G.R. Nos. L-19824, L-19825 and 19826
July 9, 1966
REPUBLIC OF THE PHILIPPINES v. BACOLOD-MURCIA MILLING CO.,
INC., MA-AO SUGAR CENTRAL CO., INC., and TALISAY-SILAY MILLING COMPANY,
REGALA, J.:
FACTS:
This is a joint appeal by three sugar centrals, Bacolod Murcia
Milling Co., Inc., Ma-ao Sugar Central Co., Inc., and Talisay-Silay Milling
Co., sister companies under one controlling ownership and management, from a
decision of the Court of First Instance of Manila finding them liable for special
assessments under Section 15 of Republic Act No. 632.
Republic Act No. 632 is the charter of the Philippine Sugar
Institute, Philsugin for short, a semi-public corporation.
Sections 15 and 16 of the aforementioned law provide:
Sec. 15. Capitalization. — To raise the
necessary funds to carry out the provisions of this Act and the purposes of the
corporation, there shall be levied on the annual sugar production a tax of TEN
CENTAVOS [P0.10] per picul of sugar to be collected for a period of five (5)
years beginning the crop year 1951-1952. The amount shall be borne by the sugar
cane planters and the sugar centrals in the proportion of their corresponding
milling share, and said levy shall constitute a lien on their sugar quedans
and/or warehouse receipts.
Sec. 16. Special Fund. — The proceeds of
the foregoing levy shall be set aside to constitute a special fund to be known
as the "Sugar Research and Stabilization Fund,"
which shall be available exclusively for the use of the corporation. All the
income and receipts derived from the special fund herein created shall accrue
to, and form part of the said fund to be available solely for the use of the
corporation.
The facts of this case bearing relevance to the issue under
consideration, as recited by the lower court and accepted by the appellants,
are the following:
x x x during the 5 crop years
mentioned in the law, namely 1951-1952, 1952-1953, 1953-1954, 1954-1955 and
1955-1956, defendant Bacolod-Murcia Milling Co., Inc., has paid P267,468.00 but
left an unpaid balance of P216,070.50; defendant Ma-ao Sugar Central Co., Inc.,
has paid P117,613.44 but left unpaid balance of P235,800.20; defendant
Talisay-Silay Milling Company has paid P251,812.43 but left unpaid balance of
P208,193.74; and defendant Central Azucarera del Danao made a payment of
P49,897.78 but left unpaid balance of P48,059.77. There is no question
regarding the correctness of the amounts paid and the amounts that remain
unpaid.
From the evidence presented, on
which there is no controversy, it was disclosed that on September 3, 1951, the
Philippine Sugar Institute, known as the PHILSUGIN for short, acquired the
Insular Sugar Refinery for a total consideration of P3,070,909.60 payable, in
accordance with the deed of sale Exhibit A, in 3 installments from the process
of the sugar tax to be collected, under Republic Act 632. The evidence further
discloses that the operation of the Insular Sugar Refinery for the years, 1954,
1955, 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred tremendous
losses as shown by an examination of the statements of income and expenses
marked Exhibits 5, 6, 7 and 8. Through the testimony of Mr. Cenon Flor Cruz,
former acting general manager of PHILSUGIN and at present technical consultant
of said entity, presented by the defendants as witnesses, it has been shown
that the operation of the Insular Sugar Refinery has consumed 70% of the
thinking time and effort of the PHILSUGIN management. x x x .
ISSUES:
First. It is fallacious to argue that no mismanagement or abuse of
corporate power could have been committed by Philsugin solely because its
charter incorporates so many devices or safeguards to preclude such abuse.
Second. The appellants' refusal to continue paying the assessment
under Republic Act 632 may not rightly be equated with a taxpayer's refusal to
pay his ordinary taxes precisely because there is a substantial distinction
between a "special assessment" and an ordinary tax. The purpose of
the former is to finance the improvement of particular properties, with the
benefits of the improvement accruing or inuring to the owners thereof who,
after all, pay the assessment. The purpose of an ordinary tax, on the other
hand, is to provide the Government with revenues needed for the financing of
state affairs. Thus, while the refusal of a citizen to pay his ordinary taxes
may not indeed be sanctioned because it would impair government functions, the
same would not hold true in the case of a refusal to comply with a special
assessment.
Third. Upon a host of decisions of the United States Supreme
Court, the imposition or collection of a special assessment upon property
owners who receive no benefit from such assessment amounts to a denial of due
process.
RULING:
We find for the appellee.
The nature of a "special assessment" similar to the case
at bar has already been discussed and explained by this Court in the case of Lutz vs. Araneta, 98 Phil. 148.
For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar
Adjustment Act, levies on owners or persons in control of lands devoted to the
cultivation of sugar cane and ceded to others for a consideration, on lease or
otherwise —
a tax equivalent to the difference
between the money value of the rental or consideration collected and the amount
representing 12 per centum of the assessed value of such land. (Sec. 3).
Under Section 6 of the said law, Commonwealth Act 567, all
collections made thereunder "shall accrue to a special fund in the
Philippine Treasury, to be known as the 'Sugar Adjustment and
Stabilization Fund,' and shall be paid out only for
any or all of the following purposes or to attain any or all of the following
objectives, as may be provided by law." It then proceeds to enumerate the
said purposes, among which are "to place the sugar industry in a position
to maintain itself; ... to readjust the benefits derived from the sugar
industry ... so that all might continue profitably to engage therein; to limit
the production of sugar to areas more economically suited to the production
thereof; and to afford laborers employed in the industry a living wage and to
improve their living and working conditions.
The plaintiff in the above case, Walter Lutz, contended that the
aforementioned tax or special assessment was unconstitutional because it was
being "levied for the aid and support of the sugar industry
exclusively," and therefore, not for a public purpose. In rejecting the
theory advanced by the said plaintiff, this Court said:
The basic defect in the
plaintiff's position in his assumption that the tax provided for in
Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of
the Act, and particularly Section 6, will show that the tax is
levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is
primarily an exercise of the police power.
It was competent for the
Legislature to find that the general welfare demanded that the sugar industry
should be stabilized in turn; and in the wide field of its police power, the
law-making body could provide that the distribution of benefits therefrom be readjusted
among its components, to enable it to resist the added strain of the increase
in taxes that it had to sustain
Once it is conceded, as it must
that the protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds what
is necessary for its protection and expedient for its promotion. Here, the
legislative discretion must be allowed full play, subject only to the test of
reasonableness; and it is not contended that the means provided in Section 6 of
the law (above quoted) bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally
valid, no reason is seen why the state may not levy taxes to raise funds for
their prosecution and attainment. Taxation may be made the implement of the
state's police power.
On the authority of the above case, then, We hold that the special
assessment at bar may be considered as similarly as the above, that is, that
the levy for the Philsugin Fund is not so much an exercise of the power of
taxation, nor the imposition of a special assessment, but, the exercise of the
police power for the general welfare of the entire country. It is, therefore,
an exercise of a sovereign power which no private citizen may lawfully resist.
