#13 LUTZ v.

ARANETA MERCADO
Topic: Inherent limitations (Public purpose)

8. CFI dismissed.
9. Plaintiff appealed directly to this Court.

FACTS:

ISSUE: WON the taxes under the Sugar Adjustment Act is

unconstitutional NO.

1. The Sugar Adjustment Act was promulgated, with a

declaration of emergency, due to the threat to our
industry by the imminent imposition of export taxes
upon sugar as provided in the Tydings-McDuffie Act and
the eventual loss of its preferential position in the
United States market
2. The purpose of the said Act was to obtain a stabilize and
readjust the benefits of the sugar industry.
3. Section 2 of the Act provides for an increase of the
existing tax on the manufacture of sugar (on each picul
of sugar manufactured).
4. Section 3 levies on owners or persons in control of lands
devoted to cultivation of sugar cane and ceded to other
for a consideration, on lease, or otherwise a tax
equivalent to the difference between the money value
of the rental or consideration collected and the amount
representing 12 per centum of the assessed value of
such land.
5. Section 6 states that all collections shall accrue to the
Sugar Adjustment and Stabilization Fund and shall be
paid out only to maintain the sugar industry, to readjust
the benefits derived from the industry, to limit the
production of sugar, to afford labor employed in the
industry.
6. Plaintiff Lutz, Judicial Administrator of Intestate Estate of
Ledesma, seeks to recover from the CIR the sum of P14,
666.40 paid by the estate as taxes under section 3.
7. Plaintiffs argument: Alleging that such tax is
unconstitutional being levied for the support of the
sugar industry exclusively which is not a public purpose.

HELD:
1. The basic defect in the plaintiffs position is his
assumption that the tax provided for in the Sugar
Adjustment Act is a pure exercise of taxing power.
2. Section 6 of the Sugar Adjustment Act shows that the
tax is levied with a regulatory purpose, to provide
means for rehabilitation and stabilization of the
threatened sugar industry.
3. The sugar production is one of the great industries of
our nation. Hence, its promotion, protection and
advancement redounds greatly to the general welfare.
4. It was competent for the legislature to find that the
general welfare demanded that the sugar industry
should be stabilized in turn, and in exercise of its police
power, the legislature could provide that the distribution
of benefits therefrom be readjusted among its
components to enable it to resist the added strain of the
increase in taxes that it had to sustain.
5. As a public concern, legislative discretion must be
allowed full play, subject to the test of reasonableness.
6. Moreover, it appears that taxes be obtained from those
who are to be benefited from the expenditure of the
funds derived from it.
7. It is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been
repeatedly held that inequalities which result from
singling out of one particular class for taxation, or
exemption infringe no constitutional limitation.
8. The Act is purely a tax measure.

9. AFFIRMED the decision of the CFI.

DISPOSITIVE: CIR WON.