14 PLANTERS PRODUCTS, INC. v.

FERTIPHIL CORPORATION
General Principles | March 14, 2008 | Justice R.T. Reyes
Nature of Case: Petition for review on certiorari of CA decision
FACTS:
● Petitioner and respondent are private corporations engaged in the importation and distribution of fertilisers, pesticides, and
agricultural chemicals.
● Then President Marcos, in the exercise of his legislative powers, issued LOI 1465 on 3 June 1985 to impose, among
others, a capital recovery component on the domestic sale of all grades of fertilisers in the Philippines.
● Pursuant to the LOI, Fertiphil paid P10 for every bag of fertiliser it sold in the domestic market to the Fertilizer and
Pesticide Authority (FPA). FPA then remitted the amount collected to the Far East Bank and Trust Company, the
depositary bank of PPI. Fertiphil paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986.
● After the 1986 EDSA Revolution, FPA voluntarily stopped the imposition of the P10 levy. With the return of democracy,
Fertiphil demanded from PPI a refund of the amounts it paid under LOI No. 1465, but PPI refused to accede to the
demand.
● Fertiphil filed a complaint for collection and damages against FPA and PPI with the RTC in Makati.
● RTC ruled in favour of Fertiphil.
● CA affirmed RTC, with modification, deleting the award for attorney’s fees. Hence, this petition.

ISSUE/S & RATIO:

1. PROCEDURAL: W/N the constitutionality of LOI 1465 can be collaterally attacked via a default judgment, W/N the
constitutionality was the lis mota of the case, and W/N the person or entity attacking it has standing - YES, YES, YES
a. Contrary to PPI’s claim, the constitutionality of LOI No. 1465 was properly and adequately raised in the
complaint for collection filed with the RTC. Judicial review of official acts on the ground of unconstitutionality
may be sought or availed of through any of the actions cognisable by courts of justice, not just by the Supreme
Court, and not necessarily in a suit for declaratory relief.
b. Direct injury test to determine standing in public suits (People v. Vera): Fertiphil has standing because it suffered
direct injury from the enforcement of the legislation as it was required to pay P10 levy for every bag of fertiliser
sold on the domestic market. Also, factoring in the levy would increase the price of the product, and would lead
to fewer customers.
2. W/N LOI 1465 or the imposition of the levy is an exercise of the taxation power of the State - YES
a. The primary purpose of the levy is revenue generation. If the primary purpose is to generate revenue, or if
revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax.
b. The P10 levy is too excessive to serve a merely regulatory purpose. It increased the price of a bag of fertiliser by
as much as 5%, which would be a big burden on the seller or the ultimate consumer.
c. The LOI also expressly provided that the levy was imposed until adequate capital is raised to make PPI viable.
3. W/N LOI 165 is a valid legislation pursuant to the exercise of taxation and police power for public purposes - NO
a. First, the LOI expressly provided in its Clause 3 that the levy be imposed to benefit PPI, a private company, as
the ultimate beneficiary. This is a clear case of crony capitalism.
b. Second, the LOI provides that the imposition of the P10 levy was conditional and dependent upon PPI becoming
financially viable. This suggests that the levy was actually imposed to benefit PPI.
c. Third, the RTC and the CA held that the levies paid under the LOI were directly remitted and deposited by FPA
to Far East Bank and Trust Company, the depositary bank of PPI. This proves that PPI benefited from the LOI. It
is also proves that the main purpose of the law was to give undue benefit and advantage to PPI.
d. Fourth, the levy was used to pay the corporate debts of PPI, as evidenced by the Letter of Understanding written
by Prime Minister and Minister of Finance Cesar Virata, addressed to PPI’s creditors.
4. W/N doctrine of operative fact is applicable, which would mean that PPI will not have to refund Fertiphil - NO
a. The general rule is that an unconstitutional law is void. It produces no rights, imposes no duties, and affords no
protection. It has no legal effect. It is, in legal contemplation, inoperative as if it has not been passed. Being void,
Fertiphil is not required to pay the levy. All levies paid should be refunded in accordance with the general Civil
Code principle against unjust enrichment. Quite the reverse, it would be inequitable and unjust not to order a
refund. To do so would unjustly enrich PPI at the expense of Fertiphil.

RULING: Petition denied. CA decision affirmed.

NOTE/Other things the Court said:

- Two limitations on the power of taxation: inherent limitations and constitutional limitations
b. One inherent limitation: tax only for valid public purpose
i. A tax, however, is not made void on the ground of want of public interest unless the want of such
interest is clear.
SUMMARY: Marcos issued an LOI which taxed fertiliser companies in order to recover capital for a certain beneficiary.
One company, Fertiphil, filed a complaint against the FPA and PPI after EDSA I on the basis that the LOI was
unconstitutional because the tax benefited a private company and not the public. RTC, CA, and SC ruled in favour of
Fertiphil.

DOCTRINE: It is a general principle that revenues derived from taxes cannot be used for purely private purposes or for
the exclusive benefit of private individuals.