fertiphiul

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    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, 1985Marcos, 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 allegesthe 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..

    PPIMRDENIED

    CA: affirmed

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    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 taxationcircumscribed 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.

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    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 literalmeaning. 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 topay until adequate capital is raised by PPI.

    3. The sum collected were totally remitted to the depositary bank of PPI. Hence, main purpose ofthe 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 corporaterehabilitation 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.