G.R. No.

L-7859 December 22, 1955

WALTER LUTZ, as Ju!c!a" Am!#!s$ra$or o% $&e '#$es$a$e Es$a$e o% $&e ecease A#$o#!o
Ja(me Leesma, 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. "#$, otherwise %nown as the &ugar !d'ustment !ct.
(romulgated in )*+,, the law in -uestion opens .section )/ with a declaration of emergency, due to
the threat to our industry y the imminent imposition of export taxes upon sugar as provided in the
Tydings-0c1uffe !ct, and the 2eventual loss of its preferential position in the 3nited &tates mar%et24
wherefore, the national policy was expressed 2to otain a read'ustment of the enefits derived from
the sugar industry y the component elements thereof2 and 2to staili5e the sugar industry so as to
prepare it for the eventuality of the loss of its preferential position in the 3nited &tates mar%et and
the imposition of the export taxes.2
In section 6, Commonwealth !ct "#$ 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 &taili5ation 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 laorers in
the factory and in the field 8 so that all might continue profitaly to engage
therein4lawphi).net
Third, to limit the production of sugar to areas more economically suited to the production
thereof4 and
Fourth, to afford laor employed in the industry a living wage and to improve their living and
wor%ingconditions; (rovided, That the (resident of the (hilippines may, until the ad'ourment
of the next regular session of the National !ssemly, ma%e the necessary disursements
from the fund herein created .)/ for the estalishment 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 adaptale 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
possiility of utili5ing the other y-products of the industry, .f/ to determine what crop or crops
are suitale for rotation and for the utili5ation of excess cane lands, and .g/ on other
prolems the solution of which would help rehailitate and staili5e 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 hereinefore enumerated,
and, li%ewise, authori5ing the disursement 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 pulic 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 rehailitation and staili5ation 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 laorers 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 staility. 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 staili5ed in
turn4 and in the wide field of its police power, the lawma%ing ody could provide that the distriution
of enefits therefrom e read'usted among its components to enale 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 pulic interests as to e within the police power
of the sovereign. .)6@ &p. @"$/.
Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of
pulic concern, it follows that the =egislature may determine within reasonale ounds what is
necessary for its protection and expedient for its promotion. Aere, the legislative discretion must e
allowed fully play, su'ect only to the test of reasonaleness4 and it is not contended that the means
provided in section # of the law .aove -uoted/ ear no relation to the o'ective pursued or are
oppressive in character. If o'ective and methods are ali%e constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may
e made the implement of the state:s police power .Creat !tl. D (ac. Tea Co. vs. Cros'ean, 7,) 3.
&. +)6, @) =. 9d. ))*74 3. &. vs. Eutler, 6*$ 3. &. ), @, =. 9d. +$$4 0:Culloch vs. 0aryland, + <heat.
7)#, + =. 9d. "$*/.
That the tax to e levied should urden the sugar producers themselves can hardly e a ground of
complaint4 indeed, it appears rational that the tax e otained precisely from those who are to e
enefited from the expenditure of the funds derived from it. !t any rate, it is inherent in the power to
tax that a state e free to select the su'ects of taxation, and it has een repeatedly held that
2ine-ualities which result from a singling out of one particular class for taxation, or exemption infringe
no constitutional limitation2 .Carmichael vs. &outhern Coal D Co%e Co., 7,) 3. &. +*", @) =. 9d.
)6+", citing numerous authorities, at p. )6")/.
From the point of view we have ta%en it appears of no moment that the funds raised under the &ugar
&taili5ation !ct, now in -uestion, should e exclusively spent in aid of the sugar industry, since it is
that very enterprise that is eing protected. It may e that other industries are also in need of similar
protection4 that the legislature is not re-uired y the Constitution to adhere to a policy of 2all or
none.2 !s ruled in 0innesota ex rel. (earson vs. (roate Court, 7,* 3. &. 6$,, @+ =. 9d. $++, 2if the
law presumaly 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 emrace 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 prolems, 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.