Mayor's Authority to Sign Contracts: Local Government Powers Under Philippine Law

The question of who may validly sign contracts on behalf of a local government unit is a practical concern for citizens, businesses, and officials alike. A 2006 Supreme Court ruling in Mallari v. Alsol clarifies this issue, holding that a city mayor has the authority to sign contracts for the city, even under the old Local Government Code. The case also offers useful guidance on the effect of a notarized document when a party did not appear before the notary.

The Facts of the Case

Two stalls in the Cabanatuan City Public Market were originally awarded to Abelardo Mallari, who later gave them to his children, Manuel Mallari and Rebecca Alsol. Manuel and his wife occupied Stall No. 7, while Rebecca occupied Stall No. 8. When Rebecca's family had to leave for Manila for two months, Manuel and his wife took over Stall No. 8 and refused to return it.

Rebecca sought help from the City Market Committee, which awarded Stall No. 7 to Manuel and Stall No. 8 to Rebecca. She then executed a Contract of Lease with the City Government, represented by Mayor Honorato C. Perez. Despite this, Manuel and his wife refused to vacate, leading to a case for recovery and possession.

The Issue: Who May Sign for the City?

The petitioners argued that the Lease Contract was invalid because the City Treasurer, not the Mayor, should have signed it. They also claimed that the Court of Appeals erred in applying the Local Government Code of 1991 (RA 7160), which took effect after the contract was signed.

The Supreme Court agreed that RA 7160 was not the applicable law. Instead, the Court applied Batas Pambansa Blg. 337 (BP 337), the old Local Government Code in effect at the time the contract was executed.

The Ruling: The Mayor Has the Power to Sign

Under BP 337, the city mayor is the chief executive of the city government. The Court found that the mayor's powers include representing the city in its business transactions and signing contracts and obligations of the city. The Court found nothing in the city treasurer's enumerated powers that grants authority to sign contracts for the city government. The treasurer's role is limited to collecting taxes, taking custody of city funds, and similar functions.

The Court also noted that even under the Cabanatuan City Revenue Code of 1974, the city treasurer's authority over public markets was limited to supervision and administration, including designating spaces and stalls to vendors. This does not include signing contracts on behalf of the city.

Notarization and Contract Validity

The petitioners also argued that the Lease Contract was invalid because Mayor Perez did not appear before the notary public who notarized the document. The Court rejected this argument.

Notarization converts a private document into a public document, but the non-appearance of a party before the notary does not necessarily nullify the transaction. Citing the Civil Code, the Court explained that the requirement of a public document is only for convenience, not for validity or enforceability. A contract remains obligatory regardless of form, provided all essential requisites are present.

Attorney's Fees

The Court also upheld the award of attorney's fees. The petitioners' refusal to vacate the stall despite repeated demands and the existence of a valid lease left the respondent with no choice but to litigate to protect her interest. This falls under Article 2208 of the Civil Code, which allows attorney's fees when the defendant's act compels the plaintiff to incur expenses to protect his or her interest.

Practical Takeaways

• City mayors have the authority to sign contracts for the city government under BP 337, the old Local Government Code. This authority includes representing the city in business transactions and signing its contracts and obligations.
• The city treasurer's role is limited to fiscal functions such as collecting taxes and taking custody of city funds. The treasurer does not have the power to sign contracts on behalf of the city.
• A contract is not automatically invalid merely because a party did not appear before the notary public. The absence of notarization, or a defect in notarization, does not nullify an otherwise valid contract.
• The applicable law depends on when the contract was executed. For contracts entered into before 1992, BP 337 governs; for those after, the Local Government Code of 1991 (RA 7160) applies.
• Attorney's fees may be awarded when a party's refusal to comply with a valid obligation forces the other party to litigate to protect their rights.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.