EDUARDO M. COJUANGCO v. REPUBLIC, GR No.

180705, 2012-11-27
Facts:
the instant petition for review under Rule 45 of the Rules of Court assails and seeks to annul a
portion of the Partial Summary Judgment dated July 11, 2003, as affirmed in a Resolution of
December 28, 2004, both rendered by the Sandiganbayan in its Civil Case
("CC") No. 0033-A
(the judgment shall hereinafter be referred to as "PSJ-A")
We upheld the Sandiganbayan's ruling that the coconut levy funds are special public funds of
the Government.
's declaration that Sections 1 and 2 of Presidential Decree ("P.D.") 755, Section 3, Article III of
P.D. 961... and Section 3, Article III of P.D. 1468, as well as the pertinent implementing
regulations of the Philippine Coconut Authority ("PCA"), are unconstitutional for allowing the use
and/or the distribution of properties acquired through the coconut levy funds to private
individuals... for their own direct benefit and absolute ownership. The Decision also affirmed the
Government's ownership of the six CIIF companies, the fourteen holding companies, and the
CIIF block of San Miguel Corporation shares of stock, for having likewise been acquired using
the coconut... levy funds. Accordingly, the properties subject of the January 24, 2012 Decision
were declared owned by and ordered reconveyed to the Government, to be used only for the
benefit of all coconut farmers and for the development of the coconut industry.
In 1971, Republic Act No. ("R.A.") 6260 was enacted creating the Coconut Investment
Company ("CIC") to administer the Coconut Investment Fund ("CIF"), which, under Section 8
thereof, was to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of... copra. Of the
PhP 0.55 levy of which the copra seller was or ought to be issued COCOFUND receipts, PhP
0.02 was placed at the disposition of COCOFED, the national association of coconut producers
declared by the Philippine Coconut Administration ("PHILCOA" now "PCA") as... having the
largest membership.
the PCA, by statutory provisions scattered in different coco levy decrees, had its share of the...
coco levy.

5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised
Coconut Industry Code), read:

Section 5. Exemption. The [CCSF] and the [CIDF] 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 PD 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
Through the years, a part of the coconut levy funds went directly or indirectly to [finance] various
projects and/or was converted into various assets or investments.[11] Relevant to the present
petition is the acquisition of the First United Bank
("FUB"), which was subsequently renamed as United Coconut Planters Bank ("UCPB").
The plan, then, was for PCA to buy all of Pedro Cojuangco's... shares in FUB. However, as later
events unfolded, a simple direct sale from the seller (Pedro) to PCA did not ensue as it was
made to appear that Cojuangco had the exclusive option to acquire the former's FUB controlling
interests.
Emerging from this elaborate, circuitous... arrangement were two deeds.
The first one was simply denominated as Agreement, dated May 1975, entered into by and
between Cojuangco for and in his behalf and in behalf of "certain other buyers", and Pedro
Cojuangco in which the former was purportedly accorded the... option to buy 72.2% of FUB's
outstanding capital stock, or 137,866 shares (the "option shares," for brevity), at PhP 200 per
share.
The second but related contract, dated May 25, 1975, was denominated as Agreement for the
Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines. It
had PCA, for itself and for the benefit of the coconut farmers, purchase from Cojuangco... the
shares of stock subject of the First Agreement for PhP200.00 per share. As additional
consideration for PCA's buy-out of what Cojuangco would later claim to be his exclusive and
personal option, it was stipulated that, from PCA, Cojuangco shall receive equity in FUB...
amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares. And so as not to dilute
Cojuangco's equity position in FUB, later UCPB, the PCA agreed under paragraph 6 (b) of the
second agreement to cede over to the former a number of fully paid FUB shares out of the
shares it
(PCA) undertakes to eventually subscribe. It was further stipulated that Cojuangco would act as
bank president for an extendible period of 5 years.
Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA used
public funds x x x in the total amount of P150 million, to purchase the FUB shares amounting to
72.2% of the authorized capital stock of the
FUB, although the PCA was later reimbursed from the coconut levy funds
Issues:
Cojuangco's petition formulates the issues in question form, as follows:... a.  Is the acquisition of
the [so-called Cojuangco, Jr. UCPB shares] by petitioner Cojuangco x x x "not supported by
valuable consideration and, therefore, null and void"?... b. Did the Sandiganbayan have
jurisdiction, in Civil Case No. 0033-A, an "ill-gotten wealth" case brought under [EO] Nos. 1 and
2, to declare the [Cojuangco UCPB shares] acquired by virtue of the Pedro Cojuangco, et al.
Agreement and/or the PCA Agreement null and... void because "not supported by valuable
consideration"?... c.  Was the claim that the acquisition by petitioner Cojuangco of shares
representing 7.2% of the outstanding capital stock of FUB (later UCPB) "not supported by
valuable consideration", a "claim" pleaded in the complaint and may therefore be the basis of a
"summary... judgment" under Section 1, Rule 35 of the Rules of Court?... d. By declaring the
[Cojuangco UCPB shares] as "not supported by valuable consideration, and therefore, null and
void", did the Sandiganbayan effectively nullify the PCA Agreement? May the Sandiganbayan
nullify the PCA Agreement when the parties to the Agreement, namely: x x x... concede its
validity? If the PCA Agreement be deemed "null and void", should not the FUB (later UCPB)
shares revert to petitioner Cojuangco (under the PCA Agreement) or to Pedro Cojuangco, et al.
x x x? Would there be a basis then, even assuming the absence of... consideration x x x, to
declare 7.2% UCPB shares of petitioner Cojuangco as "conclusively owned by the plaintiff
Republic of the Philippines"?
Ruling:
The Sandiganbayan has jurisdiction over the subject matter of... the subdivided amended
complaints,... including the shares allegedly acquired by Cojuangco... by virtue of the PCA
Agreements.
The issue of jurisdiction over the subject matter of the subdivided amended complaints has
peremptorily been put to rest by the Court in its January 24, 2012 Decision in COCOFED v.
Republic. There, the Court, citing Regalado[27] and settled... jurisprudence, stressed the
following interlocking precepts: Subject matter jurisdiction is conferred by law, not by the
consent or acquiescence of any or all of the parties.
In no uncertain terms, the Court has upheld the Sandiganbayan's assumption of jurisdiction
over the subject matter of Civil Case Nos. 0033-A and 0033-F.[29] The Court wrote:
Judging from the allegations of the defendants' illegal acts thereat made, it is fairly obvious that
both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series of
1986, the nature of ill-gotten wealth suits.
The Court can take, as it has in fact taken, judicial notice of schemes and machinations that
have been put in place to keep ill-gotten assets under wraps. These... would include the setting
up of layers after layers of shell or dummy, but controlled, corporations[31] or manipulated
instruments calculated to confuse if not altogether mislead would-be investigators from
recovering wealth deceitfully amassed at the... expense of the people or simply the fruits
thereof. Transferring the illegal assets to third parties not readily perceived as Marcos cronies
would be another.
We, therefore, reiterate our holding in COCOFED v. Republic respecting the Sandiganbayan's
jurisdiction over the subject matter of Civil Case No. 0033-A, including those matters whose
adjudication We shall resolve in the present case.
PRELIMINARILY, THE AGREEMENT BETWEEN
THE PCA AND EDUARDO M. COJUANGCO, JR. DATED MAY 25, 1975
CANNOT BE ACCORDED THE STATUS OF A LAW FOR THE
LACK OF THE REQUISITE PUBLICATION.
Publication [of the law] is indispensable in every case x x x
Consequently, We join the Sandiganbayan in its holding that the PCA-Cojuangco Agreement
shall be treated as an ordinary transaction between agreeing minds to be governed by contract
law under the Civil Code.
III
THE PCA-COJUANGCO AGREEMENT IS A VALID CONTRACT
FOR HAVING THE REQUISITE CONSIDERATION.
provisions of the Civil Code state:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (Emphasis supplied)[42]
Art. 1409. The following contracts are inexistent and void from the beginning:... x x x x
(3) Those whose cause or object did not exist at the time of the transaction;
After a circumspect study, the Court finds as inconclusive the evidence relied upon by
Sandiganbayan to support its ruling that the PCA-Cojuangco Agreement is devoid of sufficient
consideration
The presumption that a contract has sufficient consideration cannot be overthrown by the bare
uncorroborated and self-serving assertion of petitioners that it has no consideration. To
overcome the presumption of consideration, the alleged lack of consideration... must be shown
by preponderance of evidence. Petitioners failed to discharge this burden x x x.
Inadequacy of the consideration, however, does not render a contract void under Article 1355 of
the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied.)
Vales v. Villa[51] elucidates why a bad transaction cannot serve as basis for voiding a contract
There must be, in addition, a violation of law, the commission of what the law knows as an
actionable wrong, before the... courts are authorized to lay hold of the situation and remedy it.
(Emphasis ours.)
A government agency, like the PCA, stoops down to level of an ordinary citizen when... it enters
into a private transaction with private individuals.
While consideration is usually in the form of money or property, it need not be monetary. This is
clear from Article 1350 which reads:
Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure... beneficence, the mere liability of the
benefactor. (Emphasis supplied.)
The Sandiganbayan viewed the compensation of petitioner of 14,400 FUB shares as exorbitant.
In the absence of proof to the contrary and considering the absence of any complaint of illegality
or fraud from any of the contracting parties, then the presumption that "private... transactions
have been fair and regular"[53] must apply.
In view of the foregoing, the Court is left with no option but to uphold the validity of the two
agreements in question.
IV
COJUANGCO IS NOT ENTITLED TO THE UCPB SHARES
WHICH WERE BOUGHT WITH PUBLIC FUNDS
AND HENCE, ARE PUBLIC PROPERTY.
.
The coconut levy funds were exacted for a... special public purpose. Consequently, any... use or
transfer of the funds that directly... benefits private individuals should be... invalidated.
coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional
contributions from pers
Based on its definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its
sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall...
squarely into these elements
Like other tax measures, they were not voluntary payments or donations by the people. They
were enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:
"3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing
administrative and special law, pay a fine of not less than P2, 500 or more than
P10,000, or suffer cancellation of licenses to operate, or both, at the discretion of the Court."
They were clearly imposed for a public purpose. There is absolutely no question that they were
collected to advance the government's avowed policy of protecting the coconut industry.
The Court has also recently declared that the coco-levy funds are in the nature of taxes and can
only be used for public purpose.
it is at once apparent that any property acquired by means of the coconut levy funds, such as
the subject UCPB shares, should be treated as public funds or public property, subject to the
burdens and restrictions attached by law to such property.
Consequently, Cojuangco cannot stand to benefit by receiving, in his private capacity, 7.22% of
the FUB shares without violating... the constitutional caveat that public funds can only be used
for public purpose. Accordingly, the 7.22% FUB (UCPB) shares that were given to Cojuangco
shall be returned to the Government, to be used "only for the benefit of all coconut farmers and
for the development of the... coconut industry."... not only were the laws unconstitutional for
decreeing the distribution of the shares of stock for free to the coconut farmers and therefore
negating the public purposed declared by P.D. No. 276, i.e., to stabilize the price of edible oil
and to protect the coconut... industry. They likewise reclassified the coconut levy fund as private
fund, to be owned by private individuals in their private capacities, contrary to the original
purpose for the creation of such fund. To compound the situation, the offending provisions...
effectively removed the coconut levy fund away from the cavil of public funds which normally
can be paid out only pursuant to an appropriation made by law. The conversion of public funds
into private assets was illegally allowed, in fact mandated, by these provisions. Clearly...
therefore, the pertinent provisions of P.D. Nos. 755, 961 and 1468 are unconstitutional for
violating Article VI, Section 29 (3) of the Constitution. In this context, the distribution by PCA of
the UCPB shares purchased by means of the coconut levy fund a special fund of the...
government to the coconut farmers is, therefore, void.
We, therefore, affirm, on this ground, the decision of the Sandiganbayan nullifying the shares of
stock transfer to Cojuangco.
Principles:
ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking undue
advantage of relationships or influence and/or through or as a... result of improper use,
conversion or diversion of government funds or property.
There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the
Sandiganbayan has jurisdiction over the subject matter of the complaints
Moreover, the Court finds no rule that directs the plaintiff to first prove the subject matter
jurisdiction of the court before which the complaint is filed. Rather, such burden falls on the
shoulders of defendant in the hearing of a motion to dismiss... anchored on said ground or a
preliminary hearing thereon when such ground is alleged in the answer.
Laws must come out in the open in the clear light of the sun instead of skulking in the shadows
with their dark, deep secrets.
The publication, as further held in Tañada, must be of the full text of the law since the purpose
of publication is to inform the public of the contents of the law. Mere referencing the number of
the presidential decree, its title or whereabouts and its supposed date of... effectivity would not
satisfy the publication requirement.
WHEREFORE, Part C of the appealed Partial Summary Judgment in Sandiganbayan Civil Case
No. 0033-A is AFFIRMED with modification. As MODIFIED, the dispositive portion in Part C of
the Sandiganbayan's Partial Summary Judgment in Civil Case No. 0033-A, shall... read as
follows:
Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. COJUANGCO, JR.)
dated September 18, 2002 filed by Plaintiff.
Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo M.
Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law
because of the non-publication of the said Agreement.
The Agreement between PCA and defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 is
a valid contract for having the requisite consideration under Article 1318 of the Civil Code.
The transfer by PCA to defendant Eduardo M. Cojuangco, Jr. of 14,400 shares of stock of FUB
(later UCPB) from the "Option Shares" and the additional FUB shares subscribed and paid by
PCA, consisting of
Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out of the authorized but unissued
shares of the bank, subscribed and paid by PCA;
Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock
subscribed and paid by PCA; and
Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the PCA-
Cojuangco Agreement dated May 25, 1975 or the so-called "Cojuangco-UCPB shares"... is
declared unconstitutional, hence null and void.
The above-mentioned shares of stock of the FUB/UCPB transferred to defendant Cojuangco
are hereby declared conclusively owned by the Republic of the Philippines to be used only for
the benefit of all coconut farmers and for the development of the coconut industry, and...
ordered reconveyed to the Government.
The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo
M. Cojuangco, Jr. which form part of the 72.2% shares of the FUB/UCPB paid for by the PCA
with public funds later charged to the coconut levy funds, particularly the CCSF, belong to the...
plaintiff Republic of the Philippines as their true and beneficial owner.
Accordingly, the instant petition is hereby DENIED.