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General principles

Corporation defined
An 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. Classes of Corporations PUBLIC and PRIVATE

Public Corporations defined

Those formed or organized for the government of a portion of the State, organized for the government of a portion of the state for the accomplishment of parts of its own public works. (Elliot, Municipal corporations). Pursuant to this definition, public corporations in the Philippines are the governments of PROVINCES CITIES MUNICIPALITIES and BARANGAYS. They are created by the State as its own device and agency for the accomplishment of parts of its own public works.

Public corporations are established for purposes connected with the administration of civil or local governments. They are created by the State as its own agency or instrumentality to help the state in carrying out its governmental functions. They are creations of the State either by general or special act.

Classes of public corporations

Public corporations may be classified into QUASI CORPORATIONS and MUNICIPAL CORPORATIONS. Quasi-corporations are public corporations created as agencies of the State for a narrow and limited purpose (Elliot, Mun. Corp.) Unlike other public corporations they are not possessed of the powers and liabilities of selfgoverning corporations. Their power generally relates to matters of state, as distinguished from municipal concern. Barangays can be treated as quasi-corporations but with the Local Government Code, they now have assumed the status of regular public corporations like municipalities and cities.

Nature of quasi-corporations
They are public in nature but cannot, strictly speaking, be considered municipal corporations. They possess a limited number of corporate powers and have a low grade of corporate existence. They consist of various local government areas established to aid in the administration of public functions. In other jurisdictions, examples are counties, drainage districts, fire districts, highway districts, hospital districts, improvement districts, irrigation districts, reclamation districts, sanitary districts, school districts and water districts.

Purpose of creation
The main purpose of the creation of quasicorporations is to aid the State in, or to take charge of, some public or state work other than community government, for the general welfare. Existence of quasi-corporations is now blurred.

Distinguished from GOCCs

Section 2 (13) of EO 292 (Administrative Code of 1987) defines GOCC as: 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 indirectly or thru its instrumentalities, either wholly, or where applicable, as in the case of stock corporations, to the extent of at least 51% of its capital stock; provided, that GOCCs may be further categorized by the department of budget, the CSC and COA for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.

GOCC defined
In Leyson vs. Ombudsman, 331 SCRA 227 and in a later case, MIAA vs. The SC has clarified that any agency organized as a stock or non-stock corporation vested with functions related to public needs whether governmental or proprietary in nature, and owned by the government directly or thru its instrumentalities, either wholly, or where applicable, as in the case of stock corporations, to the extent of at least 51% of its capital stock is a GOCC.

AGENCY defined
According to the SC, an agency is broadly defined by statute as any of the various units of the Government, including a department, bureau, office, instrumentality, or GOCC, or a local government or a distinct unit therein. (Sec. 2, Introductory Provisions, Adm. Code of 1987).


A DEPARTMENT refers to an executive department created by law. A BUREAU is understood to refer to any principal subdivision of any department. An office refers to any major functional unit of a department or bureau, including regional offices. An INSTRUMENTALITY refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some, if not all, corporate powers, administering special funds and enjoying operational autonomy, usually thru a charter. The term includes regulatory agencies, chartered institutions and GOCCs.

Municipal Corporations
Definition: Dillon defines municipal corporation, in its strict and proper sense, as a body politic and corporate constituted by the incorporation of the inhabitants of a city or town for the purpose of local government thereof; it is established by law partly as an agency of the state to assist in the civil government of the country, but chiefly to regulate and administer the local or internal affairs of the city, town, or district which is incorporated. See Sec. 15 of the LGC

Sec. 15 Political and Corporate Nature of LGUs

Every LGU 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.

Nature and Status of MCs

Courts regard a MC as a subordinate branch of the government of the State and municipal administration as an instrumentality of state administration. It exercises DELEGATED powers of the government. Its charter is granted for the better government of the particular area or districts. It is a political division of the state and variedly described as an arm of the state, a miniature state, an instrumentality of the state, a mere creature of the same, an agent of the state, and the like. Read Province of Batangas vs. Romulo

Elements of MC
1.) A legal creation or incorporation; 2.) A corporate name by which all corporate acts are done; 3.) Inhabitants constituting the population who are invested with the political and corporate powers which are executed thru duly constituted officers and agents 4.) A place or territory within which the local civil government and corporate functions are exercised See Sec. 7 LGC

1.) Municipal corporation proper generally the term refers to incorporated LGUs invested with the power of local legislation 2.) Quasi-municipal corporation - another term for quasi corporation.

Distinction between MCP and QMC

A MCP exists and is governed by its charter; a QMC operates directly as an agency of the state to help in the administration of public functions. When invested with the power of local government, the municipal corporation as an agency of the state becomes a municipal corporation proper.

Criterion whether a corporation is MCP or QMC

Several tests to determine whether a corporation is municipal corporation or quasimunicipal. Among the tests are: The voluntary or involuntary nature of the corporation The existence or non-existence of a charter; and Whether the purpose of the corporation is solely as a governmental agency or one for self government.

Purposes of Municipal corporation

Two-fold purpose: 1.) to serve as an agency or instrumentality of the state in carrying on the functions of government which the state cannot conveniently exercise, such as the collection of taxes, assessment of property and enforcement of police regulations; and 2.) to act as agency of the inhabitants of the community in the regulation and the operation of municipal franchises and public utilities, such as maintenance of water system, ferries, wharves etc,

Municipal corporation distinguished from public corporation

It can be said that ALL MUNICIPAL CORPORATIONS are PUBLIC CORPORATIONS, but not all public corporations are municipal corporations. The term municipal corporations properly applies to incorporated provinces, cities, municipalities and barangays, with power of local administration.

Distinguishing Feature of MCs

The distinctive purpose and the distinguishing feature of a municipal corporation proper is the power of local government. Dual nature of MCs: Every municipal corporation has a twofold character the governmental and the private.

In its public or governmental aspect it 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. In its private aspect, it 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 which is wholly beyond the sphere of the public purposes for which its governmental powers are conferred.

Dual functions of MCs

1.) they serve as an instrumentality of the State in carrying out the functions of the Government. 2.) they act as an agency of the community in the administration of local affairs. It is in this character that they are acting as separate entities for their own purposes and not as subdivisions of the State.