Planters Product, Inc v.

Fertiphil Corporation
GR. No. 166006
Reyes, R.T., J.:

Facts:
In 1985, Pres. Marcos issued LOI No. 1465 which directs the Administration of the Fertilizers Pesticide Authority to include
in its fertilizer pricing formula a capital contribution component of not less than P10 per bag. Fertiphil, a private corporation
incorporated under Phil. laws, paid the total of P6,689,144 for the fertilizers sold. FPA remitted the amount to FEBTC, the
depository bank of PPI which is a private corporation.

After the Edsa Revolution, FPA stopped the imposition of the levy. Fertiphil then demanded the return of what it paid but
it was refused by PPI. Fertiphil questioned the constitutionality of LOI claiming that it is unjust, unreasonable, oppressive,
invalid and an unlawful imposition amounting to denial of due process. It also alleged that the LOI favored PPI. On the other
hand, PPI countered that the law was a valid exercise of police power.

The RTC rendered judgment in favor of Fertiphil. Even if the law was executed as an exercise of the State’s inherent power
of taxation there is a limitation that it must be for public purpose and not for promotion of private enterprise, except where
the aid is incident to the public benefit.

The CA affirmed the lower court’s decision. It applies the established test to determine the validity of a police measure that
it must be for public interest and the means employed are reasonably necessary.

Issue:
WON LOI no. 1465 was a valid legislation pursuant to the exercise of taxation and police power for public purpose.

Held:
No. Police power and 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 legislation that may interfere with personal liberty or property in order to
promote the general welfare, while the power of taxation is the power to levy taxes 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, the primary purpose of levy is revenue generation to raise funds which imposed benefit to PPI by using the levy
to pay its corporate debts. Also, the levy was conditional and dependent upon PPI becoming financially viable. It would be
a robbery for the State to tax its citizens and use the funds generated for a private purpose.