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John Hay Peoples Alternative Coalition vs.

Lim [GR 119775, 24 October 2003] En Banc, Carpio-Morales (J): 9 concur, 2 took no part Facts: Republic Act 7227, entitled "An Act Accellerating the Convetsion of Military Reservations into other Productive uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for other purposes," otherwise known as the "Bases Conversion and Development Act of 1992," was enacted on 13 March 1992. The law set 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 Philippines-United States of America Military Bases Agreement, namely, the Clark and Subic military reservations as well as their extensions including the John Hay Station (Camp John Hay) in the City of Baguio. RA 7227 created the Bases Conversion and Development Authority' (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 government policy. RA 7227 likewise created the Subic Special Economic [and Free Port] Zone (Subic SEZ) the metes and bounds of which were to be delineated in a proclamation to be issued by the President of the Philippines; and granted the Subic SEZ incentives ranging from tax and duty-free importations, exemption of businesses therein from local and national taxes, to other hall-narks of a liberalized financial and business climate. RA 7227 expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other Special Economic Zones (SEZ) in the areas covered respectively by the Clark military reservation, the Wallace Air Station in San Fernando, La Union, and Camp John Hay. On 16 August 1993, BCDA entered into a Memorandum of Agreement and Escrow Agreement with Tuntex (B.V.L) 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 Point in La Union and Camp John Hay as premier tourist destinations and recreation centers. 4 months later or on 16 December 16, 1993, BCDA, TUNTEX and ASIAWORLD executed a Joint Venture Agreements whereby they bound themselves to put up a joint venture company known as the Baguio International Development and Management Corporation which would lease areas within Camp John Hay and Poro Point for the purpose of turning such places into principal tourist and recreation spots, as originally envisioned by the parties under their AZemorandmn of Agreement. The Baguio City government meanwhile passed a number of resolutions in response to the actions taken by BCDA as owner and administrator of Camp John Hay. By Resolution of 29 September 1993, the Sangguniang Panlungsod of Baguio City officially asked BCDA to exclude all the barangays partly or totally located within Camp John Hay from the reach or coverage of any plan or program for its development. By a subsequent Resolution dated 19 January 1994, the sanggunian sought from BCDA an abdication, waiver or quitclaim of its ownership over the home lots being occupied by residents of 9 barangays surrounding the military reservation. Still by another resolution passed on 21 February 1994, the sanggunian adopted and submitted to BCDA a 15-point concept for the development of Camp John Hay. The sanggunian's vision expressed, among other things, a kind of development that affords protection to the environment, the making of a family-oriented type of tourist destination, priority in employment opportunities for Baguio residents and free access to the base area, guaranteed participation of the city government in the management and operation of the camp, exclusion of the previously named nine barangays from the area for development, and liability for local taxes of businesses to be established within the camp." BCDA, TUNTEX and ASIAWORLD agreed to some, but rejected or modified the other proposals of the sanggunian." They stressed the need to declare Camp John Hay a SEZ as a condition precedent to its full development in accordance with the mandate of RA 7227. On 11 May 1994, the sanggunian passed a resolution requesting the Mayor to order the

determination of realty taxes which may otherwise be collected from real properties of Camp John Hay. The resolution was intended to intelligently guide the sanggunian in determining its position on whether Camp John Hay be declared a SEZ, the sanggunian being of the view that such declaration would exempt the camp's property and the economic activity therein from local or national taxation. More than a month later, however, the sanggunian passed Resolution 255, (Series of 1994)," seeking and supporting, subject to its concurrence, the issuance by then President Ramos of a presidential proclamation declaring an area of 285.1 hectares of the camp as a SEZ in accordance with the provisions of RA 7227. Together with this resolution was submitted a draft of the proposed proclamation for consideration by the President. On 5 July 1994 then President Ramos issued Proclamation 420 (series of 1994), "creating and designating a portion of the area covered by the former Camp John Hay as the John Hay Special Economic Zone pursuant to Republic Act 7227." The John Hay Peoples Alternative Coalition, et. al. filed the petition for prohibition, mandamus and declaratory relief with prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction on 25 April 1995 challenging, in the main, the constitutionality or validity of Proclamation 420 as well as the legality of the Memorandum of Agreement and Joint Venture Agreement between the BCDA, and TUNTEX and ASIAWORLD. Issue: Whether the petitioners have legal standing in filing the case questioning the validity of Presidential Proclamation 420. Held: It is settled that when questions of constitutional significance are raised, the court can exercise its power of judicial review only if the following requisites are present: (1) the existence of an actual and appropriate case; (2) a personal and substantial interest of the party raising the constitutional question; (3) the exercise of judicial review is pleaded at the earliest opportunity; and (4) the constitutional question is the lis mota of the case." RA 7227 expressly requires the concurrence of the affected local government units to 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 legal standing on them, for it is in effect a recognition of the real interests that communities nearby or surrounding a particular base area have in its utilization. Thus, the interest of petitioners, being inhabitants of Baguio, in assailing the legality of Proclamation 420, is personal and substantial such that they have sustained or will sustain direct injury as a result of the government act being challenged." Theirs is a material interest, an interest in issue affected by the proclamation and not merely an interest in the question involved or an incidental interest," for what is at stake in the enforcement of Proclamation 420 is the very economic and social existence of the people of Baguio City. Moreover, Petitioners Edilberto T. Claravall and Lilia G. Yaranon were duly elected councilors of Baguio at the time, engaged in the local governance of Baguio City and whose duties included 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, Claravall and Yaranon, as city officials who voted against" the sanggunian Resolution No. 255 (Series of 1994) supporting the issuance of the now challenged Proclamation 420, have legal standing to bring the present petition.


G.R. No. 119775

MARCH 29, 2005

FACTS: Petitioners filed their Petition for prohibition, mandamus and declaratory relief assailing (1) the constitutionality of Proclamation No. 420 and (2) the legality of the Memorandum of Agreement and Joint Venture Agreement previously entered into between public respondent BCDA and private respondents. Section 3 of Proclamation No. 420 was declared NULL AND VOID and is accordingly declared of no legal force and effect. Intervener CJHDC filed a Motion for Leave to Intervene alleging that it, together with its consortium partners, entered into a Lease Agreement dated October 19, 1996 with respondent BCDA for the development of the John Hay SEZ; and that it "stands to be most affected" by this Court's Decision "invalidating the grant of tax exemption and other financial incentives" in the John Hay SEZ since "[i]ts financial obligations and development and investment commitments under the Lease Agreement were entered into upon the premise that these incentives are valid and subsisting." CJHDC, proffering grounds parallel to those of public respondents, prays that: (1) it be granted leave to intervene in this case; (2) its attached Motion for Reconsideration in Intervention be admitted; and (3) this Court's Decision of October 24, 2003 be reconsidered and petitioners' petition dismissed. CJHDC's Motion for leave to Intervene was granted and noted its Motion for Reconsideration in Intervention . ISSUE: Whether the tax exemptions and other financial incentives granted to the Subic SEZ under Section 12 of R.A. No. 7227 (Bases Conversion and Development Act of 1992), are applicable to the John Hay SEZ. RULING: CJHDC's argument that the President's "power to create Special Economic Zones carries with it the power to provide for tax and financial incentives," does not lie. It is the legislative branch which has the inherent power not only to select the subjects of taxation but to grant exemptions. Paragraph 4, Section 28 of Article VI of the Constitution is crystal clear: "[n]o law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress." Hence, it is only the legislature, as limited by the provisions of the Constitution, which has full power to exempt any person or corporation or class of property from taxation. The Constitution itself may provide for specific tax exemptions or local governments may pass ordinances providing for exemption from local taxes, but, otherwise, it is only the legislative branch which has the power to grant tax exemptions, its power to exempt being as broad as its power to tax. There is absolutely nothing in R.A. No. 7227 which can be considered a grant of tax exemption in favor of public respondent BCDA. Rather, the beneficiaries of the tax exemptions and other incentives in Section 12 (the only provision in R.A. No. 7227 which expressly grants tax exemptions) are clearly the business enterprises located within the Subic SEZ. Contrary to public respondents' interpretation, the Decision of October 24, 2003 does not "tie the hands" of executive or administrative agencies from implementing any present or future legislation which affords tax or other financial incentives to qualified persons doing business in the John Hay SEZ or elsewhere. The second sentence of Section 3 of Proclamation No. 420 was declared null and void only insofar as it purported to grant tax exemptions and other financial incentives to business enterprises located in John Hay SEZ. However, where there is statutory basis for exemptions or incentives, there is nothing to prevent qualified persons from applying for and availing thereof.