Aristoza
CONSTITUTIONAL LAW 1
JOHN HAY PEOPLE’S ALTERNATIVE COALITION V. VICTOR LIM
G.R. No. 119775
October 24, 2003
J. Carpio-Morales.
This is a petition assailing the constitutionality of Presidential Proclamation
No. 420 (Proc. 420) creating and designating a portion of the area covered
by Camp John Hay into a special economic zone (SEZ). In particular,
petitioners challenge the validity of Proc. 420 on the grounds that it infringes
on Sec. 28(4), Art. 6 of the Constitution and that it diminishes the local
autonomy of Baguio City.
FACTS:
 1992: Congress enacted RA 7227, or the Bases Conversion and
Development Act
o The act accelerates the conversion of the military reservations into
other productive uses and creates the Bases Conversion and
Development Authority (BCDA)
o RA 7227 primarily created the Subic Special Economic Zone (Subic
SEZ), delineated its metes and bounds, and granted the Subic SEZ
incentives like tax and duty-free importations, and exemptions of
businesses from local and national taxes
o The RA also gave express authority to the President to create via
Executive Proclamation, subject to the concurrence of the LGUs to
be affected, other SEZs in areas covered by Clark, Wallace Station
in San Fernando, and Camp John Hay (CJH)
 1993: BCDA entered into a Memorandum of Agreement (MOA) and
Escrow Agreement with Tuntex and Asiaworld (British Virgin Islands
corporations)
o Agreed on a joint venture agreement (JVA), which was executed,
thus creating the Baguio International Development Management
Corporation to LEASE areas within CJH in Baguio and Poro Point in
La Union
 1993: Sangguniang Panglungsod of Baguio (Sanggunian) officially
asked the BCDA to exclude 9 barangays partly and totally located in the
CJH area from the coverage of any plan for development
o Also submitted a 15-point concept for the development of CJH
o They proposed that the development be protective of the
environment and that priority development opportunities, as well as
free access, be granted to Baguio residents
o Also proposed guaranteed participation of the city govt. in the
management and operation of the camp and liability for local taxes
of the businesses to be established in the CJH
o BCDA partly agreed and rejected other proposals; the Sanggunian
then submitted their proposal to the President
 1994: Pres. Ramos issued Proc. 420, granting BCDA authority to
implement all necessary policies, rules, and regulations, including
investment incentives in the Camp John Hay Area
 1995: Petitioners filed instant petition challenging the constitutionality
and validity of the MOA and JVA between BCDA, Tuntex, and Asiaworld
ISSUES/HELD:
A. PROCEDURAL ISSUES
 Court first established that the issue of the validity of the JVA and
MOA is MOOT
o both have already been revoked at the time of the decision
o but they said that they can still review the constitutionality of
Proc. 420 which has not been mooted by the fact of conversion
of a portion of CJH into an SEZ
 Court also viewed as crucial issues the fact that the transformation
of CJH into an SEZ is not just a reclassification of the area but a
conversion.
o involves turning areas into sites of business activity in line with
govt. policy
o Baguio City’s ecology will necessarily be affected; petitioners
cite problem on scarcity of water supply within the city
o Local and national govt. is faced with the challenge of how to
provide a sustainable, sound, and equitable transition for the
city once the conversion takes place
1. Actual case or controversy: YES
 Existence of a real clash of interests and rights between petitioners
and respondents
 Dispute has ripened into a judicial controversy even absent an
overt act
2. Locus standi: YES
 RA 7227 expressly requires concurrence of affected LGUs in the
creation of SEZs, thus vesting them with legal standing for it is in
effect a recognition of the real interests of the communities to be
affected
 Interest of inhabitants of Baguio City is thus recognized since the
govt. act being challenged may lead to them sustaining direct injury
as a result
 Court also cites the Bataan powerplant case (Garcia v. Board of
Investments) in establishing petitioners’ standing because similarly,
“their interest is actual, real, vital, and legal for it would affect not
only their economic life but also the air they breathe”
 Aristoza
 Petitioners Claravall and Yaranon are duly elected councilors of RULING: 2ND sentence of Sec. 3 of Proc. 420 is declared NULL AND
Baguio; their concurrence is required by RA 7227, hence they have VOID. Not the whole Proc. 420 is declared unconstitutional since only the
locus standi said provision on tax exemption is repugnant to RA 7227 and Sec. 28(4),
3. Earliest Opportunity and Lis Mota: YES; the petition is established Art. 6. Proc. 420, without the invalidated portion, remains valid and
right away to be centered on issues of constitutionality of the assailed effective.
government acts
NOTES:
B. SUBSTANTIVE ISSUES Senate Deliberations
1. WN Proc. 420 is unconstitutional by providing for national and Senator Angara: [D]uring our short caucus, Senator Laurel raised the point
local tax exemption: YES that if we give this delegation to the President to establish other
 It was established in the language of Sec. 12, RA 7227 that the economic zones, that may be an unwarranted delegation. So we agreed
tax exemption only applies to SUBIC SEZ; no express we will simply limit the definition of powers and description of the zone to
extension of the aforesaid benefits to other SEZs still to be Subic, but that does not exclude the possibility of creating other economic
created was made. The deliberations of the Senate also affirm zones within the baselands … This provision now will be confined only
this fact [see Notes] to Subic.
 It is the legislature, unless limited by the Constitution, that has
full power to exempt any person, corporation, or class from tax,
as included in their broad power to tax. The Constitution may
provide for specific tax exemptions; local govts may pass
ordinances of tax exemption but only for local taxes
 Sec. 28(4), Art. 6, 1987 Consti: No law granting any tax
exemption shall be passed without the concurrence of a
majority of all Members of Congress
 Proc. 420 extends the tax exemption contemplated in RA 7227
to other economic zones. Thus, it is an infringement of RA 7227
and Sec. 28(4), Art. 6
2. WN Proc. 420 is unconsti for limiting or interfering w local
autonomy of Baguio City: NO
 Petitioners:
o Argue that President has no authority to subject the CJH
SEZ to the governance of the BCDA which has only
oversight functions
o Beyond oversight, they argue that there will be a diminution
of the city govt's power over an area within its jurisdiction
o Basically, they believe Proc. 420 gives the President power
of control rather than just supervision over local govt.
 Court:
o Sec. 12 of RA 7227 explicitly grants broad rights of
ownership and administration to the BCDA; hence, they
necessarily have CONTROL over it subject to certain
limitations provided by law
o Sec. 15, RA 7227 authorizes the President to delineate and
declare portions, by means of an executive proclamation,
other SEZs in areas covered by Clark, Wallace Station in
San Fernando, and Camp John Hay (CJH)