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Republic v. Bacolod-Murcia Milling Co., Inc.

, et
Date: 9 July 1966

Ponente: Justice Regala

Parties: Bacolod-Murcia Milling Co., Inc., Ma-ao Sugar Central Co., Inc., Talisay-Silay
Milling Co., petitioners, v The Republic of the Philippines, respondent

Action: Joint Appeal from Court of First Instance of Manila

• The three sugar centrals are sister companies under single ownership and
• They were required to pay 10 centavos per picul (around 5-6 kilos) of sugar
collected for 5 crop years under Sec. 15 of RA 632.
• The sugar tax was levied to create Philsugin (Philippine Sugar Institute), to conduct
research and development for sugar and sugar by-products.
• Philsugin acquired the Insular Sugar Refinery and lost a lot of money
• Appellants stopped paying the levy because they said that the purchase was
unauthorized by RA 632. They had unpaid balances
• The Court of First Instance said that they had to pay the balance, and the Supreme
Court affirmed its decision
• Special assessments: a levy on property where the property against which it is
levied derives special benefits from how the money was used (in normal people
speak: whatever this tax is spent on will benefit those who paid the tax)
• RA 632: Philippine Sugar Institute charter; where Philsugin is a semi-public
corporation meant to advance the Philippine sugar industry (research, marketing,
o Section 15 of RA 632: to raise funds for Philsugin, annual sugar production
will be levied 10c per picul of sugar collected for 5 crop years, (c.y. 1951-52
to 1956). The amount will be borne by sugar centrals and sugar cane

• CFI case:

o Appellants and another sugar central, Central Azucarera del Danao, had
unpaid balance:

 Bacolod-Murcia: P216,070.50

 Ma-ao: P235,800.20

 Talisay-Silay: P208,193.74
 Danao: P48,059.77

o 3 Sept 1951: Philsugin acquired the Insular Sugar Refinery through the
sugar tax imposed by RA632

o 1954-57: Philsugin lots a LOT of money, and at that time, 70% of Philsugin’s
time and effort had gone into the operation of Insular Sugar Refinery

o Appellants contend that the purchase of the Insular Sugar Refinery, using
money from the Philsugin fun, was not authorized by RA632 and refused to
contribute to it

 10c/picul is a special assessment, not a tax, and property owners who

pay the assessment don’t have to be forced to pay if the proceeds
have been misapplied to their prejudice

o Lower court’s Decision: Apellants are liable for special assessments and
have to pay the balance

 Appellants are liable under RA632

• Section 3 authorizes Philsugin to buy things for sugar and its

by-products, including sugar refineries

 Decision to purchase was made the board of directors, and the

appellants were duly represented by the Philippine Sugar Association,
of which the appellants are members

 All of Philsugin’s transactions pass through the General Auditor, the

Office of the President, and other pertinent authorities and
safeguards in order to ensure that purchases (including that of the
refinery) had been legal and proper

 Appellants’ refusal to pay is like a taxpayer refusing to pay taxes; it’s

dangerous to allow their motion because they were essentially taking
the law into their own hands

• In the PRESENT, the appellants say that:

o Under Section 3 of RA632, Philsugin had no authority to acquire the refinery.

Philsugin is empowered to purchase a “central experiment station or… at
most a sugar central,” not a sugar refinery.

 Cited Collector v Ledesma: definition; sugar central=sugar mill that

manufacture sugar for a number of plantations

o Refusal to pay an assessment is different from refusal to pay a tax, since a

tax is different from an assessment
o The imposition of a special assessment on property owners who won’t
benefit from it is a denial of due process

Issue: Did the CFI make the right call in ruling that the defendants are liable for the
special assessments under RA 632?


• Supreme Court finds for the appellee; CFI decision is AFFIRMED, with costs

• Cited Lutz v Araneta: Section 6 of CA 567 (sugar adjustment act) levies a

tax to accrue to the “Sugar Adjustment and Stabilization Fund”

o SC said that the assailed tax was levied to help rehabilitate and
stabilize the threatened sugar industry (history lesson: before, the
Philippines was a sugar cartel with the US as its top customer, but
the Act that enabled it to supply the US with sugar was expiring)

o The sugar industry was a leading exporter and employer and a

prime source of foreign exchange and state wealth such that its
welfare redounds to general welfare

o The assailed act is therefore an exercise of POLICE POWER because

of its importance to general welfare

• Like in the Lutz v Araneta case, Section 5 of RA632 is an exercise of

police power

• Under Section 2 of RA632, Philsugin is authorized to do research for the sugar

industry “in all its phases,” which justifies its acquisition of the Insular Sugar

• The experience is technically NOT a loss to the industry: through Philsugin’s

purchase, there is now a better appreciation for the management problems faced
by sugar centrals