniences for its own community. (City of Manila v. IAC, citing McQuillin on Municipal Corporation)

In connection with the powers of a municipal corporation, it may acquire property in its public or governmental capacity, and private or proprietary capacity. The New Civil Code divides such properties into property for public use and patrimonial properties (Article 423), and further enumerates the properties for public use as provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provisions, cities or municipalities, all other property is patrimonial without prejudice to the provisions of special laws (Ibid.)

a) Governmental

Governmental powers are those exercised in administering the powers of the state and promoting the public welfare and they include the legislative, judicial, public and political. Municipal powers on the one hand are exercised for the special benefit and advantage of the community and include those which are ministerial, private and corporate. (City of Manila v. IAC, citing McQuillin on Municipal Corporation)

Legislative and governmental powers are conferred upon a municipality, the better to enable it to aid a state in properly governing that portion of its people residing within its municipality, such powers being in their nature public. (Surigao Electric, Co., Inc. v. Municipality of Surigao, supra.)

Governmental affairs do not lose their governmental character by being delegated to the municipal governments. Nor does the fact that such duties are performed by officers of the municipality which, for convenience, the state allows the municipality to select, change their character. To preserve the peace, protect the morals and health of the community and so on is to administer government, whether it be done by the central government itself or is shifted to a local organization. (Ibid.)

The following activities of the municipality has been classified as as governmental e.g.: regulations against fire, disease, preservation of public peace, maintenance of municipal prisons, establishment of schools, post-offices, etc. (Torio v. Angelina, G.R. Nos. L-29993 and L-30183, 23 October 1978)

b) Quasi-private and corporate (a.k.a. quasi-corporation or quasi-public corporation)

The following are corporate or proprietary in character, viz: municipal waterworks, slaughter houses, markets, stables, bathing establishments, wharves, ferries and fisheries. Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as municipal or city activities of a proprietary character. (Ibid.)

The holding of the town fiesta in 1959 by the municipality of Malasiqui Pangasinan, was an exercise of a private or proprietary function of the municipality. (Ibid.)

In the absence of a special law, the North Cemetery is a patrimonial property of the City of Manila which was created by resolution of the Municipal Board of August 27, 1903 and January 7, 1904. The administration and government of the cemetery are under the City Health Officer, the order and police of the cemetery, the opening of graves, niches, or tombs, the exhuming of remains, and the purification of the same are under the charge and responsibility of the superintendent of the cemetery. The City of Manila furthermore prescribes the procedure and guidelines for the use and dispositions of burial lots and plots within the North Cemetery through Administrative Order No. 5, s. 1975. With the acts of dominion, there is, therefore no doubt that the North Cemetery is within the class of property which the City of Manila owns in its proprietary or private character. (City of Manila v. IAC, G.R. No. 71159, 15 November 1989)

1) Functions

1) They are the bodies politic established by law partly as agencies of the State to assist in the civil governance of the country.

2) Their chief purpose has been to regulate and administer the local and internal affairs of the cities, municipalities or districts.

3) They are legal institutions formed by charters from the sovereign power, whereby the populations within communities living within prescribed areas have formed themselves into bodies politic and corporate, and assumed their corporate names with the right of continuous succession and for the purposes and with the authority of subordinate self-government and improvement and the local administration of the affairs of the State. (Mandanas v. Ochoa, En Banc, supra.)

iii. Requisites for creation, conversion, division, merger or dissolution

1) In General

a) Authority to create LGUs

A local government unit may be created, divided, merged, abolished, or its boundaries substantially altered either:

1) By law enacted by Congress in the case of a province, city, municipality, or any other political subdivision; or,

2) By ordinance passed by the sangguniang panlalawigan or sangguniang panlungsod concerned in the case of a barangay located within its territorial jurisdiction, subject to such limitations and requirements prescribed in this Code. (Section 6, R.A. 7160)

b) 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 effecting such action, unless said law or ordinance fixes another date. (Section 10, Ibid.)

2) 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:

1) 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;

2) Population. – It shall be determined as the total number of inhabitants within the territorial jurisdiction of the local government unit concerned; and

3) Land Area. – It must be contiguous, unless it comprises two or more islands or is separated by a local government unit independent of the 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. (Section 7, Ibid.)

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). (Paragraph 2, Section 7, Ibid.)

a) Barangay

As the basic political unit, the barangay serves as the primary planning and implementing unit of government policies, plans, programs, projects, and activities in the community, and as a forum wherein the collective views of the people may be expressed, crystallized and considered, and where disputes may be amicably settled. (Section 384, R.A. 7610)

(1) Manner of Creation

A barangay may be created, divided, merged, abolished, or its boundary substantially altered, by law or by an ordinance of the sangguniang panlalawigan or panlungsod, subject to approval by a majority of the votes cast in a plebiscite to be conducted by the COMELEC in the local government unit or units directly affected within such period of time as may be determined by the law or ordinance creating said barangay. In the case of the creation of barangays by the sangguniang panlalawigan, the recommendation of the sangguniang bayan concerned shall be necessary. (Section 385, Ibid.)

(2) Requisites of Creation

RequisitesDetails
1) Population2,000 inhabitants
2) IncomeNone
3) Land AreaNone –but must be a contiguous territory, unless it is comprised by two (2) or more islands.

(Section 386, Ibid.)

1) POPULATION: A barangay may be created out of a contiguous territory which has a population of at least two thousand (2,000) inhabitants as certified by the National Statistics Office except in cities and municipalities within Metro Manila and other metropolitan political subdivisions or in highly urbanized cities where such territory shall have a certified population of at least five thousand (5,000) inhabitants: Provided, That the creation thereof shall not reduce the population of the original barangay or barangays to less than the minimum requirement prescribed herein.

2) INCOME: None.

3) LAND AREA: None – but must be a contiguous territory unless it is comprised by two (2) or more islancs. (Section 386, Ibid.)

b) Municipality

The municipality, consisting of a group of barangays, serves primarily as a general purpose government for the coordination and delivery of basic, regular and direct services and effective governance of the inhabitants within its territorial jurisdiction. (Section 440, Ibid.)

(1) Manner of Creation

A municipality may be created, divided, merged, abolished, or its boundary substantially altered only by an Act of Congress and subject to the approval by a majority of the votes cast in a plebiscite to be conducted by the COMELEC in the local government unit or units directly affected. Except as may otherwise be provided in the said Act, the plebiscite shall be held within one hundred twenty (120) days from the date of its effectivity. (Section 441, Ibid.)

(2) Requisites of Creation

RequisitesDetails
1) Population25,000 inhabitants
2) IncomePhp2,500,000.00 for the last two (2) consecutive years
3) Land Area50 km2 contiguous territory, unless it is comprised by two (2) or more islands.

(Section 442, Ibid.)

1) A municipality may be created if it has an average annual income, as certified by the provincial treasurer, of at least Two million five hundred thousand pesos (P2,500,000.00) for the last two (2) consecutive years based on the 1991 constant prices; a population of at least twenty-five thousand (25,000) inhabitants as certified by the National Statistics Office; and a contiguous territory of at least fifty (50) square kilometers as certified by the Lands Management Bureau: Provided, That the creation thereof shall not reduce the land area, population or income of the original municipality or municipalities at the time of said creation to less than the minimum requirements prescribed herein.

2) The territorial jurisdiction of a newly-created municipality shall be properly identified by metes and bounds. The requirement on land area shall not apply where the municipality proposed to be created is composed of one (1) or more islands. The territory need not be contiguous if it comprises two (2) or more islands.

3) The average annual income shall include the income accruing to the general fund of the municipality concerned, exclusive of special funds, transfers and non-recurring income.

4) Municipalities existing as of the date of the effectivity of this Code shall continue to exist and operate as such. Existing municipal districts organized pursuant to presidential issuances or executive orders and which have their respective set of elective municipal officials holding office at the time of the effectivity of this Code shall henceforth be considered as regular municipalities. (Section 442, Ibid.)

c) City

The city, consisting of more urbanized and developed barangays. serves as a general purpose government for the coordination and delivery of basic, regular, and direct services and effective governance of the inhabitants within its territorial jurisdiction. (Section 448, Ibid.)

(1) Manner of Creation

A city may be created, divided, merged, abolished, or its boundary substantially altered, only by an Act of Congress, and subject to approval by a majority of the votes cast in a plebiscite to be conducted by the COMELEC in the local government unit or units directly affected. Except as may otherwise be provided in such Act. the plebiscite shall be held within one hundred twenty (120) days from the date of its effectivity. (Section 449, Ibid.)

(2) Requisites of Creation

RequisitesDetails
1) Population150,000 inhabitants
2) IncomePhp20,000,000.00 for the last two (2) consecutive years
3) Land Area100 km2 contiguous territory, unless it is comprised by two (2) or more islands.

(Section 450, Ibid.)

1) A municipality or a cluster of barangays may be converted into a component city if it has an average annual income, as certified by the Department of Finance, of at least Twenty million (P20,000,000.00) for the last two (2) consecutive years based on 1991 constant prices, and if it has either of the following requisites:

a) a contiguous territory of at least one hundred (100) square kilometers, as certified by the Lands Management Bureau; or

b) a population of not less than one hundred fifty thousand (150,000) inhabitants, as certified by the National Statistics Office:

Provided, That, the creation thereof shall not reduce the land area, population, and income of the original unit or units at the time of said creation to less than the minimum requirements prescribed herein.

2) The territorial jurisdiction of a newly-created city shall be properly identified by metes and bounds. The requirement on land area shall not apply where the city proposed to be created is composed of one (1) or more islands. The territory need not be contiguous if it comprises two (2) or more islands.

3) The average annual income shall include the income accruing to the general fund, exclusive of specific funds, transfers, and non-recurring income. (Section 450, Ibid.)

d) Highly urbanized cities

(1) Manner of Creation

It shall be the duty of the President to declare a city as highly urbanized within thirty (30) days after it shall have met the minimum requirements prescribed in the immediately preceding section, upon proper application therefor and ratification in a plebiscite by the qualified voters therein. (Section 453, Ibid.)

(2) Requisites of Creation

RequisitesDetails
1) Population200,000 inhabitants
2) IncomePhp50,000,000.00 for the last two (2) consecutive years
3) Land Area100 km2 contiguous territory, unless it is comprised by two (2) or more islands.

(Section 452, Ibid.)

1) Cities with a minimum population of two hundred thousand (200,000) inhabitants as certified by the National Statistics Office, and within the latest annual income of at least Fifty Million Pesos (P50,000,000.00) based on 1991 constant prices, as certified by the city treasurer, shall be classified as highly urbanized cities.

2) Cities which do not meet above requirements shall be considered component cities of the province in which they are geographically located. If a component city is located within the boundaries of two (2) or more provinces, such city shall be considered a component of the province of which it used to be a municipality.

3) Qualified voters of highly urbanized cities shall remain excluded from voting for elective provincial officials. (Section 452, Ibid.)

e) Provinces

The province, composed of cluster of municipalities, or municipalities and component cities, and as a political and corporate unit of government, serves as dynamic mechanism for developmental processes and effective governance of local government units within its territorial jurisdiction. (Section 459, Ibid.)

(1) Manner of Creation

A province may be created, divided, merged, abolished, or its boundary substantially altered, only by an Act of Congress and subject to approval by a majority of the votes cast in a plebiscite to be conducted by the COMELEC in the local government unit or units directly affected. The plebiscite shall be held within one hundred twenty (120) days from the date of effectivity of said Act, unless otherwise provided therein. (Section 460, Ibid.)

(2) Requisites of Creation

RequisitesDetails
1) Population250,000 inhabitants
2) IncomePhp20,000,000.00 for the last two (2) consecutive years
3) Land Area2,000 km2 contiguous territory, unless it is comprised by two (2) or more islands.

(Section 461, Ibid.)

1) A province may be created if it has an average annual income, as certified by the Department of Finance, of not less than Twenty million pesos (P20,000,000.00) based on 1991 constant prices and either of the following requisites:

a) a contiguous territory of at least two thousand (2,000) square kilometers, as certified by the Lands Management Bureau; or

b) a population of not less than two hundred fifty thousand (250,000) inhabitants as certified by the National Statistics Office:

Provided, That, the creation thereof shall not reduce the land area, population, and income of the original unit or units at the time of said creation to less than the minimum requirements prescribed herein.

2) The territory need not be contiguous if it comprise two (2) or more islands or is separated by a chartered city or cities which do not contribute to the income of the province.

3) The average annual income shall include the income accruing to the general fund, exclusive of special funds, trust funds, transfers and non-recurring income. (Section 461, Ibid.)

Notable Cases

League of Cities of the Philippines v. COMELEC, En Banc, G.R. Nos. 176951, 177499, 178056, 12 April 2011

[Background] These cases were initiated by the consolidated petitions for prohibition filed by the League of Cities of the Philippines (LCP), City of Iloilo, City of Calbayog, and Jerry P. Treñas, assailing the constitutionality of the sixteen (16) laws, each converting the municipality covered thereby into a component city (Cityhood Laws), and seeking to enjoin the Commission on Elections (COMELEC) from conducting plebiscites pursuant to the subject laws.

[Case History from 15 February 2011 Resolution] In the Decision dated November 18, 2008, the Court En Banc, by a 6-5 vote, granted the petitions and struck down the Cityhood Laws as unconstitutional for violating Sections 10 and 6, Article X, and the equal protection clause.

In the Resolution dated March 31, 2009, the Court En Banc, by a 7-5 vote,3 denied the first motion for reconsideration.

On April 28, 2009, the Court En Banc issued a Resolution, with a vote of 6-6, which denied the second motion for reconsideration for being a prohibited pleading.

In its June 2, 2009 Resolution, the Court En Banc clarified its April 28, 2009 Resolution in this wise—

As a rule, a second motion for reconsideration is a prohibited pleading pursuant to Section 2, Rule 52 of the Rules of Civil Procedure which provides that: “No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.” Thus, a decision becomes final and executory after 15 days from receipt of the denial of the first motion for reconsideration.

However, when a motion for leave to file and admit a second motion for reconsideration is granted by the Court, the Court therefore allows the filing of the second motion for reconsideration. In such a case, the second motion for reconsideration is no longer a prohibited pleading.

In the present case, the Court voted on the second motion for reconsideration filed by respondent cities. In effect, the Court allowed the filing of the second motion for reconsideration. Thus, the second motion for reconsideration was no longer a prohibited pleading. However, for lack of the required number of votes to overturn the 18 November 2008 Decision and 31 March 2009 Resolution, the Court denied the second motion for reconsideration in its 28 April 2009 Resolution.

Then, in another Decision dated December 21, 2009, the Court En Banc, by a vote of 6-4,6 declared the Cityhood Laws as constitutional.

On August 24, 2010, the Court En Banc, through a Resolution, by a vote of 7-6,7 resolved the Ad Cautelam Motion for Reconsideration and Motion to Annul the Decision of December 21, 2009, both filed by petitioners, and the Ad Cautelam Motion for Reconsideration filed by petitioners-in-intervention Batangas City, Santiago City, Legazpi City, Iriga City, Cadiz City, and Oroquieta City, reinstating the November 18, 2008 Decision.

[15 February 2011 Resolution] The 16 Cityhood Bills do not violate Article X, Section 10 of the Constitution.

Congress intended that those with pending cityhood bills during the 11th Congress would not be covered by the new and higher income requirement of P100 million imposed by R.A. No. 9009. When the LGC was amended by R.A. No. 9009, the amendment carried with it both the letter and the intent of the law, and such were incorporated in the LGC by which the compliance of the Cityhood Laws was gauged.

The Cityhood Laws do not violate Section 6, Article X and the equal protection clause of the Constitution.

The equal protection clause of the 1987 Constitution permits a valid classification, provided that it: (1) rests on substantial distinctions; (2) is germane to the purpose of the law; (3) is not limited to existing conditions only; and (4) applies equally to all members of the same class.

The purpose of the enactment of R.A. No 9009 was merely to stop the “mad rush of municipalities wanting to be converted into cities” and the apprehension that before long the country will be a country of cities and without municipalities. It should be pointed out that the imposition of the P100 million average annual income requirement for the creation of component cities was arbitrarily made. To be sure, there was no evidence or empirical data, such as inflation rates, to support the choice of this amount. The imposition of a very high income requirement of P100 million, increased from P20 million, was simply to make it extremely difficult for municipalities to become component cities. And to highlight such arbitrariness and the absurdity of the situation created thereby, R.A. No. 9009 has, in effect, placed component cities at a higher standing than highly urbanized cities under Section 452 of the LGC.

Verily, the determination of the existence of substantial distinction with respect to respondent municipalities does not simply lie on the mere pendency of their cityhood bills during the 11th Congress. This Court sees the bigger picture. The existence of substantial distinction with respect to respondent municipalities covered by the Cityhood Laws is measured by the purpose of the law, not by R.A. No. 9009, but by the very purpose of the LGC, as provided in its Section 2 (a).

Indeed, substantial distinction lies in the capacity and viability of respondent municipalities to become component cities of their respective provinces. Congress, by enacting the Cityhood Laws, recognized this capacity and viability of respondent municipalities to become the State’s partners in accelerating economic growth and development in the provincial regions, which is the very thrust of the LGC, manifested by the pendency of their cityhood bills during the 11th Congress and their relentless pursuit for cityhood up to the present. Truly, the urgent need to become a component city arose way back in the 11th Congress, and such condition continues to exist.

From the foregoing, the justness in the act of Congress in enacting the Cityhood Laws becomes obvious, especially considering that 33 municipalities were converted into component cities almost immediately prior to the enactment of R.A. No. 9009. In the enactment of the Cityhood Laws, Congress merely took the 16 municipalities covered thereby from the disadvantaged position brought about by the abrupt increase in the income requirement of R.A. No. 9009, acknowledging the “privilege” that they have already given to those newly-converted component cities, which prior to the enactment of R.A. No. 9009, were undeniably in the same footing or “class” as the respondent municipalities. Congress merely recognized the capacity and readiness of respondent municipalities to become component cities of their respective provinces.

Congress, who holds the power of the purse, in enacting the Cityhood Laws, only sought the well-being of respondent municipalities, having seen their respective capacities to become component cities of their provinces, temporarily stunted by the enactment of R.A. No. 9009. By allowing respondent municipalities to convert into component cities, Congress desired only to uphold the very purpose of the LGC, i.e., to make the local government units “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,” which is the very mandate of the Constitution.

[12 April 2011 Resolution] The Cityhood Laws were not violative of the Constitution and the LGC. The respondents [muniicpalities vying to be cities] are thus entitled to their just share in the Internal Revenue Allocation (IRA) for cities. They have demonstrated their viability as component cities of their respective provinces and are developing continuously, albeit slowly, because they had previously to share the IRA with about 1,500 municipalities. With their conversion into component cities, they will have to share with only around 120 cities.

There should also be no question that the local government units covered by the Cityhood Laws belong to a class of their own. They have proven themselves viable and capable to become component cities of their respective provinces. They are and have been centers of trade and commerce, points of convergence of transportation, rich havens of agricultural, mineral, and other natural resources, and flourishing tourism spots.

Navarro v. Ermita, En Banc, G.R. No. 180050, 12 April 2011

[Background] On October 2, 2006, the President of the Republic approved into law Republic Act (R.A.) No. 9355 (An Act Creating the Province of Dinagat Islands). On December 3, 2006, the Commission on Elections (COMELEC) conducted the mandatory plebiscite for the ratification of the creation of the province under the Local Government Code (LGC). The plebiscite yielded 69,943 affirmative votes and 63,502 negative votes. With the approval of the people from both the mother province of Surigao del Norte and the Province of Dinagat Islands (Dinagat), the President appointed the interim set of provincial officials who took their oath of office on January 26, 2007. Later, during the May 14, 2007 synchronized elections, the Dinagatnons elected their new set of provincial officials who assumed office on July 1, 2007.5

On November 10, 2006, petitioners Rodolfo G. Navarro, Victor F. Bernal and Rene O. Medina, former political leaders of Surigao del Norte, filed before this Court a petition for certiorari and prohibition (G.R. No. 175158) challenging the constitutionality of R.A. No. 9355.6 The Court dismissed the petition on technical grounds. Their motion for reconsideration was also denied.

[Issue was on non-compliance with requisites with LGC; but, LGC-IRR provided for exceptions – quoted from diseent by J. Carpio] Based on the 2000 census, Dinagat Islands’ population stood only at 106,951, less than half of the statutory minimum of 250,000. In the census conducted seven years later in 2007, one year after its creation, its population grew by only 13,862, reaching 120,813, still less than half of the minimum population required. The province does not fare any better in land area, with its main island, one sub-island and around 47 islets covering only 802.12 square kilometers, less than half of the 2,000 square kilometers minimum land area required.

The Local Government Code contains no exception to the income and population or land area requirements in creating provinces. What the Code relaxed was the contiguity rule for provinces consisting of “two (2) or more islands or is separated by a chartered city or cities which do not contribute to the income of the province.” The minimum land area of 2,000 square kilometers in the Code for the creation of a province was never changed, and no exception was ever created by law. Hence, the exception created in the implementing rule of the Local Government Code, exempting provinces “composed of one (1) or more islands” from the minimum land area requirement, is void for being ultra vires, granting a statutory exception that the Local Government Code clearly withheld. The implementing rule, being a mere administrative regulation to implement the Local Government Code, cannot amend the Code but must conform to the Code. Only Congress, and not any other body, is constitutionally empowered to create, through amendatory legislation, exceptions to the land area requirement in Section 461 of the Code.

[12 April 2011 Resolution] With respect to the creation of barangays, land area is not a requisite indicator of viability. However, with respect to the creation of municipalities, component cities, and provinces, the three (3) indicators of viability and projected capacity to provide services, i.e., income, population, and land area, are provided for.

But it must be pointed out that when the local government unit to be created consists of one (1) or more islands, it is exempt from the land area requirement as expressly provided in Section 442 and Section 450 of the LGC if the local government unit to be created is a municipality or a component city, respectively. This exemption is absent in the enumeration of the requisites for the creation of a province under Section 461 of the LGC, although it is expressly stated under Article 9(2) of the LGC-IRR.

There appears neither rhyme nor reason why this exemption should apply to cities and municipalities, but not to provinces. In fact, considering the physical configuration of the Philippine archipelago, there is a greater likelihood that islands or group of islands would form part of the land area of a newly-created province than in most cities or municipalities. It is, therefore, logical to infer that the genuine legislative policy decision was expressed in Section 442 (for municipalities) and Section 450 (for component cities) of the LGC, but was inadvertently omitted in Section 461 (for provinces). Thus, when the exemption was expressly provided in Article 9(2) of the LGC-IRR, the inclusion was intended to correct the congressional oversight in Section 461 of the LGC – and to reflect the true legislative intent. It would, then, be in order for the Court to uphold the validity of Article 9(2) of the LGC-IRR.

Elementary is the principle that, if the literal application of the law results in absurdity, impossibility, or injustice, then courts may resort to extrinsic aids of statutory construction, such as the legislative history of the law, or may consider the implementing rules and regulations and pertinent executive issuances in the nature of executive and/or legislative construction. Pursuant to this principle, Article 9(2) of the LGC-IRR should be deemed incorporated in the basic law, the LGC.

It is well to remember that the LGC-IRR was formulated by the Oversight Committee consisting of members of both the Executive and Legislative departments, pursuant to Section 53332 of the LGC. As Section 533 provides, the Oversight Committee shall formulate and issue the appropriate rules and regulations necessary for the efficient and effective implementation of any and all provisions of this Code, thereby ensuring compliance with the principles of local autonomy as defined under the Constitution.

With three (3) members each from both the Senate and the House of Representatives, particularly the chairpersons of their respective Committees on Local Government, it cannot be gainsaid that the inclusion by the Oversight Committee of the exemption from the land area requirement with respect to the creation of provinces consisting of one (1) or more islands was intended by Congress, but unfortunately not expressly stated in Section 461 of the LGC, and this intent was echoed through an express provision in the LGC-IRR. To be sure, the Oversight Committee did not just arbitrarily and whimsically insert such an exemption in Article 9(2) of the LGC-IRR. The Oversight Committee evidently conducted due deliberation and consultations with all the concerned sectors of society and considered the operative principles of local autonomy as provided in the LGC when the IRR was formulated.33 Undoubtedly, this amounts not only to an executive construction, entitled to great weight and respect from this Court,34 but to legislative construction as well, especially with the inclusion of representatives from the four leagues of local government units as members of the Oversight Committee.

With the formulation of the LGC-IRR, which amounted to both executive and legislative construction of the LGC, the many details to implement the LGC had already been put in place, which Congress understood to be impractical and not too urgent to immediately translate into direct amendments to the LGC. But Congress, recognizing the capacity and viability of Dinagat to become a full-fledged province, enacted R.A. No. 9355, following the exemption from the land area requirement, which, with respect to the creation of provinces, can only be found as an express provision in the LGC-IRR. In effect, pursuant to its plenary legislative powers, Congress breathed flesh and blood into that exemption in Article 9(2) of the LGC-IRR and transformed it into law when it enacted R.A. No. 9355 creating the Island Province of Dinagat.

Further, the bill that eventually became R.A. No. 9355 was filed and favorably voted upon in both Chambers of Congress. Such acts of both Chambers of Congress definitively show the clear legislative intent to incorporate into the LGC that exemption from the land area requirement, with respect to the creation of a province when it consists of one or more islands, as expressly provided only in the LGC-IRR. Thereby, and by necessity, the LGC was amended by way of the enactment of R.A. No. 9355.

2) 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 classification prior to such division. (Section 8, Ibid.)

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 provided herein. (Paragraph 2, Section 8, Ibid.)

3) Dissolution or abolition

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 sangguniang concerned, as the case may be. (Section 9, Ibid.)

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. (Paragraph 2, Section 9, Ibid.)

iv. Status or types of municipal corporations Added

In terms of status, municipal corporations may categorized as:

1) De jure municipal corporations; and

2) De facto municipal corporations.

1) De jure municipal corporations

2) De facto municipal corporations

a) By prescription

The importance of proper factual ascertainment cannot be gainsaid, especially in light of the legal principles governing the recognition of de facto municipal corporations. It has been opined that municipal corporations may exist by prescription where it is shown that the community has claimed and exercised corporate functions, with the knowledge and acquiescence of the legislature, and without interruption or objection for period long enough to afford title by prescription. These municipal corporations have exercised their powers for a long period without objection on the part of the government that although no charter is in existence, it is presumed that they were duly incorporated in the first place and that their charters had been lost. (Camid v. Office of the President, En Banc, G.R. No. 161414, 17 January 2005)

b) Denying de facto status

The true basis for denying to the corporation a de facto status lay in the absence of any legislative act to give vitality to its creation. (Municipality of Malabang v. Benito, En Banc, G.R. No. L-28113, 28 March 1969 citing Tooke De facto Municipal Corporations under Unconstitutional Statutes, 37 Yale L.J. 935, 951-53 [1928]).

Principles:

1) The color of authority requisite to the organization of a de facto municipal corporation may be: (a) a valid law enacted by the legislature; or (b) an unconstitutional law, valid on its face, which has either (1) been upheld for a time by the courts or (2) not yet been declared void; provided that a warrant for its creation can be found in some other valid law or in the recognition of its potential existence by the general laws or constitution of the state.

2) There can be no de facto municipal corporation unless either directly or potentially, such a de jure corporation is authorized by some legislative fiat.

3) There can be no color of authority in an unconstitutional statute alone, the invalidity of which is apparent on its face.

4) There can be no de facto corporation created to take the place of an existing de jure corporation, as such organization would clearly be a usurper. (Municipality of Malabang v. Benito, En Banc, supra.)

c) Quo Warranto by the State

Generally, an inquiry into the legal existence of a municipality is reserved to the State in a proceeding for quo warranto or other direct proceeding, and that only in a few exceptions may a private person exercise this function of government. (Municipality of Malabang v. Benito, En Banc, G.R. No. L-28113, 28 March 1969)

The rule disallowing collateral attacks applies only where the municipal corporation is at least a de facto corporations. For where it is neither a corporation de jure nor de facto, but a nullity, the rule is that its existence may be, questioned collaterally or directly in any action or proceeding by any one whose rights or interests ate affected thereby, including the citizens of the territory incorporated unless they are estopped by their conduct from doing so. (Ibid.)

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