BSP v.

COA
LEONARDO-DE CASTRO, J

Facts: This case stems from when COA issued a resolution asserting its jurisdiction over BSP. According to the said resolution, since
BSP is a GOCC as pursuant to Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and Republic Act No.
7278; that in Boy Scouts of the Philippines v. National Labor Relations Commission, the Supreme Court ruled that the BSP, as
constituted under its charter, was a "government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution";
and that "the BSP is appropriately regarded as a government instrumentality under the 1987 Administrative Code.

BSP sought for reconsideration but to no avail. BSP then averred that when Boy Scouts of the Philippines vs. National Labor
Relations Commission, classifying the BSP as a government-controlled corporation is anchored on the "substantial Government
participation" in the National Executive Board of the BSP. It is to be noted that the case was decided when the BSP Charter is
defined by Commonwealth Act No. 111 as amended by Presidential Decree 460. However, when the Comm Act and the PD was
amended by the R.A 7278 virtually eliminated the "substantial government participation" in the National Executive Board by
removing:

(i) the President of the Philippines and executive secretaries, with the exception of the Secretary of Education, as
members thereof; and
(ii) the appointment and confirmation power of the President of the Philippines, as Chief Scout, over the members of the
said Board.

Also the BSP respectfully believes that the BSP is not "appropriately regarded as a government instrumentality under the 1987
Administrative Code" as stated in the COA resolution. As defined by Section 2(10) of the said code, 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
through a charter." The BSP is not an entity administering special funds. It is not even included in the DECS National Budget.

It may be argued also that the BSP is not an "agency" of the Government. The 1987 Administrative Code merely referred
the BSP as an "attached agency" of the DECS as distinguished from an actual line agency of departments that are included in the
National Budget. The BSP believes that an "attached agency" is different from an "agency." Agency, as defined in Section 2(4) of the
Administrative Code, is defined as any of the various units of the Government including a department, bureau, office, instrumentality,
government-owned or controlled corporation or local government or distinct unit therein.

In said Memorandum, the COA General Counsel opined that Republic Act No. 7278 did not supersede the Court’s ruling
in Boy Scouts of the Philippines v. National Labor Relations Commission, even though said law eliminated the substantial
government participation in the selection of members of the National Executive Board of the BSP. The Memorandum further
provides:

Analysis of the said case disclosed that the substantial government participation is only one (1) of the three (3) grounds
relied upon by the Court in the resolution of the case. Other considerations include the character of the BSP’s purposes and
functions which has a public aspect and the statutory designation of the BSP as a "public corporation". These grounds have not
been deleted by R.A. No. 7278. On the contrary, these were strengthened as evidenced by the amendment made relative to BSP’s
purposes stated in Section 3 of R.A. No. 7278.

On the argument that BSP is not appropriately regarded as "a government instrumentality" and "agency" of the
government, such has already been answered and clarified. The Supreme Court has elucidated this matter in the BSP case when it
declared that BSP is regarded as, both a "government-controlled corporation with an original charter" and as an "instrumentality" of
the Government. Likewise, it is not disputed that the Administrative Code of 1987 designated the BSP as one of the attached
agencies of DECS. Being an attached agency, however, it does not change its nature as a government-controlled corporation with
original charter and, necessarily, subject to COA audit jurisdiction. Besides, Section 2(1), Article IX-D of the Constitution provides
that COA shall have the power, authority, and duty to examine, audit and settle all accounts pertaining to the revenue and receipts
of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies or instrumentalities, including government-owned or controlled corporations with original charters.

This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary restraining order
against the COA.

Issue: whether the BSP falls under the COA’s audit jurisdiction.

Ruling: After looking at the legislative history of its amended charter and carefully studying the applicable laws and the arguments of
both parties, we find that the BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction.

BSP Charter entitled "An Act to Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its
Powers and Purposes" created the BSP as a "public corporation" to serve the following public interest or purpose:
Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with other agencies, the ability of
boys to do useful things for themselves and others, to train them in scoutcraft, and to inculcate in them patriotism, civic
consciousness and responsibility, courage, self-reliance, discipline and kindred virtues, and moral values, using the method which
are in common use by boy scouts.

The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under Republic
Act No. 7278, falls under the second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose created by law; their personality begins as soon as they
have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality,
separate and distinct from that of each shareholder, partner or member. (Emphases supplied.)

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under Article 45 of the Civil
Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or recognizing them.

The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a State policy declared in
Article II, Section 13 of the Constitution, which reads:

ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES

Section 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral,
spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their
involvement in public and civic affairs.

Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a constitutional mandate, comes
within the class of "public corporations" defined by paragraph 2, Article 44 of the Civil Code and governed by the law which creates
it, pursuant to Article 45 of the same Code.

The BSP’s Classification Under the Administrative Code of 1987

The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl Scouts of the Philippines, it is
classified as an attached agency of the DECS under Executive Order No. 292, or the Administrative Code of 1987, which states:

TITLE VI – EDUCATION, CULTURE AND SPORTS

Chapter 8 – Attached Agencies

SEC. 20. Attached Agencies. – The following agencies are hereby attached to the Department:

xxxx

(12) Boy Scouts of the Philippines;

(13) Girl Scouts of the Philippines.

The administrative relationship of an attached agency to the department is defined in the Administrative Code of 1987 as follows:

BOOK IV

THE EXECUTIVE BRANCH

Chapter 7 – ADMINISTRATIVE RELATIONSHIP

SEC. 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or in other laws defining the
special relationships of particular agencies, administrative relationships shall be categorized and defined as follows:

xxxx

(3) Attachment. – (a) This refers to the lateral relationship between the department or its equivalent and the attached agency or
corporation for purposes of policy and program coordination. The coordination may be accomplished by having the department
represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without voting
rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic reporting which
shall reflect the progress of programs and projects; and having the department or its equivalent provide general policies through its
representative in the board, which shall serve as the framework for the internal policies of the attached corporation or agency.

As an attached agency, the BSP enjoys operational autonomy, as long as policy and program coordination is achieved by having at
least one representative of government in its governing board, which in the case of the BSP is the DECS Secretary. In this sense,
the BSP is not under government control or "supervision and control." Still this characteristic does not make the attached chartered
agency a private corporation covered by the constitutional proscription in question.

Section 16, Article XII deals with "the formation, organization, or regulation of private corporations,"52 which should be done through
a general law enacted by Congress, provides for an exception, that is: if the corporation is government owned or controlled; its
creation is in the interest of the common good; and it meets the test of economic viability. The rationale behind Article XII, Section 16
of the 1987 Constitution was explained in Feliciano v. Commission on Audit,53 in the following manner:

The Constitution emphatically prohibits the creation of private corporations except by a general law applicable to all citizens. The
purpose of this constitutional provision is to ban private corporations created by special charters, which historically gave certain
individuals, families or groups special privileges denied to other citizens.

It may be gleaned from the above discussion that Article XII, Section 16 bans the creation of "private corporations" by special law.
The said constitutional provision should not be construed so as to prohibit the creation of public corporations or a corporate agency
or instrumentality of the government intended to serve a public interest or purpose, which should not be measured on the basis of
economic viability, but according to the public interest or purpose it serves as envisioned by paragraph (2), of Article 44 of the Civil
Code and the pertinent provisions of the Administrative Code of 1987.

The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and Economic Viability

The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall within the
constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise known as "public corporations." These corporations are treated by law as
agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but
to different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative
relationship to the government or any of its Departments or Offices.

The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and Economic Viability

The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall within the
constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise known as "public corporations." These corporations are treated by law as
agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but
to different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative
relationship to the government or any of its Departments or Offices.

Classification of Corporations Under Section 16, Article XII of the Constitution on National Economy and Patrimony

Note that in Boy Scouts of the Philippines v. National Labor Relations Commission, the BSP, under its former charter, was regarded
as both a government owned or controlled corporation with original charter and a "public corporation." The said case pertinently
stated:

While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private entities, we believe that
considering the character of its purposes and its functions, the statutory designation of the BSP as "a public corporation" and the
substantial participation of the Government in the selection of members of the National Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a government-controlled corporation within the meaning of Article IX (B) (2) (1) of the
Constitution.

We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the BSP as one of the attached
agencies of the Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is defined as referring to
any of the various units of the Government including a department, bureau, office, instrumentality, government-owned or -controlled
corporation, or local government or distinct unit therein. "Government instrumentality" is in turn defined in the 1987 Administrative
Code in the following manner:
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 through a charter. This term includes regulatory agencies, chartered institutions and government-
owned or controlled corporations.

The same Code describes a "chartered institution" in the following terms:

Chartered institution - refers to any agency organized or operating under a special charter, and vested by law with functions relating
to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of
the State.

We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation with an original charter" and as an
"instrumentality" of the Government within the meaning of Article IX (B) (2) (1) of the Constitution.

"Government-owned or controlled corporation" refers to 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 through
its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per
cent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department
of the Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government because of reduction of the
number of representatives of the government in the BSP Board, it does not follow that it also ceases to be a government
instrumentality as it still retains all the characteristics of the latter as an attached agency of the DECS under the Administrative
Code. Vesting corporate powers to an attached agency or instrumentality of the government is not constitutionally prohibited and is
allowed by the above-mentioned provisions of the Civil Code and the 1987 Administrative Code.

Economic Viability and Ownership and Control Tests Inapplicable to Public Corporations

As presently constituted, the BSP still remains an instrumentality of the national government. It is a public corporation created by law
for a public purpose, attached to the DECS pursuant to its Charter and the Administrative Code of 1987. It is not a private
corporation which is required to be owned or controlled by the government and be economically viable to justify its existence under
a special law.

Thus, the test of economic viability clearly does not apply to public corporations dealing with governmental functions, to which
category the BSP belongs. The discussion above conveys the constitutional intent not to apply this constitutional ban on the creation
of public corporations where the economic viability test would be irrelevant. The said test would only apply if the corporation is
engaged in some economic activity or business function for the government.

It is undisputed that the BSP performs functions that are impressed with public interest.

Re: the COA’s Jurisdiction

Regarding the COA’s jurisdiction over the BSP, Section 8 of its amended charter allows the BSP to receive contributions or
donations from the government. Section 8 reads:

Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the Philippines by the
Government or any of its subdivisions, branches, offices, agencies or instrumentalities shall be expended by the Executive Board in
pursuance of this Act.lawph!1

Historically, therefore, the BSP had been subjected to government audit in so far as public funds had been infused thereto.
However, this practice should not preclude the exercise of the audit jurisdiction of COA, clearly set forth under the Constitution,
which pertinently provides:

Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts
pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations
with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal
autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled
corporations with original charters and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly
or indirectly, from or through the Government, which are required by law of the granting institution to submit to such audit as a
condition of subsidy or equity.

Since the BSP, under its amended charter, continues to be a public corporation or a government instrumentality, we come to the
inevitable conclusion that it is subject to the exercise by the COA of its audit jurisdiction in the manner consistent with the provisions
of the BSP Charter.
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO
ANIMALS v. COA
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No. 1285, enacted on January 19,
1905, by the Philippine Commission. The petitioner, at the time it was created, was composed of animal aficionados and animal
propagandists. The objects of the petitioner, as stated in Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted
upon animals or the protection of animals in the Philippine Islands, and generally, to do and perform all things which may tend in any
way to alleviate the suffering of animals and promote their welfare.

At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in existence. Act No. 1285
antedated both the Corporation Law and the constitution of the Securities and Exchange Commission. Important to note is that the
nature of the petitioner as a corporate entity is distinguished from the sociedad anonimas under the Spanish Code of Commerce.

For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the protection of animals, the petitioner
was initially imbued under its charter with the power to apprehend violators of animal welfare laws. In addition, the petitioner was to
share one-half (1/2) of the fines imposed and collected through its efforts for violations of the laws related thereto.

Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the fines collected for violation of
animal-related laws were recalled by virtue of Commonwealth Act (C.A.) No. 148

Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No. 63 dated November 12, 1936, portions
of which provide:

Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered One Hundred Forty Eight
was enacted depriving the agents of the Society for the Prevention of Cruelty to Animals of their power to arrest persons who have
violated the laws prohibiting cruelty to

On December 1, 2003, an audit team from respondent Commission on Audit (COA) visited the office of the petitioner to conduct an
audit survey pursuant to COA Office Order No. 2003-051 dated November 18, 2003 5 addressed to the petitioner. The petitioner
demurred on the ground that it was a private entity not under the jurisdiction of COA

Petitioner explained thus:

a. Although the petitioner was created by special legislation, this necessarily came about because in January 1905 there
was as yet neither a Corporation Law or any other general law under which it may be organized and incorporated, nor a
Securities and Exchange Commission which would have passed upon its organization and incorporation.

b. That Executive Order No. 63, issued during the Commonwealth period, effectively deprived the petitioner of its power to
make arrests, and that the petitioner lost its operational funding, underscore the fact that it exercises no governmental
function. In fine, the government itself, by its overt acts, confirmed petitioner’s status as a private juridical entity.

The COA General Counsel issued a Memorandum6 dated May 6, 2004, asserting that the petitioner was subject to its audit
authority.

Issue: whether the petitioner qualifies as a government agency that may be subject to audit by respondent COA.

Ruling: The petition is impressed with merit.

First, the Court agrees with the petitioner that the "charter test" cannot be applied.

Essentially, the "charter test" as it stands today provides:

[T]he test to determine whether a corporation is government owned or controlled, or private in nature is simple. Is it created by its
own charter for the exercise of a public function, or by incorporation under the general corporation law? Those with special charters
are government corporations subject to its provisions, and its employees are under the jurisdiction of the Civil Service Commission,
and are compulsory members of the Government Service Insurance System.

The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime established by the 1935
Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation, organization, or regulation of private
corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof.

The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions. Section 16 of Article XII of the present
Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or established by special charters in the interest of the common good
and subject to the test of economic viability.

Section 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935 Constitution and Section 4 of Article XIV of the 1973
Constitution.

During the formulation of the 1935 Constitution, the Committee on Franchises recommended the foregoing proscription to prevent
the pressure of special interests upon the lawmaking body in the creation of corporations or in the regulation of the same. To permit
the lawmaking body by special law to provide for the organization, formation, or regulation of private corporations would be in effect
to offer to it the temptation in many cases to favor certain groups, to the prejudice of others or to the prejudice of the interests of the
country.

And since the underpinnings of the charter test had been introduced by the 1935 Constitution and not earlier, it follows that the test
cannot apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule
that laws in general have no retroactive effect, unless the contrary is provided. All statutes are to be construed as having only a
prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or
is necessarily implied from the language used. In case of doubt, the doubt must be resolved against the retrospective effect.

There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the law itself so expressly
provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and (5) in case of
laws creating new rights. None of the exceptions is present in the instant case.

As pointed out by the OSG, both the 1935 and 1987 Constitutions contain transitory provisions maintaining all laws issued not
inconsistent therewith until amended, modified or repealed.

In a legal regime where the charter test doctrine cannot be applied, the mere fact that a corporation has been created by virtue of a
special law does not necessarily qualify it as a public corporation.

What then is the nature of the petitioner as a corporate entity? What legal regime governs its rights, powers, and duties?

As stated, at the time the petitioner was formed, the applicable law was the Philippine Bill of 1902, and, emphatically, as also stated
above, no proscription similar to the charter test can be found therein.

The textual foundation of the charter test, which placed a limitation on the power of the legislature, first appeared in the 1935
Constitution. However, the petitioner was incorporated in 1905 by virtue of Act No. 1258, a law antedating the Corporation Law (Act
No. 1459) by a year, and the 1935 Constitution, by thirty years. There being neither a general law on the formation and organization
of private corporations nor a restriction on the legislature to create private corporations by direct legislation, the Philippine
Commission at that moment in history was well within its powers in 1905 to constitute the petitioner as a private juridical entity.1â

As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given retroactive effect, thereby freeing
all doubt as to which class of corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of private domestic
corporation, which the Court will further elaborate on under the fourth point.

Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any agency of the State, unlike
government-owned and -controlled corporations. No government representative sits on the board of trustees of the petitioner. Like
all private corporations, the successors of its members are determined voluntarily and solely by the petitioner in accordance with its
by-laws, and may exercise those powers generally accorded to private corporations, such as the powers to hold property, to sue and
be sued, to use a common seal, and so forth. It may adopt by-laws for its internal operations: the petitioner shall be managed or
operated by its officers "in accordance with its by-laws in force.

Third. The employees of the petitioner are registered and covered by the Social Security System at the latter’s initiative, and not
through the Government Service Insurance System, which should be the case if the employees are considered government
employees. This is another indication of petitioner’s nature as a private entity. Section 1 of Republic Act No. 1161, as amended by
Republic Act No. 8282, otherwise known as the Social Security Act of 1997, defines the employer:
Employer – Any person, natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business, industry,
undertaking or activity of any kind and uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations
owned or controlled by the Government: Provided, That a self-employed person shall be both employee and employer at the same
time.

Fourth. The respondents contend that the petitioner is a "body politic" because its primary purpose is to secure the protection and
welfare of animals which, in turn, redounds to the public good.

This argument, is, at best, specious. 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, 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, railroad, warehouse, telegraph, telephone, water supply corporations and
transportation companies. It must be stressed that a quasi-public corporation is a species of private 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.

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 latter’s 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. They are created by the State as its own device and agency
for the accomplishment of parts of its own public works.
Province of Cotabato v. GRP
Issue: whether MOA-AD violate the Constitution and the laws.

With regard to the provisions of the MOA-AD, there can be no question that they cannot all be accommodated under the present
Constitution and laws. Respondents have admitted as much in the oral arguments before this Court, and the MOA-AD itself
recognizes the need to amend the existing legal framework to render effective at least some of its provisions. Respondents,
nonetheless, counter that the MOA-AD is free of any legal infirmity because any provisions therein which are inconsistent with the
present legal framework will not be effective until the necessary changes to that framework are made. The validity of this argument
will be considered later. For now, the Court shall pass upon how.

The nature of the "associative" relationship may have been intended to be defined more precisely in the still to be forged
Comprehensive Compact. Nonetheless, given that there is a concept of "association" in international law, and the MOA-AD - by its
inclusion of international law instruments in its TOR- placed itself in an international legal context, that concept of association may
be brought to bear in understanding the use of the term "associative" in the MOA-AD.

Keitner and Reisman state that

[a]n association is formed when two states of unequal power voluntarily establish durable links. In the basic model, one
state, the associate, delegates certain responsibilities to the other, the principal, while maintaining its
international status as a state. Free associations represent a middle ground between integration and
independence.

In international practice, the "associated state" arrangement has usually been used as a transitional device of former colonies on
their way to full independence. Examples of states that have passed through the status of associated states as a transitional phase
are Antigua, St. Kitts-Nevis-Anguilla, Dominica, St. Lucia, St. Vincent and Grenada. All have since become independent states.

MOA-AD, it contains many provisions which are consistent with the international legal concept of association, specifically the
following: the BJE's capacity to enter into economic and trade relations with foreign countries, the commitment of the Central
Government to ensure the BJE's participation in meetings and events in the ASEAN and the specialized UN agencies, and the
continuing responsibility of the Central Government over external defense. Moreover, the BJE's right to participate in Philippine
official missions bearing on negotiation of border agreements, environmental protection, and sharing of revenues pertaining to the
bodies of water adjacent to or between the islands forming part of the ancestral domain, resembles the right of the governments of
FSM and the Marshall Islands to be consulted by the U.S. government on any foreign affairs matter affecting them.

These provisions of the MOA indicate, among other things, that the Parties aimed to vest in the BJE the status of an associated
state or, at any rate, a status closely approximating it.

The concept of association is not recognized under the present Constitution

No province, city, or municipality, not even the ARMM, is recognized under our laws as having an "associative" relationship with the
national government. Indeed, the concept implies powers that go beyond anything ever granted by the Constitution to any local or
regional government. It also implies the recognition of the associated entity as a state. The Constitution, however, does not
contemplate any state in this jurisdiction other than the Philippine State, much less does it provide for a transitory status that aims to
prepare any part of Philippine territory for independence.

Even the mere concept animating many of the MOA-AD's provisions, therefore, already requires for its validity the amendment of
constitutional provisions, specifically the following provisions of Article X:

SECTION 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities,
municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as
hereinafter provided.

SECTION 15. There shall be created 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,
economic and social structures, and other relevant characteristics within the framework of this Constitution and the
national sovereignty as well as territorial integrity of the Republic of the Philippines.

The BJE is a far more powerful

entity than the autonomous region
recognized in the Constitution
It is not merely an expanded version of the ARMM, the status of its relationship with the national government being fundamentally
different from that of the ARMM. Indeed, BJE is a state in all but name as it meets the criteria of a state laid down in the
Montevideo Convention,154 namely, a permanent population, a defined territory, a government, and a capacity to enter into
relations with other states.

Even assuming arguendo that the MOA-AD would not necessarily sever any portion of Philippine territory, the spirit animating it -
which has betrayed itself by its use of the concept of association - runs counter to the national sovereignty and territorial
integrity of the Republic.

The defining concept underlying the relationship between the national government and the BJE being itself contrary to the
present Constitution, it is not surprising that many of the specific provisions of the MOA-AD on the formation and powers
of the BJE are in conflict with the Constitution and the laws.

Article X, Section 18 of the Constitution provides that "[t]he creation of the autonomous region shall be effective when approved by a
majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and
geographic areas voting favorably in such plebiscite shall be included in the autonomous region." (Emphasis supplied)

As reflected above, the BJE is more of a state than an autonomous region. But even assuming that it is covered by the term
"autonomous region" in the constitutional provision just quoted, the MOA-AD would still be in conflict with it. Under paragraph 2(c)
on TERRITORY in relation to 2(d) and 2(e), the present geographic area of the ARMM and, in addition, the municipalities of Lanao
del Norte which voted for inclusion in the ARMM during the 2001 plebiscite - Baloi, Munai, Nunungan, Pantar, Tagoloan and
Tangkal - are automatically part of the BJE without need of another plebiscite, in contrast to the areas under Categories A and B
mentioned earlier in the overview. That the present components of the ARMM and the above-mentioned municipalities voted for
inclusion therein in 2001, however, does not render another plebiscite unnecessary under the Constitution, precisely because what
these areas voted for then was their inclusion in the ARMM, not the BJE.

The MOA-AD, moreover, would not

comply with Article X, Section 20 of
the Constitution

since that provision defines the powers of autonomous regions as follows:

SECTION 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the
organic act of autonomous regions shall provide for legislative powers over:

(1) Administrative organization;

(2) Creation of sources of revenues;

(3) Ancestral domain and natural resources;

(4) Personal, family, and property relations;

(5) Regional urban and rural planning development;

(6) Economic, social, and tourism development;

(7) Educational policies;

(8) Preservation and development of the cultural heritage; and

(9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of the region

Again on the premise that the BJE may be regarded as an autonomous region, the MOA-AD would require an amendment that
would expand the above-quoted provision. The mere passage of new legislation pursuant to sub-paragraph No. 9 of said
constitutional provision would not suffice, since any new law that might vest in the BJE the powers found in the MOA-AD must, itself,
comply with other provisions of the Constitution. It would not do, for instance, to merely pass legislation vesting the BJE with treaty-
making power in order to accommodate paragraph 4 of the strand on RESOURCES which states: "The BJE is free to enter into any
economic cooperation and trade relations with foreign countries: provided, however, that such relationships and understandings do
not include aggression against the Government of the Republic of the Philippines
Under our constitutional system, it is only the President who has that power. Pimentel v. Executive Secretary155 instructs:

In our system of government, the President, being the head of state, is regarded as the sole organ and authority in
external relations and is the country's sole representative with foreign nations. As the chief architect of foreign
policy, the President acts as the country's mouthpiece with respect to international affairs. Hence, the President is
vested with the authority to deal with foreign states and governments, extend or withhold recognition, maintain
diplomatic relations, enter into treaties, and otherwise transact the business of foreign relations. In the realm of
treaty-making, the President has the sole authority to negotiate with other states.

To remove all doubts about the irreconcilability of the MOA-AD with the present legal system, a discussion of not only the
Constitution and domestic statutes, but also of international law is in order, for

Article II, Section 2 of the Constitution states that the Philippines "adopts the generally accepted principles of international
law as part of the law of the land."

Applying this provision of the Constitution, the Court, in Mejoff v. Director of Prisons, held that the Universal Declaration of Human
Rights is part of the law of the land on account of which it ordered the release on bail of a detained alien of Russian descent whose
deportation order had not been executed even after two years. Similarly, the Court in Agustin v. Edu applied the aforesaid
constitutional provision to the 1968 Vienna Convention on Road Signs and Signals.

The MOA-AD cannot be reconciled with the present Constitution and laws. Not only its specific provisions but the very concept
underlying them, namely, the associative relationship envisioned between the GRP and the BJE, are unconstitutional, for the
concept presupposes that the associated entity is a state and implies that the same is on its way to independence.

While there is a clause in the MOA-AD stating that the provisions thereof inconsistent with the present legal framework will not be
effective until that framework is amended, the same does not cure its defect. The inclusion of provisions in the MOA-AD establishing
an associative relationship between the BJE and the Central Government is, itself, a violation of the Memorandum of Instructions
From The President dated March 1, 2001, addressed to the government peace panel. Moreover, as the clause is worded, it virtually
guarantees that the necessary amendments to the Constitution and the laws will eventually be put in place. Neither the GRP Peace
Panel nor the President herself is authorized to make such a guarantee. Upholding such an act would amount to authorizing a
usurpation of the constituent powers vested only in Congress, a Constitutional Convention, or the people themselves through the
process of initiative, for the only way that the Executive can ensure the outcome of the amendment process is through an undue
influence or interference with that process.

While the MOA-AD would not amount to an international agreement or unilateral declaration binding on the Philippines under
international law, respondents' act of guaranteeing amendments is, by itself, already a constitutional violation that renders the MOA-
AD fatally defective.
Basco v. PAGCOR
Facts: "The new PAGCOR — responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the Philippine Amusement and Gaming
Corporation (PAGCOR) Charter — PD 1869, because it is allegedly contrary to morals, public policy and order, and because —

A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila City
government's right to impose taxes and license fees, which is recognized by law;

B. For the same reason stated in the immediately preceding paragraph, the law has intruded into the local government's
right to impose local taxes and license fees. This, in contravention of the constitutionally enshrined principle of local
autonomy;

C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR — conducted gambling, while
most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices;

D. It violates the avowed trend of the Cory government away from monopolistic and crony economy, and toward free
enterprise and privatization.

To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's repealing clause, all
laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly repealed, amended or modified.

It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of Internal Revenue and the
Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly remitted to the National Government a total of P2.5
Billion in form of franchise tax, government's income share, the President's Social Fund and Host Cities' share. In addition,
PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation with various governmental agencies,
and other private associations and organizations. In its 3 1/2 years of operation under the present administration, PAGCOR remitted
to the government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9)
casinos nationwide, directly supporting the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.

But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and void" for being "contrary to
morals, public policy and public order," monopolistic and tends toward "crony economy", and is violative of the equal protection
clause and local autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal Dignity and
Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2 (Educational
Values) of Article XIV of the 1987 Constitution.

This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate consideration by the Court,
involving as it does the exercise of what has been described as "the highest and most delicate function which belongs to the judicial
department of the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).

As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of the government We
need not be reminded of the time-honored principle, deeply ingrained in our jurisprudence, that a statute is presumed to be valid.
Every presumption must be indulged in favor of its constitutionality. This is not to say that We approach Our task with diffidence or
timidity. Where it is clear that the legislature or the executive for that matter, has over-stepped the limits of its authority under the
constitution, We should not hesitate to wield the axe and let it fall heavily, as fall it must, on the offending statute.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not mean
that the Government cannot regulate it in the exercise of its police power.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that
may interfere with personal liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As
defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not capable
of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. (Philippine
Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).

Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and circumstances thus assuming the greatest benefits.
 It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter. Along with the
taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance.

The police power of the State is a power co-extensive with self-protection and is most aptly termed the "law of
overwhelming necessity. It is "the most essential, insistent, and illimitable of powers.

What was the reason behind the enactment of P.D. 1869?

P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an appropriate institution all games
of chance authorized by existing franchise or permitted by law". As was subsequently proved, regulating and centralizing gambling
operations in one corporate entity — the PAGCOR, was beneficial not just to the Government but to society in general. It is a
reliable source of much needed revenue for the cash strapped Government. It provided funds for social impact projects and
subjected gambling to "close scrutiny, regulation, supervision and control of the Government" With the creation of PAGCOR and the
direct intervention of the Government, the evil practices and corruptions that go with gambling will be minimized if not totally
eradicated. Public welfare, then, lies at the bottom of the enactment of PD 1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the
exemption clause in P.D. 1869 is violative of the principle of local autonomy.

Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, "the Charter or
statute must plainly show an intent to confer that power or the municipality cannot assume it. Its "power to tax" therefore
must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent
power to tax"

(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal corporations are
mere creatures of Congress" which has the power to "create and abolish municipal corporations" due to its "general
legislative powers" Congress, therefore, has the power of control over Local governments. And if Congress can grant the
City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power.

(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of
local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771
and was vested exclusively on the National Government

Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling.
Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits" is no
longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned
or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National
Government.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the
category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local
government.

This doctrine emanates from the "supremacy" of the National Government over local governments.

Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch,
in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed
that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the accomplishment of them.

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be
undesirable activities or enterprise using the power to tax as "a tool for regulation"

The power to tax which was called by Justice Marshall as the "power to destroy" cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power to wield it.
The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law.
Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its
"exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot
therefore be violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III Records of the 1987
Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First Ed.,
1988, p. 374). It does not make local governments sovereign within the state or an "imperium in imperio."

Local Government has been described as a political subdivision of a nation or state which is constituted by law and has
substantial control of local affairs. In a unitary system of government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign subdivision of one sovereign nation, it cannot be
an imperium in imperio. Local government in such a system can only mean a measure of decentralization of the function
of government.

As to what state powers should be "decentralized" and what may be delegated to local government units remains a matter of policy,
which concerns wisdom. It is therefore a political question.

What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State concern and hence, it is the sole
prerogative of the State to retain it or delegate it to local governments.
Lina v. Paño
Facts: On December 29, 1995, respondent Tony Calvento was appointed agent by the Philippine Charity Sweepstakes Office
(PCSO) to install Terminal OM 20 for the operation of lotto. He asked Mayor Calixto Cataquiz, Mayor of San Pedro, Laguna, for a
mayor's permit to open the lotto outlet. This was denied by Mayor Cataquiz in a letter dated February 19, 1996. The ground for said
denial was an ordinance passed by the Sangguniang Panlalawigan of Laguna.

As a result of this resolution of denial, respondent Calvento filed a complaint for declaratory relief with prayer for preliminary
injunction and temporary restraining order. In the said complaint, respondent Calvento asked the Regional Trial Court of San Pedro
Laguna, Branch 93, for the following reliefs: (1) a preliminary injunction or temporary restraining order, ordering the defendants to
refrain from implementing or enforcing Kapasiyahan Blg. 508, T. 1995; (2) an order requiring Hon. Municipal Mayor Calixto R
Cataquiz to issue a business permit for the operation of a lotto outlet; and (3) an order annulling or declaring as invalid Kapasiyahan
Blg. 508, T. 1995.

On February 10, 1997, the respondent judge, Francisco Dizon Paño, promulgated his decision enjoining the petitioners from
implementing or enforcing resolution or Kapasiyahan Blg. 508, T. 1995. The dispositive portion of said decision reads:

WHEREFORE, premises considered, defendants, their agents and representatives are hereby enjoined from
implementing or enforcing resolution or kapasiyahan blg. 508, T. 1995 of the Sangguniang Panlalawigan ng Laguna
prohibiting the operation of the lotto in the province of Laguna.

Petitioners contend that the assailed resolution is a valid policy declaration of the Provincial Government of Laguna of its vehement
objection to the operation of lotto and all forms of gambling. It is likewise a valid exercise of the provincial government's police power
under the General Welfare Clause of Republic Act 7160, otherwise known as the Local Government Code of 1991. 6 They also
maintain that respondent's lotto operation is illegal because no prior consultations and approval by the local government were
sought before it was implemented contrary to the express provisions of Sections 2 (c) and 27 of R.A. 7160

Respondent Calvento argues that the questioned resolution is, in effect, a curtailment of the power of the state since in this case
the national legislature itself had already declared lotto as legal and permitted its operations around the country. The Office of the
Solicitor General (OSG), for the State, contends that the Provincial Government of Laguna has no power to prohibit a form of
gambling which has been authorized by the national government.

He argues that this is based on the principle that ordinances should not contravene statutes as municipal governments are merely
agents of the national government. The local councils exercise only delegated legislative powers which have been conferred on
them by Congress. This being the case, these councils, as delegates, cannot be superior to the principal or exercise powers higher
than those of the latter.

Issues: (1) whether Kapasiyahan Blg. 508, T. 1995 of the Sangguniang Panlalawigan of Laguna and the denial of a mayor's permit
based thereon are valid; and (2) whether prior consultations and approval by the concerned Sanggunian are needed before a lotto
system can be operated in a given local government unit.

Ruling: As a policy statement expressing the local government's objection to the lotto, such resolution is valid. This is part of the
local government's autonomy to air its views which may be contrary to that of the national government's. However, this freedom to
exercise contrary views does not mean that local governments may actually enact ordinances that go against laws duly enacted by
Congress. Given this premise, the assailed resolution in this case could not and should not be interpreted as a measure or
ordinance prohibiting the operation of lotto.

The game of lotto is a game of chance duly authorized by the national government through an Act of Congress. Republic Act 1169,
as amended by Batas Pambansa Blg. 42, is the law which grants a franchise to the PCSO and allows it to operate the lotteries.

This statute remains valid today. While lotto is clearly a game of chance, the national government deems it wise and proper to
permit it. Hence, the Sangguniang Panlalawigan of Laguna, a local government unit, cannot issue a resolution or an ordinance that
would seek to prohibit permits. Stated otherwise, what the national legislature expressly allows by law, such as lotto, a provincial
board may not disallow by ordinance or resolution.

In our system of government, the power of local government units to legislate and enact ordinances and resolutions is merely a
delegated power coming from Congress. As held in Tatel vs. Virac,13 ordinances should not contravene an existing statute enacted
by Congress. The reasons for this is obvious, as elucidated in Magtajas v. Pryce Properties Corp.

Municipal governments are only agents of the national government. Local councils exercise only delegated legislative
powers conferred upon them by Congress as the national lawmaking body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a heresy to suggest that the local government units can undo the acts of
Congress, from which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute.
 Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It breathes into
them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it may destroy, it may abridge and
control. Unless there is some constitutional limitation on the right, the legislature might, by a single act, and if we can suppose it
capable of so great a folly and so great a wrong, sweep from existence all of the municipal corporations in the state, and the
corporation could not prevent it. We know of no limitation on the right so far as the corporation themselves are concerned. They are,
so to phrase it, the mere tenants at will of the legislature.

Nothing in the present constitutional provision enhancing local autonomy dictates a different conclusion.

The basic relationship between the national legislature and the local government units has not been enfeebled by the new
provisions in the Constitution strengthening the policy of local autonomy. Without meaning to detract from that policy, we
here confirm that Congress retains control of the local government units although in significantly reduced degree now than
under our previous Constitutions. The power to create still includes the power to destroy. The power to grant still includes
the power to withhold or recall. True, there are certain notable innovations in the Constitution, like the direct conferment
on the local government units of the power to tax (citing Art. X, Sec. 5, Constitution), which cannot now be withdrawn by
mere statute. By and large, however, the national legislature is still the principal of the local government units, which
cannot defy its will or modify or violate it.

Ours is still a unitary form of government, not a federal state. Being so, any form of autonomy granted to local
governments will necessarily be limited and confined within the extent allowed by the central authority. Besides, the principle of local
autonomy under the 1987 Constitution simply means "decentralization". It does not make local governments sovereign within the
state or an "imperium in imperio"

To conclude our resolution of the first issue, respondent mayor of San Pedro, cannot avail of Kapasiyahan Bilang 508,
Taon 1995, of the Provincial Board of Laguna as justification to prohibit lotto in his municipality. For said resolution is nothing but an
expression of the local legislative unit concerned. The Board's enactment, like spring water, could not rise above its source of
power, the national legislature.

As for the second issue, we hold that petitioners erred in declaring that Sections 2 (c) and 27 of Republic Act 7160, otherwise known
as the Local Government Code of 1991, apply mandatorily in the setting up of lotto outlets around the country. These provisions
state:

SECTION 2. Declaration of Policy. — . . .

(c) It is likewise the policy of the State to require all national agencies and offices to conduct periodic consultations with
appropriate local government units, non-governmental and people's organizations, and other concerned sectors of the
community before any project or program is implemented in their respective jurisdictions.

SECTION 27. Prior Consultations Required. — No project or program shall be implemented by government authorities
unless the consultations mentioned in Section 2 (c) and 26 hereof are complied with, and prior approval of the sanggunian
concerned is obtained; Provided, that occupants in areas where such projects are to be implemented shall not be evicted
unless, appropriate relocation sites have been provided, in accordance with the provisions of the Constitution.

From a careful reading of said provisions, we find that these apply only to national programs and/or projects which are to be
implemented in a particular local community. Lotto is neither a program nor a project of the national government, but of a charitable
institution, the PCSO. Though sanctioned by the national government, it is far fetched to say that lotto falls within the contemplation
of Sections 2 (c) and 27 of the Local Government Code.

Section 27 of the Code should be read in conjunction with Section 26 thereof. 17 Section 26 reads:

SECTION 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. - It shall be the duty of
every national agency or government-owned or controlled corporation authorizing or involved in the planning and
implementation of any project or program that may cause pollution, climatic change, depletion of non-renewable
resources, loss of crop land, range-land, or forest cover, and extinction of animal or plant species, to consult with the local
government units, nongovernmental organizations, and other sectors concerned and explain the goals and objectives of
the project or program, its impact upon the people and the community in terms of environmental or ecological balance,
and the measures that will be undertaken to prevent or minimize the adverse effects thereof.

Thus, the projects and programs mentioned in Section 27 should be interpreted to mean projects and programs whose effects are
among those enumerated in Section 26 and 27, to wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3)
may cause the depletion of non-renewable resources; (4) may result in loss of crop land, range-land, or forest cover; (5) may
eradicate certain animal or plant species from the face of the planet; and (6) other projects or programs that may call for the eviction
of a particular group of people residing in the locality where these will be implemented. Obviously, none of these effects will be
produced by the introduction of lotto in the province of Laguna.
 In sum, we find no reversible error in the RTC decision enjoining Mayor Cataquiz from enforcing or implementing
the Kapasiyahan Blg. 508, T. 1995, of the Sangguniang Panlalawigan of Laguna. That resolution expresses merely a policy
statement of the Laguna provincial board. It possesses no binding legal force nor requires any act of implementation. It provides no
sufficient legal basis for respondent mayor's refusal to issue the permit sought by private respondent in connection with a legitimate
business activity authorized by a law passed by Congress.