CORPORATIONan artificial being created by operation of law, having the right of succession and the powers,

attributes and properties expressly authorized by law or incident to its existence.

a. PUBLIC CORPORATIONone formed and organized for the government of a portion of the State.


Classes of Corporation:
a. Public or Municipala body politic and corporate constituted by incorporation of inhabitants of city or
town for purposes of local government thereof or as agency of State to assist in civil government of the
country; one formed and organized for the government of a portion of the State.
b. Privateone formed for some private purpose, benefit, aim or end.
c. Quasi-Publica private corporation that renders public service or supplies public wants.
d. Quasi-corporationpublic corporations created as agencies of State for narrow and limited purpose.

Elements of Municipal Corporation
a. Legal creation or incorporation
b. Corporate name
c. Inhabitants
d. Territory
Dual Nature of Municipal Corporation
Every local government unit created or organized 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 political subdivision of the National
Government and as a corporate entity representing the inhabitants of its territory.
a. Public/Governmentalit acts as an agent of the State for the government of the territory and the
inhabitants within the municipal limits; it exercises by delegation a part of the sovereignty of the State.
b. Private/Proprietaryit acts in a similar category as a business corporation, performing functions not
strictly governmental or political; it stands for the community in the administration of local affairs. It acts
as a separate entity for its own purposes and not as a subdivision of the State.

Criterion to determine whether corporation is public:
The relationship of the corporation to the State, i.e., if created by the State as its own agency to help the
State in carrying out its governmental functions, then it is public, otherwise, it is private.

De Facto Municipal Corporation
--a corporation that may exist in fact although not point of law because of certain defects in some essential features
of its incorporation.

Elements of De Facto Municipal Corporation:
a. A valid law authorizing incorporation
b. An attempt in good faith to organize under it
c. A colorable compliance with the law
d. An assumption of corporate powers
e. Decentralization of Administration- the central government delegates administrative powers to
political subdivisions in order to broaden the base of government power.
f.
g. Decentralization of Power (Political Decentralization)- involves abdication of political power in favor
of LGUs declared autonomous. (Limbonas vs. Mangelin, 170 SCRA 786)
h.
i. NOTE:
j. Local Autonomy- is self-governing. It is the granting of more powers, authority, responsibilities
and resources to the lower or local levels of a government system. The principle of local autonomy
under the 1987 Constitution simply means decentralization. It does not make the local government
sovereign within the state or an imperium in imperio.




Rules of Interpretation (Sec. 5, RA 7160)
a. Any provision on a local government unit shall be liberally interpreted 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 govt
unit enacting it, and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any
local govt 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
govt units in accelerating economic development and upgrading the 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 prestation involving a local govt unit shall be governed by the original terms and
conditions of said contracts or the law in force at the time such rights were vested.

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.

1. Declaration of State Policy over LGUs (Sec. 2, RA 7160)

a. 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 communications and
make them more effective partners in the attainment of national goals.
b. To ensure the accountability of local govt units through the institution of effective mechanisms of
recall, initiative and referendum.
c. To require all national agencies and offices to conduct periodic consultations with appropriate
local govt units, non-governmental and peoples organizations and other concerned sectors of
the community before any project or program is implemented in their respective jurisdictions.

A. Creation of LGUs:
A local government unit may be created, divided, merged, abolished, or its boundaries substantially altered by law enacted
by Congress in the case of a province, city, municipality, or other political subdivisions, or by Sanggunian Panlalawigan or
Sanggunian Panlungsod ordinance in the case of a barangay. (Sec.6)

NOTE:
nature of the power to create: LEGISLATIVE

1. While the power to create barangays has been delegated to Sanggunian Panlalawigan and Sangguniang Panlungsod,
Congress, in order to enhance the delivery of basic services in indigenous cultural communities, may create barangays in such
communities notwithstanding the requirements set forth by law. (Sec.385a, LGC)

2. The creation or conversion of a local government unit to another level shall be based on the following verifiable indicators of
viability and projected capacity to provide services:
a. Sufficient income and
b. Population and/or
c. Land area

NOTE: Compliance with the above-cited indicators shall be attested by the Department of Finance, the National Statistics Office
and the Land Management Bureau of the DENR, respectively.

Necessity of Fixing Corporate Limits:
As a matter of general rule, municipal corporations cannot, without legal authorization, exercise its powers beyond its own
corporate limits. It is necessary that it must have its boundaries fixed, definite and certain, in order that may be identified and
that all may know the exact scope or section of territory or geographical division embraced within the corporate limits and over
which the municipal corporation has jurisdiction. A description of the boundaries of a municipal corporation is said to be an
essential part of its charter and necessary to corporate existence. An incorporation is void where the boundaries of the municipal
corporation are not described with certainty.

NOTE:
BP 885, which created the Province of Negros del Norte was declared unconstitutional because it did not comply with
the land area criterion prescribed under the LGC. The use of the word territory in Sec. 17 of the LGC refers only to the physical
mass of land area, not to the waters comprising a political entity. It excludes the waters over which the political unit exercises
control (Tan vs. Comelec, 142 SCRA 727).

Status of Sub-provinces
Existing sub-provinces are converted into regular provinces upon the approval by a majority votes cast in a plebiscite to be
held in the said sub-province and the original province directly affected. (Sec.462, LGC)

Autonomous Regions
The Philippine Constitution mandates the creation of autonomous regions in Muslim Mindanao and in the Cordilleras
consisting of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural
heritage, and economic and social cultures. (Sec.15, Art.10, PC)

NOTE:
RA 6734, the organic act establishing the Autonomous Regional Government of Muslim Mindanao was held valid by
the Supreme Court. (Datu Firdausi Abbas vs. COMELEC, 179 SCRA 287). However, the sole Province of Ifugao which, in the
plebiscite, alone voted in favor of RA 6766, cannot validly constitute the Autonomous Region of the Cordilleras. (Ordillo vs.
COMELEC, 192 SCRA 100)

Special Metropolitan Political Subdivisions
The Congress may, by law, create special metropolitan political subdivisions, but the component cities and municipalities
shall retain their basic autonomy and shall be entitled to their own local executives and legislative assemblies. The jurisdiction of
the metropolitan authority that will be thereby created shall be limited to basic services requiring coordination. (Sec. 11, Art. X,
PC)

NOTE:
With the passage of RA 7924, Metropolitan Manila was declared as a special development and administrative region
and the administration of metrowide basic services affecting the region was placed under a development authority referred to
as the Metropolitan Manila Development Authority (MMDA), whose functions were without prejudice to the autonomy of the
affected local government units. The law does not grant police nor legislative powers to MMDA. Even the Metro Manila Council,
the governing board of the MMDA, has not been delegated any legislative power. Clearly, MMDA is not a political unit. There is
no grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of the metropolis. MMDA
cannot open for public use a private road in a private subdivision (MMDA vs. Bel-Air Village Association, Inc., G.R. No.
135962, March 27, 2000).



Attack against invalidity of incorporation
No collateral attack shall lie; an inquiry into the legal existence of a municipal corporation is reserved to the State in a
proceeding for quo warranto or other direct proceeding. But this rule applies only when the municipal corporation is, at least, a
de facto municipal corporation.

PLEBISCITE REQUIREMENT: Who shall participate
Sec. 10 of the LGC provides that the creation, division and merger, abolition or substantial alteration of the boundaries of
local government units must be approved by a majority of votes cast in a plebiscite in the political unit or units directly affected.
Such plebiscite shall be conducted by the COMELEC within 120 days from the date of the effectivity of the law. The completion
of the publication of the law should be the reckoning point in determining the 120-day period within which to conduct the
plebiscite, not from the date of its approval when the law had not yet been published. Since publication is indispensable for the
effectivity of a law, a plebiscite can be scheduled only after the law creating a city took effect. (Cawaling vs. COMELEC, Oct.
26, 2002)
The plebiscite for the creation of a new province or municipality shall include the participation of the residents of the
mother province or mother municipality in order to conform to the constitutional requirement. (Padilla vs. COMELEC, 214 SCRA
735)

In the conversion of a municipality into a component city, however, only the registered voters of the municipality sought
to be converted into a component city, shall participate in the plebiscite.

LGU Created Income Population Land area

Barangay

No minimum requirement
2,000 but 5,000 for Metro
Manila and highly
urbanized cities

No minimum requirement
Municipality P2.5 million 25,000, and 50 sq.km
Component City P100 million 150,000 or 100 sq.km.
Highly Urbanized City P50 million 200,000 No minimum requirement
Province P20 million 250,000 or 2,000 sq.km.

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 members of the Sanggunian, unless some other date is fixed therefore by law or ordinance
creating it. (Sec.14, LGC)

Division and Merger of LGUs
The division and merger of local government units shall comply with the same requirements for their creation. The
income, population or land area shall not be reduced to less than the minimum requirements. Likewise, the income classification
of the original local government unit shall not fall below its current income classification prior to such division. (Sec.8, LGC)

Abolition of LGUs
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 the LGC, as certified by the national agencies to Congress or to the
Sanggunian concerned. Likewise, the law or, ordinance abolishing an LGU shall specify the province, city, municipality, or
barangay with which the local government unit sought to be abolished will be incorporated or merged. (Sec.9, LGC)

GENERAL POWERS AND ATTRIBUTES OF LGUs
A. Powers in general

1. Sources:
a. Sec. 25, Art II: Secs. 5,6 and 7, Art. X, Philippine Constitution
b. Statutes, e.g., R.A. 7160
c. Charter (particularly of cities)
d. Doctrine of the right of self-government, but applies only in States which adhere to the doctrine.


2. Classifications:
a. Express, implied and inherent
b. Public or governmental, private or proprietary
c. Intramural or extramural
d. Mandatory and directory, ministerial and discretionary

B. GOVERNMENTAL POWERS:
1. General Welfare Clause- the statutory grant of police power to local government units.

Limitations:
a. Express grant by law
b. Exercisable only within the territorial limits of the LGU, except for protection of water supply
c. Equal protection clause
d. Due process clause
e. Must not be contrary to the Constitution and the laws.

NOTE:
A local government unit may exercise delegated governmental powers:
Police power (under the General Welfare Clause)
Power of Taxation
Power of Eminent Domain

a. Requisites for the validity of a municipal ordinance:
1. Must not contravene the Constitution and any statute;
2. Must not be unfair or oppressive;
3. Must not be partial or discriminatory;
4. Must not prohibit, but may regulate trade which is not illegal per se;
5. Must not be unreasonable; and
6. Must be general in application and consistent with public policy.

An ordinance extending burial assistance of P500 to a bereaved family whose gross income does not exceed P2,000 a month,
has been upheld by the Supreme Court as a valid exercise of police power. This power is organic and flexible. The care for the
poor is generally recognized as a public duty. The support for the poor has long been an accepted exercise of police power in
the promotion of common good. The police power of a municipal corporation is broad and commensurate with the duty to
provide for the real needs of the people in their health, safety, comfort, and convenience as consistently as may be with private
rights. It extends to all the great public needs and in a broad sense includes all legislation and almost every function of the
municipal government. (Binay vs. Domingo, 201 SCRA 508)

Devolution refers to the act by which the national government confers powers and authority upon the various local government
units to perform specific functions and responsibilities. This includes the transfer to the local government units of the records,
equipment and other assets and personnel of national agencies and offices.

2. Power to generate and apply resources (18, LGC)
The exercise by local governments of the power to tax is ordained by the present Constitution (5, Art. X, Phil.
Constitution). Only guidelines and limitations that may be established by Congress can define and limit such power of local
governments. But local governments have no power to tax instrumentalities of the National Government. PAGCOR being an
instrumentality of the National Government is therefore exempt from local taxes. (Basco vs. PAGCOR, 197 SCRA 52)

Main Sources of Revenues of LGUs
A. Under the Constitution
1. taxes, fees and charges (5, Art. X)
2. share in the national taxes- Internal Revenue Allotment
3. share in the proceeds of the utilization and development of the national wealth within their areas (7, Art. X)
B. Under the Local Government Code
1. floating of bonds
2. grants/aids

All LGUs are empowered to create their own sources of revenue and to levy taxes, fees and charges subject to the provisions
on local taxation consistent with the basic policy of local autonomy. The Sanggunian concerned through an ordinance has the
power to impose a tax, fee or charge. The procedural requirements of public hearing and publication must be observed for
purposes of compliance with the requirements of due process.

C. Fundamental Principles on Local taxation
1. Taxation shall be uniform in each local government unit;
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on the taxpayers ability to pay;
b. be levied and collected only for public purposes;
c. not be unjust, excessive, oppressive or confiscatory;
d. not be contrary to law, public policy, national economic policy, or in restraint of trade.
3. The collection of taxes, fees, charges and other impositions shall in no case be let to any private persons;
4. The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of, and be subject to
disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically
provided herein; and
5. Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

D. Fundamental Principles of Local Fiscal Administration
1. No money shall be paid out of the local treasury except in pursuance of an appropriation ordinance or law;
2. Local government funds and monies shall be spent solely for public purposes;
3. Local revenue is generated only from the sources expressly authorized by law or ordinance, and collection thereof
shall at all times be acknowledged properly;
4. All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for
as local funds, unless otherwise provided by law;
5. Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust is created or
the funds received.
6. Every officer of the local government unit whose duties permit or require the possession or custody of local funds shall
be properly bonded, and such officer shall be accountable and responsible for said funds and for the safekeeping thereof in
conformity with the provisions of law.
7. Local governments shall formulate sound financial plans, and the local budgets shall be based on functions, activities
and projects, in terms of expected results.
8. Local budget plans and goals shall, as far as practicable, be harmonized with national development plans, goals and
strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources.
9. Local budgets shall operationalize approved development plans.
10. Local government units shall ensure that their respective budgets incorporate the requirements of their component
units and provide for equitable allocation of resources among these component units.
11. National planning shall be based on local planning to ensure that the needs and aspirations of the people as
articulated by the local government units in their respective local development plans are considered in the formulation of budgets
of national line agencies or offices.
12. Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and
operations of the local government units.
13. The local government unit shall endeavor to have a balanced budget in each fiscal year of operation.


3.Eminent Domain (19, LGC)

The power to expropriate private property has been delegated by Congress to LGUs under 19, LGC. The exercise by
LGUs of the power of eminent domain are subject to the usual constitutional limitations such as necessity, private property,
taking, public use, just compensation and due process of law.
The determination of whether there is genuine necessity for the exercise of the power of eminent domain is a justiciable
question when exercised by the LGUs and generally a political question when exercised by Congress.

NOTE:
Private property already devoted to public use can still be a subject of expropriation by Congress but not by LGUs.

The additional limitations on the exercise of the power of eminent domain by LGUs are, as follows:
1. Exercised only by the local chief executive, acting pursuant to a valid ordinance;
2. For public use or purpose or welfare, for the benefit of the poor and the landless;
3. Only after a valid and definite offer had been made to, and not accepted by, the owner;
4. An LGU shall file a complaint for expropriation on the strength of an ordinance and not a mere resolution passed by the
Sanggunian. (Municipality of Paranaque vs. VM Realty Corp., 292 SCRA 676)

The promulgation of the ordinance authorizing the local chief executive to exercise the power must be promulgated prior to the
filing of the complaint for eminent domain with the proper court, and not after the court shall have determined the amount of just
compensation to which the defendant is entitled. (Heirs of Suguitan vs. City of Mandaluyong, 328 SCRA 137)

NOTE:
An LGU may immediately take possession of the property upon filing of expropriation proceedings and deposit in court of 15%
of the FMV of the property.

4.Other powers
a. Reclassification of lands (20, RA 7160)
A city or municipality may, through an ordinance passed after conducting public hearings for the purpose, may
authorize the reclassification of agricultural lands and provide for the manner of their utilization or their disposition:
i. When the land ceases to be economically feasible and sound for agricultural purposes as determined by the
Department of Agriculture;
ii. Where the land shall have substantially greater economic value for residential, commercial or industrial
purposes as determined by the sanggunian; 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:

for highly urbanized cities and independent component cities: 15%
for component cities and 1
st
to 3
rd
class municipalities: 10%
for 4
th
and 6
th
class municipalities: 5%

Provided that agricultural land distributed to land reform beneficiaries shall not be affected by such reclassification.

b. Closure and opening of roads (21, RA 7160)
A local government unit may, pursuant to an ordinance, permanent or temporarily close or open any local
road, alley, park, or square falling within its jurisdiction, provided that in case of permanent closure, such ordinance must be
approved by at least 2/3 of all the members of the sanggunian, and when necessary, and adequate substitute for the public
facility shall be provided.

NOTE:
Additional limitations in case of permanent closure:
i. Adequate provision for the maintenance of public safety must be made;
ii. The property may be used or conveyed for any purpose for which other real property may be lawfully used or
conveyed, but no freedom park shall be closed permanently without provision for its transfer or relocation to a new site.

Temporary closure may be made during an actual emergency, fiesta celebrations, public rallies, etc.


c. Naming of LGUs, public places, streets and structures

NOTES:
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 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 Philippine Historical Commission.

A change of name of a public school shall be made only upon the recommendation of the local school board concerned.

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.

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.
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. (13, LGC)

d. Settlement of boundary disputes (118 a-d, RA 7160):
Boundary disputes between and among local government units shall, as much as possible, be settled
amicably. To this end:
a. Boundary disputes involving two or more barangays in the same city or municipality shall be
referred for settlement to the sangguniang panlungsod or sangguniang bayan concerned.
b. Boundary disputes involving two or more municipalities within the same province shall be referred
for settlement to the sangguniang panlalawigan concerned.
c. Boundary disputes involving municipalities or component cities of different provinces shall be jointly
referred for settlement to the sanggunians of the provinces concerned.
d. Boundary disputes involving a component city or municipality on the one hand and a highly
urbanized city on the other, or two or more highly urbanized cities, shall be jointly referred for
settlement to the respective sanggunians of the parties.

Procedure:
In the event the sanggunian fails to effect an amicable settlement within 60 days from the date the dispute was referred
thereto, it shall issue a certification to that effect. Thereafter, the dispute shall be formally tried by the sanggunian concerned
which shall decide the issue within 60 days from the date of the certification referred to above.
Within the time and manner prescribed by the Rules of Court, any party may elevate the decision of the sanggunian concerned,
any party may elevate the decision of the sanggunian concerned to the proper Regional Trial Court having jurisdiction over the
area in dispute. The Regional Trial Court shall decide the appeal within one (1) year from the filing thereof. Pending final
resolution of the case, the disputed area prior to the dispute shall be maintained and continued for all legal purposes. (119,
LGC)

e. Authority over police units (6, Art. XVI, Philippine Constitution)
The State shall establish and maintain one police force, which shall be national in scope and civilian in character, to be
administered and controlled by a National Police Commission. The authority of local executives over the police units in thei r
jurisdiction shall be provided by law.




LOCAL LEGISLATIVE POWER
A. Products of legislative action
1. Ordinance- prescribes a rule of conduct.
2. Resolution- of temporary character, or expresses sentiment.

B. Requisites for validity:
1. Must not contravene the Constitution and any statute
2. Must not be unfair or oppressive
3. Must not be partial or discriminatory
4. Must not prohibit, but may regulate trade
5. Must not be unreasonable
6. Must be general in application and consistent with public policy.

Approval of ordinances:
Ordinances passed by the sangguniang panlalawigan, sangguniang panlungsod or sangguniang bayan shall be
approved:
- If the local chief executive approves the same, affixing his signature on each and every page thereof.
- If the local chief executive vetoes the same, and the veto is overridden by 2/3 vote of all the members of the
sanggunian.

Where petitioner was charged with falsification of a public document for approving a resolution which purportedly appropriated
money to pay for the terminal leave of 2 employees when actually no such resolution was passed, the petitioner argued that his
signature on the resolution was merely ministerial. The Supreme Court disagreed, saying that the grant of the veto power
accords the Mayor the discretion whether or not to approve the resolution. (De Los Reyes vs. Sandiganbayan, G.R. 121215,
Nov. 13, 1997)

Note:
The governor or mayor may veto any item in the following cases:
a. Particular item or items in an appropriations ordinance
b. Ordinance adopting a local development plan and public investment program
c. Ordinance directing the payment of money or creating liability. (55)

The grounds for veto are:
a. The ordinance is ultra vires
b. Or that it is prejudicial to public welfare

The veto shall be communicated to the sanggunian within 15 days in the case of a province and 10 days in the case of
a city or municipality; otherwise, the ordinance shall be deemed approved, as if he signed it. The sanggunian may
override the veto by 2/3 of all its members. (54)

Enforcement of disapproved ordinances/resolutions:
Any attempt to enforce an ordinance or resolution approving the local development plan and public investment
program, after the disapproval thereof, shall be sufficient ground for the suspension or dismissal of the official or employee
concerned.

Effectivity
a. Unless otherwise stated in the ordinance, it shall take effect after 10 days from posting at the provincial capitol or city,
municipal or barangay hall and two other conspicuous places.
b. The gist of all ordinances with penal sanction shall be published in a newspaper of general circulation in the province.
In the absence of such newspaper, the ordinance shall be posted in all municipalities and cities of the province where
the sanggunian of origin is situated.
c. In highly urbanized and independent component cities, in addition to posting, the main features of the ordinance shall
be published in a local newspaper of general circulation. In the absence of such newspaper, it shall be published in
any newspaper of general circulation. (59

C. Corporate Powers (22, RA 7160)
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
a. The local government unit may acquire real or personal, tangible or intangible property, in any manner allowed by
law, e.g., sale, donation, etc.
b. The local government unit may alienate only patrimonial property, upon proper authority.
c. In the absence of proof that the property was acquired through corporate or private funds, the presumption is that
it came from the State upon the creation of the municipality and, thus, is governmental or public property. (Salas
vs. Jarencio, 48 SCRA 734; Rebuco vs. Villegas, 55 SCRA 656)
d. Town plazas are properties of public dominion; they may be occupied temporarily, but only for the duration of an
emergency (Espiritu vs. Municipal Council of Pozorrubio, Pangasinan, 102 Phil. 866).
e. A public plaza is beyond the commerce of man, and cannot be the subject of lease or other contractual
undertaking. And, even assuming the existence of a valid lease of the public plaza or part thereof, the municipal
resolution effectively terminated the agreement, for it is settled that the police power cannot be surrendered or
bargained away through the medium of a contract (Villanueva vs. Castaneda, 154 SCRA 142).

5. Power to enter into contracts

a. Requisites of a valid municipal contracts
i. The local government unit has the express, implied or inherent power to enter into the particular contract.
ii. The contract is entered into by the proper department, board, committee, officer or agent. Unless
otherwise provided by the Code, no contract may be entered into by the local chief executive on behalf of
the local government unit without prior authorization by the sangguniang concerned.
iii. The contract must comply with certain substantive requirements, i.e., when expenditure of public fund is
to be made, there must be an actual appropriation and a certificate of availability of funds.
iv. The contract must comply with the formal requirements of written contracts, e.g., the Statute of Frauds.
b. Ultra vires contracts
When a contract is entered into without compliance with the first and the third requisites (above), the same is ultra
vires and is null and void. Such contract cannot be ratified or validated. Ratification of defective municipal contracts is
possible only when there is non-compliance with the second and/or fourth requirements above. Ratification may be
express or implied.

c. Authority to negotiate and secure contracts (23, RA 7160)
The local chief executive may, upon authority of the sanggunian, negotiate and secure financial grants or donations
in kind, in support of the basic services and facilities enumerated under 17, from local and foreign assistance
agencies without necessity of securing clearance or approval from any department, agency, or office of the national
government or 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.

V. MUNICIPAL LIABILITY

A. Specific provisions making LGUs liable:
a. 24, RA 7160- Liability for damages- Local government units and their officials are not exempt from liability for death or
injury to persons or damage to property.
b. Art. 2189, NCC- The local government unit is liable in damages for death or injuries suffered by reason of the defective
condition of roads, streets, bridges, public buildings and other public works.
c. Art. 2180, (par.6), NCC- The State is responsible when it acts through a special agent.
d. Art. 34, NCC- The local government unit is subsidiarily liable for damages suffered by a person by reason of the failure
or refusal of a member of the police force to render aid and prosecution in case of danger to life and property.

2. Liability for Tort
a. If the local government unit is engaged in governmental functions, it is NOT liable.
b. If engaged in proprietary functions, local government unit is liable.
Holding of town fiesta is a proprietary function. The Municipality of Malasique, Pangasinan, was held liable for the
death of a member of the zarzuela group when the stage collapsed, under the principle of respondeat superior.

NOTE:
The municipal council managed the town fiesta. While the municipality was held liable, the councilors themselves are
not liable for the negligence of their employees or agents. (Torio vs. Fontanilla, 85 SCRA 599)

4. Liability for contracts
a. General Rule- A municipal corporation, like an ordinary person, is liable on a contract it enters into, provided that the
contract is intra vires. If the contract is ultra vires, the munipal corporation is not liable.

NOTES:
A private individual who deals with a municipal corporation is imputed constructive knowledge of the extent of the power or
authority of the municipal corporation to enter into contracts.
Ordinarily, therefore, the doctrine of estoppel does not lie against municipal corporation.

b. Doctrine of Implied Municipal Liability- A municipality may become obligated upon an implied contract to pay the
reasonable value of the benefits accepted or appropriated by it as to which it has the general power to contract
(Province of Cebu vs. IAC, 147 SCRA 447).
The doctrine applies to all cases where money or property of a party is received under such circumstances that the
general law, independent of an express contract, implies an obligation to do justice with respect to the same.
Thus, in this case, the Province of Cebu cannot set up the plea that the contract was ultra vires and still retain
benefits thereunder. Having regarded the contract as valid for purposes of reaping benefits, the Province of Cebu is
estopped to question its validity for the purpose of denying answerability.