Facts:

Petitioner and private respondents are private corporations incorporated under Philippine laws. They are both engaged in the importation and distribution of fertilizers and pesticides and agricultural chemicals.

June 3, 1985 Marcos, exercising his legislative powers issued LOI 1465 (letter of instruction) which provided the imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers in the Philippines. LOI, provides a capital component of not less than P10 per bag. Goal is to collect as much until PPI, petitioner, becomes financially viable. Respondents, paid 10 per bag to the Fertilizer and Pesticide Authority (FPA.) FPA then remitted the amount collected to the Far East bank and Trust Company, depositary bank of petitioners. In total, P6,689.144 from july 8, 1985 to January 25, 1986.

-----------after the 1986 edsa revolution, FPA voluntarily stopped the imposition of the P10levy. And then Fertiphil demanded from PPi a refund of the amount paid pursuant to LOI 1465, but PPI refused.

A complaint for collection and damages was filed against FPA and PPi with the RTC in Makati. It alleges the constitutionality of LOI 1465 for being unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law. That LOI solely favoured PPi a private corporation which used the proceeds to maintain its monopoly of the fertilizer industry. ANSWER, FPA, through SOL. Gen, countered that the issuance of LOI no. 1465 was a valid exercise of the police power of the state in ensuring the stability of the fertilizer industry in the country. RTC: decided in favour of fertiphil and against PPI. It ordered the payment of the sum with interest at 12% per annum. Mainly..

RTC: LOI was not a valid exercise of states inherent power of taxation as the basic principle of taxation is that it can only be levied for public purpose only.. PPI MR DENIED CA: affirmed

ISSUE: 1. WON the issuance of the LOI 1465 was a valid exercise of the taxation of power of the state. 2. WON the levy was for a public purpose SC: affirmed the decision of CA and RTC. PPi argues that LOI 1465 is a valid exercise of police power. It was implemented for the purpose of assuring the fertilizer supply and distribution in the country and for benefitting a foundation created by law to hold In trust for millions of farmers their stock ownership in PPI. Fertiphil. Claims.. it is unconstitutional as it advances the private interest of PPI. Using the money to pay for its corporate debt. SC, drew a line between police power and power of taxation. Police power is the power of the state to enact legislation that may interfere with personal liberty or property in order to promote general welfare, while the power of taxation is the power to levy taxes to be used for public purpose. The main purpose of police power is the regulation of a behaviour or conduct, while taxation is revenue generation.

Tests. Lawful subjects and lawful means. Are used to determine the validity of a law enacted under police power. Power of taxation circumscribed by inherent and constitutional limitations. ---If the primary purpose of the levy is revenue generation then the exaction of it is called tax. SC further explained, that the P10 additional are as much as 5% of the total prize per bag which are too excessive and a big burden on the seller or the ultimate consumer. The LOI further subscribed that it is imposed until adequate capital is raised to make PPI Viable.

2. It was not for a public purpose. DOCTRINE: taxes are exacted ONLY for a public purpose. They cannot be used for purely private purposes or for the exclusive benefit of private purposes. The reason is simple. The power to tax exists for public welfare, hence; it is implicit in its power is the limitation it should only for a public purpose.

Sc.judiciary.gov.ph/jurisprudence/2008/march2008/160006.htm Public purpose is a broad concept. For public purpose includes relocation of illegal settlers, low-cost housing and urban or agrarian reform. Proof that it served only for a private purpose 1. The text. Applying a principle in stat con that a text in a statute should be given a literal meaning. In this case, the text of LOI is plain that the levy was imposed in order to raise capital for PPI. The framers of the LOI did not even hide the insidious purpose of the law. They were cavalier enough to name PPI as the sole beneficiary of the taxes levied under LOI. 2. P10 imposition was solely dependent on PPI becoming financially viable. They are required to pay until adequate capital is raised by PPI. 3. The sum collected were totally remitted to the depositary bank of PPI. Hence, main purpose of the law is to give undue benefit and advantage to PPI. 4. The levy was used to pay the corporate debts of PPI. Proven by petitions for corporate rehabilitation against PPI before the SEC. and a letter of undertaking signed by Prime Minister then and minister of Finance recognizing that PPI was in a financial distress. It may be enacted under a valid police power, but power of taxation was not as it did not promote public welfare.