PLANTERS PRODUCTS INC. vs. FERTIPHIL CORP.

QUESTION: What is Locus Standi?  ANSWER:  The right to stand before the court to bring action against another party for collection and damage because it was the affected party.

Petitioner PLANTERS PRODUCTS INC. and respondent FERTIPHIL CORP. are private corporations engaged in importation and distribution of FERTILIZERS, PESTICIDES & other Agricultural Products.

Then President Marcos issued a Levy Tax through a Letter of Instruction (LOI No. 1465) imposing capital recovery component of P10 per bag of fertilizer to be remitted to FERTILIZER & PESTICIDE AUTHORITY (FPA).  The  levy was to continue till adequate capital was raised to make PPI financially viable.

So FertiPhil remitted the same to said agency, which was then remitted to the depository bank of PPI. FertiPhil paid roughly P6M to FPA from 1985 to 1986. Ito yung kasagsagan ng EDSA Revolution. 

After the 1986 EDSA Revolution, FPA voluntarily stopped the imposition of the P10 levy. FertiPhil therefore demanded from PPI a  full refund of the amount it remitted, however PPI refused.

As a result FertiPhil filed a complaint for collection and damages questioning the constitutionality of LOI 1465, claiming that it was an unjust, unreasonable, oppressive, invalid and unlawful tax imposition that amounted to a denial of due process. 

PPI argues that FertiPhil has no LOCUS STANDI to question the constitutionality of LOI No. 1465 because it doesn’t have a “personal and substantial interest in the case.” Meaning FertiPhil did not suffer any damage from the imposition because incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller fertilizer company. 

ISSUE:

Whether or not FERTIPHIL has Locus Standi to question the constitutionality of LOI No. 1465. (What is POWER OF TAXATION & POLICE POWER?)

RULING:

FERTIPHIL has Locus Standi.  It suffered direct injury because it was a TAX PAYER.  

Actually the doctrine of Locus Standi is a mere procedural technicality which may be waived. In the Abaya vs. Ebdane case the court even took a liberal stance stating that “a taxpayer need not be a party to the contract in order  to challenge its validity” 

I think this is more of a question of whether the imposition operated under the basis of POLICE POWER or the POWER TO TAX which are 2 of the inherent powers of the state.  

Police Power is the power of the state to enact legislation that may interfere with personal liberty or property in or to promote the general welfare, while Power of Taxation is the power to levy taxes to be used for public purpose. 

The main purpose of each: 

Police Power = Regulation of Behavior or Conduct for the Public Welfare

Power of Taxation =   Revenue Generation for the Public Welfare

These powers are distinct and have different tests for validity. The “lawful subject” 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.

While it is true that the power to tax can be used as an implement of Police Power, the primary purpose of the levy was revenue generation.  If the purpose is primarily revenue then the exaction is properly called a tax.    

FertiPhil wins this case.

REBURIANO vs. CA

Alright here we go. Back to the old drawing board.

RTC rendered judgment in favor of Pepsi Cola Bottling Co. ordering a certain James Reburiano and his brother to pay the amount of P55,000 with interest for the unpaid bottles of softdrinks it received from the company. Why only 55,000? well this happened around late 70s to early 80s.   Back when what? we were all sucking pacifiers in our mouths learning to walk in big smiles and all for having our first taste of cold bottled Pepsi Cola even if its just a teeny weeny drop from the bottle just because some stupid crazy adult neared it to our mouth just to see our reaction? :)  Well what can I say, weve been uncontrollable since then.

So the writ of execution was issued.  However, it appeared that prior to the promulgation of the decision of the trial court, private respondent PEPSI COLA, AMENDED ITS ARTICLES OF INCORPORATION TO SHORTEN ITS TERM OF EXISTENCE to July 8, 1983.

Actually the amended articles of incorporation was approved by the SEC. The thing was, the trial court was not notified of this fact. 

Reburiano moved to quash the writ of execution on the grounds that when RTC rendered its decision, the Pepsi Cola  was no longer in existence and had no more juridical personality and so, as such, it no longer had the capacity to sue and be sued; and since Pepsi lost its existence and juridical personality, lawyer for Pepsi therefore had no more client in this case and so his appearance in this case was no longer possible and tenable. 

Private respondent Pepsi of course opposed petitioners' motion. It argued that the jurisdiction of the court as well as the respective parties capacity to sue had already been established during the initial stages of the case.  And that when the complaint was filed in 1982, private respondent was still an existing corporation.  The mere fact that it was dissolved at the time the case was yet to be resolved did not warrant the dismissal of the case or oust the trial court of its jurisdiction. 

Question: What was the purpose therefore of the dissolution?  Private respondent explained that its dissolution was effected in order to transfer its assets to a new firm of almost the same name and was thus only for convenience. Private respondent argues that petitioners knew that it had ceased to exist during the course of the trial of the case but did not act upon this information until the judgment was about to be enforced against them; hence, the filing of a Motion to Quash and the present petition are mere dilatory tactics resorted to by petitioners. 

Pepsi Cola likewise cites the ruling in Gelano v. Court of Appeals that the counsel of a dissolved corporation is deemed a trustee of the same for purposes of continuing such action or actions as may be pending at the time of the dissolution.

RTC denied Reburiano’s petition to quash the writ of execution.  An appeal was made.  CA likewise dismissed the appeal.  Hence, this petition for review on certiorari.

ISSUE: 

Whether or not Pepsi still had juridical personality to pursue its case against Reburiano after a shortening of its corporate existence.

RULING: 

Yes. Petitioner Reburiano etc. are in error in contending that "a dissolved and non-existing corporation could no longer be represented by a lawyer and concomitantly a lawyer could not appear as counsel for a non-existing judicial person.”

The only reason for their refusal to execute the same is that there is no existing corporation to which they are indebted. Such argument is fallacious. The law specifically allows a trustee to manage the affairs of the corporation in liquidation. Consequently, any supervening fact, such as the dissolution of the corporation, repeal of a law, or any other fact of similar nature would not serve as an effective bar to the enforcement of such right.

Remember there is a 3 Year Period Rule in Corporate Dissolution and Liquidation Process?

Sec. 122 of the Corporation Code provides:  Corporate Liquidation. — Every Corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, said corporation is authorized the empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interests, all interests which the corporation had in the property in terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.

With regard to the Trustee Issue: 

In the GELANO Case, the counsel of the dissolved corporation was considered a trustee. Likewise in a later case titled CLEMENTE vs. CA, the court held that the Board of Directors may be permitted to complete the corporate liquidation by continuing as "trustees" by legal implication.

Under Sec. 145 of the Corpo Code - "No right of remedy in favor or against any corporation shall be removed or impaired either by:

1. Subsequent dissolution od said corporation or
2. By any subsequentAmendment or repeal of this code

This provision safeguards the rights of a corporation which is dissolved pending litigation. Since the law specifically allows a trustee to manage the affairs of the corporation in liquidation, any supervening fact, such as

1. Dissolution of the corporation
2. Repeal of the law
3. any other fact of similar nature

would not serve as an effective bar to the enforcement of such right.

Pepsi Cola wins this case.