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7/29/2019 Public Corpo Notes

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PUBLIC CORPORATIONS Reference Book (Rodriguez, LGC)

THE BIPOLAR NATURE OF PUBLIC CORPORATIONS

1. PUBLIC CORPORATIONS v. PRIVATE CORPORATIONS

In Philippine Society for the Prevention of Cruelty to Animals v. COA, the court held:

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,[21] 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. Examples of these corporations are utility,[22] railroad,

warehouse, telegraph, telephone, water supply corporations and transportation

companies.[23] It must be stressed that a quasi-public corporation is a species ofprivate 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.[24]

Authorities are of the view that the purpose alone of the corporation cannot be

taken as a safe guide, for the fact is that almost all corporations are nowadays created to

promote the interest, good, or convenience of the public. A bank, for example, is a

private corporation; yet, it is created for a public benefit. Private schools and universities

are likewise private corporations; and yet, they are rendering public service. Private

hospitals and wards are charged with heavy social responsibilities. More so with all

common carriers. On the other hand, there may exist a public corporation even if it is

endowed with gifts or donations from private individuals.

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 latters 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.

2. PUBLIC PROPERTY v. PATRIMONIAL PROPERTY

Public Property, as defined in Articles 420-424 of the Civil Code can be divided into two

categories:

a. Property for public use consists public works open and free for public use and

enjoyment, including: provincial roads, city streets, municipal streets, squares,

fountains, promenades and parks.Additionally, public property also includes: canals,


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rivers, torrents, ports and bridges constructed by the State, banks, shores,

roadsteads, and others of similar character.

Such property is owned and regulated by the municipal corporation in his

governmental capacity. That is to say, he merely acts as an agent of the national

government. Therefore, it can neither be alienated nor gained by prescription1

.

b. Patrimonial Property held by the municipal corporation in its corporate or

ministerial capacity. As its corporate self, the municipal corporate holds patrimonial

property separate from the national government. The legislature cannot therefore

convert patrimonial property into property for public use without due process just

compensation.

Q: Is it possible to convert property for public use into patrimonial property?

A: Yes, property for public use may be converted into patrimonial property by virtue of an

official declaration expressly converting public property to patrimonial property.

Malabanan v. Republic of the Philippines (2009):

In complying with Section 14(2) of the Property Registration Decree, consider that under

the Civil Code, prescription is recognized as a mode of acquiring ownership of

patrimonial property. However, public domain lands become only patr imonial

property n ot on ly with a declarat ion th at these are al ienable or dispo sable. There

must also be an express government manifestation that the property is already

patrimonial or no longer retained for public service or the development of national

wealth, under Article 422 of the Civil Code.36 And only when the property has become

patrimonial can the prescriptive period for the acquisition of property of the publicdominion begin to run.

(a) Patrimonial property is private property of the government. The person

acquires ownership of patrimonial property by prescription under the Civil Code is

entitled to secure registration thereof under Section 14(2) of the Property

Registration Decree.

1Prescription refers to the mode of acquiring or losing ownership over and other real rights through a lapse of

period in time and in the manner and conditions laid down by law (NCC Art. 1155). Additionally, Article 1115 of

the new civil code provides that:

All things which are within the commerce of men are susceptible of prescription, unless otherwise

provided. Property of the State or any of its subdivisions not patrimonial in character shall not be the

object of prescription. (1936a)

In a number of cases held by the Supreme Court, public property has been held to be among those things which

are beyond the commerce of men, as they are property of the state, herself (Doctrina Regaliana). (See: City of

Manila v. Garcia, Muyot v. De La Fuente). Public property cannot therefore be the subject of any contract, as

provided in Art. 1347 of the Civil Code.


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(b) There are two kinds of prescription by which patrimonial property may be

acquired, one ordinary and other extraordinary. Under ordinary acquisitive

prescription, a person acquires ownership of a patrimonial property through

possession for at least ten (10) years, in good faith and with just title. Under

extraordinary acquisitive prescription, a persons uninterrupted adverse

possession of patrimonial property for at least thirty (30) years, regardless ofgood faith or just title, ripens into ownership.

The import of this ruling is clear. Under Section 14(2) of P.D. 1529, before acquisitive

prescription could commence, the property sought to be registered must not only be

classified as alienable and disposable; it must also be expressly declared by the State

that it is no longer intended for public service or the development of the national wealth

or that the property has been converted into patrimonial. Thus, absent an express

declaration by the State, the land remains to be property of public dominion.

Said ruling was reiterated in Republic of the Philippines v Metro Index Development Corporation

(2012), which held that:

Simply put, it is not the notorious, exclusive and uninterrupted possession and

occupation of an alienable and disposable public land for the mandated periods that

converts it to patrimonial. The indispensability of an official declaration that the property

is now held by the State in its private capacity or placed within the commerce of man for

prescription to have any effect against the State cannot be overemphasized.

A mere declaration that public land is alienable and disposable will not suffice, what the law

requires is an express declaration of the conversion itself. The reason for this is simple; an

alienable and disposable land is not necessarily a patrimonial land for this only means that

said property is no longer for public use at a particular moment in time. It may still,however, be intended for public use in the future.

In Capitulo v. Aquino, the court held that it does not matter that the property is not actually

devoted to public use or for some public service. If the property has been and is intended

for use or service, and the city has not devoted it to other uses or adopted any measure

amounted to the withdrawal of the said intent, then it is still and it continues to be property

forpublic use. (Said Ruling is in accordance with the Public Land Act, or C.A. 141)

Q: Since public property may be converted to patrimonial property by virtue of an official

declaration of expressed conversion, then it follows that all public property may be subjectedto an official declaration of conversion?

A: No.Article XII, Sec. 2 of the Constitution provides that:

All lands of the public domain, waters, minerals, coal, petroleum, and other

mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and


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fauna, and other natural resources are owned by the State. With the exception of

agricultural lands, all other natural resources shall no t be alienated.

Since only patrimonial lands can be alienated and acquired by prescription, then it

follows that these non-alienable lands cannot be converted.

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