Tiu v. Court of Appeals GR No. 127410, January 20, 1999

Fact: The petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. Petitioners petition for review under Rule 45 of the Rules of Court, seeking the reversal of the Court of Appeals. The challenged Decision upheld the constitutionality and validity of Executive Order No. 97-A (EO 97-A), according to which the grant and enjoyment of the tax and duty incentives authorized under Republic Act No. 7227 (RA 7227) were limited to the business enterprises and residents within the fenced-in area of the Subic Special Economic Zone (SSEZ).

Issue: Whether the EO 97-A violates the equal protection clause of the Constitution in confining the application of R.A. 7227 within the secured area.

Held: No, said Order is not violative of the equal protection clause; neither is it discriminatory. Rather, than we find real and substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another.  The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class. The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation which is limited either by the object to which it is directed or by the territory within which it is to operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable. grounds exist for making a distinction between those who fall within such class and those who do not.

Classification, to be valid, must:

1. rest on substantial distinctions,
2. be germane to the purpose of the law,
3. not be limited to existing conditions only, and
4. apply equally to all members of the same class.

It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As long as there are actual and material differences between territories, there is no violation of the constitutional clause. And of course, anyone, including the petitioners, possessing the requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free port zone. That the classification set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the objective is to establish a “self-sustaining, industrial, commercial, financial and investment center” in the area. There will, therefore, be a long-term difference between such investment center and the areas outside it.

Lastly, the classification applies equally to all the resident individuals and businesses within the “secured area.” The residents, being in like circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly treated, both in privileges granted and in obligations required. The Court holds that no undue favor or privilege was extended. The classification occasioned by EO 97-A was not unreasonable, capricious or unfounded. To repeat, it was based, rather, on fair and substantive considerations that were germane to the legislative purpose.