Title
John Hay Peoples Alternative Coalition vs. Lim
Case
G.R. No. 119775
Decision Date
Oct 24, 2003
Petitioners challenged the constitutionality of Presidential Proclamation No. 420, which designated part of Camp John Hay as a Special Economic Zone with tax exemptions. The Supreme Court ruled the tax exemptions unconstitutional due to lack of legislative authority but upheld BCDA's governance, affirming local autonomy and petitioners' standing.
tax exemption
unconstitutional
local and national taxes
A

Case Summary (G.R. No. 119775)

Factual Background

Camp John Hay was a former United States military reservation whose reversion and conversion into productive uses was governed by the policy established in R.A. No. 7227, which created the Bases Conversion and Development Authority (BCDA) and authorized the President, with the concurrence of affected local government units, to create Special Economic Zones (SEZ) for former base areas. BCDA entered into preparatory agreements with private respondents Tuntex and AsiaWorld in August 1993 and executed a Joint Venture Agreement on December 16, 1993 to form a joint venture to develop Poro Point and Camp John Hay as tourist and recreational centers.

Local Government Actions

The Sangguniang Panlungsod of the City of Baguio reacted to BCDA actions with a series of resolutions. On September 29, 1993 it sought exclusion of barangays from any development plan; on January 19, 1994 it sought abandonment or quitclaim of home lots occupied by residents; and on February 21, 1994 it submitted a 15-point concept for Camp John Hay's development expressing environmental protection, local employment, free access, and local fiscal participation. On May 11, 1994 the sanggunian requested a determination of realty taxes to guide its position. On June 30, 1994 it passed Resolution No. 255 (Series of 1994) giving concurrence, subject to conditions, to a presidential proclamation declaring a portion of Camp John Hay a SEZ and submitted a draft proclamation to the President.

Presidential Proclamation

On July 5, 1994 President Ramos issued Proclamation No. 420 creating the John Hay Special Economic Zone covering 288.1 hectares of the John Hay reservation and declaring BCDA, pursuant to Section 15 of R.A. No. 7227, as the governing body of the zone to determine utilization and disposition of lands subject to private rights and in consultation and coordination with the City Government of Baguio. Section 3 of the Proclamation provided that the John Hay SEZ would have applicable incentives under Section 12 of R.A. No. 7227 and incentives under other laws, including the Export Processing Zone law, the Omnibus Investments Code, and the Foreign Investments Act of 1991.

Procedural History and Relief Sought

Petitioners filed a direct petition for prohibition, mandamus and declaratory relief with a prayer for temporary restraining order or writ of preliminary injunction on April 25, 1995 challenging principally the constitutionality of Proclamation No. 420 and the legality of BCDA’s agreements with Tuntex and AsiaWorld. Petitioners alleged, inter alia, that the Proclamation unlawfully granted tax exemptions that only Congress could confer, that it interfered with the autonomy of the City of Baguio, that it violated uniformity and equal protection in taxation, that BCDA’s negotiated agreements were illegal, and that environmental impact assessment requirements had not been complied with.

Respondents’ Contentions

Respondents argued that the petition was moot and academic because BCDA had revoked the Memorandum of Agreement and Joint Venture Agreement by letter dated November 21, 1995, that the Proclamation merely effectuated legislative intent under R.A. No. 7227 to convert bases into hubs of investment, that petitioners lacked standing as taxpayers and that no justiciable case or controversy existed, and that the petition should be dismissed for failure to observe the hierarchy of courts and exhaustion of administrative remedies.

Petitioners’ Contentions

Petitioners maintained that the grant of tax exemptions in Proclamation No. 420 amounted to a legislative power vested in Congress and required the concurrence of a majority of all members of Congress under Article VI, Section 28 (4), 1987 Constitution; that Section 2 of the Proclamation unlawfully diminished Baguio City’s autonomy by designating BCDA as governing body of the zone; that the agreements with Tuntex and AsiaWorld were entered into by direct negotiation in violation of law; and that environmental impact assessment had not been properly undertaken.

Jurisdiction and Admissibility

The Court addressed preliminary questions of jurisdiction and entertained the direct petition despite the general reluctance to receive original actions, because R.A. No. 7227, Section 21 expressly vested the Supreme Court with exclusive power to enjoin implementation of projects for conversion of military reservations. The Court also noted its discretionary power to take direct cognizance when issues are of sufficient public importance and remanding the case would unduly prolong resolution.

Standing and Justiciability

The Court found that petitioners possessed personal and substantial interest to challenge Proclamation No. 420. The concurrence requirement in R.A. No. 7227 conferred legal standing upon affected local government units and those inhabiting the vicinity have material interests that would be directly affected. Petitioners who were elected city councilors and who voted against the sanggunian resolution were held to have standing. The Court also held that the controversy was concrete and ripe for judicial determination and that the mootness of the now-revoked agreements did not negate the justiciability of constitutional questions spawned by the proclamation.

Constitutional Issues Presented

The Court framed the principal issues as: (1) whether the petition complied with requisites for judicial review of constitutional issues; (2) whether Proclamation No. 420 constitutionally provided for national and local tax exemption and other economic incentives within the John Hay SEZ; and (3) whether Proclamation No. 420 unconstitutionally limited or interfered with the local autonomy of the City of Baguio.

Court’s Analysis on Tax Exemption

The Court examined Section 3 of Proclamation No. 420, which applied incentives under Section 12 of R.A. No. 7227 and other investment laws to the John Hay SEZ. The Court observed that Section 12 of R.A. No. 7227 expressly granted tax exemptions and special incentives only to the Subic Special Economic Zone and that legislative history confirmed the exclusivity of those privileges to Subic. The Court emphasized the settled rule that tax exemptions must be manifest, unmistakable and expressly granted by statute and that

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