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Tax Case Digest: Planters Product v. Fertiphil Corp. (2008)

Planters Product v. Fertiphil Corp.
G.R. No. 166006  March 14, 2008

Lessons Applicable:  Bet. private and public suit, easier to file public suit, Apply real party in interest test for private suit and direct injury test for public suit, Validity test varies depending on which inherent power

Laws Applicable:

  • President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others, for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA).
  • FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate debts of Planters Products Inc. (PPI)
  • After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.  Upon return of democracy, Fertiphil demanded a refund but PPI refused.  Fertiphil filed a complaint for collection and damages against FPA and PPI with the RTC on the ground that LOI No. 1465 is unjust, unreaonable oppressive, invalid and unlawful resulting to denial of due process of law.  
  • FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the fertilizing industry in the country and that Fertiphil did NOT sustain damages since the burden imposed fell on the ultimate consumers.
  • RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it  is NOT for public purpose as PPI is a private corporation.
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power

1. Yes.  In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands to be benefited or injured by the judgment in the suit.  In public suits, there is the right of the ordinary citizen to petition the courts to be freed from unlawful government intrusion and illegal official action subject to the  direct injury test or where there must be personal and substantial interest in the case such that he has sustained or will sustain direct injury as a result.  Being a mere procedural technicality, it has also been held that locus standi may be waived in the public interest such as cases of transcendental importance or with far-reaching implications whether  private or public suit, Fertiphil has locus standi.

2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and harm its business.  It is also of paramount public importance since it involves the constitutionality of a tax law and use of taxes for public purpose.

3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have different tests for validity.  Police power is the power of the state to enact the legislation that may interfere with personal liberty on property in order to promote general welfare.  While, the power of taxation is the power to levy taxes as to be used for public purpose.  The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The lawful subjects and lawful means tests are used to determine the validity of a law enacted under the police power.  The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.

In this case, it is for purpose of revenue.  But it is a robbery for the State to tax the citizen and use the funds generation for a private purpose.  Public purpose does NOT only pertain to those purpose which are traditionally viewed as essentially governmental function such as  building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.