G.R. No.

L-7859 December 22, 1955 ultimately to insure its continued existence notwithstanding the loss of that market
and the consequent necessity of meeting competition in the free markets of the
WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased world;
Antonio Jayme Ledesma,plaintiff-appellant,
vs. Second, to readjust the benefits derived from the sugar industry by all of the
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee. component elements thereof — the mill, the landowner, the planter of the sugar cane,
and the laborers in the factory and in the field — so that all might continue profitably
Ernesto J. Gonzaga for appellant. to engage therein;lawphi1.net
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E.
Torres and Solicitor Felicisimo R. Rosete for appellee. Third, to limit the production of sugar to areas more economically suited to the
production thereof; and

REYES, J.B L., J.: Fourth, to afford labor employed in the industry a living wage and to improve their
living and working conditions: Provided, That the President of the Philippines may,
This case was initiated in the Court of First Instance of Negros Occidental to test the legality until the adjourment of the next regular session of the National Assembly, make the
of the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar necessary disbursements from the fund herein created (1) for the establishment and
Adjustment Act. operation of sugar experiment station or stations and the undertaking of researchers
(a) to increase the recoveries of the centrifugal sugar factories with the view of
reducing manufacturing costs, (b) to produce and propagate higher yielding varieties
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency,
of sugar cane more adaptable to different district conditions in the Philippines, (c) to
due to the threat to our industry by the imminent imposition of export taxes upon sugar as
lower the costs of raising sugar cane, (d) to improve the buying quality of denatured
provided in the Tydings-McDuffe Act, and the "eventual loss of its preferential position in the
alcohol from molasses for motor fuel, (e) to determine the possibility of utilizing the
United States market"; wherefore, the national policy was expressed "to obtain a
readjustment of the benefits derived from the sugar industry by the component elements other by-products of the industry, (f) to determine what crop or crops are suitable for
thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of rotation and for the utilization of excess cane lands, and (g) on other problems the
solution of which would help rehabilitate and stabilize the industry, and (2) for the
its preferential position in the United States market and the imposition of the export taxes."
improvement of living and working conditions in sugar mills and sugar plantations,
authorizing him to organize the necessary agency or agencies to take charge of the
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the expenditure and allocation of said funds to carry out the purpose hereinbefore
manufacture of sugar, on a graduated basis, on each picul of sugar manufactured; while enumerated, and, likewise, authorizing the disbursement from the fund herein
section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar created of the necessary amount or amounts needed for salaries, wages, travelling
cane and ceded to others for a consideration, on lease or otherwise — expenses, equipment, and other sundry expenses of said agency or agencies.

a tax equivalent to the difference between the money value of the rental or Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of
consideration collected and the amount representing 12 per centum of the assessed Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of
value of such land. P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-
1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the
According to section 6 of the law — aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public
purpose for which a tax may be constitutioally levied. The action having been dismissed by
SEC. 6. All collections made under this Act shall accrue to a special fund in the the Court of First Instance, the plaintifs appealed the case directly to this Court (Judiciary Act,
Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' section 17).
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. The basic defect in the plaintiff's position is 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
First, to place the sugar industry in a position to maintain itself, despite the gradual particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a
loss of the preferntial position of the Philippine sugar in the United States market, and
regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened From the point of view we have taken it appears of no moment that the funds raised under
sugar industry. In other words, the act is primarily an exercise of the police power. the Sugar Stabilization Act, now in question, should be exclusively spent in aid of the sugar
industry, since it is that very enterprise that is being protected. It may be that other industries
This Court can take judicial notice of the fact that sugar production is one of the great are also in need of similar protection; that the legislature is not required by the Constitution to
industries of our nation, sugar occupying a leading position among its export products; that it adhere to a policy of "all or none." As ruled in Minnesota ex rel. Pearson vs. Probate Court,
gives employment to thousands of laborers in fields and factories; that it is a great source of 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where it is most felt, it is not
the state's wealth, is one of the important sources of foreign exchange needed by our to be overthrown because there are other instances to which it might have been applied;" and
government, and is thus pivotal in the plans of a regime committed to a policy of currency that "the legislative authority, exerted within its proper field, need not embrace all the evils
stability. Its promotion, protection and advancement, therefore redounds greatly to the within its reach" (N. L. R. B. vs. Jones & Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).
general welfare. Hence 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 Even from the standpoint that the Act is a pure tax measure, it cannot be said that the
police power, the lawmaking body could provide that the distribution of benefits therefrom be devotion of tax money to experimental stations to seek increase of efficiency in sugar
readjusted among its components to enable it to resist the added strain of the increase in production, utilization of by-products and solution of allied problems, as well as to the
taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. improvements of living and working conditions in sugar mills or plantations, without any part
State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. of such money being channeled directly to private persons, constitutes expenditure of tax
121). money for private purposes, (compare Everson vs. Board of Education, 91 L. Ed. 472, 168
ALR 1392, 1400).
As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida —
The decision appealed from is affirmed, with costs against appellant. So ordered.
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 State is affected to such an extent by public interests as to be
within the police power of the sovereign. (128 Sp. 857).

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 fully 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 (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U. S. 412, 81 L. Ed. 1193;
U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat. 316, 4 L. Ed.
579).

That the tax to be levied should burden the sugar producers themselves can hardly be a
ground of complaint; indeed, it appears rational that the tax be obtained precisely from those
who are to be benefited from the expenditure of the funds derived from it. At any rate, it is
inherent in the power to tax that a state be free to select the subjects of taxation, and it has
been repeatedly held that "inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation" (Carmichael vs. Southern Coal
& Coke Co., 301 U. S. 495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251).