G.R. No.

L-7859

December 22, 1955

WALTER LUTZ, as Ju !c!a" A m!#!s$ra$or o% $&e '#$es$a$e Es$a$e o% $&e ecease A#$o#!o Ja(me Le esma, plaintiff-appellant, vs. J. ANT)N') ARANETA, as $&e *o""ec$or o% '#$er#a" Re+e#ue, defendant-appellee. Ernesto J. Gonzaga for appellant. Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres and Solicitor Felicisimo . osete for appellee.

RE,E-, J.. L., J.: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed y Commonwealth !ct No. "#$, otherwise %nown as the &ugar !d'ustment !ct. (romulgated in )*+,, the law in -uestion opens .section )/ with a declaration of emergency, due to the threat to our industry y the imminent imposition of export taxes upon sugar as provided in the Tydings-0c1uffe !ct, and the 2eventual loss of its preferential position in the 3nited &tates mar%et24 wherefore, the national policy was expressed 2to o tain a read'ustment of the enefits derived from the sugar industry y the component elements thereof2 and 2to sta ili5e the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the 3nited &tates mar%et and the imposition of the export taxes.2 In section 6, Commonwealth !ct "#$ provides for an increase of the existing tax on the manufacture of sugar, on a graduated asis, on each picul of sugar manufactured4 while section 7 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 8 a tax e-uivalent to the difference etween the money value of the rental or consideration collected and the amount representing )6 per centum of the assessed value of such land. !ccording to section # of the law 8 &9C. #. !ll collections made under this !ct shall accrue to a special fund in the (hilippine Treasury, to e %nown as the :&ugar !d'ustment and &ta ili5ation Fund,: and shall e paid out only for any or all of the following purposes or to attain any or all of the following o 'ectives, as may e provided y law. First, to place the sugar industry in a position to maintain itself, despite the gradual loss of the preferntial position of the (hilippine sugar in the 3nited &tates mar%et, and ultimately to insure its continued existence notwithstanding the loss of that mar%et and the conse-uent necessity of meeting competition in the free mar%ets of the world4 &econd, to read'ust the enefits derived from the sugar industry y all of the component elements thereof 8 the mill, the landowner, the planter of the sugar cane, and the la orers in the factory and in the field 8 so that all might continue profita ly to engage therein4lawphi).net

Third, to limit the production of sugar to areas more economically suited to the production thereof4 and Fourth, to afford la or employed in the industry a living wage and to improve their living and wor%ing conditions; (rovided, That the (resident of the (hilippines may, until the ad'ourment of the next regular session of the National !ssem ly, ma%e the necessary dis ursements from the fund herein created .)/ for the esta lishment and operation of sugar experiment station or stations and the underta%ing of researchers .a/ to increase the recoveries of the centrifugal sugar factories with the view of reducing manufacturing costs, . / to produce and propagate higher yielding varieties of sugar cane more adapta le to different district conditions in the (hilippines, .c/ to lower the costs of raising sugar cane, .d/ to improve the uying -uality of denatured alcohol from molasses for motor fuel, .e/ to determine the possi ility of utili5ing the other y-products of the industry, .f/ to determine what crop or crops are suita le for rotation and for the utili5ation of excess cane lands, and .g/ on other pro lems the solution of which would help reha ilitate and sta ili5e the industry, and .6/ for the improvement of living and wor%ing conditions in sugar mills and sugar plantations, authori5ing him to organi5e the necessary agency or agencies to ta%e charge of the expenditure and allocation of said funds to carry out the purpose herein efore enumerated, and, li%ewise, authori5ing the dis ursement from the fund herein created of the necessary amount or amounts needed for salaries, wages, travelling expenses, e-uipment, and other sundry expenses of said agency or agencies. (laintiff, <alter =ut5, in his capacity as >udicial !dministrator of the Intestate 9state of !ntonio >ayme =edesma, see%s to recover from the Collector of Internal ?evenue the sum of ()+,###.+, paid y the estate as taxes, under section 7 of the !ct, for the crop years )*+@-)*+* and )*+*-)*",4 alleging that such tax is unconstitutional and void, eing levied for the aid and support of the sugar industry exclusively, which in plaintiff:s opinion is not a pu lic purpose for which a tax may e constitutioally levied. The action having een dismissed y the Court of First Instance, the plaintifs appealed the case directly to this Court .>udiciary !ct, section )$/. The asic defect in the plaintiff:s position is his assumption that the tax provided for in Commonwealth !ct No. "#$ is a pure exercise of the taxing power. !nalysis of the !ct, and particularly of section # .heretofore -uoted in full/, will show that the tax is levied with a regulatory purpose, to provide means for the reha ilitation and sta ili5ation of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. This Court can ta%e 'udicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading position among its export products4 that it gives employment to thousands of la orers in fields and factories4 that it is a great source of the state:s wealth, is one of the important sources of foreign exchange needed y our government, and is thus pivotal in the plans of a regime committed to a policy of currency sta ility. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Aence it was competent for the legislature to find that the general welfare demanded that the sugar industry should e sta ili5ed in turn4 and in the wide field of its police power, the lawma%ing ody could provide that the distri ution of enefits therefrom e read'usted among its components to ena le it to resist the added strain of the increase in taxes that it had to sustain .&ligh vs. Bir%wood, 67$ 3. &. "6, "* =. 9d. @7"4 >ohnson vs. &tate ex rel. 0arey, ** Fla. )7)), )6@ &o. @"74 0axcy Inc. vs. 0ayo, ),7 Fla. ""6, )7* &o. )6)/. !s stated in >ohnson vs. &tate ex rel. 0arey, with reference to the citrus industry in Florida 8 The protection of a large industry constituting one of the great sources of the state:s wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population

of the &tate is affected to such an extent y pu lic interests as to e within the police power of the sovereign. .)6@ &p. @"$/. Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of pu lic concern, it follows that the =egislature may determine within reasona le ounds what is necessary for its protection and expedient for its promotion. Aere, the legislative discretion must e allowed fully play, su 'ect only to the test of reasona leness4 and it is not contended that the means provided in section # of the law .a ove -uoted/ ear no relation to the o 'ective pursued or are oppressive in character. If o 'ective and methods are ali%e constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may e made the implement of the state:s police power .Creat !tl. D (ac. Tea Co. vs. Cros'ean, 7,) 3. &. +)6, @) =. 9d. ))*74 3. &. vs. Eutler, 6*$ 3. &. ), @, =. 9d. +$$4 0:Culloch vs. 0aryland, + <heat. 7)#, + =. 9d. "$*/. That the tax to e levied should urden the sugar producers themselves can hardly e a ground of complaint4 indeed, it appears rational that the tax e o tained precisely from those who are to e enefited from the expenditure of the funds derived from it. !t any rate, it is inherent in the power to tax that a state e free to select the su 'ects of taxation, and it has een repeatedly held that 2ine-ualities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation2 .Carmichael vs. &outhern Coal D Co%e Co., 7,) 3. &. +*", @) =. 9d. )6+", citing numerous authorities, at p. )6")/. From the point of view we have ta%en it appears of no moment that the funds raised under the &ugar &ta ili5ation !ct, now in -uestion, should e exclusively spent in aid of the sugar industry, since it is that very enterprise that is eing protected. It may e that other industries are also in need of similar protection4 that the legislature is not re-uired y the Constitution to adhere to a policy of 2all or none.2 !s ruled in 0innesota ex rel. (earson vs. (ro ate Court, 7,* 3. &. 6$,, @+ =. 9d. $++, 2if the law presuma ly hits the evil where it is most felt, it is not to e overthrown ecause there are other instances to which it might have een applied42 and that 2the legislative authority, exerted within its proper field, need not em race all the evils within its reach2 .N. =. ?. E. vs. >ones D =aughlin &teel Corp. 7,) 3. &. ), @) =. 9d. @*7/. 9ven from the standpoint that the !ct is a pure tax measure, it cannot e said that the devotion of tax money to experimental stations to see% increase of efficiency in sugar production, utili5ation of y-products and solution of allied pro lems, as well as to the improvements of living and wor%ing conditions in sugar mills or plantations, without any part of such money eing channeled directly to private persons, constitutes expenditure of tax money for private purposes, .compare 9verson vs. Eoard of 9ducation, *) =. 9d. +$6, )#@ !=? )7*6, )+,,/. The decision appealed from is affirmed, with costs against appellant. &o ordered. Paras, !. J., "engzon, Padilla, concur. e#es, A., Jugo, "autista Angelo, $abrador, and !oncepcion, JJ.,