Republic v. Bacolod Murcia
It is, therefore, an exercise of a sovereign
FACTS: RA 632 created the Philippine Sugar Institute, a semi-public corporation.
In 1951, the Institute acquired the Insular Sugar Refinery for P3.07 million
payable in installments from the proceeds of the Sugar tax to be collected under
RA 632. The operation of the refinery for 1954 to 1957 was disastrous as the
Institute suffered tremendous losses. Contending that the purchase of refinery
with money from the Institutes fund was not authorized under RA 632, and that
the continued operation of the refinery is inimical to their interest, Bacolod-
Murcia Milling Co., Ma-ao Sugar Central, Talisay-Silay Milling Co. and the Central
Azucarera del Danao refused to continue with their contribution to said fund. The
trial court found them liable under RA 632. Hence, this petition.
ISSUE: Are the milling companies liable?
RULING: Yes. The special assessment or levy for the Philippine Sugar Institute
Fund is not so much an exercise of the power of taxation, nor the imposition of a
special assessment, but the exercise of 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.
Section 2a of the charter authorizes Philsugin to acquire the refinery in question.
The financial loss resulting from the operation thereof is no means an index that
the industry did profit therefrom, as other gains of a different nature (such as
experience) may have been realized.
FACTS: Joint appeal by three sugar centrals, respondents herein. 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.
The appellants' thesis is simply to the effect that the "10 centavos per picul of
sugar" authorized to be collected under Sec. 15 of Republic 632 is a special
assessment. As such, the proceeds thereof may be devoted only to the specific
purpose for which the assessment was authorized, a special assessment being a
levy upon property predicated on the doctrine that the property against which it
is levied derives some special benefit from the improvement. It is not a tax
measure intended to raise revenues for the Government.
ISSUE: Is the imposition of special assessment an exercise of the taxing power
RULING: The Court deemed it relevant to discuss its holding in Lutz v. Araneta.
For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar
Adjustment Act, 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." 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.
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.
power which no private citizen may lawfully resist.
Action: Joint Appeal from Court of First Instance of Manila
Summary:
The three sugar centrals are sister companies under single ownership
and management.
They were required to pay 10 centavos per picul (around 5-6 kilos) of
sugar collected for 5 crop years under Sec. 15 of RA 632.
The sugar tax was levied to create Philsugin (Philippine Sugar Institute),
to conduct research and development for sugar and sugar by-products.
Philsugin acquired the Insular Sugar Refinery and lost a lot of money
Appellants stopped paying the levy because they said that the purchase
was unauthorized by RA 632. They had unpaid balances
The Court of First Instance said that they had to pay the balance, and the
Supreme Court affirmed its decision
Definitions:
Special assessments: a levy on property where the property against
which it is levied derives special benefits from how the money was used
(in normal people speak: whatever this tax is spent on will benefit those
who paid the tax)
RA 632: Philippine Sugar Institute charter; where Philsugin is a semi-
public corporation meant to advance the Philippine sugar industry
(research, marketing, etc.)
o Section 15 of RA 632: to raise funds for Philsugin, annual sugar
production will be levied 10c per picul of sugar collected for 5
crop years, (c.y. 1951-52 to 1956). The amount will be borne by
sugar centrals and sugar cane planters
Facts:
CFI case:
o Appellants and another sugar central, Central Azucarera del
Danao, had unpaid balance:
Bacolod-Murcia: P216,070.50
Ma-ao: P235,800.20
Talisay-Silay: P208,193.74
Danao: P48,059.77
o 3 Sept 1951: Philsugin acquired the Insular Sugar Refinery
through the sugar tax imposed by RA632
o 1954-57: Philsugin lots a LOT of money, and at that time, 70% of
Philsugins time and effort had gone into the operation of Insular
Sugar Refinery
o Appellants contend that the purchase of the Insular Sugar
Refinery, using money from the Philsugin fun, was not authorized
by RA632 and refused to contribute to it
10c/picul is a special assessment, not a tax, and property
owners who pay the assessment dont have to be forced
to pay if the proceeds have been misapplied to their
prejudice
o Lower courts Decision: Apellants are liable for special
assessments and have to pay the balance
Appellants are liable under RA632
 Section 3 authorizes Philsugin to buy things for
sugar and its by-products, including sugar
refineries
Decision to purchase was made the board of directors,
and the appellants were duly represented by the
Philippine Sugar Association, of which the appellants are
members
All of Philsugins transactions pass through the General
Auditor, the Office of the President, and other pertinent
authorities and safeguards in order to ensure that
purchases (including that of the refinery) had been legal
and proper
Appellants refusal to pay is like a taxpayer refusing to
pay taxes; its dangerous to allow their motion because
they were essentially taking the law into their own hands
In the PRESENT, the appellants say that:
o Under Section 3 of RA632, Philsugin had no authority to acquire
the refinery. Philsugin is empowered to purchase a central
experiment station or at most a sugar central, not a sugar
refinery.
Cited Collector v Ledesma: definition; sugar
central=sugar mill that manufacture sugar for a number
of plantations
o Refusal to pay an assessment is different from refusal to pay a
tax, since a tax is different from an assessment
o The imposition of a special assessment on property owners who
wont benefit from it is a denial of due process
Issue: Did the CFI make the right call in ruling that the defendants are liable for
the special assessments under RA 632?
Ruling:
Supreme Court finds for the appellee; CFI decision is AFFIRMED, with
costs
Cited Lutz v Araneta: Section 6 of CA 567 (sugar adjustment act)
levies a tax to accrue to the Sugar Adjustment and Stabilization
Fund
o SC said that the assailed tax was levied to help
rehabilitate and stabilize the threatened sugar industry
(history lesson: before, the Philippines was a sugar cartel
with the US as its top customer, but the Act that enabled
it to supply the US with sugar was expiring)
o The sugar industry was a leading exporter and employer
and a prime source of foreign exchange and state wealth
such that its welfare redounds to general welfare
o The assailed act is therefore an exercise of POLICE
POWER because of its importance to general welfare
Like in the Lutz v Araneta case, Section 5 of RA632 is an exercise
of police power
Under Section 2 of RA632, Philsugin is authorized to do research for the
sugar industry in all its phases, which justifies its acquisition of the
Insular Sugar Refinery
The experience is technically NOT a loss to the industry: through
Philsugins purchase, there is now a better appreciation for the
management problems faced by sugar centrals