Mindmapped version of G.R. 119775 John Hay People's Alternative Coalition et al v. Victor Lim et al Ponente: J. Carpio-Morales Promulgated: 2003

1. John Hay People s Alternative Coalition
vs.
Victor Lim
Cecille Carmela T. de los Reyes
Philippine Christian University
Taxation Law
Professor: Atty. Antonio Bonilla
G.R. 119775 (2003)
Penned by: J. Carpio-Morales

2. Petitioners in this case ASSAIL the
constitutionality of Presidential
Proclamation 420 s. 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
RA 7227
RA 7227 or the Bases Conversion and
Development Act of 1992, set out the policy for
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 Camp John Hay
Station in Baguio.
special economic zone = designated areas in countries
that possess special economic zone regulations that are
different from other areas in the same country.
The RA 7227 created public respondent Bases
Conversion and Development Authority—
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.

3. R.A. 7227
BASES CONVERSION
AND DEVELOPMENT
ACT OF 1992
Created the Bases
Conversion Development
Authority (BCDA)
Created the Subic Special
Economic (and Freeport
Zone) = SEZ the metes and
bounds of which were to be
delineated in a proclamation
issued by the President
Expressly gave the President the authority 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 the Camp John Hay.

4. Bases Conversion Development Authority
(BCDA) entered into a Memorandum of
Agreement and Escrow Agreement with
private respondents TUNTEX and
ASIAWORLD—private corporations registered
under the laws of 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
destination and recreation centers.
Four months later, BCDA, TUNTEX and
ASIAWORLD executed a Joint Venture
Agreement—whereby they bound themselves
to put up a joint venture company known as the:
Baguio International Development and
Management Corporation
which would lease areas with the 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 Memorandum of Agreement.
Baguio City Government
meanwhile passed no. of
resolutions in response to
the actions taken by BCDA
as the owner and
administrator of Camp John
Hay.
1. The Sangguniang
Panlungsod of Baguio City
officially asked BCDA to
exclude all barangays
totally or partially located
within Camp John Hay
from the reach or
coverage of any plan or
program for its
development.
2. 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.
3. By another resolution, the
Sanggunian adopted and submitted
to BCDA a 15-point concept for the
development of Camp John Hay.
The Sanggunian s vision expressed
a kind of development that affords:
 protection to the environment,
 family-oriented type 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 previously named 9
barangays from the area of
development
 liability of local taxes of
businesses to be established
within the camp.

5. BCDA, TUNTEX AND
ASIAWORLD agreed to
some, but rejected or
modified the other
proposals of the
sanggunian.
They stressed that they
need to declare Camp
John Hay as SEZ as a
condition precedent to its
full development in
accordance with the
mandate of RA 7227.

6. The Sanggunian passed another resolution,
requesting:
1. 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 guide the Sanggunian in
determining its position on whether Camp John Hay be
declared a SEZ—being of the view that such
declaration would exempt the camp s
property and the economic activity
therein from local or national taxation.
A month later, Sanggunian passed another
resolution seeking and supporting—subject to
its concurrence, the issuance of Pres. Ramos of
a Presidential Proclamation declaring an area of
288.1 hectares of the camp as SEZ in accordance
with the RA 7227 provisions.
Together with this resolution was submitted a draft of
the proposed proclamation for consideration by the
President.
President Ramos issued:
Proclamation 420 which
established SEZ on a portion of
Camp John Hay

7. Petitioners filed a
petition against PP
420 on the grounds
that:
1. PP 420 insofar as it grants
tax exemption is invalid and
illegal—as it is an
unconstitutional exercise by
the President of a power
granted only to the
legislature.
2. PP 420—insofar as it
limits the powers and
interferes with the autonomy
of the City of Baguio is
invalid, illegal and
unconstitutional.
3. PP 420—is
unconstitutional because it
violates the rule that all taxes
should be uniform and
equitable
4. The Memorandum of
Agreement entered into by
and between private and
public respondent BCDA
having been entered only as
direct negotiation is illegal.
A TRO/ writ of preliminary
injunction is prayed for to enjoin
BCDA, John Hay Poro Point
Development Corporation and the
city government from
implementing PP 420, Tuntex &
AsiaWorld from proceeding with
their plan respecting Camp John
Hay s development pursuant to
their Joint Venture Agreement with
BCDA.

8. In maintaining the
validity of PP 420,
respondents claim
that:
By extending to the John Hay
SEZ, the proclamation is
merely implementing the
legislative intent of the said
law to turn the US military
bases into hubs of business
activity or investment.
They underscore the point that
the government s policy of
bases convention can not be
achieved without extending
the same tax exemptions
granted by RA 7227 to Subic
SEZ to other SEZ.

9. ISSUES and COURT RULING
1. Whether present petition
complies with the requirements for
this Court s exercise of jurisdiction
over constitutional issues?
The grant by law on local government units
of the right of concurrence on the bases
convention 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 it its utlitization
The interests of petitioners, being inhabitants
of Baguio; in assailing the legality of PP
420—is personal and substantial.
Requisites for judicial review on assailing the
constitutionality of a law:
 The existence of actual case
 Personal and substantial interest of the
party raising the constitutional question
 The exercise of judicial review is pleaded
at the earliest opportunity
 The constitutional question is the lis mota
of the case (or the cause of suit or action)
2. Does the grant of tax exemption
to the John Hay SEZ contravenes
Article VI Sec. 28 of the
Constitution which provides that:
No law granting any tax
exemption shall be passed without
the concurrence of a majority of all
the members of the Congress ?
 It is clear that under Sec. 12, RA 7227—it is
only Subic SEZ which was granted by the
Congress with tax exemption, investments
and incentives and the like.
 There is no express intention of the
aforesaid benefits to other SEZ still to be
created at that time via PP.
 Also, the deliberations of the Senate confirm
the exclusivity to Subic SEZ of the tax and
investment privileges accorded it under the
law
 While the grant of economic
incentives may be essential
to the creation and success
of SEZ—the incentives
under RA 7227 are exclusive
only to Subic SEZ

10. ISSUES and COURT RULING
2. Does the grant of tax exemption
to the John Hay SEZ contravenes
Article VI Sec. 28 of the
Constitution which provides that:
No law granting any tax
exemption shall be passed without
the concurrence of a majority of all
the members of the Congress ?
 The nature of the assailed privilege is
one of tax exemption. It is the
legislature, unless granted by a
provision in the Constitution—that has
the power to tax any person,
corporation or class from taxation.
Other than the Congress, the
Constitution itself may provide specific
tax exemptions, or local governments
may pass ordinances on tax exemption
only from local taxes.
 Contrary to respondents
suggestions, the claimed
statutory exemption of John Hay
SEZ from taxation should be
manifest and unmistakeable
from the language of the law on
which it is based—it must be
expressly granted in a statute
stated in a language too clear to
be mistaken.
 Grant of tax exemption and
under privileges to the John Hay
SEZ in PP 420 is void for being
violative of the Constitution.
3. Does PP 420 violate the
autonomy of the local
governments?
 NO—According to RA 7227, BCDA
has ownership and administration
rights over the Camp John Hay
subject to certain limitations
provided by the law.
 The delineation and declaration of a
portion of the area covered by Camp
John Hay as a SEZ was well within
the powers of the President to do so
by means of a proclamation.