Corporate Powers of Public Corporations in Philippine Law

Introduction

In the Philippine legal framework, public corporations play a pivotal role in governance and public service delivery. These entities, distinct from private corporations, are instrumentalities of the state established to perform governmental or proprietary functions. The corporate powers of public corporations are derived from constitutional provisions, statutory enactments, and judicial interpretations, ensuring they operate within the bounds of public interest and accountability. This article comprehensively examines the nature, sources, scope, exercise, and limitations of these powers, drawing from relevant laws such as the 1987 Constitution, the Local Government Code of 1991 (Republic Act No. 7160), the Corporation Code of the Philippines (Batas Pambansa Blg. 68), and the GOCC Governance and Operations Act of 2011 (Republic Act No. 10149). It explores public corporations in two primary categories: local government units (LGUs) as municipal corporations and government-owned or controlled corporations (GOCCs).

Definition and Classification of Public Corporations

Public corporations in Philippine law are juridical entities created by the state for the administration of public affairs. They are vested with corporate personality, enabling them to sue and be sued, enter into contracts, acquire and dispose of property, and exercise other powers akin to private corporations but subject to public law constraints.

Municipal Corporations (Local Government Units)

Municipal corporations encompass provinces, cities, municipalities, and barangays, as defined under Section 1 of the Local Government Code (LGC). These are political subdivisions established for local self-governance, performing both governmental (e.g., police power, taxation) and proprietary (e.g., market operations) functions. The Supreme Court in cases like Province of Negros Occidental v. Commission on Audit (G.R. No. 182574, 2009) has affirmed that LGUs possess dual personalities: public for sovereign acts and private for commercial undertakings.

Government-Owned or Controlled Corporations (GOCCs)

GOCCs are stock or non-stock corporations vested with functions relating to public needs, whether governmental or proprietary, and owned by the government directly or through its instrumentalities. Republic Act No. 10149 defines a GOCC as any agency organized as a corporation under the Corporation Code, with at least 50% of its capital stock or voting shares owned by the government. Examples include the Philippine National Oil Company (PNOC) and the National Power Corporation (NPC). Unlike municipal corporations, GOCCs are primarily engaged in proprietary activities but remain subject to state control.

Sources of Corporate Powers

The corporate powers of public corporations stem from multiple legal sources, ensuring alignment with national policy and public welfare.

Constitutional Foundations

The 1987 Constitution provides the bedrock for these powers. Article X establishes the framework for local autonomy, granting LGUs the right to create sources of revenue and exercise powers necessary for effective governance (Section 5). For GOCCs, Article XII, Section 16 mandates that they be created by special charters in the public interest, prohibiting their use for private gain.

Statutory Grants

Local Government Code (RA 7160): This is the primary statute for LGUs. Section 16 outlines the general welfare clause, empowering LGUs to promote health, safety, and prosperity. Section 22 enumerates corporate powers, including perpetual succession, the ability to sue and be sued, contract execution, property acquisition, and eminent domain.
Corporation Code (BP 68): Applicable to GOCCs, Sections 36 to 45 detail general corporate powers, such as adopting by-laws, issuing stocks (for stock GOCCs), and entering partnerships. However, these are modified by special laws creating specific GOCCs.
GOCC Governance Act (RA 10149): This law standardizes GOCC operations, mandating performance scorecards and limiting powers to those aligned with their charters. It empowers the Governance Commission for GOCCs (GCG) to rationalize and oversee these entities.

Judicial Doctrines

The Supreme Court has expounded on these powers through doctrines like the "necessary and proper" clause. In City of Manila v. Intermediate Appellate Court (G.R. No. 71159, 1987), the Court held that powers not expressly granted may be implied if essential to the declared objects and purposes of the corporation.

Scope of Corporate Powers

Corporate powers are categorized into express, implied, and incidental powers, with variations between LGUs and GOCCs.

Express Powers

These are explicitly conferred by law.

For LGUs:
- Fiscal Powers: Levy taxes, fees, and charges (LGC, Section 129); borrow money and issue bonds (Section 295).
- Regulatory Powers: Enact ordinances for general welfare, including zoning and business regulation (Section 458 for cities, analogous for others).
- Proprietary Powers: Operate economic enterprises like public markets and slaughterhouses (Section 17).
- Eminent Domain: Expropriate private property for public use upon just compensation (Section 19).
For GOCCs:
- Operational Powers: Engage in business activities per their charters, such as energy production for NPC or banking for Land Bank of the Philippines.
- Contractual Powers: Enter into joint ventures, public-private partnerships (under RA 6957, as amended), and procurement contracts (RA 9184).
- Personnel Management: Hire and compensate employees, subject to Civil Service rules for governmental GOCCs.

Implied Powers

Implied powers are those reasonably necessary to effectuate express powers. For instance, an LGU's power to maintain peace implies the authority to establish police stations. In Pimentel v. Aguirre (G.R. No. 132988, 2000), the Court clarified that implied powers must not contravene national laws or the Constitution.

For GOCCs, implied powers include borrowing funds if essential to their mandate, as seen in Philippine Airlines v. Civil Aeronautics Board (G.R. No. 119528, 1997), where operational flexibility was upheld.

Incidental Powers

These are auxiliary to main functions, such as adopting seals, acquiring equipment, or investing surplus funds. Section 36(11) of the Corporation Code grants GOCCs the power to do all things necessary for corporate existence.

Exercise of Corporate Powers

The exercise of these powers is governed by principles of accountability, transparency, and public trust.

Governing Bodies

LGUs: Powers are vested in the local chief executive (governor, mayor) and the sanggunian (legislative body). Ordinances require sanggunian approval, while executive orders implement them.
GOCCs: Managed by a board of directors appointed by the President, with the CEO handling day-to-day operations. RA 10149 requires fit-and-proper rules for board members.

Procedural Requirements

Contracts: Must comply with bidding laws (RA 9184) to prevent corruption. Ultra vires contracts are void.
Budgeting and Auditing: Subject to Commission on Audit (COA) oversight. LGUs follow the Local Budget Circulars; GOCCs remit dividends to the national treasury (RA 10149, Section 29).
Public Participation: LGUs must conduct consultations for major projects (LGC, Section 26); GOCCs disclose performance via the GCG website.

Judicial Review

Acts of public corporations are subject to certiorari, prohibition, or mandamus. In League of Cities v. COMELEC (G.R. No. 176951, 2008), the Court invalidated city creations for violating constitutional equality clauses.

Limitations on Corporate Powers

Public corporations' powers are not absolute, bounded by constitutional, statutory, and ethical constraints.

Constitutional Limitations

Non-Delegation: Powers cannot be delegated without standards (e.g., Pelaez v. Auditor General, G.R. No. L-23825, 1965, on presidential creation of municipalities).
Due Process and Equal Protection: Actions must not be arbitrary.
Bill of Rights: Cannot infringe on freedoms without justification.

Statutory and Administrative Constraints

Supervision by National Government: LGUs are under DILG oversight; GOCCs by GCG and DOF.
Fiscal Autonomy Limits: Cannot impose taxes preempted by national laws (LGC, Section 133).
Prohibition on Political Activities: GOCCs cannot engage in partisan politics.

Liability and Accountability

Public corporations can be held liable for torts in proprietary functions (City of Manila v. Teotico, G.R. No. L-23052, 1968). Officials face administrative or criminal sanctions for abuse, under RA 3019 (Anti-Graft Law).

Special Considerations in Evolving Contexts

In recent developments, public corporations have adapted powers to address contemporary challenges:

Disaster Response: LGUs' powers expanded under RA 10121 (Disaster Risk Reduction Law) for resilience building.
Digital Governance: GOCCs like DICT-affiliated entities exercise powers in cybersecurity and e-governance.
Sustainability: Powers include environmental protection, as in Oposa v. Factoran (G.R. No. 101083, 1993), implying intergenerational equity.

Conclusion

The corporate powers of public corporations in Philippine law embody the balance between autonomy and state sovereignty, enabling efficient public service while safeguarding against abuse. For LGUs, these powers foster decentralization; for GOCCs, they drive economic development. Continuous judicial and legislative refinements ensure these entities remain responsive to societal needs, upholding the principle that all power emanates from the people. Future reforms may further integrate technology and sustainability, but the core remains: powers must serve the public good.