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

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 Summary: • The three sugar centrals are sister companies under single ownership and management. • 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 Definitions: • 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, etc.) 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 planters Facts: • CFI case: o Appellants and another sugar central, Central Azucarera del Danao, had unpaid balance:    Bacolod-Murcia: Ma-ao: Talisay-Silay: P216,070.50 P235,800.20 P208,193.74

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




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


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


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? Ruling: • • 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) 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 The assailed act is therefore an exercise of POLICE POWER because of its importance to general welfare


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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 Refinery 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

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