EDUARDO M. COJUANGCO, JR., PETITIONER, VS. REPUBLIC OF THE PHILIPPINES, RESPONDENT.

Cojuangco versus Republic of the Philippines

The Case

This is a petition for review brought by Eduardo Cojuangco, Junior against the Republic of the Philippines, assailing a portion of a partial summary judgment rendered by the Sandiganbayan in a suit for the recovery of ill-gotten wealth. The Republic, through the Presidential Commission on Good Government, sought to recover shares of stock in what became the United Coconut Planters Bank, contending that these were acquired using coconut levy funds and that the compensation paid to Cojuangco for his supposed option over the bank shares was without valid consideration. The case matters because it fixes the character of the coconut levy funds as special public funds and settles the ownership of the bank shares acquired through them.

Procedural History

The Republic filed a complaint for recovery of ill-gotten wealth before the Sandiganbayan, docketed as Civil Case Number 0033, which was later subdivided into eight amended complaints, including Civil Case Number 0033-A. On motion of the Republic, the Sandiganbayan rendered a Partial Summary Judgment dated July 11, 2003, declaring the Agreement between the Philippine Coconut Authority and Cojuangco null and void for lack of valuable consideration and declaring the bank shares conclusively owned by the Government. Cojuangco moved for reconsideration, which the Sandiganbayan denied in a Resolution dated December 28, 2004. A subsequent motion to set the case for trial was likewise denied in a Resolution dated May 11, 2007, which declared the partial summary judgment final and appealable. Cojuangco then elevated the matter to the Supreme Court by petition for review under Rule 45. The Court had earlier resolved related petitions in a Decision dated January 24, 2012, but expressly reserved the issues raised in this petition for separate resolution.

Facts

In 1971, Republic Act Number 6260 created the Coconut Investment Company to administer the Coconut Investment Fund, sourced from a levy on the sale of copra. Over the years, several presidential decrees established and regulated various coconut levy funds, including the Coconut Consumers Stabilization Fund and the Coconut Industry Development Fund, all administered by the Philippine Coconut Authority.

To provide credit facilities to coconut farmers, the Philippine Coconut Authority sought to acquire a commercial bank. Pedro Cojuangco controlled the First United Bank, later renamed the United Coconut Planters Bank. Rather than a direct sale, an arrangement was made in which Cojuangco was purportedly given an exclusive and personal option to buy the controlling shares. Two agreements were executed in May 1975: one between Cojuangco and Pedro Cojuangco covering the option shares, and another between Cojuangco and the Philippine Coconut Authority for the acquisition of the bank for the benefit of the coconut farmers. As additional consideration for the buy-out of his option, Cojuangco was to receive equity in the bank, and the Philippine Coconut Authority agreed to cede him shares to maintain his equity position.

The Philippine Coconut Authority paid the entire acquisition price out of the coconut levy fund. Cojuangco later received a total of 95,304 bank shares from the mother shares of the Philippine Coconut Authority. After the 1986 EDSA event, the Presidential Commission on Good Government sequestered the bank shares and instituted the recovery suit, leading to the partial summary judgment now challenged.

Issues

• Whether or not the coconut levy funds are special public funds of the Government.
• Whether or not the Agreement between the Philippine Coconut Authority and Cojuangco, including the compensation paid to him, is null and void for lack of valuable consideration.
• Whether or not the bank shares acquired through the coconut levy funds are conclusively owned by the Government.

Applicable Provisions

Section 1 of Presidential Decree Number 755 provides:

It is hereby declared that the policy of the State is to provide readily available credit facilities to the coconut farmers at preferential rates; that this policy can be expeditiously and efficiently realized by the implementation of the Agreement for the Acquisition of a Commercial Bank for the benefit of Coconut Farmers executed by the Philippine Coconut Authority; and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers.

This provision was invoked to validate the agreement, but the Court found it could not cure the lack of consideration in the compensation paid to Cojuangco.

Section 5, Article III of Presidential Decree Number 961, as amended by Presidential Decree Number 1468, provides:

The Coconut Consumers Stabilization Fund and the Coconut Industry Development Fund as well as all disbursements as herein authorized, shall not be construed as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of Presidential Decree Number 711; the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their private capacities.

This provision was declared unconstitutional for allowing the use and distribution of properties acquired through the coconut levy funds to private individuals for their own direct benefit and absolute ownership.

Ruling

On the first issue, the Court held that the coconut levy funds are special public funds of the Government. They are levied by authority of law and collected for a specific public purpose, namely the benefit of all coconut farmers and the development of the coconut industry.

On the second issue, the Court affirmed the Sandiganbayan's ruling that the Agreement between the Philippine Coconut Authority and Cojuangco, including the compensation paid to him, is null and void for lack of valuable consideration. The Court held that the Agreement did not have the effect of law because it was not published as part of Presidential Decree Number 755, even if Section 1 thereof made reference to it.

On the third issue, the Court affirmed that the bank shares acquired through the coconut levy funds are conclusively owned by the Government, to be used only for the benefit of all coconut farmers and for the development of the coconut industry.

Doctrine

The coconut levy funds are special public funds of the Government, not private funds of the coconut farmers. Properties acquired through these funds, including the bank shares in question, are owned by the Government and must be used solely for the benefit of all coconut farmers and the development of the coconut industry. Any agreement that allows the use or distribution of such properties to private individuals for their own direct benefit and absolute ownership is unconstitutional. An agreement that is not published as part of the decree it seeks to implement does not have the effect of law and cannot validate a transfer of public funds or property without valuable consideration.

Disposition

The petition was denied, and the partial summary judgment of the Sandiganbayan was affirmed. The Government was declared the lawful owner of the bank shares acquired through the coconut levy funds.

Remember This

The single line worth memorizing is that coconut levy funds are special public funds, and properties acquired through them belong to the Government for the benefit of all coconut farmers. Examiners like to use this case to test the character of coconut levy funds and the consequences of using public funds for private benefit.