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JOHN HAY PEOPLES ALTERNATIVE COALITION vs. LIM (2003) Ponente: CARPIO-MORALES, J.

The present petition for prohibition, mandamus and declaratory relief assails the constitutionality of Presidential Proclamation No. 420, Series of 1994, CREATING AND DESIGNATING A PORTION OF THE COVERED BY THE FORMER CAMP JOHN [HAY] AS THE JOHN HAY SPECIAL ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227. FACTS: - RA 7227, otherwise known as the Bases Conversion and Development Act of 1992, enacted on March 13, 1992, provides, among others, of the following: o Sets out the policy of the government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases under the 1947 Phil-US MBA, namely, the Clark and Subic military reservations as well as their extensions including Camp John Hay. o Creation of the Bases Conversion and Development Authority (BCDA), which, according to Sec.3 of RA 7227, is vested with the power to utilize the base areas in accordance with the declared government policy o Creation of the Subic Special Economic [and Free Port] Zone (Subic SEZ), which, under Sec.12 of the same law, is granted with incentives ranging from tax and duty-free importations, exemptions of businesses therein from local and national taxes, to other hallmarks of liberalized financial and business climate o Expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other SEZs in the areas covered. - Agreements entered into and executed by the BCDA: o August 16, 1993: Memorandum of Agreement with private respondents TUNTEX and ASIAWORLD, preparatory to the formation of a joint venture for the development of Poro Point in La Union and Camp John Hay o December 16, 1993: Joint Venture Agreement where BCDA, TUNTEX and ASIAWORLD bound themselves to put up a joint venture company - The following are Resolutions passed by the Baguio City government in response to actions taken by the BCDA: o Sept. 29 Resolution: Sangguniang Panglungsod of Baguio asked BCDA to exclude all the barangays partly or totally located within CJH from the coverage of any plan for its development o Jan. 19, 1994 Res: Sanggunian sought from BCDA abdication, waiver, or quitclaim of its ownership home lots occupied by residents of 9 barangays o Feb. 21 Res: 15-point concept for the development of CJH, suggestions from which were agreed to by the BCDA, TUNTEX and ASIAWORLD, but the need to declare CJH a SEZ was stressed o May 11 Res: Sanggunian requesting the Mayor for the determination of realty taxes which may be collected from real properties of CJH o Resolution No. 255: supported the issuance by the then President Ramos of a presidential proclamation declaring an area of 288.1 hectares of the camp as a SEZ in accordance with RA 7227 - July 5, 1994: Pres. Ramos issued Proclamation No. 420, which established a SEZ on a portion of Camp John Hay ISSUES/ARGUMENTS/OPINION/RATIO: 1. Issue on Direct Filing (Jurisdiction) Respondents: Petition should be dismissed for disregard of the hierarchy of courts and of the doctrine of exhaustion of administrative remedies Petitioners: invoked the exclusive authority of the SC under Section 21 of RA 7227 to enjoin or restrain implementation of projects for conversion of base areas SC: Petitioners direct filing of the present petition is allowed because it is only the SC which has the power under the abovementioned section to enjoin implementation of projects for the development of former US military reservations. The present petition also involves critical issues relating to the promotion of the countrys economic and social development, and to Baguio Citys ecology and environment, which is why the SC assumes jurisdiction.

2. WON the present petition complies with the requirements for Judicial Review YES! a. Actual Case or Controversy CHECK!

R: Issues are rendered moot and academic by the abandonment of the questioned MOA and Joint Venture Agreements due to parties inaction SC: There is a real clash of interests and rights between petitioners and respondents arising from the issuance of the Proclamation. Also, the mere enactment of the questioned law deemed to have ripened the issue into a judicial controversy. b. Petitioners Legal Standing CHECK! R: Petitioners lack legal standing, even as taxpayers P: Present petition is a taxpayers suit SC: Petitioners, as inhabitants of Baguio City, have personal and substantial interest such that they have sustained or will sustain direct injury as a result of the government act being challenged. Theirs is a material interest for what is at stake is the very economic and social existence of the people of Baguio City. Petitioners Claravall and Yaranon, as councillors of Baguio at that time, also have standing since they have the prerogative to concur with the declaration of a portion of CJH as a SEZ. c. Earliest Opportunity and Lis Mota CHECK! SC: Respondents never raised issues with respect to these two, hence, they are deemed waived. 3. WON Proclamation No. 420 is constitutional by providing for national and local tax exemption within and granting other economic incentives to the John Hay SEZ NO! P: Nowhere in RA 7227 is there a grant of tax exemption to SEZs yet to be established in base areas, unlike the grant under Section 12 which provides for tax exemption to the established Subic SEZ. The tax exemption grant to John Hay SEZ contravenes Article VI, Section 28 (4) of the 1987 Constitution which provides that No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. SC: Under Section 12 of RA 7227, it is only the Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation. The deliberations of Senate confirm the exclusivity to Subic SEZ of the tax and investment privileges accorded it under the law. The grant of economic incentives to the John Hay SEZ, as provided by Section 3 of Proclamation No. 420, cannot be sustained. Also, it is the Legislature, unless limited by a provision of the state constitution, which has the full power to exempt any person or corporation or class of property fro taxation, its power to exempt being as broad as its power to tax. (Other than Congress, the constitution or local ordinances may also provide for tax exemptions.) 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. 4. WON Proclamation No. 420 is constitutional for limiting and interfering with the local autonomy of Baguio City YES! P: Proclamation No. 420 is unconstitutional for being in derogation of Baguio Citys local autonomy. (Section 2: BCDA as the governing body of the John Hay SEZ). The questioned proclamation unlawfully gives the President power of control over the local government instead of just mere supervision. SC: Petitioners arguments are bereft of merit. Under RA 7227, the BCDA is entrusted with the purpose of owning, holding and/or administering the military reservations including John Hay. With such broad rights of ownership and administration, the BCDA virtually has control over CJH. The law (Proclamation) merely emphasizes or reiterates the statutory role or functions it has been granted. DISPOSITIVE PORTION - SC: The entire assailed proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant to law or the Constitution. The delineation and declaration of a portion of the area of CJH as SEZ was well within the powers of the President to do so by means of a proclamation. - The second sentence of Section 3 of Proclamation No. 420 (granting tax exemption to the John Hay SEZ) is hereby declared NULL and VOID and is accordingly declared of no legal force and effect. Other portions remain valid and effective.