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ENBANC

[G.R.No.119775.October24,2003]

JOHNHAYPEOPLESALTERNATIVECOALITION,MATEOCARIOFOUNDATION
INC.,CENTERFORALTERNATIVESYSTEMSFOUNDATIONINC.,REGINA
VICTORIA A. BENAFIN REPRESENTED AND JOINED BY HER MOTHER
MRS.ELISABENAFIN,IZABELM.LUYKREPRESENTEDANDJOINEDBY
HER MOTHER MRS. REBECCA MOLINA LUYK, KATHERINE PE
REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE,
SOLEDAD S. CAMILO, ALICIA C. PACALSO ALIAS KEVAB, BETTY I.
STRASSER, RUBY C. GIRON, URSULA C. PEREZ ALIAS BAYAY,
EDILBERTO T. CLARAVALL, CARMEN CAROMINA, LILIA G. YARANON,
DIANE MONDOC, petitioners, vs. VICTOR LIM, PRESIDENT, BASES
CONVERSION DEVELOPMENT AUTHORITY JOHN HAY PORO POINT
DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) CO.
LTD., ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF
ENVIRONMENTANDNATURALRESOURCES,respondents.
DECISION
CARPIOMORALES,J.:

By the present petition for prohibition, mandamus and declaratory relief with prayer for a
temporary restraining order (TRO) and/or writ of preliminary injunction, petitioners assail, in the
main,theconstitutionalityofPresidentialProclamationNo.420,Seriesof1994,CREATINGAND
DESIGNATING A PORTION OF THE AREA COVERED BY THE FORMER CAMP JOHN [HAY]
ASTHEJOHNHAYSPECIALECONOMICZONEPURSUANTTOREPUBLICACTNO.7227.
Republic Act No. 7227, AN ACT ACCELERATING THE CONVERSION OF MILITARY
RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING THE BASES CONVERSION
AND DEVELOPMENT AUTHORITY FOR THIS PURPOSE, PROVIDING FUNDS THEREFOR
ANDFOROTHERPURPOSES,otherwiseknownastheBasesConversionandDevelopmentAct
of1992,whichwasenactedonMarch13,1992,setoutthepolicyofthegovernmenttoaccelerate
the sound and balanced conversion into alternative productive uses of the former military bases
underthe1947PhilippinesUnitedStatesofAmericaMilitaryBasesAgreement,namely,theClark
andSubicmilitaryreservationsaswellastheirextensionsincludingtheJohnHayStation(Camp
[1]
JohnHayorthecamp)intheCityofBaguio.
As noted in its title, R.A. No. 7227 created public respondent Bases Conversion and
[2]
DevelopmentAuthority (BCDA), vesting it with powers pertaining to the multifarious aspects of
carrying out the ultimate objective of utilizing the base areas in accordance with the declared
governmentpolicy.
R.A.No.7227likewisecreatedtheSubicSpecialEconomic[andFreePort]Zone(SubicSEZ)
the metes and bounds of which were to be delineated in a proclamation to be issued by the
[3]
PresidentofthePhilippines.
R.A.No.7227grantedtheSubicSEZincentivesrangingfromtaxanddutyfreeimportations,
exemptionofbusinessesthereinfromlocalandnationaltaxes,tootherhallmarksofaliberalized
[4]
financialandbusinessclimate.
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And R.A. No. 7227 expressly gave authority to the President to create through executive
proclamation, subject to the concurrence of the local government units directly affected, other
SpecialEconomicZones(SEZ)intheareascoveredrespectivelybytheClarkmilitaryreservation,
[5]
theWallaceAirStationinSanFernando,LaUnion,andCampJohnHay.
On August 16, 1993, BCDA entered into a Memorandum of Agreement and Escrow
Agreement with private respondents Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld
Internationale Group, Inc. (ASIAWORLD), private corporations registered under the laws of the
British Virgin Islands, preparatory to the formation of a joint venture for the development of Poro
PointinLaUnionandCampJohnHayaspremiertouristdestinationsandrecreationcenters.Four
months later or on December 16, 1993, BCDA, TUNTEX and ASIAWORD executed a Joint
[6]
VentureAgreement wherebytheyboundthemselvestoputupajointventurecompanyknownas
the Baguio International Development and Management Corporation which would lease areas
withinCampJohnHayandPoroPointforthepurposeofturningsuchplacesintoprincipaltourist
and recreation spots, as originally envisioned by the parties under their Memorandum of
Agreement.
The Baguio City government meanwhile passed a number of resolutions in response to the
actionstakenbyBCDAasownerandadministratorofCampJohnHay.
[7]

By Resolution of September 29, 1993, the Sangguniang Panlungsod of Baguio City (the
sanggunian) officially asked BCDA to exclude all the barangays partly or totally located within
CampJohnHayfromthereachorcoverageofanyplanorprogramforitsdevelopment.
[8]

ByasubsequentResolution datedJanuary19,1994,thesangguniansoughtfromBCDAan
abdication,waiverorquitclaimofitsownershipoverthehomelotsbeingoccupiedbyresidentsof
nine(9)barangayssurroundingthemilitaryreservation.
Still by another resolution passed on February 21, 1994, the sanggunian adopted and
[9]
submittedtoBCDAa15pointconceptforthedevelopmentofCampJohnHay. Thesanggunians
vision expressed, among other things, a kind of development that affords protection to the
environment, the making of a familyoriented type of tourist destination, priority in employment
opportunitiesforBaguioresidentsandfreeaccesstothebasearea,guaranteedparticipationofthe
citygovernmentinthemanagementandoperationofthecamp,exclusionofthepreviouslynamed
nine barangays from the area for development, and liability for local taxes of businesses to be
[10]
establishedwithinthecamp.
BCDA, TUNTEX and ASIAWORLD agreed to some, but rejected or modified the other
[11]
proposals of the sanggunian. They stressed the need to declare Camp John Hay a SEZ as a
[12]
conditionprecedenttoitsfulldevelopmentinaccordancewiththemandateofR.A.No.7227.
On May 11, 1994, the sanggunian passed a resolution requesting the Mayor to order the
determinationofrealtytaxeswhichmayotherwisebecollectedfromrealpropertiesofCampJohn
[13]
Hay. Theresolutionwasintendedtointelligentlyguidethesanggunianindeterminingitsposition
on whether Camp John Hay be declared a SEZ, it (the sanggunian)being of the view that such
declaration would exempt the camps property and the economic activity therein from local or
nationaltaxation.
More than a month later, however, the sanggunian passed Resolution No. 255, (Series of
[14]
1994), seeking and supporting, subject to its concurrence, the issuance by then President
Ramosofapresidentialproclamationdeclaringanareaof288.1hectaresofthecampasaSEZin
accordance with the provisions of R.A. No. 7227. Together with this resolution was submitted a
[15]
draftoftheproposedproclamationforconsiderationbythePresident.
[16]

OnJuly5,1994thenPresidentRamosissuedProclamationNo.420, thetitleofwhichwas
earlier indicated, which established a SEZ on a portion of Camp John Hay and which reads as
follows:
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xxx
PursuanttothepowersvestedinmebythelawandtheresolutionofconcurrencebytheCityCouncilof
Baguio,I,FIDELV.RAMOS,PresidentofthePhilippines,doherebycreateanddesignateaportionofthe
areacoveredbytheformerJohnHayreservationasembraced,covered,anddefinedbythe1947Military
BasesAgreementbetweenthePhilippinesandtheUnitedStatesofAmerica,asamended,astheJohnHay
SpecialEconomicZone,andaccordinglyorder:
SECTION1.CoverageofJohnHaySpecialEconomicZone.TheJohnHaySpecialEconomicZoneshall
covertheareaconsistingofTwoHundredEightyEightandone/tenth(288.1)hectares,moreorless,ofthe
totalofSixHundredSeventySeven(677)hectaresoftheJohnHayReservation,moreorless,whichhave
beensurveyedandverifiedbytheDepartmentofEnvironmentandNaturalResources(DENR)asdefinedby
thefollowingtechnicaldescription:
Aparcelofland,situatedintheCityofBaguio,ProvinceofBenguet,IslandofLuzon,andparticularly
describedinsurveyplansPsd131102002639andCcs131102000030asapprovedon16August1993and
26August1993,respectively,bytheDepartmentofEnvironmentandNaturalResources,indetailcontaining
:
Lot1,Lot2,Lot3,Lot4,Lot5,Lot6,Lot7,Lot13,Lot14,Lot15,andLot20ofCcs131102000030
and
Lot3,Lot4,Lot5,Lot6,Lot7,Lot8,Lot9,Lot10,Lot11,Lot14,Lot15,Lot16,Lot17,andLot18of
Psd131102002639beingportionsofTCTNo.T3812,LRCRec.No.87.
WithacombinedareaofTWOHUNDREDEIGHTYEIGHTANDONE/TENTHHECTARES(288.1
hectares)ProvidedthattheareaconsistingofapproximatelySixandtwo/tenth(6.2)hectares,moreorless,
presentlyoccupiedbytheVOAandtheresidenceoftheAmbassadoroftheUnitedStates,shallbe
consideredaspartoftheSEZonlyuponturnoverofthepropertiestothegovernmentoftheRepublicofthe
Philippines.
Sec.2.GoverningBodyoftheJohnHaySpecialEconomicZone.PursuanttoSection15ofRepublicActNo.
7227,theBasesConversionandDevelopmentAuthorityisherebyestablishedasthegoverningbodyofthe
JohnHaySpecialEconomicZoneand,assuch,authorizedtodeterminetheutilizationanddispositionofthe
landscomprisingit,subjecttoprivaterights,ifany,andinconsultationandcoordinationwiththeCity
GovernmentofBaguioafterconsultationwithitsinhabitants,andtopromulgatethenecessarypolicies,rules,
andregulationstogovernandregulatethezonethrutheJohnHayPoroPointDevelopmentCorporation,
whichisitsimplementingarmforitseconomicdevelopmentandoptimumutilization.
Sec.3.InvestmentClimateinJohnHaySpecialEconomicZone.PursuanttoSection5(m)andSection15of
RepublicActNo.7227,theJohnHayPoroPointDevelopmentCorporationshallimplementallnecessary
policies,rules,andregulationsgoverningthezone,includinginvestmentincentives,inconsultationwith
pertinentgovernmentdepartments.Amongothers,thezoneshallhavealltheapplicableincentivesofthe
SpecialEconomicZoneunderSection12ofRepublicActNo.7227andthoseapplicableincentivesgranted
intheExportProcessingZones,theOmnibusInvestmentCodeof1987,theForeignInvestmentActof1991,
andnewinvestmentlawsthatmayhereinafterbeenacted.
Sec.4.RoleofDepartments,Bureaus,Offices,AgenciesandInstrumentalities.AllHeadsofdepartments,
bureaus,offices,agencies,andinstrumentalitiesofthegovernmentareherebydirectedtogivefullsupportto
BasesConversionandDevelopmentAuthorityand/oritsimplementingsubsidiaryorjointventureto
facilitatethenecessaryapprovalstoexpeditetheimplementationofvariousprojectsoftheconversion
program.
Sec.5.LocalAuthority.Exceptashereinprovided,theaffectedlocalgovernmentunitsshallretaintheirbasic
autonomyandidentity.
Sec.6.RepealingClause.Allorders,rules,andregulations,orpartsthereof,whichareinconsistentwiththe
provisionsofthisProclamation,areherebyrepealed,amended,ormodifiedaccordingly.
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Sec.7.Effectivity.Thisproclamationshalltakeeffectimmediately.
DoneintheCityofManila,this5thdayofJuly,intheyearofOurLord,nineteenhundredandninetyfour.
[17]

The issuance of Proclamation No. 420 spawned the present petition for prohibition,
mandamus and declaratory relief which was filed on April 25, 1995 challenging, in the main, its
constitutionality or validity as well as the legality of the Memorandum of Agreement and Joint
Venture Agreement between public respondent BCDA and private respondents TUNTEX and
ASIAWORLD.
Petitionersallegeasgroundsfortheallowanceofthepetitionthefollowing:
I.PRESIDENTIALPROCLAMATIONNO.420,SERIESOF1990(sic)INSOFARASITGRANTS
TAX EXEMPTIONS IS INVALID AND ILLEGAL AS IT IS AN UNCONSTITUTIONAL
EXERCISEBYTHEPRESIDENTOFAPOWERGRANTEDONLYTOTHELEGISLATURE.
II. PRESIDENTIAL PROCLAMATION NO. 420, IN SO FAR AS IT LIMITS THE POWERS AND
INTERFERESWITHTHEAUTONOMYOFTHECITYOFBAGUIOISINVALID,ILLEGALAND
UNCONSTITUTIONAL.
III. PRESIDENTIAL PROCLAMATION NO. 420, SERIES OF 1994 IS UNCONSTITUTIONAL IN
THATITVIOLATESTHERULETHATALLTAXESSHOULDBEUNIFORMANDEQUITABLE.
IV.THEMEMORANDUMOFAGREEMENTENTEREDINTOBYANDBETWEENPRIVATEAND
PUBLIC RESPONDENTS BASES CONVERSION DEVELOPMENT AUTHORITY HAVING
BEENENTEREDINTOONLYBYDIRECTNEGOTIATIONISILLEGAL.
V. THE TERMS AND CONDITIONS OF THE MEMORANDUM OF AGREEMENT ENTERED
INTO BY AND BETWEEN PRIVATE AND PUBLIC RESPONDENT BASES CONVERSION
DEVELOPMENTAUTHORITYIS(sic)ILLEGAL.
VI. THE CONCEPTUAL DEVELOPMENT PLAN OF RESPONDENTS NOT HAVING
UNDERGONE ENVIRONMENTAL IMPACT ASSESSMENT IS BEING ILLEGALLY
CONSIDEREDWITHOUTAVALIDENVIRONMENTALIMPACTASSESSMENT.

A temporary restraining order and/or writ of preliminary injunction was prayed for to enjoin
BCDA,JohnHayPoroPointDevelopmentCorporationandthecitygovernmentfromimplementing
ProclamationNo.420,andTUNTEXandASIAWORLDfromproceedingwiththeirplanrespecting
[18]
CampJohnHaysdevelopmentpursuanttotheirJointVentureAgreementwithBCDA.
Public respondents, by their separate Comments, allege as moot and academic the issues
raised by the petition, the questioned Memorandum ofAgreement and Joint Venture Agreement
havingalreadybeendeemedabandonedbytheinactionofthepartiestheretopriortothefilingof
the petition as in fact, by letter of November 21, 1995, BCDA formally notified TUNTEX and
[19]
ASIAWORLDoftherevocationoftheirsaidagreements.
InmaintainingthevalidityofProclamationNo.420,respondentscontendthatbyextendingto
the John Hay SEZ economic incentives similar to those enjoyed by the Subic SEZ which was
establishedunderR.A.No.7227,theproclamationismerelyimplementingthelegislativeintentof
saidlawtoturntheUSmilitarybasesintohubsofbusinessactivityorinvestment.Theyunderscore
thepointthatthegovernmentspolicyofbasesconversioncannotbeachievedwithoutextending
thesametaxexemptionsgrantedbyR.A.No.7227toSubicSEZtootherSEZs.
DenyingthatProclamationNo.420isinderogationofthelocalautonomyofBaguioCityorthat
itisviolativeoftheconstitutionalguaranteeofequalprotection,respondentsassailpetitionerslack
ofstandingtobringthepresentsuitevenastaxpayersandintheabsenceofanyactualcaseor
controversytowarrantthisCourtsexerciseofitspowerofjudicialreviewovertheproclamation.
Finally,respondentsseektheoutrightdismissalofthepetitionforhavingbeenfiledindisregard
ofthehierarchyofcourtsandofthedoctrineofexhaustionofadministrativeremedies.
[20]

Replying, petitionersaverthatthedoctrineofexhaustionofadministrativeremediesfindsno
applicationhereinsincetheyareinvokingtheexclusiveauthorityofthisCourtunderSection21of
R.A. No. 7227 to enjoin or restrain implementation of projects for conversion of the base areas
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that the established exceptions to the aforesaid doctrine obtain in the present petition and that
theypossessthestandingtobringthepetitionwhichisataxpayerssuit.
[21]

Public respondents have filed their Rejoinder


memoranda.

and the parties have filed their respective

Before dwelling on the core issues, this Court shall first address the preliminary procedural
questionsconfrontingthepetition.
The judicial policy is and has always been that this Court will not entertain direct resort to it
exceptwhentheredresssoughtcannotbeobtainedinthepropercourts,orwhenexceptionaland
compellingcircumstanceswarrantavailmentofaremedywithinandcallingfortheexerciseofthis
[22]

Courtsprimaryjurisdiction. Neitherwillitentertainanactionfordeclaratoryrelief,whichispartly
thenatureofthispetition,overwhichithasnooriginaljurisdiction.
[23]

Nonetheless, as it is only this Court which has the power under Section 21 of R.A. No.
7227 to enjoin implementation of projects for the development of the former US military
reservations, the issuance of which injunction petitioners pray for, petitioners direct filing of the
presentpetitionwithitisallowed.Overandabovethisproceduralobjectiontothepresentsuit,this
Courtretainsfulldiscretionarypowertotakecognizanceofapetitionfileddirectlytoitifcompelling
[24]
reasons, or the nature and importance of the issues raised, warrant. Besides, remanding the
casetothelowercourtsnowwouldjustundulyprolongadjudicationoftheissues.
The transformation of a portion of the area covered by Camp John Hay into a SEZ is not
simplyareclassificationofanarea,amereascriptionofastatustoaplace.Itinvolvesturningthe
formerUSmilitaryreservationintoafocalpointforinvestmentsbybothlocalandforeignentities.It
istobemadeasiteofvigorousbusinessactivity,ultimatelyservingasaspurtothecountryslong
awaited economic growth. For, as R.A. No. 7227 unequivocally declares, it is the governments
policytoenhancethebenefitstobederivedfromthebaseareasinordertopromotetheeconomic
[25]
andsocialdevelopmentofCentralLuzoninparticularandthecountryingeneral. LiketheSubic
SEZ, the John Hay SEZ should also be turned into a selfsustaining, industrial, commercial,
[26]
financialandinvestmentcenter.
Morethantheeconomicinterestsatstake,thedevelopmentofCampJohnHayaswellasof
the other base areas unquestionably has critical links to a host of environmental and social
concerns. Whatever use to which these lands will be devoted will set a chain of events that can
affectonewayoranotherthesocialandeconomicwayoflifeofthecommunitieswherethebases
arelocated,andultimatelythenationingeneral.
UnderscoringthefragilityofBaguioCitysecologywithitsproblemonthescarcityofitswater
supply,petitionerspointoutthatthelocalandnationalgovernmentarefacedwiththechallengeof
howtoprovideforanecologicallysustainable,environmentallysound,equitabletransitionforthe
[27]
cityinthewakeofCampJohnHaysreversiontothemassofgovernmentproperty. Butthatis
whyR.A.No.7227emphasizesthesoundandbalancedconversionoftheClarkandSubicmilitary
[28]
reservations and their extensions consistent with ecological and environmental standards. It
cannot thus be gainsaid that the matter of conversion of the US bases into SEZs, in this case
CampJohnHay,assumesimportanceofanationalmagnitude.
Convinced then that the present petition embodies crucial issues, this Court assumes
jurisdictionoverthepetition.
As far as the questioned agreements between BCDA and TUNTEX and ASIAWORLD are
concerned, the legal questions being raised thereon by petitioners have indeed been rendered
mootandacademicbytherevocationofsuchagreements.Thereare,however,otherissuesposed
bythepetition,thosewhichcenterontheconstitutionalityofProclamationNo.420,whichhavenot
beenmootedbythesaidsuperveningeventuponapplicationoftherulesforthejudicialscrutinyof
constitutionalcases.Theissuesboildownto:
(1)WhetherthepresentpetitioncomplieswiththerequirementsforthisCourtsexerciseofjurisdiction
overconstitutionalissues
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(2)WhetherProclamationNo.420isconstitutionalbyprovidingfornationalandlocaltaxexemption
withinandgrantingothereconomicincentivestotheJohnHaySpecialEconomicZoneand
(3)WhetherProclamationNo.420isconstitutionalforlimitingorinterferingwiththelocalautonomy
ofBaguioCity

Itissettledthatwhenquestionsofconstitutionalsignificanceareraised,thecourtcanexercise
itspowerofjudicialreviewonlyifthefollowingrequisitesarepresent:(1)theexistenceofanactual
andappropriatecase(2)apersonalandsubstantialinterestofthepartyraisingtheconstitutional
question (3) the exercise of judicial review is pleaded at the earliest opportunity and (4) the
[29]
constitutionalquestionisthelismotaofthecase.
Anactualcaseorcontroversyreferstoanexistingcaseorcontroversythatisappropriateor
[30]
ripefordetermination,notconjecturaloranticipatory. Thecontroversyneedstobedefiniteand
concrete,bearinguponthelegalrelationsofpartieswhoarepittedagainsteachotherduetotheir
[31]

adverselegalinterests. Thereisinthepresentcasearealclashofinterestsandrightsbetween
petitionersandrespondentsarisingfromtheissuanceofapresidentialproclamationthatconverts
a portion of the area covered by Camp John Hay into a SEZ, the former insisting that such
proclamationcontainsunconstitutionalprovisions,thelatterclaimingotherwise.
R.A. No. 7227 expressly requires the concurrence of the affected local government units to
[32]
the creation of SEZs out of all the base areas in the country. The grant by the law on local
government units of the right of concurrence on the bases conversion is equivalent to vesting a
legalstandingonthem,foritisineffectarecognitionoftherealintereststhatcommunitiesnearby
orsurroundingaparticularbaseareahaveinitsutilization.Thus,theinterestofpetitioners,being
inhabitantsofBaguio,inassailingthelegalityofProclamationNo.420,ispersonalandsubstantial
suchthattheyhavesustainedorwillsustaindirectinjuryasaresultofthegovernmentactbeing
[33]
challenged. Theirs is a material interest, an interest in issue affected by the proclamation and
[34]

notmerelyaninterestinthequestioninvolvedoranincidentalinterest, forwhatisatstakeinthe
enforcementofProclamationNo.420istheveryeconomicandsocialexistenceofthepeopleof
BaguioCity.
PetitionerslocusstandiparallelsthatofthepetitionerandotherresidentsofBataan,specially
[35]

of the town of Limay, in Garcia v. Board of Investments where this Court characterized their
interestintheestablishmentofapetrochemicalplantintheirplaceasactual,real,vitalandlegal,
foritwouldaffectnotonlytheireconomiclifebuteventheairtheybreathe.
Moreover,petitionersEdilbertoT.ClaravallandLiliaG.Yaranonweredulyelectedcouncilors
ofBaguioatthetime,engagedinthelocalgovernanceofBaguioCityandwhosedutiesincluded
deciding for and on behalf of their constituents the question of whether to concur with the
declaration of a portion of the area covered by Camp John Hay as a SEZ. Certainly then,
[36]

petitionersClaravallandYaranon,ascityofficialswhovotedagainst thesanggunianResolution
No. 255 (Series of 1994) supporting the issuance of the now challenged Proclamation No. 420,
havelegalstandingtobringthepresentpetition.
Thatthereishereinadisputeonlegalrightsandinterestsisthusbeyonddoubt.Themootness
oftheissuesconcerningthequestionedagreementsbetweenpublicandprivaterespondentsisof
nomoment.
Bythemereenactmentofthequestionedlawortheapprovalofthechallengedact,thedisputeisdeemedto
haveripenedintoajudicialcontroversyevenwithoutanyotherovertact.Indeed,evenasingularviolationof
[37]

theConstitutionand/orthelawisenoughtoawakenjudicialduty.

Astothethirdandfourthrequisitesofajudicialinquiry,thereislikewisenoquestionthatthey
have been complied with in the case at bar. This is an action filed purposely to bring forth
constitutionalissues,rulingonwhichthisCourtmusttakeup.Besides,respondentsneverraised
issueswithrespecttotheserequisites,hence,theyaredeemedwaived.
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Having cleared the way for judicial review, the constitutionality of Proclamation No. 420, as
framedinthesecondandthirdissuesabove,mustnowbeaddressedsquarely.
ThesecondissuereferstopetitionersobjectionagainstthecreationbyProclamationNo.420
ofaregimeoftaxexemptionwithintheJohnHaySEZ.PetitionersarguethatnowhereinR.A.No.
7227isthereagrant of tax exemption to SEZsyet to be established in base areas, unlike the
grant under Section 12 thereof of tax exemption and investment incentives to the therein
established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude,
thuscontravenesArticleVI,Section28(4)oftheConstitutionwhichprovidesthatNolawgranting
any tax exemption shall be passed without the concurrence of a majority of all the members of
Congress.
Section3ofProclamationNo.420,thechallengedprovision,reads:
Sec.3.InvestmentClimateinJohnHaySpecialEconomicZone.PursuanttoSection5(m)andSection15of
RepublicActNo.7227,theJohnHayPoroPointDevelopmentCorporationshallimplementallnecessary
policies,rules,andregulationsgoverningthezone,includinginvestmentincentives,inconsultationwith
pertinentgovernmentdepartments.Amongothers,thezoneshallhavealltheapplicableincentivesofthe
SpecialEconomicZoneunderSection12ofRepublicActNo.7227andthoseapplicableincentives
grantedintheExportProcessingZones,theOmnibusInvestmentCodeof1987,theForeign
InvestmentActof1991,andnewinvestmentlawsthatmayhereinafterbeenacted.(Emphasisand
underscoringsupplied)
Upontheotherhand,Section12ofR.A.No.7227provides:
xxx
(a)WithintheframeworkandsubjecttothemandateandlimitationsoftheConstitutionandthepertinent
provisionsoftheLocalGovernmentCode,theSubicSpecialEconomicZoneshallbedevelopedintoaself
sustaining,industrial,commercial,financialandinvestmentcentertogenerateemploymentopportunitiesin
andaroundthezoneandtoattractandpromoteproductiveforeigninvestments
b)TheSubicSpecialEconomicZoneshallbeoperatedandmanagedasaseparatecustomsterritory
ensuringfreeflowormovementofgoodsandcapitalwithin,intoandexportedoutoftheSubicSpecial
EconomicZone,aswellasprovideincentivessuchastaxanddutyfreeimportationsofrawmaterials,capital
andequipment.However,exportationorremovalofgoodsfromtheterritoryoftheSubicSpecialEconomic
ZonetotheotherpartsofthePhilippineterritoryshallbesubjecttocustomsdutiesandtaxesunderthe
CustomsandTariffCodeandotherrelevanttaxlawsofthePhilippines
(c)Theprovisionsofexistinglaws,rulesandregulationstothecontrarynotwithstanding,notaxes,localand
national,shallbeimposedwithintheSubicSpecialEconomicZone.Inlieuofpayingtaxes,threepercent
(3%)ofthegrossincomeearnedbyallbusinessesandenterpriseswithintheSubicSpecialEconomicZone
shallberemittedtotheNationalGovernment,onepercent(1%)eachtothelocalgovernmentunitsaffected
bythedeclarationofthezoneinproportiontotheirpopulationarea,andotherfactors.Inaddition,thereis
herebyestablishedadevelopmentfundofonepercent(1%)ofthegrossincomeearnedbyallbusinessesand
enterpriseswithintheSubicSpecialEconomicZonetobeutilizedfortheMunicipalityofSubic,andother
municipalitiescontiguoustobebaseareas.Incaseofconflictbetweennationalandlocallawswithrespectto
taxexemptionprivilegesintheSubicSpecialEconomicZone,thesameshallberesolvedinfavorofthe
latter
(d)Noexchangecontrolpolicyshallbeappliedandfreemarketsforforeignexchange,gold,securitiesand
futuresshallbeallowedandmaintainedintheSubicSpecialEconomicZone
(e)TheCentralBank,throughtheMonetaryBoard,shallsuperviseandregulatetheoperationsofbanksand
otherfinancialinstitutionswithintheSubicSpecialEconomicZone
(f)BankingandFinanceshallbeliberalizedwiththeestablishmentofforeigncurrencydepositoryunitsof
localcommercialbanksandoffshorebankingunitsofforeignbankswithminimumCentralBankregulation

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(g)AnyinvestorwithintheSubicSpecialEconomicZonewhosecontinuinginvestmentshallnotbeless
thanTwoHundredfiftythousanddollars($250,000),his/herspouseanddependentchildrenundertwenty
one(21)yearsofage,shallbegrantedpermanentresidentstatuswithintheSubicSpecialEconomicZone.
TheyshallhavefreedomofingressandegresstoandfromtheSubicSpecialEconomicZonewithoutany
needofspecialauthorizationfromtheBureauofImmigrationandDeportation.TheSubicBayMetropolitan
AuthorityreferredtoinSection13ofthisActmayalsoissueworkingvisasrenewableeverytwo(2)yearsto
foreignexecutivesandotheralienspossessinghighlytechnicalskillswhichnoFilipinowithintheSubic
SpecialEconomicZonepossesses,ascertifiedbytheDepartmentofLaborandEmployment.Thenamesof
aliensgrantedpermanentresidencestatusandworkingvisasbytheSubicBayMetropolitanAuthorityshall
bereportedtotheBureauofImmigrationandDeportationwithinthirty(30)daysafterissuancethereof
xxx(Emphasissupplied)
ItisclearthatunderSection12ofR.A.No.7227itisonlytheSubicSEZwhichwasgrantedby
Congresswithtaxexemption,investmentincentivesandthelike.Thereisnoexpressextensionof
theaforesaidbenefitstootherSEZsstilltobecreatedatthetimeviapresidentialproclamation.
ThedeliberationsoftheSenateconfirmtheexclusivitytoSubicSEZofthetaxandinvestment
privileges accorded it under the law, as the following exchanges between our lawmakers show
during the second reading of the precursor bill of R.A. No. 7227 with respect to the investment
policiesthatwouldgovernSubicSEZwhicharenowembodiedintheaforesaidSection12thereof:
xxx
SenatorMaceda:ThisiswhatIwastalkingabout.Wegetintoproblemsherebecauseallofthesefollowing
policiesarecenteredaroundtheconceptoffreeport.Andinthemainparagraphabove,wehavedeclared
bothClarkandSubicasspecialeconomiczones,subjecttothesepolicieswhichare,ineffect,afreeport
arrangement.
SenatorAngara:TheGentlemanisabsolutelycorrect,Mr.President.Sowemustconfinethesepolicies
onlytoSubic.
MayIwithdrawthenmyamendment,andinsteadprovidethatTHESPECIALECONOMICZONEOF
SUBICSHALLBEESTABLISHEDINACCORDANCEWITHTHEFOLLOWINGPOLICIES.Subjectto
style,Mr.President.
Thus,itisveryclearthattheseprinciplesandpoliciesareapplicableonlytoSubicasafreeport.
SenatorPaterno:Mr.President.
ThePresident:SenatorPaternoisrecognized.
SenatorPaterno:ItakeitthattheamendmentsuggestedbySenatorAngarawouldthenpreventthe
establishmentofotherspecialeconomiczonesobservingthesepolicies.
SenatorAngara:No,Mr.President,becauseduringourshortcaucus,SenatorLaurelraisedthepointthatif
wegivethisdelegationtothePresidenttoestablishothereconomiczones,thatmaybeanunwarranted
delegation.
SoweagreedthatwewillsimplylimitthedefinitionofpowersanddescriptionofthezonetoSubic,butthat
doesnotexcludethepossibilityofcreatingothereconomiczoneswithinthebaselands.
SenatorPaterno:Butifthatamendmentisfollowed,nootherspecialeconomiczonemaybecreatedunder
authorityofthisparticularbill.Isthatcorrect,Mr.President?
SenatorAngara:Underthisspecificprovision,yes,Mr.President.Thisprovisionnowwillbeconfinedonly
toSubic.

[38]

xxx(Underscoringsupplied).
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AsgatheredfromtheearlierquotedSection12ofR.A.No.7227,theprivilegesgiventoSubic
SEZ consist principally of exemption from tariff or customs duties, national and local taxes of
business entities therein (paragraphs (b) and (c)), free market and trade of specified goods or
properties (paragraph d), liberalized banking and finance (paragraph f), and relaxed immigration
rulesforforeigninvestors(paragraphg).Yet,apartfromthese,ProclamationNo.420alsomakes
available to the John Hay SEZ benefits existing in other laws such as the privilege of export
processing zonebased businesses of importing capital equipment and raw materials free from
[39]

taxes,dutiesandotherrestrictions tax and dutyexemptions, tax holiday, tax credit, and other
[40]
incentives under the Omnibus Investments Code of 1987 and the applicability to the subject
[41]

zoneofrulesgoverningforeigninvestmentsinthePhilippines.

WhilethegrantofeconomicincentivesmaybeessentialtothecreationandsuccessofSEZs,
free trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The
incentivesunderR.A.No.7227areexclusiveonlytotheSubicSEZ,hence,theextensionofthe
sametotheJohnHaySEZfindsnosupporttherein.Neitherdoesthesamegrantofprivilegesto
the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No.
420,whichlawswerealreadyextantbeforetheissuanceoftheproclamationortheenactmentof
R.A.No.7227.
Moreimportantly,thenatureofmostoftheassailedprivilegesisoneoftaxexemption.Itisthe
legislature,unlesslimitedbyaprovisionofthestateconstitution,thathasfullpowertoexemptany
personorcorporationorclassofpropertyfromtaxation,itspowertoexemptbeingasbroadasits
[42]

power to tax.
exemptions,

[43]

Other than Congress, the Constitution may itself provide for specific tax

orlocalgovernmentsmaypassordinancesonexemptiononlyfromlocaltaxes.

[44]

The challenged grant of tax exemption would circumvent the Constitutions imposition that a
law granting any tax exemption must have the concurrence of a majority of all the members of
[45]

Congress. Inthesamevein,theotherkindsofprivilegesextendedtotheJohnHaySEZareby
traditionandusageforCongresstolegislateupon.
Contrarytopublicrespondentssuggestions,theclaimedstatutoryexemptionoftheJohnHay
SEZfromtaxationshouldbemanifestandunmistakablefromthelanguageofthelawonwhichitis
[46]

baseditmustbeexpresslygrantedinastatutestatedinalanguagetoocleartobemistaken.
Taxexemptioncannotbeimpliedasitmustbecategoricallyandunmistakablyexpressed.

[47]

IfitweretheintentofthelegislaturetogranttotheJohnHaySEZthesametaxexemptionand
incentivesgiventotheSubicSEZ,itwouldhavesoexpresslyprovidedintheR.A.No.7227.
ThisCourtnodoubtcanvoidanactorpolicyofthepoliticaldepartmentsofthegovernmenton
[48]
eitheroftwogroundsinfringementoftheConstitutionorgraveabuseofdiscretion.
This Court then declares that the grant by Proclamation No. 420 of tax exemption and other
privileges to the John Hay SEZ is void for being violative of the Constitution. This renders it
unnecessary to still dwell on petitioners claim that the same grant violates the equal protection
guarantee.
With respect to the final issue raised by petitioners that Proclamation No. 420 is
unconstitutional for being in derogation of Baguio Citys local autonomy, objection is specifically
mountedagainstSection2thereofinwhichBCDAissetupasthegoverningbodyoftheJohnHay
SEZ.

[49]

PetitionersarguethatthereisnoauthorityofthePresidenttosubjecttheJohnHaySEZtothe
governanceofBCDAwhichhasjustoversightfunctionsoverSEZandthattodosoistodiminish
the city governments power over an area within its jurisdiction, hence, Proclamation No. 420
unlawfully gives the President power of control over the local government instead of just mere
supervision.
Petitioners arguments are bereft of merit. Under R.A. No. 7227, the BCDA is entrusted with,
[50]

amongotherthings,thefollowingpurpose:
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xxx
(a)Toown,holdand/oradministerthemilitaryreservationsofJohnHayAirStation,WallaceAirStation,
ODonnellTransmitterStation,SanMiguelNavalCommunicationsStation,Mt.Sta.RitaStation(Hermosa,
Bataan)andthoseportionsofMetroManilaCampswhichmaybetransferredtoitbythePresident
xxx(Underscoringsupplied)
With such broad rights of ownership and administration vested in BCDA over Camp John Hay,
BCDAvirtuallyhascontroloverit,subjecttocertainlimitationsprovidedforbylaw.Bydesignating
BCDAasthegoverningagencyoftheJohnHaySEZ,thelawmerelyemphasizesorreiteratesthe
statutoryroleorfunctionsithasbeengranted.
Theunconstitutionalityofthegrantoftaximmunityandfinancialincentivesascontainedinthe
second sentence of Section 3 of Proclamation No. 420 notwithstanding, the entire assailed
proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant to
lawortheConstitution.ThedelineationanddeclarationofaportionoftheareacoveredbyCamp
John Hay as a SEZ was well within the powers of the President to do so by means of a
[51]

proclamation. The requisite prior concurrence by the Baguio City government to such
proclamation appears to have been given in the form of a duly enacted resolution by the
sanggunian.TheotherprovisionsoftheproclamationhadbeenproventobeconsistentwithR.A.
No.7227.
WherepartofastatuteisvoidascontrarytotheConstitution,whileanotherpartisvalid,the
[52]

validportion,ifseparablefromtheinvalid,maystandandbeenforced. ThisCourtfindsthatthe
otherprovisionsinProclamationNo.420convertingadelineatedportionofCampJohnHayinto
theJohnHaySEZareseparablefromtheinvalidsecondsentenceofSection3thereof,hencethey
stand.
WHEREFORE,thesecondsentenceofSection3ofProclamationNo.420isherebydeclared
NULLANDVOIDandisaccordinglydeclaredofnolegalforceandeffect.Publicrespondentsare
herebyenjoinedfromimplementingtheaforesaidvoidprovision.
ProclamationNo.420,withouttheinvalidatedportion,remainsvalidandeffective.
SOORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Panganiban, SandovalGutierrez, Carpio, AustriaMartinez,
Callejo,Sr.,Azcuna,andTinga,JJ.,concur.
Puno,J.,nopart,duetorelationship.
Quisumbing,J.,dueprioraction,nopart.
YnaresSantiago,andCorona,JJ.,onleave.
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]

R.A.7227,Section2.
Id.,Section3.
Id.,Section12.
Ibid.
R.A.7227,Section15.
Rollo,AnnexA,pp.4557.
Id.,AnnexC,pp.6465.
Rollo,AnnexD,pp.6667.
Id.,AnnexE,pp.6869.

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[10]
[11]

JohnHayPeople'sAlternativeCoalitionvsLim:119775:October24,2003:J.CarpioMorales:EnBanc:Decision

Id.,AnnexE1,pp.7071.

Id.,AnnexB,pp.5863.

[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]

[24]
[25]
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]

Ibid.
Rollo,AnnexF,p.72.
Id.,AnnexH,p.76.
Id.at7778.
Id.at7981.
Rollo,pp.244.
Rollo,pp.2223.
Rollo,p.167.
Rollo,pp.181200.
Id.at235240.
Tanov.Socrates,278SCRA154[1997]citingSantiagov.Vasquez,217SCRA633[1993].
R. A. 7227, Section 21 provides: The implementation of the projects for the conversion into alternative productive
usesofthemilitaryreservationsareurgentandnecessaryandshallnotberestrainedorenjoinedexceptbyan
orderissuedbytheSupremeCourtofthePhilippines.
Fortichv.Corona,289SCRA624[1998].
R.A.7227,Section2.
Id.atSection12(a).
Rollo,pp.2021.
R.A.7227,Section4(b).
IntegratedBarofthePhilippinesv.Zamora,338SCRA81[2000].
BoardofOptometryv.Colet,260SCRA88[1996].
Cruz,PhilippinePoliticalLaw,p.258[1998].
VideR.A.7227,Sections12and15.
Joyav.PresidentialCommissiononGoodGovernment,225SCRA568(1993).
Ibid.
177SCRA374(1989).
Rollo,AnnexH,p.76.
Pimentel,Jr.v.Aguirre,336SCRA201(2000).
RecordoftheSenate,Vol.III,N.56,p.329[January22,1992].
VideR.A.7916,TheSpecialEconomicZoneActof1995.
ThereareamultitudeofincentivesundertheOmnibusInvestmentsCodeof1987dependingontheclassificationof
thebusinessorenterprisethatiscoveredbytheCode.

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[41]
[42]
[43]
[44]
[45]
[46]
[47]
[48]
[49]

[50]
[51]
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JohnHayPeople'sAlternativeCoalitionvsLim:119775:October24,2003:J.CarpioMorales:EnBanc:Decision

SeeR.A.7042,ForeignInvestmentsActof1991.
71Am.Jur.2d309.
VideCONSTITUTION,ArticleVI,Section28(3).
VideR.A.7160,Section192.
CONSTITUTION,ArticleVI,Section28(4).
CommissionerofInternalRevenuev.CourtofAppeals,298SCRA83(1998).
NationalDevelopmentCompanyv.CommissionerofInternalRevenue,151SCRA472(1987).
Garciav.Corona,SeparateOpinionofJusticePanganiban,321SCRA218,237(1999).
Proc. No. 420, Section 2. Governing Body of the John Hay Special Economic Zone. Pursuant to Section 15 of
Republic Act No. 7227, the Bases Conversion and Development Authority is hereby established as the
governing body of the John Hay Special Economic Zone and, as such, authorized to determine the utilization
anddispositionofthelandscomprisingit,subjecttoprivaterights,ifany,andinconsultationandcoordination
with the City Government of Baguio after consultation with its inhabitants, and to promulgate the necessary
policies, rules, and regulations to govern and regulate the zone thru the John Hay Poro Point Development
Corporation,whichisitsimplementingarmforitseconomicdevelopmentandoptimumutilization.
R.A.7227,Section4.
R.A.7227,Section15.
Agpalo,StatutoryConstruction,pp.2728[1995].

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