Republic of the Philippines

Supreme Court

Baguio City

 

 

EN BANC

 

REPUBLIC OF THE PHILIPPINES,

Petitioner,

 

 

- versus -

 

 

SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR., AGRICULTURAL CONSULTANCY SERVICES, INC., ARCHIPELAGO REALTY CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC., CHRISTENSEN PLANTATION COMPANY, DISCOVERY REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., FAR EAST RANCH, INC., FILSOV SHIPPING COMPANY, INC., FIRST UNITED TRANSPORT, INC., HABAGAT REALTY DEVELOPMENT, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP., LABAYUG AIR TERMINALS, INC., LANDAIR INTERNATIONAL MARKETING CORP., LHL CATTLE CORP., LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS CORP., OCEANSIDE MARITIME ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING CORP., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONG-BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., RADYO PILIPINO CORP., RANCHO GRANDE, INC., REDDEE DEVELOPERS, INC., SAN ESTEBAN DEVELOPMENT CORP., SILVER LEAF PLANTATIONS, INC., SOUTHERN SERVICE TRADERS, INC., SOUTHERN STAR CATTLE CORP., SPADE ONE RESORTS CORP., UNEXPLORED LAND DEVELOPERS, INC., VERDANT PLANTATIONS, INC., VESTA AGRICULTURAL CORP. AND WINGS RESORTS CORP.,

Respondents.

 

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REPUBLIC OF THE PHILIPPINES,

Petitioner,

 

 

- versus -

 

 

SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR., MEADOW LARK PLANTATIONS, INC., SILVER LEAF PLANTATIONS, INC., PRIMAVERA FARMS, INC., PASTORAL FARMS, INC., BLACK STALLION RANCH, INC., MISTY MOUNTAINS AGRICULTURAL CORP., ARCHIPELAGO REALTY CORP., AGRICULTURAL CONSULTANCY SERVICES, INC., SOUTHERN STAR CATTLE CORP., LHL CATTLE CORP., RANCHO GRANDE, INC., DREAM PASTURES, INC., FAR EAST RANCH, INC., ECHO RANCH, INC., LAND AIR INTERNATIONAL MARKETING CORP., REDDEE DEVELOPERS, INC., PCY OIL MANUFACTURING CORP., LUCENA OIL FACTORY, INC., METROPLEX COMMODITIES, INC., VESTA AGRICULTURAL CORP., VERDANT PLANTATIONS, INC., KAUNLARAN AGRICULTURAL CORP., ECJ & SONS AGRICULTURAL ENTERPRISES, INC., RADYO PILIPINO CORP., DISCOVERY REALTY CORP., FIRST UNITED TRANSPORT, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., ARCHIPELAGO FINANCE AND LEASING CORP., SAN ESTEBAN DEVELOPMENT CORP., CHRISTENSEN PLANTATION COMPANY, NORTHERN CARRIERS CORP., VENTURE SECURITIES, INC., BALETE RANCH, INC., ORO VERDE SERVICES, INC., and KALAWAKAN RESORTS, INC.,

                              Respondents.

 

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REPUBLIC OF THE PHILIPPINES,

Petitioner,

 

 

- versus -

 

 

EDUARDO M. COJUANGCO, JR., FERDINAND E. MARCOS, IMELDA R. MARCOS, EDGARDO J. ANGARA,* JOSE C. CONCEPCION, AVELINO V. CRUZ, EDUARDO U. ESCUETA, PARAJA G. HAYUDINI, JUAN PONCE ENRILE, TEODORO D. REGALA, DANILO URSUA, ROGELIO A. VINLUAN, AGRICULTURAL CONSULTANCY SERVICES, INC., ANGLO VENTURES, INC., ARCHIPELAGO REALTY CORP., AP HOLDINGS, INC., ARC INVESTMENT, INC., ASC INVESTMENT, INC., AUTONOMOUS DEVELOPMENT CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC., CAGAYAN DE ORO OIL COMPANY, INC., CHRISTENSEN PLANTATION COMPANY, COCOA INVESTORS, INC., DAVAO AGRICULTURAL AVIATION, INC., DISCOVERY REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., ECJ & SONS AGRI. ENT., INC., FAR EAST RANCH, INC., FILSOV SHIPPING COMPANY, INC., FIRST MERIDIAN DEVELOPMENT, INC., FIRST UNITED TRANSPORT, INC., GRANEXPORT MANUFACTURING CORP., HABAGAT REALTY DEVELOPMENT, INC., HYCO AGRICULTURAL, INC., ILIGAN COCONUT INDUSTRIES, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP., LABAYOG AIR TERMINALS, INC., LANDAIR INTERNATIONAL MARKETING CORP., LEGASPI OIL COMPANY, LHL CATTLE CORP., LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS CORP., OCEANSIDE MARITIME ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING CORP., PHILIPPINE RADIO CORP., INC., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONG-BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., RADYO PILIPINO CORP., RANCHO GRANDE, INC., RANDY ALLIED VENTURES, INC., REDDEE DEVELOPERS, INC., ROCKSTEEL RESOURCES, INC., ROXAS SHARES, INC., SAN ESTEBAN DEVELOPMENT CORP., SAN MIGUEL CORPORATION OFFICERS, INC., SAN PABLO MANUFACTURING CORP., SOUTHERN LUZON OIL MILLS, INC., SILVER LEAF PLANTATIONS, INC., SORIANO SHARES, INC., SOUTHERN SERVICE TRADERS, INC., SOUTHERN STAR CATTLE CORP., SPADE 1 RESORTS CORP., TAGUM AGRICULTURAL DEVELOPMENT CORP., TEDEUM RESOURCES, INC., THILAGRO EDIBLE OIL MILLS, INC., TODA HOLDINGS, INC., UNEXPLORED LAND DEVELOPERS, INC., VALHALLA PROPERTIES, INC., VENTURES SECURITIES, INC., VERDANT PLANTATIONS, INC., VESTA AGRICULTURAL CORP. and WINGS RESORTS CORP.,

Respondents.

 

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JOVITO R. SALONGA, WIGBERTO E. TAÑADA, OSCAR F. SANTOS, VIRGILIO M. DAVID, ROMEO C. ROYANDAYAN for himself and for SURIGAO DEL SUR FEDERATION OF AGRICULTURAL COOPERATIVES (SUFAC), MORO FARMERS ASSOCIATION OF ZAMBOANGA DEL SUR (MOFAZS) and COCONUT FARMERS OF SOUTHERN LEYTE COOPERATIVE (COFA-SL); PHILIPPINE RURAL RECONSTRUCTION MOVEMENT (PRRM), represented by CONRADO S. NAVARRO; COCONUT INDUSTRY REFORM MOVEMENT, INC. (COIR) represented by JOSE MARIE T. FAUSTINO; VICENTE FABE for himself and for PAMBANSANG KILUSAN NG MGA SAMAHAN NG MAGSASAKA (PAKISAMA); NONITO CLEMENTE for himself and for the NAGKAKAISANG UGNAYAN NG MGA MALILIIT NA MAGSASAKA AT MANGGAGAWA SA NIYUGAN (NIUGAN); DIONELO M. SUANTE, SR. for himself and for KALIPUNAN NG MALILIIT NA MAGNINIYOG NG PILIPINAS (KAMMPIL), INC.,

Petitioners-Intervenors.

  G.R. No. 166859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

G.R. No. 169203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

G.R. No. 180702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

   Present:

 

CORONA, C.J.,

CARPIO,

CARPIO MORALES,

VELASCO, JR.,

NACHURA,

LEONARDO-DE CASTRO,

BRION,

PERALTA,

BERSAMIN,

DEL CASTILLO,

ABAD,

VILLARAMA, JR.,

PEREZ, 

MENDOZA, and

SERENO, JJ.:

 

Promulgated:

 

April 12, 2011

 

x-----------------------------------------------------------------------------------------x

 

 

D E C I S I O N

         

 

BERSAMIN, J.:

 

 

          For over two decades, the issue of whether the sequestered sizable block of shares representing 20% of the outstanding capital stock of San Miguel Corporation (SMC) at the time of acquisition belonged to their registered owners or to the coconut farmers has remained unresolved. Through this decision, the Court aims to finally resolve the issue and terminate the uncertainty that has plagued that sizable block of shares since then.

           

These consolidated cases were initiated on various dates by the Republic of the Philippines (Republic) via petitions for certiorari in G.R. Nos. 166859[1] and 169023,[2] and via petition for review on certiorari in 180702,[3] the first two petitions being brought to assail the following resolutions issued in Civil Case No. 0033-F by the Sandiganbayan, and the third being brought to appeal the adverse decision promulgated on November 28, 2007 in Civil Case No. 0033-F by the Sandiganbayan.

 

Specifically, the petitions and their particular reliefs are as follows:

 

(a)    G.R. No. 166859 (petition for certiorari), to assail the resolution promulgated on December 10, 2004[4] denying the Republic’s Motion For Partial Summary Judgment;

 

(b)    G.R. No. 169023 (petition for certiorari), to nullify and set aside, firstly, the resolution promulgated on October 8, 2003,[5] and, secondly, the resolution promulgated on June 24, 2005[6] modifying the resolution of October 8, 2003; and

 

(c)     G.R. No. 180702 (petition for review on certiorari), to appeal the decision promulgated on November 28, 2007.[7]

 

 

ANTECEDENTS

 

          On July 31, 1987, the Republic commenced Civil Case No. 0033 in the Sandiganbayan by complaint, impleading as defendants respondent Eduardo M. Cojuangco, Jr. (Cojuangco) and 59 individual defendants. On October 2, 1987, the Republic amended the complaint in Civil Case No. 0033 to include two additional individual defendants. On December 8, 1987, the Republic further amended the complaint through its Amended Complaint [Expanded per Court-Approved Plaintiff’s ‘Manifestation/Motion Dated Dec. 8, 1987] albeit dated October 2, 1987.

 

          More than three years later, on August 23, 1991, the Republic once more amended the complaint apparently to avert the nullification of the writs of sequestration issued against properties of Cojuangco. The amended complaint dated August 19, 1991, designated as Third Amended Complaint [Expanded Per Court-Approved Plaintiff’s Manifestation/Motion Dated Dec. 8, 1987],[8] impleaded in addition to Cojuangco, President Marcos, and First Lady Imelda R. Marcos nine other individuals, namely: Edgardo J. Angara, Jose C. Concepcion, Avelino V. Cruz, Eduardo U. Escueta, Paraja G. Hayudini, Juan Ponce Enrile, Teodoro D. Regala, and Rogelio Vinluan, collectively, the ACCRA lawyers, and Danilo Ursua, and 71 corporations.

 

On March 24, 1999, the Sandiganbayan allowed the subdivision of the complaint in Civil Case No. 0033 into eight complaints, each pertaining to distinct transactions and properties and impleading as defendants only the parties alleged to have participated in the relevant transactions or to have owned the specific properties involved. The subdivision resulted into the following subdivided complaints, to wit:

 

                    Subdivided Complaint                               Subject Matter

1.

Civil Case No. 0033-A

Anomalous Purchase and Use of First United Bank (now United Coconut Planters Bank)

 

2.

Civil Case No. 0033-B

Creation of Companies Out of Coco Levy Funds

 

3.

Civil Case No. 0033-C

Creation and Operation of Bugsuk Project and Award of P998 Million Damages to Agricultural Investors, Inc.

 



4.

 

Civil Case No. 0033-D

Disadvantageous Purchases and Settlement of the Accounts of Oil Mills Out of Coco Levy Funds

 

5.

 

Civil Case No. 0033-E

Unlawful Disbursement and Dissipation of Coco Levy Funds

 

6.

Civil Case No. 0033-F

Acquisition of SMC shares of stock

 

7.

Civil Case No. 0033-G

Acquisition of Pepsi-Cola

 

8.

Civil Case No. 0033-H

Behest Loans and Contracts

 

 

In Civil Case No. 0033-F, the individual defendants were Cojuangco, President Marcos and First Lady Imelda R. Marcos, the ACCRA lawyers, and Ursua. Impleaded as corporate defendants were Southern Luzon Oil Mills, Cagayan de Oro Oil Company, Incorporated, Iligan Coconut Industries, Incorporated, San Pablo Manufacturing Corporation,  Granexport Manufacturing Corporation, Legaspi Oil Company, Incorporated, collectively referred to herein as the CIIF Oil Mills, and their 14 holding companies, namely: Soriano Shares, Incorporated, Roxas Shares, Incorporated, Arc Investments, Incorporated, Toda Holdings, Incorporated, ASC Investments, Incorporated, Randy Allied Ventures, Incorporated, AP Holdings, Incorporated, San Miguel Corporation Officers, Incorporated, Te Deum Resources, Incorporated, Anglo Ventures, Incorporated, Rock Steel Resources, Incorporated, Valhalla Properties, Incorporated, and First Meridian Development, Incorporated.

 

Allegedly, Cojuangco purchased a block of 33,000,000 shares of SMC stock through the 14 holding companies owned by the CIIF Oil Mills. For this reason, the block of 33,133,266 shares of SMC stock shall be referred to as the CIIF block of shares.

 

Also impleaded as defendants in Civil Case No. 0033-F were several corporations[9] alleged to have been under Cojuangco’s control and used by him to acquire the block of shares of SMC stock totaling 16,276,879 at the time of acquisition (representing approximately 20% percent of the capital stock of SMC). These corporations are referred to as Cojuangco corporations or companies, to distinguish them from the CIIF Oil Mills. Reference hereafter to Cojuangco and the Cojuangco corporations or companies shall be as Cojuangco, et al., unless the context requires individualization.

 

The material averments of the Republic’s Third Amended Complaint (Subdivided)[10] in Civil Case No. 0033-F included the following:

 

       12.  Defendant Eduardo Cojuangco, Jr., served as a public officer during the Marcos administration.  During the period of his incumbency as a public officer, he acquired assets, funds, and other property grossly and manifestly disproportionate to his salaries, lawful income and income from legitimately acquired property.

 

         13.  Having fully established himself as the undisputed “coconut king” with unlimited powers to deal with the coconut levy funds, the stage was now set for Defendant Eduardo M. Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine economic activity namely: softdrinks, agribusiness, oil mills, shipping, cement manufacturing, textile, as more fully described below.

 

         14.  Defendant Eduardo Cojuangco, Jr. taking undue advantage of his association, influence and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and the individual defendants, embarked upon devices, schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and the Filipino people, such as when he – misused coconut levy funds to buy out majority of the outstanding shares of stock of San Miguel Corporation in order to control the largest agri-business, foods and beverage company in the Philippines, more particularly described as follows:

        

(a)  Having control over the coconut levy, Defendant Eduardo M. Cojuangco invested the funds in diverse activities, such as the various businesses SMC was engaged in (e.g. large beer, food, packaging, and livestock);

 

(b)  He entered SMC in early 1983 when he bought most of the 20 million shares Enrique Zobel owned in the Company.  The shares, worth $49 million, represented 20% of SMC;

 

(c)  Later that year, Cojuangco also acquired the Soriano stocks through a series of complicated and secret agreements, a key feature of which was a “voting trust agreement” that stipulated that Andres, Jr. or his heir would proxy over the vote of the shares owned by Soriano and Cojuangco.  This agreement, which accounted for 30% of the outstanding shares of SMC and which lasted for five (5) years, enabled the Sorianos to retain management control of SMC for the same period;

 

(d)  Furthermore, in exchange for an SMC investment of $45 million in non-voting preferred shares in UCPB, Soriano served as the vice-chairman of the supposed bank of the coconut farmers, UCPB, and in return, Cojuangco, for investing funds from the coconut levy, was named vice-chairman of SMC;

 

(e) Consequently, Cojuangco enjoyed the privilege of appointing his nominees to the SMC Board, to which he appointed key members of the ACCRA Law Firm (herein Defendants) instead of coconut farmers whose money really funded the sale;

 

(f)  The scheme of Cojuangco to use the lawyers of the said Firm was revealed in a document which he signed on 19 February 1983 entitled “Principles and Framework of Mutual Cooperation and Assistance” which governed the rules for the conduct of management of SMC and the disposition of the shares which he bought.

 

(g)  All together, Cojuangco purchased 33 million shares of the SMC through the following 14 holding companies:

 

a)   Soriano Shares, Inc.                            1,249,163

b)   ASC Investors, Inc.                            1,562,449

c)   Roxas Shares, Inc.                              2,190,860

d)   ARC Investors, Inc.                            4,431,798

e)   Toda Holdings, Inc.                            3,424,618

f)   AP Holdings, Inc.                               1,580,997

g)   Fernandez Holdings, Inc.                      838,837

h)   SMC Officers Corps., Inc.                  2,385,987

i)    Te Deum Resources, Inc.                    2,674,899

j)    Anglo Ventures Corp.                         1,000.000

k)   Randy Allied Ventures, Inc.               1,000,000

l)    Rock Steel Resources, Inc.                 2,432,625

m)  Valhalla Properties Ltd., Inc.              1,361,033

n)   First Meridian Development, Inc.       1,000,000

                                                              ___________

                                                                33,133,266

 

3.1.  The same fourteen companies were in turn owned by the following six (6) so-called CIIF Companies which were:

 

a)   San Pablo Manufacturing Corp.                     19%

b)   Southern Luzon Coconut Oil Mills, Inc.        11%

c)   Granexport Manufacturing Corporation         19%

d)   Legaspi Oil Company, Inc.                             18%

e)   Cagayan de Oro Oil Company, Inc.               18%

f)   Iligan Coconut Industries, Inc.                       15%

                                                                            _____   

                                                                             100%

 

(h)  Defendant Corporations are but “shell” corporations owned by interlocking shareholders who have previously admitted that they are just “nominee stockholders” who do not have any proprietary interest over the shares in their names.  The respective affidavits of the following, namely:  Jose C. Concepcion, Florentino M. Herrera III, Teresita J. Herbosa, Teodoro D. Regala, Victoria C. de los Reyes, Manuel R. Roxas, Rogelio A. Vinluan, Eduardo U. Escuete and Franklin M. Drilon, who were all, at the time they became such stockholders, lawyers of the Angara Abello Concepcion Regala & Cruz (ACCRA) Law Offices, the previous counsel who incorporated said corporations, prove that they were merely nominee stockholders thereof.

 

(i)  Mr. Eduardo M. Cojuangco, Jr., acquired a total of 16,276,879 shares of San Miguel Corporation from the Ayala group: of said shares, a total of 8,138,440 (broken into 7,128,227 Class A and 1,010,213 Class B shares) were placed in the names of Meadowlark Plantations, Inc. (2,034,610) and Primavera Farms, Inc. (4,069,220).  The Articles of Incorporation of these three companies show that Atty. Jose C. Concepcion of ACCRA owns 99.6% of the entire outstanding stock.  The same shareholder executed three (3) separate “Declaration of Trust and Assignment of Subscription:” in favor of a BLANK assignee pertaining to his shareholdings in Primavera Farms, Inc., Silver Leaf Plantations, Inc. and Meadowlark Plantations, Inc.

 

(k) The other respondent Corporations are owned by interlocking shareholders who are likewise lawyers in the ACCRA Law Offices and had admitted their status as “nominee stockholders” only.

 

(k-1) The corporations: Agricultural Consultancy Services, Inc., Archipelago Realty Corporation, Balete Ranch, Inc., Black Stallion Ranch, Inc., Discovery Realty Corporation, First United Transport, Inc., Kaunlaran Agricultural Corporation, LandAir International Marketing Corporation, Misty Mountains Agricultural Corporation, Pastoral Farms, Inc., Oro Verde Services, Inc. Radyo Filipino Corporation, Reddee Developers, Inc., Verdant Plantations, Inc. and Vesta Agricultural Corporation, were incorporated by lawyers of ACCRA Law Offices.

 

(k-2)  With respect to PCY Oil Manufacturing Corporation and Metroplex Commodities, Inc., they are controlled respectively by HYCO, Inc. and Ventures Securities, Inc., both of which were incorporated likewise by lawyers of ACCRA Law Offices.

 

(k-3) The stockholders who appear as incorporators in most of the other Respondents corporations are also lawyers of the ACCRA Law Offices, who as early as 1987 had admitted under oath that they were acting only as “nominee stockholders.”

 

(l)  These companies, which ACCRA Law Offices organized for Defendant Cojuangco to be able to control more than 60% of SMC shares, were funded by institutions which depended upon the coconut levy such as the UCPB, UNICOM, United Coconut Planters Assurance Corp. (COCOLIFE), among others.  Cojuangco and his ACCRA lawyers used the funds from 6 large coconut oil mills and 10 copra trading companies to borrow money from the UCPB and purchase these holding companies and the SMC stocks.  Cojuangco used $150 million from the coconut levy, broken down as follows:

 

   Amount                       Source             Purpose

   (in million)

  

   $22.26                         Oil Mills          equity in holding

                                                               companies

 

   $65.6                           Oil Mills          loan to holding

                                                               companies

 

 

   $61.2                           UCPB             loan to holding

                                                               companies [164]

 

The entire amount, therefore, came from the coconut levy, some passing through the Unicom Oil mills, others directly from the UCPB.

 

(m)  With his entry into the said Company, it began to get favors from the Marcos government, significantly the lowering of the excise taxes (sales and specific taxes) on beer, one of the main products of SMC.

 

(n)  Defendant Cojuangco controlled SMC from 1983 until his co-defendant Marcos was deposed in 1986.

 

(o)  Along with Cojuangco, Defendant Enrile and ACCRA also had interests in SMC, broken down as follows:

     

           % of SMC                   Owner

           Cojuangco

 

           31.3%                          coconut levy money

 

           18%                             companies linked to Cojuangco

 

           5.2%                            government

 

           5.2%                            SMC employee retirement fund

 

           Enrile & ACCRA

 

           1.8%                            Enrile

           1.8%                            Jaka Investment Corporation

 

           1.8%                            ACCRA Investment Corporation

 

 

         15.  Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro Regala, Avelino Cruz, Rogelio Vinluan, Eduardo U. Escueta and Paraja G. Hayudini of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed, conspired and confederated with each other in setting up, through the use of coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK.  CIC, and more than twenty other coconut levy-funded corporations, including the acquisition of San Miguel Corporation shares and its institutionalization through presidential directives of the coconut monopoly. Through insidious means and machinations, ACCRA, being the wholly-owned investment arm, ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987.  This ranks ACCRA Investments Corporation number 44 among the top 100 biggest stockholders of UCPB which has approximately 1,400,000 shareholders.  On the other hand, the corporate books show the name Edgardo J. Angara as holding approximately 3,744 shares as of February, 1984.

 

         16. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another, constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the constitution and laws of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino people.[11]

 

 

          On June 17, 1999, Ursua and Enrile each filed his separate Answer with Compulsory Counterclaims.

 

          Before filing their answer, the ACCRA lawyers sought their exclusion as defendants in Civil Case No. 0033, averring that even as they admitted having assisted in the organization and acquisition of the companies included in Civil Case No. 0033, they had acted as mere nominees-stockholders of corporations involved in the sequestration proceedings pursuant to office practice.  After the Sandiganbayan denied their motion, they elevated their cause to this Court, which ultimately ruled in their favor in the related cases of Regala, et al. v. Sandiganbayan, et al.[12]  and Hayudini v. Sandiganbayan, et al.,[13] as follows:

 

         WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21, 1992 are hereby ANNULLED and SET ASIDE.  Respondent Sandiganbayan is further ordered to exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini as parties-defendants in SB Civil Case No. 0033 entitled “Republic of the Philippines v. Eduardo Cojuangco, Jr., et al.”

 

         SO ORDERED.

 

          Conformably with the ruling, the Sandiganbayan excluded the ACCRA lawyers from the case on May 24, 2000.[14] 

 

On June 23, 1999, Cojuangco filed his Answer to the Third Amended Complaint,[15] averring the following affirmative defenses, to wit:

 

         7.00. The Presidential Commission on Good Government (PCGG) is without authority to act in the name and in behalf of the “Republic of the Philippines”.

 

         7.01. As constituted in E.O. No. 1, the PCGG was composed of “Minister Jovito R. Salonga, as Chairman, Mr. Ramon Diaz, Mr. Pedro L. Yap, Mr. Raul Daza and Ms. Mary Concepcion Bautista, as Commissioners”. When the complaint in the instant case was filed, Minister Salonga, Mr. Pedro L. Yap and Mr. Raul Daza had already left the PCGG.  By then the PCGG had become functus officio.

 

         7.02. The Sandiganbayan has no jurisdiction over the complaint or over the transaction alleged in the complaint.

 

         7.03.  The complaint does not allege any cause of action.

 

         7.04.  The complaint is not brought in the name of the real parties in interest, assuming any cause of action exists.

 

         7.05. Indispensable and necessary parties have not been impleaded.

 

         7.06. There is improper joinder of causes of action (Sec. 6, Rule 2, Rules of Civil Procedure). The causes of action alleged, if any, do not arise out of the same contract, transaction or relation between the parties, nor are they simply for money, or are of the same nature and character.

 

         7.07. There is improper joinder of parties defendants (Sec. 11, Rule 3, Rules of Civil Procedure).The causes of action alleged as to defendants, if any, do not involve a single transaction or a related series of transactions.  Defendant is thus compelled to litigate in a suit regarding matters as to which he has no involvement.  The questions of fact and law involved are not common to all defendants.

 

         7.08.  In so far as the complaint seeks the forfeiture of assets allegedly acquired by defendant “manifestly out of proportion to their salaries, to their other lawful income and income from legitimately acquired property,” under R.A. 1379, the “previous inquiry similar to preliminary investigation in criminal cases” required to be conducted under Sec. 2 of that law before any suit for forfeiture may be instituted, was not conducted; as a consequence, the Court may not acquire and exercise jurisdiction over such a suit.

         7.09. The complaint in the instant suit was filed July 31, 1987, or within one year before the local election held on January 18, 1988.  If this suit involves an action under R.A. 1379, its institution was also in direct violation of Sec. 2, R.A. No. 1379.

 

         7.10. E.O. No. 1, E.O. No. 2, E.O. No. 14 and 14-A, are unconstitutional.  They violate due process, equal protection, ex post facto and bill of attainder provisions of the Constitution.

 

         7.11. Acts imputed to defendant which he had committed were done pursuant to law and in good faith.

 

          The Cojuangco corporations’ Answer[16] had the same tenor as the Answer of Cojuangco.

 

          In his own Answer with Compulsory Counterclaims,[17] Ursua averred affirmative and special defenses.

 

          In his own Answer with Compulsory Counterclaims,[18] Enrile specifically denied the material averments of the Third Amended Complaint and asserted affirmative defenses.

 

The CIIF Oil Mills’ Answer[19] also contained affirmative defenses.

 

On December 20, 1999, the Sandiganbayan scheduled the pre-trial in Civil Case No. 0033-F on March 8, 2000, giving the parties sufficient time to file their Pre-Trial Briefs prior to that date.  Subsequently, the parties filed their respective Pre-Trial Briefs, as follows: Cojuangco and the Cojuangco corporations, jointly on February 14, 2000; Enrile, on March 1, 2000; the CIIF Oil Mills, on March 3, 2000; and Ursua, on March 6, 2000. However, the Republic sought several extensions to file its own Pre-Trial Brief, and eventually did so on May 9, 2000.

 

          In the meanwhile, some non-parties sought to intervene. On November 22, 1999, GABAY Foundation, Inc. (GABAY) filed its complaint-in-intervention.  On February 24, 2000, the Philippine Coconut Producers Federation, Inc., Maria Clara L. Lobregat, Jose R. Eleazar, Jr., Domingo Espina, Jose Gomez, Celestino Sabate, Manuel del Rosario, Jose Martinez, Jr., and Eladio Chato (collectively referred to as COCOFED, considering that the co-intervenors were its officers) also sought to intervene, citing the October 2, 1989 ruling in G.R. No. 75713 entitled COCOFED v. PCGG whereby the Court recognized COCOFED as the “private national association of coconut producers certified in 1971 by the PHILCOA as having the largest membership among such producers” and as such “entrusted it with the task of maintaining continuing liaison with the different sectors of the industry, the government and its mass base.”  Pending resolution of its motion for intervention, COCOFED filed a Pre-Trial Brief on March 2, 2000.

 

            On May 24, 2000, the Sandiganbayan denied GABAY’s intervention without prejudice because it found “that the allowance of GABAY to enter under the special character in which it presents itself would be to open the doors to other groups of coconut farmers whether of the same kind or of any other kind which could be considered a sub-class or a sub-classification of the coconut planters or the coconut industry of this country.”[20]

 

            COCOFED’s intervention as defendant was allowed on May 24, 2000, however, because “the position taken by the COCOFED is relevant to the proceedings herein, if only to state that there is a special function which the COCOFED and the coconut planters have in the matter of the coconut levy funds and the utilization of those funds, part of which is in dispute in the instant matter.”[21]

 

          The pre-trial was actually held on May 24, 2000,[22] during which the Sandiganbayan sought clarification from the parties, particularly the Republic, on their respective positions, but at the end it found the clarifications “inadequately” enlightening. Nonetheless, the Sandiganbayan, not disposed to reset, terminated the pre-trial:

 

xxx primarily because the Court is given a very clear impression that the plaintiff does not know what documents will be or whether they are even available to prove the causes of action in the complaint.  The Court has pursued and has exerted every form of inquiry to see if there is a way by which the plaintiff could explain in any significant particularity the acts and the evidence which will support its claim of wrong-doing by the defendants.  The plaintiff has failed to do so.[23]

 

The following material portions of the pre-trial order[24] are quoted to provide a proper perspective of what transpired during the pre-trial, to wit:

 

       Upon oral inquiry from the Court, the issues which were being raised by plaintiff appear to have been made on a very generic character.  Considering that any claim for violation or breach of trust or deception cannot be made on generic statements but rather by specific acts which would demonstrate fraud or breach of trust or deception, together with the evidence in support thereof, the same was not acceptable to the Court.

 

         The plaintiff through its designated counsel for this morning, Atty. Dennis Taningco, has represented to this Court that the annexes to its pre-trial brief, more particularly the findings of the COA in its various examinations, copies of which COA reports are attached to the pre-trial brief, would demonstrate the wrong, the act or omission attributed to the defendants or to several of them and the basis, therefore, for the relief that plaintiff seeks in its complaint.  It would appear, however, that the plaintiff through its counsel at this time is not prepared to go into the specifics of the identification of these wrongs or omissions attributed to plaintiff.

 

         The Court has reminded the plaintiff that a COA report proves itself only in proceedings where the issue arises from a review of the accountability of particular officers and, therefore, to show the existence of shortages or deficiencies in an examination conducted for that purpose, provided that such a report is accompanied by its own working papers and other supporting documents.

 

         In civil cases such as this, a COA report would not have the same independent probative value since it is not a review of the accountability of public officers for public property in their custody as accountable officers.  It has been the stated view of this Court that a COA report, to be of significant evidence, may itself stand only on the basis of the supporting documents that upon which it is based and upon an analysis made by those who are competent to do so.  The Court, therefore, sought a more specific statement from plaintiff as to what these documents were and which of them would prove a particular act or omission or a series of acts or omissions purportedly committed by any, by several or by all of the defendants in any particular stage of the chain of alleged wrong-doing in this case.

 

         The plaintiff was not in a position to do so.

 

         The Court has remonstrated with the plaintiff, insofar as its inadequacy is concerned, primarily because this case was set for pre-trial as far back as December and has been reset from its original setting, with the undertaking by the plaintiff to prepare itself for these proceedings.  It appears to this Court at this time that the failure of the plaintiff to have available responses and specific data and documents at this stage is not because the matter has been the product of oversight or notes and papers left elsewhere; rather, the agitation of this Court arises from the fact that at this very stage, the plaintiff through its counsel does not know what these documents are, where these documents will be and is still anticipating a submission or a delivery thereof by COA at an undetermined time.  The justification made by counsel for this stance is that this is only pre-trial and this information and the documents are not needed yet.

 

         The Court is not prepared to postpone the pre-trial anew primarily because the Court is given a very clear impression that the plaintiff does not know what documents will be or whether they are even available to prove the causes of action in the complaint.  The Court has pursued and has exerted every form of inquiry to see if there is a way by which the plaintiff could explain in any significant particularity the acts and the evidence which will support its claim of wrong-doing by the defendants.  The plaintiff has failed to do so.

 

         Defendants Cojuangco have come back and reiterated their previous inquiry as to the statement of the cause of action and the description thereof.  While the Court acknowledges that logically, that statement along that line would be primary, the Court also recognizes that sometimes the phrasing of the issue may be determined or may arise after a statement of the evidence is determined by this Court because the Court can put itself in a position of more clearly and perhaps more accurately stating what the issues are. The Pre-Trial Order, after all, is not so much a reflection of merely separate submissions by all of the parties involved, witnesses by the Court, as to what the subject matter of litigation will be, including the determination of what matters of fact remain unresolved.  At this time, the plaintiff has not taken the position on any factual statement or any piece of evidence which can be subject of admission or denial, nor any specifics of any act which could be disputed by the defendants; what plaintiff through counsel has stated are general conclusions, general statements of abuse and misuse and opportunism.

 

         After an extended break requested by some of the parties, the sessions were resumed and nothing anew arose from the plaintiff. The plaintiff sought fifteen (15) days to file a reply to the comments and observations made by defendant Cojuangco to the pre-trial brief of the plaintiff. This Court denied this Request since the submissions in preparation for pre-trial are not litigious or contentious matters.  They are mere assertions or positions which may or may not be meritorious depending upon the view of the Court of the entire case and if useful at the pre-trial. At this stage, the plaintiff then reiterated its earlier request to consider the pre-trial terminated. The Court sought the positions of the other parties, whether or not they too were prepared to submit their respective positions on the basis of what was before the Court at pre-trial.  All of the parties, in the end, have come to an agreement that they were submitting their own respective positions for purpose of pre-trial on the basis of the submissions made of record.

 

         With all of the above, the pre-trial is now deemed terminated.

 

         This Order has been overly extended simply because there has been a need to put on record all of the events that have taken place leading to the conclusions which were drawn herein.

 

         The parties have indicated a desire to make their submissions outside of trial as a consequence of this terminated pre-trial, with the plea that the transcript of the proceedings this morning be made available to them, so that they may have the basis for whatever assertions they will have to make either before this Court or elsewhere. The Court deems the same reasonable and the Court now gives the parties fifteen (15) days after notice to them that the transcript of stenographic notes of the proceedings herein are complete and ready for them to be retrieved.  Settings for trial or for any other proceeding hereafter will be fixed by this Court either upon request of the parties or when the Court itself shall have determined that nothing else has to be done.

 

         The Court has sought confirmation from the parties present as to the accuracy of the recapitulation herein of the proceedings this morning and the Court has gotten assent from all of the parties.

 

xxx

 

         SO ORDERED.[25]

         

In the meanwhile, the Sandiganbayan, in order to conform with the ruling in Presidential Commission on Good Government v. Cojuangco, et al.,[26] resolved COCOFED’s Omnibus Motion (with prayer for preliminary injunction) relative to who should vote the UCPB shares under sequestration, holding as follows: [27]

 

       In the light of all of the above, the Court submits itself to jurisprudence and with the statements of the Supreme Court in G.R. No. 115352 entitled Enrique Cojuangco, Jr., et al. vs. Jaime Calpo, et al. dated January 27, 1997, as well as the resolution of the Supreme Court promulgated on January 27, 1999 in the case of PCGG vs. Eduardo Cojuangco, Jr., et al., G.R. No. 13319 which included the Sandiganbayan as one of the respondents.  In these two cases, the Supreme Court ruled that the voting of sequestered shares of stock is governed by two considerations, namely:

 

1.   whether there is prima facie evidence showing that the said shares are ill-gotten and thus belong to the State; and

 

2.   whether there is an imminent danger of dissipation thus necessitating their continued sequestration and voting by the PCGG while the main issue pends with the Sandiganbayan.

 

xxx            xxx              xxx.

         In view hereof, the movants COCOFED, et al and Ballares, et al. as well as Eduardo Cojuangco, et al. who were acknowledged to be registered stockholders of the UCPB are authorized, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from this Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders’ Meeting on March 6, 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders.

 

xxx            xxx              xxx.

         

Consequently, on March 1, 2001, the Sandiganbayan issued a writ of preliminary injunction to enjoin the PCGG from voting the sequestered shares of stock of the UCPB.

 

          On July 25, 2002, before Civil Case No. 0033-F could be set for trial, the Republic filed a Motion for Judgment on the Pleadings and/or for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.).[28]

 

Cojuangco, Enrile, and COCOFED separately opposed the motion. Ursua adopted COCOFED’s opposition.

 

          Thereafter, the Republic likewise filed a Motion for Partial Summary Judgment [Re: Shares in San Miguel Corporation Registered in the Respective Names of Defendant Eduardo M. Cojuangco, Jr. and the Defendant Cojuangco Companies].[29]

 

Cojuangco, et al. opposed the motion,[30] after which the Republic submitted its reply.[31]

 

          On February 23, 2004, the Sandiganbayan issued an order,[32] in which it enumerated the admitted facts or facts that appeared to be without substantial controversy in relation to the Republic’s Motion for Judgment on the Pleadings and/or for Partial Summary Judgment [Re: Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.]. 

 

Commenting on the order of February 23, 2004, Cojuangco, et al. specified the items they considered as inaccurate, but particularly interposed no objection to item no. 17 (to the extent that item no. 17 stated that Cojuangco had disclaimed any interest in the CIIF block SMC shares of stock registered in the names of the 14 corporations listed in item no. 1 of the order).[33]   

 

The Republic also filed its Comment,[34]  but COCOFED denied the admitted facts summarized in the order of February 23, 2004.[35]

 

          Earlier, on October 8, 2003,[36] the Sandiganbayan resolved the various pending motions and pleadings relative to the writs of sequestration issued against the defendants, disposing:

      

       IN VIEW OF THE FOREGOING, the Writs of Sequestration Nos. (a) 86-0042 issued on April 8, 1986, (b) 86-0062 issued on April 21, 1986, (c) 86-0069 issued on April 22, 1986, (d) 86-0085 issued on May 9, 1986, (e) 86-0095 issued on May 16, 1986, (f) 86-0096 dated May 16, 1986, (g) 86-0097 issued on May 16, 1986, (h) 86-0098 issued on May 16, 1986 and (i) 87-0218 issued on May 27, 1987 are hereby declared automatically lifted for being null and void.

 

         Despite the lifting of the writs of sequestration, since the Republic continues to hold a claim on the shares which is yet to be resolved, it is hereby ordered that the following shall be annotated in the relevant corporate books of San Miguel Corporation:

 

(1) any sale, pledge, mortgage or other disposition of any of the shares of the Defendants Eduardo Cojuangco, et al. shall be subject to the outcome of this case;

 

(2)  the Republic  through the PCGG shall be given twenty (20) days written notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge, mortgage or other disposition of the shares;

 

(3)  in the event of sale, mortgage or other disposition of the shares, by the Defendants Cojuangco, et al., the consideration therefore, whether in cash or in kind, shall be placed in escrow with Land Bank of the Philippines, subject to disposition only upon further orders of this Court; and

 

(4)  any cash dividends that are declared on the shares shall be placed in escrow with the Land Bank of the Philippines, subject to disposition only upon further orders of this Court.  If in case stock dividends are declared, the conditions on the sale, pledge, mortgage and other disposition of any of the shares as above-mentioned in conditions 1, 2 and 3, shall likewise apply.

 

In so far as the matters raised by Defendants Eduardo Cojuangco, et al. in their “Omnibus Motion” dated September 23, 1996 and “Reply to PCGG’s Comment/Opposition with Motion to Order PCGG to Complete Inventory, to Nullify Writs of Sequestration and to Enjoin PCGG from Voting Sequestered Shares of Stock” dated January 3, 1997, considering the above conclusion, this Court rules that it is no longer necessary to delve into the matters raised in the said Motions.

 

       SO ORDERED.[37]

 

 

          Cojuangco, et al. moved for the modification of the resolution,[38] praying for the deletion of the conditions for allegedly restricting their rights. The Republic also sought reconsideration of the resolution.[39]

 

Eventually, on June 24, 2005, the Sandiganbayan denied both motions, but reduced the restrictions thuswise:

 

         WHEREFORE, the “Motion for Reconsideration (Re: Resolution dated September 17, 2003 Promulgated on October 8, 2003)” dated October 24, 2003 of Plaintiff Republic is hereby DENIED for lack of merit.  As to the “Motion for Modification (Re: Resolution Promulgated on October 8, 2003)” dated October 22, 2003, the same is hereby DENIED for lack of merit.  However, the restrictions imposed by this Court in its Resolution dated September 17, 2003 and promulgated on October 8, 2003 shall now read as follows:

 

“Despite the lifting of the writs of sequestration, since the Republic continues to hold a claim on the shares which is yet to be resolved, it is hereby ordered that the following shall be annotated in the relevant corporate books of San Miguel Corporation:

 

“a)  any sale, pledge, mortgage or other disposition of any of the shares of the Defendants Eduardo Cojuangco, et al. shall be subject to the outcome of this case.

 

“b) the Republic through the PCGG shall be given twenty (20) days written notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge, mortgage or other disposition of the shares.

 

“SO ORDERED.”[40]

 

 

          Pending resolution of the motions relative to the lifting of the writs of sequestration, SMC filed a Motion for Intervention with attached Complaint-in-Intervention,[41] alleging, among other things, that it had an interest in the matter in dispute between the Republic and defendants CIIF Companies for being the owner by purchase of a portion (i.e., 25,450,000 SMC shares covered by Stock Certificate Nos. A0004129 and B0015556 of the so-called “CIIF block of SMC shares of stock” sought to be recovered as alleged ill-gotten wealth). 

 

Although Cojuangco, et al. interposed no objection to SMC’s intervention, the Republic opposed,[42] averring that the intervention would be improper and was a mere attempt to litigate anew issues already raised and passed upon by the Supreme Court. COCOFED similarly opposed SMC’s intervention,[43] and Ursua adopted its opposition.

 

          On May 6, 2004, the Sandiganbayan denied SMC’s motion to intervene.[44] SMC sought reconsideration,[45] and its motion to that effect was opposed by COCOFED and the Republic.

 

          On May 7, 2004, the Sandiganbyan granted the Republic’s Motion for Judgment on the Pleadings and/or Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.) and rendered a Partial Summary Judgment,[46] the dispositive portion of which reads as follows:

 

         WHEREFORE, in view of the foregoing, we hold that:

 

         The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and Cocofed, et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES, NAMELY:

 

      1.   Southern Luzon Coconut Oil Mills (SOLCOM);

      2.   Cagayan de Oro Oil Co., Inc. (CAGOIL);

      3.   Iligan Coconut Industries, Inc. (ILICOCO);

      4.   San Pablo Manufacturing Corp. (SPMC);

      5.   Granexport Manufacturing Corp. (GRANEX); and

      6.   Legaspi Oil Co., Inc. (LEGOIL),

 

AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:

 

1.   Soriano Shares, Inc.;

2.   ACS Investors, Inc.;

3.   Roxas Shares, Inc.;

4.   Arc Investors, Inc.;

5.   Toda Holdings, Inc.;

6.   AP. Holdings, Inc.;

7.   Fernandez Holdings, Inc.;

8.   SMC Officers Corps. Inc.;

9.   Te Deum Resources, Inc.;

10. Anglo Ventures, Inc.;

11. Randy Allied Ventures, Inc.;

12. Rock Steel Resources, Inc.;

13. Valhalla Properties Ltd., Inc.; and

14. First Meridian Development, Inc.

 

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK TOTALING 33,133,266 SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS DECLARED, PAID AND ISSUED THEREON AS WELL AS ANY INCREMENTS THERETO ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE DECLARED OWNED BY THE GOVERNMENT IN-TRUST FOR ALL THE COCONUT FARMERS AND ORDERED RECONVEYED TO THE GOVERNMENT.

 

         Let the trial of this Civil Case proceed with respect to the issues which have not been disposed of in this partial Summary Judgment, including the determination of whether the CIIF Block of SMC Shares adjudged to be owned by the Government represents 27% of the issued and outstanding capital stock of SMC according to plaintiff or 31.3% of said capital stock according to COCOFED, et al. and Ballares, et al.

 

         SO ORDERED.[47]

 

 

          In the same resolution of May 7, 2004, the Sandiganbayan considered the Motions to Dismiss filed by Cojuangco, et al. on August 2, 2000 and by Enrile on September 4, 2000 as overtaken by the Republic’s Motion for Judgment on the Pleadings and/or Partial Summary Judgment.[48] 

 

On May 25, 2004, Cojuangco, et al. filed their Motion for Reconsideration.[49]

 

COCOFED filed its so-called Class Action Omnibus Motion: (a) Motion to Dismiss for Lack of Subject Matter Jurisdiction and Alternatively, (b) Motion for Reconsideration dated May 26, 2004.[50]

 

The Republic submitted its Consolidated Comment.[51]

         

Relative to the resolution of May 7, 2004, the Sandiganbayan issued its resolution of December 10, 2004,[52] denying the Republic’s Motion for Partial Summary Judgment (Re: Shares in San Miguel  Corporation Registered in the Respective Names of Defendants Eduardo M. Cojuangco, Jr. and the defendant Cojuangco Companies) upon the following reasons:

 

       In the instant case, a circumspect review of the records show that while there are facts which appear to be undisputed, there are also genuine factual issues raised by the defendants which need to be threshed out in a full-blown trial. Foremost among these issues are the following:

 

1)      What are the “various sources” of funds, which the defendant Cojuangco and his companies claim they utilized to acquire the disputed SMC shares?

 

2)      Whether or not such funds acquired from alleged “various sources” can be considered coconut levy funds;

 

3)      Whether or not defendant Cojuangco had indeed served in the governing bodies of PC, UCPB and/or CIIF Oil Mills at the time the funds used to purchase the SMC shares were obtained such that he owed a fiduciary duty to render an account to these entities as well as to the coconut farmers;

 

4)      Whether or not defendant Cojuangco took advantage of his position and/or close ties with then President Marcos to obtain favorable concessions or exemptions from the usual financial requirements from the lending banks and/or coco-levy funded companies, in order to raise the funds to acquire the disputed SMC shares; and if so, what are these favorable concessions or exemptions?

 

Answers to these issues are not evident from the submissions of the plaintiff and must therefore be proven through the presentation of relevant and competent evidence during trial.  A perusal of the subject Motion shows that the plaintiff hastily derived conclusions from the defendants’ statements in their previous pleadings although such conclusions were not supported by categorical facts but only mere inferences.  In the Reply dated October 2, 2003, the plaintiff construed the supposed meaning of the phrase “various sources” (referring to the source of defendant Cojuangco’s funds which were used to acquire the subject SMC shares), which plaintiff said was quite obvious from the defendants’ admission in his Pre-Trial Brief, which we quote:

 

“According to Cojuangco’s own Pre-Trial Brief, these so-called ‘various sources’, i.e., the sources from which he obtained the funds he claimed to have used in buying the 20% SMC shares are not in fact ‘various’ as he claims them to be.  He says he obtained ‘loans’ from UCPB and ‘advances’ from the CIIF Oil Mills.  He even goes  as far as to admit that his only evidence in this case would have been ‘records of UCPB’ and a ‘representative of the CIIF Oil Mills’ obviously the ‘records of UCPB’ relate to the ‘loans’ that Cojuangco claims to have obtained from UCPB – of which he was President and CEO – while the ‘representative of the CIIF Oil Mills’ will obviously testify on the ‘advances’ Cojuangco obtained from CIIF Oil Mills – of which he was also the President and CEO.”

 

From the foregoing premises, plaintiff went on to conclude that:

 

“These admissions of defendant Cojuangco are outright admissions that he (1) took money from the bank entrusted by law with the administration of coconut levy funds and (2) took more money from the very corporations/oil mills in which part of those coconut levy funds (the CIIF) was placed – treating the funds of UCPB and the CIIF as his own personal capital to buy ‘his’ SMC shares.”

 

We cannot agree with the plaintiff’s contention that the defendant’s statements in his Pre-Trial Brief regarding the presentation of a possible CIIF witness as well as UCPB records, can already be considered as admissions of   the defendant’s exclusive use and misuse of coconut levy funds to acquire the subject SMC shares and defendant Cojuangco’s alleged taking advantage of his positions to acquire the subject SMC shares.  Moreover, in ruling on a motion for summary judgment, the court “should take that view of the evidence most favorable to the party against whom it is directed, giving such party the benefit of all inferences.”  Inasmuch as this issue cannot be resolved merely from an interpretation of the defendant’s statements in his brief, the UCPB records must be produced and the CIIF witness must be heard to ensure that the conclusions that will be derived have factual basis and are thus, valid.

 

WHEREFORE, in view of the forgoing, the Motion for Partial Summary Judgment dated July 11, 2003 is hereby DENIED for lack of merit.

 

SO ORDERED. 

 

          Thereafter, on December 28, 2004, the Sandiganbayan resolved the other pending motions,[53] viz:

 

         WHEREFORE, in view of the foregoing, the Motion for Reconsideration dated May 25, 2004 filed by defendant Eduardo M. Cojuangco, Jr., et al. and the Class Action Omnibus Motion: (a) Motion to Dismiss for Lack of Subject Matter Jurisdiction and Alternatively, (b) Motion for Reconsideration dated May 26, 2004 filed by COCOFED, et al. and Ballares, et al. are hereby DENIED for lack of merit.

 

         SO ORDERED.[54]

 

          COCOFED moved to set the case for trial,[55] but the Republic opposed the motion.[56] On their part, Cojuangco, et al. also moved to set the trial,[57] with the Republic similarly opposing the motion.[58]

 

On March 23, 2006, the Sandiganbayan granted the motions to set for trial and set the trial on August 8, 10, and 11, 2006.[59]

 

          In the meanwhile, on August 9, 2005, the Republic filed a Motion for Execution of Partial Summary Judgment (re: CIIF block of SMC Shares of Stock),[60]  contending that an execution pending appeal was justified because any appeal by the defendants of the Partial Summary Judgment would be merely dilatory. 

 

Cojuangco, et al. opposed the motion.[61] 

 

          The Sandiganbayan denied the Republic’s Motion for Execution of Partial Summary Judgment (re: CIIF block of SMC Shares of Stock),[62] to wit:

 

         WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL SUMMARY JUDGMENT (RE: CIIF BLOCK OF SMC SHARES OF STOCK) dated August 8, 2005 of the plaintiff is hereby denied for lack of merit.  However, this Court orders the severance of this particular claim of Plaintiff.  The Partial Summary Judgment dated May 7, 2004 is now considered a separate final and appealable judgment with respect to the said CIIF Block of SMC shares of stock.

 

         The Partial Summary Judgment rendered on May 7, 2004 is modified by deleting the last paragraph of the dispositive portion which will now read, as follows:

 

WHEREFORE, in view of the foregoing, we hold that:

 

The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies and Cocofed, et al.) filed by Plaintiff is hereby GRANTED.  ACCORDINGLY, THE CIIF COMPANIES, NAMELY:

 

1.     Southern Coconut Oil Mills (SOLCOM);

2.     Cagayan de Oro Oil Co., Inc. (CAGOIL);

3.     Iligan Coconut Industries, Inc. (ILICOCO);

4.     San Pablo Manufacturing Corp. (SPMC);

5.     Granexport Manufacturing Corp. 

                        (GRANEX); and

6.     Legaspi Oil Co., Inc. (LEGOIL),

 

AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:  

 

1.  Soriano Shares, Inc.;

2.  ACS Investors, Inc.;

3.  Roxas Shares, Inc.;

4.  Arc Investors, Inc.;

5.  Toda Holdings, Inc.;

6.  AP Holdings, Inc.;

7.  Fernandez Holdings, Inc.;

8.  SMC Officers Corps, Inc.;

9.  Te Deum Resources, Inc.;

10. Anglo Ventures, Inc.;

11. Randy Allied Ventures, Inc.;

12. Rock Steel Resources, Inc.;

13. Valhalla Properties Ltd., Inc.; and

14. First Meridian Development, Inc.

 

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK TOTALING 33,133,266 SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS DECLARED, PAID AND ISSUED THEREON AS WELL AS ANY INCREMENTS THERETO ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE DECLARED OWNED BY THE GOVERNMENT IN TRUST FOR ALL THE COCONUT FARMERS AND ORDERED RECONVEYED TO THE GOVERNMENT.

 

The aforementioned Partial Summary Judgment is now deemed a separate appealable judgment which finally disposes of the ownership of the CIIF Block of SMC Shares, without prejudice to the continuation of proceedings with respect to the remaining claims particularly those pertaining to the Cojuangco, et al. block of SMC shares.

 

         SO ORDERED.[63]

 

          During the pendency of the Republic’s motion for execution, Cojuangco, et al. filed a Motion for Authority to Sell San Miguel Corporation (SMC) shares, praying for leave to allow the sale of SMC shares to proceed, exempted from the conditions set forth in the resolutions promulgated on October 3, 2003 and June 24, 2005.[64] The Republic opposed, contending that the requested leave to sell would be tantamount to removing jurisdiction over the res or the subject of litigation.[65] 

 

          However, the Sandiganbayan eventually granted the Motion for Authority to Sell San Miguel Corporation (SMC) shares.[66]

 

Thereafter, Cojuangco, et al. manifested to the Sandiganbayan that the shares would be sold to the San Miguel Corporation Retirement Plan.[67]  Ruling on the manifestations of Cojuangco, et al., the Sandiganbayan issued its resolution of July 30, 2007 allowing the sale of the shares, to wit:

         

This notwithstanding however, while the Court exempts the sale from the express condition that it shall be subject to the outcome of the case, defendants Cojuangco, et al. may well be reminded that despite the deletion of the said condition, they cannot transfer to any buyer any interest higher than what they have.  No one can transfer a right to another greater than what he himself has.  Hence, in the event that the Republic prevails in the instant case, defendants Cojuangco, et al. hold themselves liable to their transferees-buyers, especially if they are buyers in good faith and for value.  In such eventuality, defendants Cojuangco, et al. cannot be shielded by the cloak of principle of caveat emptor because case law has it that this rule only requires the purchaser to exercise such care and attention as is usually exercised by ordinarily prudent men in like business affairs, and only applies to defects which are open and patent to the service of one exercising such care.

 

Moreover, said defendants Eduardo M. Cojuangco, et al. are hereby ordered to render their report on the sale within ten (10) days from completion of the payment by the San Miguel Corporation Retirement Plan.

 

SO ORDERED.[68]

 

Cojuangco, et al. later rendered a complete accounting of the proceeds from the sale of the Cojuangco block of shares of SMC stock, informing that a total amount of P 4,786,107,428.34 had been paid to the UCPB as loan repayment.[69]

 

It appears that the trial concerning the disputed block of shares was not scheduled because the consideration and resolution of the aforecited motions for summary judgment occupied much of the ensuing proceedings. 

 

At the hearing of August 8, 2006, the Republic manifested[70] that it did not intend to present any testimonial evidence and asked for the marking of certain exhibits that it would have the Sandiganbayan take judicial notice of.   The Republic was then allowed to mark certain documents as its Exhibits A to I, inclusive, following which it sought and was granted time within which to formally offer the exhibits. 

 

On August 31, 2006, the Republic filed its Manifestation of Purposes (Re: Matters Requested or Judicial Notice on the 20% Shares in San Miguel Corporation Registered in the Respective Names of defendant Eduardo M. Cojuangco, Jr. and the defendant Cojuangco Companies).[71] 

 

On September 18, 2006, the Sandiganbayan issued the following resolution,[72] to wit:

 

         Acting on the Manifestation of Purposes (Re:  Matters Requested or Judicial Notice on the 20% Shares in San Miguel Corporation Registered in the Respective names of Defendant Eduardo M. Cojuangco, Jr. and the Defendant Cojuangco Companies) dated 28 August 2006 filed by the plaintiff, which has been considered its formal offer of evidence, and the Comment of Defendants Eduardo M. Cojuangco, Jr., et al. on Plaintiff’s “Manifestation of Purposes …” Dated August 30, 2006 dated September 15, 2006, the court resolves to ADMIT all the exhibits offered, i.e.:

         

     Exhibit “A” – the Answer of defendant Eduardo M. Cojuangco, Jr. to the Third Amended Complaint (Subdivided) dated June 23, 1999, as well as the sub-markings (Exhibit “A-1” to “A-4”;

     Exhibit “B” –  the “Pre-Trial Brief dated January 11, 2000 of defendant CIIF Oil Mills and fourteen (14) CIIF Holding Companies, as well as the sub-markings Exhibits “B-1” and “B-2”

     Exhibit “C” –  the Pre-Trial Brief dated January 11, 2000 of defendant Eduardo M. Cojuangco, Jr. as well as the sub-markings Exhibits “C-1”, “C-1-a” and “C-1-b”;

     Exhibit “D” –  the Plaintiff’s Motion for Summary Judgment [Re:  Shares in San Miguel Corporation Registered in the Respective Names of Defendant Eduardo M. Cojuangco, Jr. and the Defendant Cojuangco Companies] dated  July 11, 2003, as well as the sub-markings Exhibits “D-1” to “D-4”

 

the said exhibits being part of the record of the case, as well as

           

     Exhibit  “E” –  Presidential Decree No. 961 dated July 11, 1976;

     Exhibit “F” –   Presidential Decree No. 755 dated July 29, 1975;

     Exhibit “G” –  Presidential Decree No. 1468 dated June 11, 1978;

     Exhibit “H” –   Decision of the Supreme Court in Republic vs. COCOFED, et al., G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462

 

the aforementioned exhibits being matters of public record.

  

The admission of these exhibits is being made over the objection of the defendants Cojuangco, et al. as to the relevance thereof and as to the purposes for which they were offered in evidence, which matters shall be taken into consideration by the Court in deciding the case on the merits.

 

The trial hereon shall proceed on November 21, 2006, at 8:30 in the morning as previously scheduled.[73]

 

 

          During the hearing on November 24, 2006, Cojuangco, et al. filed their Submission and Offer of Evidence of Defendants,[74] formally offering in evidence certain documents to substantiate their counterclaims, and informing that they found no need to present countervailing evidence because the Republic’s evidence did not prove the allegations of the Complaint. On December 5, 2006, after the Republic submitted its Comment,[75] the Sandiganbayan admitted the exhibits offered by Cojuangco, et al., and granted the parties a non-extendible period within which to file their respective memoranda and reply-memoranda. 

 

          Thereafter, on February 23, 2007, the Sandiganbayan considered the case submitted for decision.[76]

 

ISSUES

 

The various issues submitted for consideration by the Court are summarized hereunder.

 

G.R. No. 166859

 

          The Republic came to the Court via petition for certiorari[77] to assail the denial of its Motion for Partial Summary Judgment through the resolution promulgated on December 10, 2004, insisting that the Sandiganbayan thereby committed grave abuse of discretion: (a) in holding that the various sources of funds used in acquiring the SMC shares of stock remained disputed; (b) in holding that it was disputed whether or not Cojuangco had served in the governing bodies of PCA, UCPB, and/or the CIIF Oil Mills; and (c) in not finding that Cojuangco had taken advantage of his position and had violated his fiduciary obligations in acquiring the SMC shares of stock in issue.

 

          The Court will consider and resolve the issues thereby raised alongside the issues presented in G.R. No. 180702.

 

G.R. No. 169203

 

          In the resolution promulgated on October 8, 2003, the Sandiganbayan declared as “automatically lifted for being null and void” nine writs of sequestration (WOS) issued against properties of Cojuangco and Cojuangco companies, considering that: (a) eight of them (i.e., WOS No. 86-0062 dated April 21, 1986; WOS No. 86-0069 dated April 22, 1986; WOS No. 86-0085 dated May 9, 1986; WOS No. 86-0095 dated May 16, 1986; WOS No. 86-0096 dated May 16, 1986; WOS No. 86-0097 dated May 16, 1986; WOS No. 86-0098 dated May 16, 1986; and WOS No. 87-0218 dated May 27, 1987) had been issued by only one PCGG Commissioner, contrary to the requirement of Section 3 of the Rules of the PCGG for at least two Commissioners to issue the WOS; and (b) the ninth (i.e., WOS No. 86-0042 dated April 8, 1986), although issued prior to the promulgation of the Rules of the PCGG requiring at least two Commissioners to issue the WOS, was void for being issued without prior determination by the PCGG of a prima facie basis for sequestration. 

 

Nonetheless, despite its lifting of the nine WOS, the Sandiganbayan prescribed four conditions to be still “annotated in the relevant corporate books of San Miguel Corporation” considering that the Republic “continues to hold a claim on the shares which is yet to be resolved.”[78]

 

In its resolution promulgated on June 24, 2005, the Sandiganbayan denied the Republic’s Motion for Reconsideration filed vis-a-vis the resolution promulgated on October 8, 2003, but reduced the conditions earlier imposed to only two.[79]

 

          On September 1, 2005, the Republic filed a petition for certiorari[80] to annul the resolutions promulgated on October 8, 2003 and on June 24, 2005 on the ground that the Sandiganbayan had thereby committed grave abuse of discretion:

 

I.

XXX IN LIFTING WRIT OF SEQUESTRATION NOS. 86-0042 AND 87-0218 DESPITE EXISTENCE OF THE BASIC REQUISITES FOR THE VALIDITY OF SEQUESTRATION.

 

II.

XXX WHEN IT DENIED PETITIONER’S ALTERNATIVE PRAYER IN ITS MOTION FOR RECONSIDERATION FOR THE ISSUANCE OF AN ORDER OF SEQUESTRATION AGAINST ALL THE SUBJECT SHARES OF STOCK IN ACCORDNCE WITH THE RULING IN REPUBLIC VS. SANDIGANBAYAN, 258 SCRA 685 (1996).

 

III.

XXX IN SUBSEQUENTLY DELETING THE LAST TWO (2) CONDITIONS WHICH IT EARLIER IMPOSED ON THE SUBJECT SHARES OF STOCK.[81]

 

 

 

G.R. No. 180702

 

On November 28, 2007, the Sandiganbayan promulgated its decision,[82] decreeing as follows:

 

         WHEREFORE, in view of all the foregoing, the Court is constrained to DISMISS, as it hereby DISMISSES, the Third Amended Complaint in subdivided Civil Case No. 0033-F for failure of plaintiff to prove by preponderance of evidence its causes of action against defendants with respect to the twenty percent (20%) outstanding shares of stock of San Miguel Corporation registered in defendants’ names, denominated herein as the “Cojuangco, et al. block” of SMC shares.  For lack of satisfactory warrant, the counterclaims in defendants’ Answers are likewise ordered dismissed.

 

         SO ORDERED.

         

Hence, the Republic appeals, positing:

 

I.

COCONUT LEVY FUNDS ARE PUBLIC FUNDS. THE SMC SHARES, WHICH WERE ACQUIRED BY RESPONDENTS COJUANGCO, JR. AND THE COJUANGCO COMPANIES WITH THE USE OF COCONUT LEVY FUNDS – IN VIOLATION OF RESPONDENT COJUANGCO, JR.’S FIDUCIARY OBLIGATION – ARE, NECESSARILY, PUBLIC IN CHARACTER AND SHOULD BE RECONVEYED TO THE GOVERNMENT.

 

II.

PETITIONER HAS CLEARLY DEMONSTRATED ITS ENTITLEMENT, AS A MATTER OF LAW, TO THE RELIEFS PRAYED FOR.[83]

 

and urging the following issues to be resolved, to wit:

 

I.

WHETHER THE HONORABLE SANDIGANBAYAN COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED CIVIL CASE NO. 0033-F; AND

 

 

II.

WHETHER OR NOT THE SUBJECT SHARES IN SMC, WHICH WERE ACQUIRED BY, AND ARE IN THE RESPECTIVE NAMES OF RESPONDENTS COJUANGCO, JR. AND THE COJUANGCO COMPANIES, SHOULD BE RECONVEYED TO THE REPUBLIC OF THE PHILIPPINES FOR HAVING BEEN ACQUIRED USING COCONUT LEVY FUNDS.[84]

 

 

          On their part, the petitioners-in-intervention[85] submit the following issues, to wit:

 

I

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED THE CASE A QUO IN VIOLATION OF LAW AND APPLICABLE RULINGS OF THE HONORABLE COURT IN RULING THAT, WHILE ADMITTEDLY THE SUBJECT SMC SHARES WERE PURCHASED FROM LOAN PROCEEDS FROM UCPB AND ADVANCES FROM THE CIIF OIL MILLS, SAID SUBJECT SMC SHARES ARE NOT PUBLIC PROPERTY

 

II

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED THE CASE A QUO IN VIOLATION OF LAW AND APPLICABLE RULINGS OF THE HONORABLE COURT IN FAILING TO RULE THAT, EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT LOAN PROCEEDS FROM UCPB ARE NOT PUBLIC FINDS, STILL, SINCE RESPONDENT COJUANGCO, IN THE PURCHASE OF THE SUBJECT SMC SHARES FROM SUCH LOAN PROCEEDS, VIOLATED HIS FIDUCIARY DUTIES AND TOOK A COMMERCIAL OPPORTUNITY THAT RIGHTFULLY BELONGED TO UCPB (A PUBLIC CORPORATION), THE SUBJECT SMC SHARES SHOULD REVERT BACK TO THE GOVERNMENT.

 

 

RULING

 

          We deny all the petitions of the Republic.

 

I

Lifting of nine WOS for violation of PCGG Rules

did not constitute grave abuse of discretion

 

 

Through its resolution promulgated on June 24, 2005, assailed on certiorari in G.R. No. 169203, the Sandiganbayan lifted the nine WOS for the following reasons, to wit:

 

Having studied the antecedent facts, this Court shall now resolve the pending incidents especially defendants’ “Motion to Affirm that the Writs or Orders of Sequestration Issued on Defendants’ Properties Were Unauthorized, Invalid and Never Became Effective” dated March 5, 1999.

 

Section 3 of the PCGG Rules and Regulations promulgated on April 11, 1986, provides:

 

“Sec. 3.  Who may issue. – A writ of sequestration or a freeze or hold order may be issued by the Commission upon the authority of at least two Commissioners, based on the affirmation or complaint of an interested party or motu propio (sic) the issuance thereof is warranted.”

 

       In this present case, of all the questioned writs of sequestration issued after the effectivity of the PCGG Rules and Regulations or after April 11, 1986, only writ no. 87-0218 issued on May 27, 1987 complied with the requirement that it be issued by at least two Commissioners, the same having been issued by Commissioners Ramon E. Rodrigo and Quintin S. Doromal.  However, even if Writ of Sequestration No. 87-0218 complied with the requirement that the same be issued by at least two Commissioners, the records fail to show that it was issued with factual basis or with factual foundation as can be seen from the Certification of the Commission Secretary of the PCGG of the excerpt of the minutes of the meeting of the PCGG held on May 26, 1987, stating therein that:

 

“The Commission approved the recommendation of Dir. Cruz to sequester all the shares of stock, assets, records, and documents of Balete Ranch, Inc. and the appointment of the Fiscal Committee with ECI Challenge, Inc./Pepsi-Cola for Balete Ranch, Inc. and the Aquacor Marketing Corp. vice Atty. S. Occena. The objective is to consolidate the Fiscal Committee activities covering three associated entities of Mr. Eduardo Cojuangco.Upon recommendation of Comm. Rodrigo, the reconstitution of the Board of Directors of the three companies was deferred for further study.”

 

         Nothing in the above-quoted certificate shows that there was a prior determination of a factual basis or factual foundation.  It is the absence of a prima facie basis for the issuance of a writ of sequestration and not the lack of authority of two (2) Commissioners which renders the said writ void ab initio.  Thus, being the case, Writ of Sequestration No. 87-0218 must be automatically lifted.

 

         As declared by the Honorable Supreme Court in two cases it has decided,

 

“The absence of a prior determination by the PCGG of a prima facie basis for the sequestration order is, unavoidably, a fatal defect which rendered the sequestration of respondent corporation and its properties void ab initio.”  And

 

“The corporation or entity against which such writ is directed will not be able to visually determine its validity, unless the required signatures of at least two commissioners authorizing its issuance appear on the very document itself.  The issuance of sequestration orders requires the existence of a prima facie case.  The two –commissioner rule is obviously intended to assure a collegial determination of such fact.  In this light, a writ bearing only one signature is an obvious transgression of the PCGG Rules.”

 

Consequently, the writs of sequestration nos. 86-0062, 86-0069, 86-0085, 86-0095, 86-0096, 86-0097 and 86-0098 must be lifted for not having complied with the pertinent provisions of the PCGG Rules and Regulations, all of which were issued by only one Commissioner and after April 11, 1986 when the PCGG Rules and Regulations took effect, an utter disregard of the PCGG’s Rules and Regulations.  The Honorable Supreme Court has stated that:

 

“Obviously, Section 3 of the PCGG Rules was intended to protect the public from improvident, reckless and needless sequestrations of private property.  And since these Rules were issued by Respondent Commission, it should be the first entity to observe them.”

 

Anent the writ of sequestration no. 86-0042 which was issued on April 8, 1986 or prior to the promulgation of the PCGG Rules and Regulations on April 11, 1986, the same cannot be declared void on the ground that it was signed by only one Commissioner because at the time it was issued, the Rules and Regulations of the PCGG were not yet in effect.  However, it again appears that there was no prior determination of the existence of a prima facie basis or factual foundation for the issuance of the said writ.  The PCGG, despite sufficient time afforded by this Court to show that a prima facie basis existed prior to the issuance of Writ No. 86-0042, failed to do so.  Nothing in the records submitted by the PCGG in compliance of the Resolutions and Order of this Court would reveal that a meeting was held by the Commission for the purpose of determining the existence of a prima facie evidence prior to its issuance.  In a case decided by the Honorable Supreme Court, wherein it involved a writ of sequestration issued by the PCGG on March 19, 1986 against all assets, movable and immovable, of Provident International Resources Corporation and Philippine Casino Operators Corporation, the Honorable Supreme Court enunciated:

 

     “The questioned sequestration order was, however issued on March 19, 1986, prior to the promulgation of the PCGG Rules and Regulations.  As a consequence, we cannot reasonably expect the commission to abide by said rules, which were nonexistent at the time the subject writ was issued by then Commissioner Mary Concepcion Bautista.  Basic is the rule that no statute, decree, ordinance, rule or regulation (and even policies) shall be given retrospective effect unless explicitly stated so.  We find no provision in said Rules which expressly gives them retroactive effect, or implies the abrogation of previous writs issued not in accordance with the same Rules.  Rather, what said Rules provide is that they “shall be effective immediately,” which in legal parlance, is understood as “upon promulgation”.  Only penal laws are given retroactive effect insofar as they favor the accused.

 

      We distinguish this case from Republic vs. Sandiganbayan, Romualdez and Dio Island Resort, G.R. No. 88126, July 12, 1996 where the sequestration order against Dio Island Resort, dated April 14, 1986, was prepared, issued and signed not by two commissioners of the PCGG, but by the head of its task force in Region VIII.  In holding that said order was not valid since it was not issued in accordance with PCGG Rules and Regulations, we explained:

 

“(Sec. 3 of the PCGG Rules and Regulations), couched in clear and simple language, leaves no room for interpretation.  On the basis thereof, it is indubitable that under no circumstances can a sequestration or freeze order be validly issued by one not a commissioner of the PCGG.

 

x x x         x x x    x x x

 

   Even assuming arguendo that Atty. Ramirez had been given prior authority by the PCGG to place Dio Island Resort under sequestration, nevertheless, the sequestration order he issued is still void since PCGG may not delegate its authority to sequester to its representatives and subordinates, and any such delegation is valid and ineffective.”

 

We further said:

 

     “In the instant case, there was clearly no prior determination made by the PCGG of a prima facie basis for the sequestration of Dio Island Resort, Inc. x x x

 

x x x    x x x    x x x

 

      The absence of a prior determination by the PCGG of a prima facie basis for the sequestration order is, unavoidably, a fatal defect which rendered the sequestration of respondent corporation and its properties void ab initio.  Being void ab initio, it is deemed nonexistent, as though it had never been issued, and therefore is not subject to ratification by the PCGG.

 

      What were obviously lacking in the above case were the basic requisites for the validity of a sequestration order which we laid down in BASECO vs. PCGG, 150 SCRA 181, 216, May 27, 1987, thus:

 

      “Section (3) of the Commission’s Rules and regulations provides that sequestration or freeze (and takeover) orders issue upon the authority of at least two commissioners, based on the affirmation or complaint of an interested party, or motu propio (sic) when the Commission has reasonable grounds to believe that the issuance thereof is warranted.”

 

     In the case at bar, there is no question as to the presence of prima facie evidence justifying the issuance of the sequestration order against respondent corporations.  But the said order cannot be nullified for lack of the other requisite (authority of at least two commissioners) since, as explained earlier, such requisite was nonexistent at the time the order was issued.”

 

         As to the argument of the Plaintiff Republic that Defendants Cojuangco, et al. have not shown any contrary prima facie proof that the properties subject matter of the writs of sequestration were legitimate acquisitions, the same is misplaced.  It is a basic legal doctrine, as well as many times enunciated by the Honorable Supreme Court that when a prima facie proof is required in the issuance of a writ, the party seeking such extraordinary writ must establish that it is entitled to it by complying strictly with the requirements for its issuance and not the party against whom the writ is being sought for to establish that the writ should not be issued against it.

 

 

According to the Republic, the Sandiganbayan thereby gravely abused its discretion in: (a) in lifting WOS No. 86-0042 and No. 87-0218 despite the basic requisites for the validity of sequestration being existent; (b) in denying the Republic’s alternative prayer for the issuance of an order of sequestration against all the subject shares of stock in accordance with the ruling in Republic v. Sandiganbayan, 258 SCRA 685, as stated in its Motion For Reconsideration; and (c) in deleting the last two conditions the Sandiganbayan had earlier imposed on the subject shares of stock.

 

We sustain the lifting of the nine WOS for the reasons made extant in the assailed resolution of October 8, 2003, supra.

 

          Section 3 of the Rules of the PCGG, promulgated on April 11, 1986, provides:

 

         Section 3. Who may issue. – A writ of sequestration or a freeze or hold order may be issued by the Commission upon the authority of at least two Commissioners, based on the affirmation or complaint of an interested party or motu proprio when the Commission has reasonable grounds to believe that the issuance thereof is warranted. 

 

 

          Conformably with Section 3, supra, WOS No. 86-0062 dated April 21, 1986; WOS No. 86-0069 dated April 22, 1986; WOS No. 86-0085 dated May 9, 1986; WOS No. 86-0095 dated May 16, 1986; WOS No. 86-0096 dated May 16, 1986; WOS No. 86-0097 dated May 16, 1986; and WOS No. 86-0098 dated May 16, 1986 were lawfully and correctly nullified considering that only one PCGG Commissioner had issued them.

 

Similarly, WOS No. 86-0042 dated April 8, 1986 and WOS No. 87-0218 dated May 27, 1987 were lawfully and correctly nullified  ̶ notwithstanding that WOS No. 86-0042, albeit signed by only one Commissioner (i.e., Commissioner Mary Concepcion Bautista), was not at the time of its issuance subject to the two-Commissioners rule, and WOS No. 87-0218, albeit already issued under the signatures of two Commissioners  ̶  considering that both had been issued without a prior determination by the PCGG of a prima facie basis for the sequestration.

 

Plainly enough, the irregularities infirming the issuance of the several WOS could not be ignored in favor of the Republic and resolved against the persons whose properties were subject of the WOS. Where the Rules of the PCGG instituted safeguards under Section 3, supra, by requiring the concurrent signatures of two Commissioners to every WOS issued and the existence of a prima facie case of ill gotten wealth to support the issuance, the non-compliance with either of the safeguards nullified the WOS thus issued. It is already settled that sequestration, due to its tendency to impede or limit the exercise of proprietary rights by private citizens, is construed strictly against the State, conformably with the legal maxim that statutes in derogation of common rights are generally strictly construed and rigidly confined to the cases clearly within their scope and purpose.[86]

 

          Consequently, the nullification of the nine WOS, being in implementation of the safeguards the PCGG itself had instituted, did not constitute any abuse of its discretion, least of all grave, on the part of the Sandiganbayan.

 

          Nor did the Sandiganbayan gravely abuse its discretion in reducing from four to only two the conditions imposed for the lifting of the WOS. The Sandiganbayan thereby acted with the best of intentions, being all too aware that the claim of the Republic to the sequestered assets and properties might be prejudiced or harmed pendente lite unless the protective conditions were annotated in the corporate books of SMC. Moreover, the issue became academic following the Sandiganbayan’s promulgation of its decision dismissing the Republic’s Amended Complaint, which thereby removed the stated reason – “the Republic continues to hold a claim on the shares which is yet to be resolved” – underlying the need for the annotation of the conditions (whether four or two).

 

II

The Concept and Genesis of

Ill-Gotten Wealth in the Philippine Setting

 

          A brief review of the Philippine law and jurisprudence pertinent to ill-gotten wealth should furnish an illuminating backdrop for further discussion.

 

In the immediate aftermath of the peaceful 1986 EDSA Revolution, the administration of President Corazon C. Aquino saw to it, among others, that rules defining the authority of the government and its instrumentalities were promptly put in place. It is significant to point out, however, that the administration likewise defined the limitations of the authority.

 

The first official issuance of President Aquino, which was made on February 28, 1986, or just two days after the EDSA Revolution, was Executive Order (E.O.) No. 1, which created the Presidential Commission on Good Government (PCGG). Ostensibly, E.O. No. 1 was the first issuance in light of the EDSA Revolution having come about mainly to address the pillage of the nation’s wealth by President Marcos, his family, and cronies.

 

 

E.O. No. 1 contained only two WHEREAS Clauses, to wit:

 

WHEREAS, vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad;

 

WHEREAS, there is an urgent need to recover all ill-gotten wealth;[87]

 

 

          Paragraph (4) of E.O. No. 2[88] further required that the wealth, to be ill-gotten, must be “acquired by them through or as a result of improper or illegal use of or the conversion of funds belonging to the Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their official position, authority, relationship, connection or influence to unjustly enrich themselves at the expense and to the grave damage and prejudice of the Filipino people and the Republic of the Philippines.”

 

Although E.O. No. 1 and the other issuances dealing with ill-gotten wealth (i.e., E.O. No. 2, E.O. No. 14, and E.O. No. 14-A) only identified the subject matter of ill-gotten wealth and the persons who could amass ill-gotten wealth and did not include an explicit definition of ill-gotten wealth, we can still discern the meaning and concept of ill-gotten wealth from the WHEREAS Clauses themselves of E.O. No. 1, in that ill-gotten wealth consisted of the “vast resources of the government” amassed by “former President Ferdinand E. Marcos, his immediate family, relatives and close associates both here and abroad.” It is clear, therefore, that ill-gotten wealth would not include all the properties of President Marcos, his immediate family, relatives, and close associates but only the part that originated from the “vast resources of the government.”

 

          In time and unavoidably, the Supreme Court elaborated on the meaning and concept of ill-gotten wealth. In Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on Good Government,[89] or BASECO, for the sake of brevity, the Court held that:

 

xxx until it can be determined, through appropriate judicial proceedings, whether the property was in truth “ill-gotten,” i.e., acquired  through or as a result of improper or illegal use of or the conversion of funds belonging to the Government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of official position, authority, relationship, connection or influence, resulting in unjust enrichment of the ostensible owner and grave damage and prejudice to the State.  And this, too, is the sense in which the term is commonly understood in other jurisdictions.[90]

 

 

The BASECO definition of ill-gotten wealth was reiterated in Presidential Commission on Good Government v. Lucio C. Tan,[91] where the Court said:

 

         On this point, we find it relevant to define “ill-gotten wealth.” In Bataan Shipyard and Engineering Co., Inc., this Court described “ill-gotten wealth” as follows:

 

“Ill-gotten wealth is that acquired through or as a result of improper or illegal use of or the conversion of funds belonging to the Government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of official position, authority, relationship, connection or influence, resulting in unjust enrichment of the ostensible owner and grave damage and prejudice to the State. And this, too, is the sense in which the term is commonly understood in other jurisdiction.”

 

Concerning respondents’ shares of stock here, there is no evidence presented by petitioner that they belong to the Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial institutions.  Nor is there evidence that respondents, taking undue advantage of their connections or relationship with former President Marcos or his family, relatives and close associates, were able to acquire those shares of stock.

 

 

            Incidentally, in its 1998 ruling in Chavez v. Presidential Commission on Good Government,[92] the Court rendered an identical definition of ill-gotten wealth, viz:

 

         xxx. We may also add that ‘ill-gotten wealth’, by its very nature, assumes a public character. Based on the aforementioned Executive Orders, ‘ill-gotten wealth’ refers to assets and properties purportedly acquired, directly or indirectly, by former President Marcos, his immediate family, relatives and close associates through or as a result of their improper or illegal use of government funds or properties; or their having taken undue advantage of their public office; or their use of powers, influence or relationships, “resulting in their unjust enrichment and causing grave damage and prejudice to the Filipino people and the Republic of the Philippines.” Clearly, the assets and properties referred to supposedly originated from the government itself. To all intents and purposes, therefore, they belong to the people. As such, upon reconveyance they will be returned to the public treasury, subject only to the satisfaction of positive claims of certain persons as may be adjudged by competent courts.  Another declared overriding consideration for the expeditious recovery of ill-gotten wealth is that it may be used for national economic recovery.

 

            All these judicial pronouncements demand two concurring elements to be present before assets or properties were considered as ill-gotten wealth, namely: (a) they must have “originated from the government itself,” and (b) they must have been taken by former President Marcos, his immediate family, relatives, and close associates by illegal means. 

         

But settling the sources and the kinds of assets and property covered by E.O. No. 1 and related issuances did not complete the definition of ill-gotten wealth. The further requirement was that the assets and property should have been amassed by former President Marcos, his immediate family, relatives, and close associates both here and abroad. In this regard, identifying former President Marcos, his immediate family, and relatives was not difficult, but identifying other persons who might be the close associates of former President Marcos presented an inherent difficulty, because it was not fair and just to include within the term close associates everyone who had had any association with President Marcos, his immediate family, and relatives.

 

Again, through several rulings, the Court became the arbiter to determine who were the close associates within the coverage of E.O. No. 1.

 

In Republic v. Migriño,[93] the Court held that respondents Migriño, et al. were not necessarily among the persons covered by the term close subordinate or close associate of former President Marcos by reason alone of their having served as government officials or employees during the Marcos administration, viz:

 

         It does not suffice, as in this case, that the respondent is or was a government official or employee during the administration of former Pres. Marcos. There must be a prima facie showing that the respondent unlawfully accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or his wife. This is so because otherwise the respondent’s case will fall under existing general laws and procedures on the matter. xxx

 

In Cruz, Jr. v. Sandiganbayan,[94] the Court declared that the petitioner was not a close associate as the term was used in E.O. No. 1 just because he had served as the President and General Manager of the GSIS during the Marcos administration.

 

In Republic v. Sandiganbayan,[95] the Court stated that respondent Maj. Gen. Josephus Q. Ramas’ having been a Commanding General of the Philippine Army during the Marcos administration “d[id] not automatically make him a subordinate of former President Ferdinand Marcos as this term is used in Executive Order Nos. 1, 2, 14 and 14-A absent a showing that he enjoyed close association with former President Marcos.”

 

          It is well to point out, consequently, that the distinction laid down by E.O. No. 1 and its related issuances, and expounded by relevant judicial pronouncements unavoidably required competent evidentiary substantiation made in appropriate judicial proceedings to determine: (a) whether the assets or properties involved had come from the vast resources of government, and (b) whether the individuals owning or holding such assets or properties were close associates of President Marcos. The requirement of competent evidentiary substantiation made in appropriate judicial proceedings was imposed because the factual premises for the reconveyance of the assets or properties in favor of the government due to their being ill-gotten wealth could not be simply assumed. Indeed, in BASECO,[96] the Court made this clear enough by emphatically observing:

 

         6.  Government’s Right and Duty to Recover All Ill-gotten Wealth

 

         There can be no debate about the validity and eminent propriety of the Government’s plan “to recover all ill-gotten wealth.”

 

         Neither can there be any debate about the proposition that assuming the above described factual premises of the Executive Orders and Proclamation No. 3 to be true, to be demonstrable by competent evidence, the recovery from Marcos, his family and his minions of the assets and properties involved, is not only a right but a duty on the part of Government.

 

         But however plain and valid that right and duty may be, still a balance must be sought with the equally compelling necessity that a proper respect be accorded and adequate protection assured, the fundamental rights of private property and free enterprise which are deemed pillars of a free society such as ours, and to which all members of that society may without exception lay claim.

 

         xxx Democracy, as a way of life enshrined in the Constitution, embraces as its necessary components freedom of conscience, freedom of expression, and freedom in the pursuit of happiness. Along with these freedoms are included economic freedom and freedom of enterprise within reasonable bounds and under proper control. xxx Evincing much concern for the protection of property, the Constitution distinctly recognizes the preferred position which real estate has occupied in law for ages.  Property is bound up with every aspect of social life in a democracy as democracy is conceived in the Constitution.  The Constitution realizes the indispensable role which property, owned in reasonable quantities and used legitimately, plays in the stimulation to economic effort and the formation and growth of a solid social middle class that is said to be the bulwark of democracy and the backbone of every progressive and happy country.

 

a.        Need of Evidentiary Substantiation in Proper Suit

 

         Consequently, the factual premises of the Executive Orders cannot simply be assumed.  They will have to be duly established by adequate proof in each case, in a proper judicial proceeding, so that the recovery of the ill-gotten wealth may be validly and properly adjudged and consummated; although there are some who maintain that the fact — that an immense fortune, and “vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad,” and they have resorted to all sorts of clever schemes and manipulations to disguise and hide their illicit acquisitions — is within the realm of judicial notice, being of so extensive notoriety as to dispense with proof thereof. Be this as it may, the requirement of evidentiary substantiation has been expressly acknowledged, and the procedure to be followed explicitly laid down, in Executive Order No. 14. [97]

 

 

Accordingly, the Republic should furnish to the Sandiganbayan in proper judicial proceedings the competent evidence proving who were the close associates of President Marcos who had amassed assets and properties that would be rightly considered as ill-gotten wealth.

 

III.

Summary Judgment was not warranted;

The Republic should have adduced evidence

to substantiate its allegations against the Respondents

 

          We affirm the decision of November 28, 2007, because the Republic did not discharge its burden as the plaintiff to establish by preponderance of evidence that the respondents’ SMC shares were illegally acquired with coconut-levy funds.

 

          The decision of November 28, 2007 fully explained why the Sandiganbayan dismissed the Republic’s case against Cojuangco, et al., viz:

 

         Going over the evidence, especially the laws, i.e., P.D. No. 961, P.D. No. 755, and P.D. No. 1468, over which plaintiff prayed that Court to take judicial notice of, it is worth noting that these same laws were cited by plaintiff when it filed its motion for judgment on the pleadings and/or summary judgment regarding the CIIF block of SMC shares of stock.  Thus, the Court has already passed upon the same laws when it arrived at judgment determining ownership of the CIIF block of SMC shares of stock.  Pertinently, in the Partial Summary Judgment promulgated on May 7, 2004, the Court gave the following rulings finding certain provisions of the above-cited laws to be constitutionally infirmed, thus:

 

   In this case, Section 2(d) and Section 9 and 10, Article III, of P.D. Nos. 961 and 1468 mandated the UCPB to utilize the CIIF, an accumulation of a portion of the CCSF and the CIDF, for investment in the form of shares of stock in corporations organized for the purpose of engaging in the establishment and the operation of industries and commercial activities and other allied business undertakings relating to coconut and other palm oils industry in all aspects.  The investments made by UCPB in CIIF companies are required by the said Decrees to be equitably distributed for free by the said bank to the coconut farmers (Sec. 10, P.D. No. 961 and Sec. 10, P.D. No. 1468).  The public purpose sought to be served by the free distribution of the shares of stock acquired with the use of public funds is not evident in the laws mentioned.  More specifically, it is not clear how private ownership of the shares of stock acquired with public funds can serve a public purpose.  The mode of distribution of the shares of stock also left much room for the diversion of assets acquired through public funds into private uses or to serve directly private interests, contrary to the Constitution.  In the said distribution, defendants COCOFED, et al. and Ballares, et al. admitted that UCPB followed the administrative issuances of PCA which we found to be constitutionally objectionable in our Partial Summary Judgment in Civil Case No. 0033-A, the pertinent portions of which are quoted hereunder:

 

xxx         xx        xxx.

 

        The distribution for free of the shares of stock of the CIIF Companies is tainted with the above-mentioned constitutional infirmities of the PCA administrative issuances.  In view of the foregoing, we cannot consider the provision of P.D. No. 961 and P.D. No. 1468 and the implementing regulations issued by the PCA as valid legal basis to hold that assets acquired with public funds have legitimately become private properties.

 

        The CIIF Companies having been acquired with public funds, the 14 CIIF-owned Holding Companies and all their assets, including the CIIF Block of SMC Shares, being public in character, belong to the government.  Even granting that the 14 Holding Companies acquired the SMC Shares through CIIF advances and UCPB loans, said advances and loans are still the obligations of the said companies.  The incorporating equity or capital of the 14 Holding Companies, which were allegedly used also for the acquisition of the subject SMC shares, being wholly owned by the CIIF Companies, likewise form part of the coconut levy funds, and thus belong to the government in trust for the ultimate beneficiaries thereof, which are all the coconut farmers.

 

xxx         xxx      xxx.

 

         And, with the above-findings of the Court, the CIIF block of SMC shares were subsequently declared to be of public character and should be reconveyed to the government in trust for coconut farmers.  The foregoing findings notwithstanding, a question now arises on whether the same laws can likewise serve as ultimate basis for a finding that the Cojuangco, et al. block of SMC shares are also imbued with public character and should rightfully be reconveyed to the government.

 

         On this point, the Court disagrees with plaintiff that reliance on said laws would suffice to prove that defendants Cojuangco, et al.’s acquisition of SMC shares of stock was illegal as public funds were used.  For one, plaintiff’s reliance thereon has always had reference only to the CIIF block of shares, and the Court has already settled the same by going over the laws and quoting related findings in the Partial Summary judgment rendered in Civil Case No. 0033-A.  For another, the allegations of plaintiff pertaining to the Cojuangco block representing twenty percent (20%) of the outstanding capital stock of SMC stress defendant Cojuangco’s acquisition by virtue of his positions as Chief Executive Officer of UCPB, a member-director of the Philippine Coconut Authority (PCA) Governing Board, and a director of the CIIF Oil Mills.  Thus, reference to the said laws would not settle whether there was abuse on the part of defendants Cojuangco, et al. of their positions to acquire the SMC shares. [98]

 

         Besides, in the Resolution of the Court on plaintiff’s Motion for Parial Summary Judgment (Re: Shares in San Miguel Corporation Registered in the Respective Names of Defendants Eduardo M. Cojuangco, Jr. and the defendant Cojuangco Companies), the Court already rejected plaintiff’s reference to said laws.  In fact, the Court declined to grant plaintiff’s motion for partial summary judgment because it simply contended that defendant Cojuangco’s statements in his pleadings, which plaintiff again offered in evidence herein, regarding the presentation of a possible CIIF witness as well as UCPB records can already be considered admissions of defendants’ exclusive use and misuse of coconut levy funds.  In the said resolution, the Court already reminded plaintiff that the issues cannot be resolved by plaintiff’s interpretation of defendant Cojuangco’s statements in his brief. Thus, the substantial portion of the Resolution of the Court denying plaintiff’s motion for partial summary judgment is again quoted for emphasis: [99]

 

      We cannot agree with the plaintiff’s contention that the defendant’s statements in his Pre-Trial Brief regarding the presentation of a possible CIIF witness as well as UCPB records, can already be considered as admissions of the defendant’s exclusive use and misuse of coconut levy funds to acquire the subject SMC shares and defendant Cojuangco’s alleged taking advantage of his positions to acquire the subject SMC shares.  Moreover, in ruling on a motion for summary judgment, the court “should take that view of the evidence most favorable to the party against whom it is directed, giving such party the benefit of all favorable inferences.” Inasmuch as this issue cannot be resolved merely from an interpretation of the defendant’s statements in his brief, the UCPB records must be produced and the CIIF witness must be heard to ensure that the conclusions that will be derived have factual basis and are thus, valid. [100]

 

      WHEREFORE, in view of the foregoing, the Motion for Partial Summary Judgment dated July 11, 2003 is hereby DENIED for lack of merit.

 

      SO ORDERED.

 

      (Emphasis supplied)

 

         Even assuming that, as plaintiff prayed for, the Court takes judicial notice of the evidence it offered with respect to the Cojuangco block of SMC shares of stock, as contained in plaintiff’s manifestation of purposes, still its evidence do not suffice to prove the material allegations in the complaint that Cojuangco took advantage of his positions in UCPB and PCA in order to acquire the said shares.  As above-quoted, the Court, itself, has already ruled, and hereby stress that “UCPB records must be produced and the CIIF witness must be heard to ensure that the conclusions that will be derived have factual basis and are thus, valid.” Besides, the Court found that there are genuine factual issues raised by defendants that need to be threshed out in a full-blown trial, and which plaintiff had the burden to substantially prove.  Thus, the Court outlined these genuine factual issues as follows:

 

1)   What are the “various sources” of funds, which defendant Cojuangco and his companies claim they utilized to acquire the disputed SMC shares?

 

2)   Whether or not such funds acquired from alleged “various sources” can be considered coconut levy funds;

 

3)   Whether or not defendant Cojuangco had indeed served in the governing bodies of PCA, UCPB and/or CIIF Oil Mills at the time the funds used to purchase the SMC shares were obtained such that he owed a fiduciary duty to render an account to these entities as well as to the coconut farmers;

 

4)   Whether or not defendant Cojuangco took advantage of his position and/or close ties with then President Marcos to obtain favorable concessions or exemptions from the usual financial requirements from the lending banks and/or coco-levy funded companies, in order to raise the funds to acquire the disputed SMC shares; and if so, what are these favorable concessions or exemptions?[101]

 

Answers to these issues are not evident from the submissions of plaintiff and must therefore be proven through the presentation of relevant and competent evidence during trial.  A perusal of the subject Motion shows that the plaintiff hastily derived conclusions from the defendants’ statements in their previous pleadings although such conclusions were not supported by categorical facts but only mere inferences.  xxx xxx  xxx.” (Emphasis supplied) [102]

 

         Despite the foregoing pronouncement of the Court, plaintiff did not present any other evidence during the trial of this case but instead made its manifestation of purposes, that later served as its offer of evidence in the instant case, that merely used the same evidence it had already relied upon when it moved for partial summary judgment over the Cojuangco block of SMC shares.  Altogether, the Court finds the same insufficient to prove plaintiff’s allegations in the complaint because more than judicial notices, the factual issues require the presentation of admissible, competent and relevant evidence in accordance with Sections 3 and 4, Rule 128 of the Rules on Evidence.

 

         Moreover, the propriety of taking judicial notice of plaintiff’s exhibits is aptly questioned by defendants Cojuangco, et al.  Certainly, the Court can take judicial notice of laws pertaining to the coconut levy funds as well as decisions of the Supreme Court relative thereto, but taking judicial notice does not mean that the Court would accord full probative value to these exhibits.  Judicial notice is based upon convenience and expediency for it would certainly be superfluous, inconvenient, and expensive both to parties and the court to require proof, in the ordinary way, of facts which are already known to courts.  However, a court cannot take judicial notice of a factual matter in controversy.  Certainly, there are genuine factual matters in the instant case, as above-cited, which plaintiff ought to have proven with relevant and competent evidence other than the exhibits it offered.

 

         Referring to plaintiff’s causes of action against defendants Cojuangco, et al., the Court finds its evidence insufficient to prove that the source of funds used to purchase SMC shares indeed came from coconut levy funds. In fact, there is no direct link that the loans obtained by defendant Cojuangco, Jr. were the same money used to pay for the SMC shares. The scheme alleged to have been taken by defendant Cojuangco, Jr. was not even established by any paper trail or testimonial evidence that would have identified the same.  On account of his positions in the UCPB, PCA and the CIIF Oil Mills, the Court cannot conclude that he violated the fiduciary obligations of the positions he held in the absence of proof that he was so actuated and that he abused his positions.[103]

 

 

It was plain, indeed, that Cojuangco, et al. had tendered genuine issues through their responsive pleadings and did not admit that the acquisition of the Cojuangco block of SMC shares had been illegal, or had been made with public funds. As a result, the Republic needed to establish its allegations with preponderant competent evidence, because, as earlier stated, the fact that property was ill gotten could not be presumed but must be substantiated with competent proof adduced in proper judicial proceedings. That the Republic opted not to adduce competent evidence thereon despite stern reminders and warnings from the Sandiganbayan to do so revealed that the Republic did not have the competent evidence to prove its allegations against Cojuangco, et al.

 

Still, the Republic, relying on the 2001 holding in Republic v. COCOFED,[104] pleads in its petition for review (G.R. No. 180702) that:

 

         With all due respect, the Honorable Sandiganbayan failed to consider legal precepts and procedural principles
vis-à-vis the records of the case showing that the funds or “various loans” or “advances” used in the acquisition of the disputed SMC Shares ultimately came from the coconut levy funds.

 

         As discussed hereunder, respondents’ own admissions in their Answers and Pre-Trial Briefs confirm that the “various sources” of funds utilized in the acquisition of the disputed SMC shares came from “borrowings” and “advances” from the UCPB and the CIIF Oil Mills.[105]

 

          Thereby, the Republic would have the Sandiganbayan pronounce the block of SMC shares of stock acquired by Cojuangco, et al. as ill-gotten wealth even without the Republic first presenting preponderant evidence establishing that such block had been acquired illegally and with the use of coconut levy funds.

 

The Court cannot heed the Republic’s pleas for the following reasons:

 

To begin with, it is notable that the decision of November 28, 2007 did not rule on whether coconut levy funds were public funds or not. The silence of the Sandiganbayan on the matter was probably due to its not seeing the need for such ruling following its conclusion that the Republic had not preponderantly established the source of the funds used to pay the purchase price of the concerned SMC shares, and whether the shares had been acquired with the use of coconut levy funds.

 

Secondly, the ruling in Republic v. COCOFED[106] determined only whether certain stockholders of the UCPB could vote in the stockholders’ meeting that had been called. The issue now before the Court could not be controlled by the ruling in Republic v. COCOFED, however, for even as that ruling determined the issue of voting, the Court was forthright enough about not thereby preempting the Sandiganbayan’s decisions on the merits on ill-gotten wealth in the several cases then pending, including this one, viz: 

 

 

         In making this ruling, we are in no way preempting the proceedings the Sandiganbayan may conduct or the final judgment it may promulgate in Civil Case No. 0033-A, 0033-B and 0033-F.  Our determination here is merely prima facie, and should not bar the anti-graft court from making a final ruling, after proper trial and hearing, on the issues and prayers in the said civil cases, particularly in reference to the ownership of the subject shares.

 

         We also lay down the caveat that, in declaring the coco levy funds to be prima facie public in character, we are not ruling in any final manner on their classification — whether they are general or trust or special funds — since such classification is not at issue here.  Suffice it to say that the public nature of the coco levy funds is decreed by the Court only for the purpose of determining the right to vote the shares, pending the final outcome of the said civil cases.

 

         Neither are we resolving in the present case the question of whether the shares held by Respondent Cojuangco are, as he claims, the result of private enterprise. This factual matter should also be taken up in the final decision in the cited cases that are pending in the court a quo.  Again, suffice it to say that the only issue settled here is the right of PCGG to vote the sequestered shares, pending the final outcome of said cases.

 

 

Thirdly, the Republic’s assertion that coconut levy funds had been used to source the payment for the Cojuangco block of SMC shares was premised on its allegation that the UCPB and the CIIF Oil Mills were public corporations. But the premise was grossly erroneous and overly presumptuous, because:

 

(a) The fact of the UCPB and the CIIF Oil Mills being public corporations or government-owned or government-controlled corporations precisely remained controverted by Cojuangco, et al. in light of the lack of any competent to that effect being in the records;

 

(b) Cojuangco explicitly averred in paragraph 2.01.(b) of his Answer that the UCPB was a “private corporation;” and

 

(c) The Republic did not competently identify or establish which ones of the Cojuangco corporations had supposedly received advances from the CIIF Oil Mills. 

 

          Fourthly, the Republic asserts that the contested block of shares had been paid for with “borrowings” from the UCPB and “advances” from the CIIF Oil Mills, and that such borrowings and advances had been illegal because the shares had not been purchased for the “benefit of the Coconut Farmers.” To buttress its assertion, the Republic relied on the admissions supposedly made in paragraph 2.01 of Cojuangco’s Answer in relation to paragraph 4 of the Republic’s Amended Complaint. 

 

The best way to know what paragraph 2.01 of Cojuangco’s Answer admitted is to refer to both paragraph 4 of the Amended Complaint and paragraph 2.01 of his Answer, which are hereunder quoted:

 

Paragraph 4 of the Amended Complaint

 

 

         4.   Defendant EDUARDO M. COJUANGCO, JR., was Governor of Tarlac, Congressman of then First District of Tarlac and Ambassador-at-Large in the Marcos Administration.  He was commissioned Lieutenant Colonel in the Philippine Air Force, Reserve.  Defendant Eduardo M. Cojuangco, Jr., otherwise known as the “Coconut King” was head of the coconut monopoly which was instituted by Defendant Ferdinand E. Marcos, by virtue of the Presidential Decrees.  Defendant Eduardo E. Cojuangco, Jr., who was also one of the closest associates of the Defendant Ferdinand E. Marcos, held the positions of Director of the Philippine Coconut Authority, the United Coconut Mills, Inc., President and Board Director of the United Coconut Planters Bank, United Coconut Planters Life Assurance Corporation, and United Coconut Chemicals, Inc. He was also the Chairman of the Board and Chief Executive Officer and the controlling stockholder of the San Miguel Corporation.  He may be served summons at 45 Balete Drive, Quezon City or at 136 East 9th Street, Quezon City.

 

Paragraph 2.01 of Respondent Cojuangco’s Answer

 

         2.01. Herein defendant admits paragraph 4 only insofar as it alleges the following:

 

      (a)     That herein defendant has held the following positions in government: Governor of Tarlac, Congressman of the then First District of Tarlac, Ambassador-at-Large, Lieutenant Colonel in the Philippine Air Force and Director of the Philippines Coconut Authority;

 

      (b)     That he held the following positions in private corporations: Member of the Board of Directors of the United Coconut Oil Mills, Inc.; President and member of the Board of Directors of the United Coconut Planters Bank, United Coconut Planters Life Assurance Corporation, and United Coconut Chemicals, Inc.; Chairman of the Board and Chief Executive of San Miguel Corporation; and

 

      (c)     That he may be served with summons at 136 East 9th Street, Quezon City.

 

         Herein defendant specifically denies the rest of the allegations of paragraph 4, including any insinuation that whatever association he may have had with the late Ferdinand Marcos or Imelda Marcos has been in connection with any of the acts or transactions alleged in the complaint or for any unlawful purpose.

 

 

It is basic in remedial law that a defendant in a civil case must apprise the trial court and the adverse party of the facts alleged by the complaint that he admits and of the facts alleged by the complaint that he wishes to place into contention. The defendant does the former either by stating in his answer that they are true or by failing to properly deny them. There are two ways of denying alleged facts: one is by general denial, and the other, by specific denial.[107]

 

In this jurisdiction, only a specific denial shall be sufficient to place into contention an alleged fact.[108] Under Section 10,[109] Rule 8 of the Rules of Court, a specific denial of an allegation of the complaint may be made in any of three ways, namely: (a) a defendant specifies each material allegation of fact the truth of which he does not admit and, whenever practicable, sets forth the substance of the matters upon which he relies to support his denial; (b) a defendant who desires to deny only a part of an averment specifies so much of it as is true and material and denies only the remainder; and (c) a defendant who is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint states so, which has the effect of a denial.

 

The express qualifications contained in paragraph 2.01 of Cojuangco’s Answer constituted efficient specific denials of the averments of paragraph 2 of the Republic’s Amended Complaint under the first method mentioned in Section 10 of Rule 8, supra. Indeed, the aforequoted paragraphs of the Amended Complaint and of Cojuangco’s Answer indicate that Cojuangco thereby expressly qualified his admission of having been the President and a Director of the UCPB with the averment that the UCPB was a “private corporation;” that his Answer’s allegation of his being a member of the Board of Directors of the United Coconut Oil Mills, Inc. did not admit that he was a member of the Board of Directors of the CIIF Oil Mills, because the United Coconut Oil Mills, Inc. was not one of the CIIF Oil Mills; and that his Answer nowhere contained any admission or statement that he had held the various positions in the government or in the private corporations at the same time and in 1983, the time when the contested acquisition of the SMC shares of stock took place.

 

What the Court stated in Bitong v. Court of Appeals (Fifth Division)[110] as to admissions is illuminating:

 

When taken in its totality, the Amended Answer to the Amended Petition, or even the Answer to the Amended Petition alone, clearly raises an issue as to the legal personality of petitioner to file the complaint.  Every alleged admission is taken as an entirety of the fact which makes for the one side with the qualifications which limit, modify or destroy its effect on the other side.  The reason for this is, where part of a statement of a party is used against him as an admission, the court should weigh any other portion connected with the statement, which tends to neutralize or explain the portion which is against interest.

 

In other words, while the admission is admissible in evidence, its probative value is to be determined from the whole statement and others intimately related or connected therewith as an integrated unit. Although acts or facts admitted do not require proof and cannot be contradicted, however, evidence aliunde can be presented to show that the admission was made through palpable mistake.  The rule is always in favor of liberality in construction of pleadings so that the real matter in dispute may be submitted to the judgment of the court.

 

 

          And, lastly, the Republic cites the following portions of the joint Pre-Trial Brief of Cojuangco, et al.,[111] to wit:

 

IV.

PROPOSED EVIDENCE

xxx

         4.01. xxx Assuming, however, that plaintiff presents evidence to support its principal contentions, defendant’s evidence in rebuttal would include testimonial and documentary evidence showing: a) the ownership of the shares of stock prior to their acquisition by respondents (listed in Annexes ‘A” and ‘B”); b) the consideration for the acquisition of the shares of stock by the persons or companies in whose names the shares of stock are now registered; and c) the source of the funds used to pay the purchase price.

 

         4.02. Herein respondents intend to present the following evidence:

xxx

         b.  Proposed Exhibits  ____, ____, ____

 

         Records of the United Coconut Planters Bank which would show borrowings of the companies listed in Annexes “A” and “B”, or companies affiliated or associated with them, which were used to source payment of the shares of stock of the San Miguel Corporation subject of this case.

 

         4.03.  Witnesses.

xxx

         (b)  A representative of the United Coconut Planters Bank who will testify in regard the loans which were used to source the payment of the price of SMC shares of stock.

 

         (c) A representative from the CIIF Oil Mills who will testify in regard the loans or credit advances which were used to source the payment of the purchase price of the SMC shares of stock.

 

 

The Republic insists that the aforequoted portions of the joint Pre-Trial Brief were Cojuangco, et al.’s admission that:

 

(a) Cojuangco had received money from the UCPB, a bank entrusted by law with the administration of the coconut levy funds; and

 

(b) Cojuangco had received more money from the CIIF Oil Mills in which part of the CIIF funds had been placed, and thereby used the funds of the UCPB and the CIIF as capital to buy his SMC shares.[112]

 

          We disagree with the Republic’s posture.

 

The statements found in the joint Pre-Trial Brief of Cojuangco, et al. were noticeably written beneath the heading of Proposed Evidence. Such location indicated that the statements were only being proposed, that is, they were not yet intended or offered as admission of any fact stated therein. In other words, the matters stated or set forth therein might or might not be presented at all. Also, the text and tenor of the statements expressly conditioned the proposal on the Republic ultimately presenting its evidence in the action. After the Republic opted not to present its evidence, the condition did not transpire; hence, the proposed admissions, assuming that they were that, did not materialize.

 

Obviously, too, the statements found under the heading of Proposed Evidence in the joint Pre-Trial Brief were incomplete and inadequate on the important details of the supposed transactions (i.e., alleged borrowings and advances). As such, they could not constitute admissions that the funds had come from borrowings by Cojuangco, et al. from the UCPB or had been credit advances from the CIIF Oil Companies. Moreover, the purpose for presenting the records of the UCPB and the representatives of the UCPB and of the still unidentified or unnamed CIIF Oil Mills as declared in the joint Pre-Trial Brief did not at all show whether the UCPB and/or the unidentified or unnamed CIIF Oil Mills were the only sources of funding, or that such institutions, assuming them to be the sources of the funding, had been the only sources of funding. Such ambiguousness disqualified the statements from being relied upon as admissions. It is fundamental that any statement, to be considered as an admission for purposes of judicial proceedings, should be definite, certain and unequivocal;[113] otherwise, the disputed fact will not get settled.

 

Another reason for rejecting the Republic’s posture is that the Sandiganbayan, as the trial court, was in no position to second-guess what the non-presented records of the UCPB would show as the borrowings made by the corporations listed in Annexes A and B, or by the companies affiliated or associated with them, that “were used to source payment of the shares of stock of the San Miguel Corporation subject of this case,” or what the representative of the UCPB or the representative of the CIIF Oil Mills would testify about loans or credit advances used to source the payment of the price of SMC shares of stock.

 

          Lastly, the Rules of Court has no rule that treats the statements found under the heading Proposed Evidence as admissions binding Cojuangco, et al. On the contrary, the Rules of Court has even distinguished between admitted facts and facts proposed to be admitted during the stage of pre-trial. Section 6 (b),[114] Rule 18 of the Rules of Court, requires a Pre-Trial Brief to include a summary of admitted facts and a proposed stipulation of facts. Complying with the requirement, the joint Pre-Trial Brief of Cojuangco, et al. included the summary of admitted facts in its paragraph 3.00 of its Item III, separately and distinctly from the Proposed Evidence, to wit:

 

III.

SUMMARY OF UNDISPUTED FACTS

 

         3.00. Based on the complaint and the answer, the acquisition of the San Miguel shares by, and their registration in the names of, the companies listed in Annexes “A” and “B” may be deemed undisputed.

 

         3.01. All other allegations in the complaint are disputed.[115]

 

The burden of proof, according to Section 1, Rule 131 of the Rules of Court, is “the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law.” Here, the Republic, being the plaintiff, was the party that carried the burden of proof. That burden required it to demonstrate through competent evidence that the respondents, as defendants, had purchased the SMC shares of stock with the use of public funds; and that the affected shares of stock constituted ill-gotten wealth. The Republic was well apprised of its burden of proof, first through the joinder of issues made by the responsive pleadings of the defendants, including Cojuangco, et al. The Republic was further reminded through the pre-trial order and the Resolution denying its Motion for Summary Judgment, supra, of the duty to prove the factual allegations on ill-gotten wealth against Cojuangco, et al., specifically the following disputed matters:

 

(a) When the loans or advances were incurred;

 

(b) The amount of the loans from the UCPB and of the credit advances from the CIIF Oil Mills, including the specific CIIF Oil Mills involved;

 

(c) The identities of the borrowers, that is, all of the respondent corporations together, or separately; and the amounts of the borrowings;

 

(d) The conditions attendant to the loans or advances, if any;

 

(e) The manner, form, and time of the payments made to Zobel or to the Ayala Group, whether by check, letter of credit, or some other form; and

 

(f) Whether the loans were paid, and whether the advances were liquidated.

 

With the Republic nonetheless choosing not to adduce evidence proving the factual allegations, particularly the aforementioned matters, and instead opting to pursue its claims by Motion for Summary Judgment, the Sandiganbayan became completely deprived of the means to know the necessary but crucial details of the transactions on the acquisition of the contested block of shares. The Republic’s failure to adduce evidence shifted no burden to the respondents to establish anything, for it was basic that the party who asserts, not the party who denies, must prove.[116] Indeed, in a civil action, the plaintiff has the burden of pleading every essential fact and element of the cause of action and proving them by preponderance of evidence. This means that if the defendant merely denies each of the plaintiff’s allegations and neither side produces evidence on any such element, the plaintiff must necessarily fail in the action.[117] Thus, the Sandiganbayan correctly dismissed Civil Case No. 0033-F for failure of the Republic to prove its case by preponderant evidence.

 

A summary judgment under Rule 35 of the Rules of Court is a procedural technique that is proper only when there is no genuine issue as to the existence of a material fact and the moving party is entitled to a judgment as a matter of law.[118] It is a method intended to expedite or promptly dispose of cases where the facts appear undisputed and certain from the pleadings, depositions, admissions, and affidavits on record.[119] Upon a motion for summary judgment the court’s sole function is to determine whether there is an issue of fact to be tried, and all doubts as to the existence of an issue of fact must be resolved against the moving party. In other words, a party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, and any doubt as to the existence of such an issue is resolved against the movant.  Thus, in ruling on a motion for summary judgment, the court should take that view of the evidence most favorable to the party against whom it is directed, giving that party the benefit of all favorable inferences.[120]

 

The term genuine issue has been defined as an issue of fact that calls for the presentation of evidence as distinguished from an issue that is sham, fictitious, contrived, set up in bad faith, and patently unsubstantial so as not to constitute a genuine issue for trial. The court can determine this on the basis of the pleadings, admissions, documents, affidavits, and counter-affidavits submitted by the parties to the court. Where the facts pleaded by the parties are disputed or contested, proceedings for a summary judgment cannot take the place of a trial.[121] Well-settled is the rule that a party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact.[122] Upon that party’s shoulders rests the burden to prove the cause of action, and to show that the defense is interposed solely for the purpose of delay. After the burden has been discharged, the defendant has the burden to show facts sufficient to entitle him to defend.[123] Any doubt as to the propriety of a summary judgment shall be resolved against the moving party.

 

We need not stress that the trial courts have limited authority to render summary judgments and may do so only in cases where no genuine issue as to any material fact clearly exists between the parties.  The rule on summary judgment does not invest the trial courts with jurisdiction to try summarily the factual issues upon affidavits, but authorizes summary judgment only when it appears clear that there is no genuine issue as to any material fact.[124]

 

IV.

Republic’s burden to establish by preponderance of evidence that respondents’ SMC shares had been illegally acquired with coconut-levy funds was not discharged

 

Madame Justice Carpio Morales argues in her dissent that although the contested SMC shares could be inescapably treated as fruits of funds that are prima facie public in character, Cojuangco, et al. abstained from presenting countervailing evidence; and that with the Republic having shown that the SMC shares came into fruition from coco levy funds that are prima facie public funds, Cojuangco, et al. had to go forward with contradicting evidence, but did not.

 

          The Court disagrees. We cannot reverse the decision of November 28, 2007 on the basis alone of judicial pronouncements to the effect that the coconut levy funds were prima facie public funds,[125] but without any competent evidence linking the acquisition of the block of SMC shares by Cojuangco, et al. to the coconut levy funds.

 

V.

No violation of the DOSRI and

Single Borrower’s Limit restrictions

 

            The Republic’s lack of proof on the source of the funds by which Cojuangco, et al. had acquired their block of SMC shares has made it shift its position, that it now suggests that Cojuangco had been enabled to  obtain the loans by the issuance of LOI 926 exempting the UCPB from the DOSRI and the Single Borrower’s Limit restrictions.

 

          We reject the Republic’s suggestion.

 

Firstly, as earlier pointed out, the Republic adduced no evidence on the significant particulars of the supposed loan, like the amount, the actual borrower, the approving official, etc. It did not also establish whether or not the loans were DOSRI[126] or issued in violation of the Single Borrower’s Limit. Secondly, the Republic could not outrightly assume that President Marcos had issued LOI 926 for the purpose of allowing the loans by the UCPB in favor of Cojuangco. There must be competent evidence to that effect. And, finally, the loans, assuming that they were of a DOSRI nature or without the benefit of the required approvals or in excess of the Single Borrower’s Limit, would not be void for that reason. Instead, the bank or the officers responsible for the approval and grant of the DOSRI loan would be subject only to sanctions under the law.[127]

 

VI.

Cojuangco violated no fiduciary duties

 

The Republic invokes the following pertinent statutory provisions of the Civil Code, to wit:

 

Article 1455.  When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong.

 

Article 1456.  If property is acquired through mistake or fraud, the person obtaining it s by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

 

and the Corporation Code, as follows:

 

         Section 31. Liability of directors, trustees or officers.—Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

 

         When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.    

 

          Did Cojuangco breach his “fiduciary duties” as an officer and member of the Board of Directors of the UCPB? Did his acquisition and holding of the contested SMC shares come under a constructive trust in favor of the Republic?

 

          The answers to these queries are in the negative.

 

The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the trustee using trust funds to purchase, or a person acquiring property through mistake or fraud), and Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting for or assenting to patently unlawful acts of the corporation, among others) require factual foundations to be first laid out in appropriate judicial proceedings. Hence, concluding that Cojuangco breached fiduciary duties as an officer and member of the Board of Directors of the UCPB without competent evidence thereon would be unwarranted and unreasonable.

 

Thus, the Sandiganbayan could not fairly find that Cojuangco had committed breach of any fiduciary duties as an officer and member of the Board of Directors of the UCPB. For one, the Amended Complaint contained no clear factual allegation on which to predicate the application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation Code. Although the trust relationship supposedly arose from Cojuangco’s being an officer and member of the Board of Directors of the UCPB, the link between this alleged fact and the borrowings or advances was not established.  Nor was there evidence on the loans or borrowings, their amounts, the approving authority, etc. As trial court, the Sandiganbayan could not presume his breach of fiduciary duties without evidence showing so, for fraud or breach of trust is never presumed, but must be alleged and proved.[128]

 

The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implication. In a contract of loan, one of the parties (creditor) delivers money or other consumable thing to another (debtor) on the condition that the same amount of the same kind and quality shall be paid.[129] Owing to the consumable nature of the thing loaned, the resulting duty of the borrower in a contract of loan is to pay, not to return, to the creditor or lender the very thing loaned. This explains why the ownership of the thing loaned is transferred to the debtor upon perfection of the contract.[130] Ownership of the thing loaned having transferred, the debtor enjoys all the rights conferred to an owner of property, including the right to use and enjoy (jus utendi), to consume the thing by its use (jus abutendi), and to dispose (jus disponendi), subject to such limitations as may be provided by law.[131] Evidently, the resulting relationship between a creditor and debtor in a contract of loan cannot be characterized as fiduciary.[132]

 

To say that a relationship is fiduciary when existing laws do not provide for such requires evidence that confidence is reposed by one party in another who exercises dominion and influence. Absent any special facts and circumstances proving a higher degree of responsibility, any dealings between a lender and borrower are not fiduciary in nature.[133] This explains why, for example, a trust receipt transaction is not classified as a simple loan and is characterized as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner.[134]

 

          Based on the foregoing, a debtor can appropriate the thing loaned without any responsibility or duty to his creditor to return the very thing that was loaned or to report how the proceeds were used. Nor can he be compelled to return the proceeds and fruits of the loan, for there is nothing under our laws that compel a debtor in a contract of loan to do so. As owner, the debtor can dispose of the thing borrowed and his act will not be considered misappropriation of the thing.[135] The only liability on his part is to pay the loan together with the interest that is either stipulated or provided under existing laws.

 

WHEREFORE, the Court dismisses the petitions for certiorari in G.R. Nos. 166859 and 169023; denies the petition for review on certiorari in G.R. No. 180702; and, accordingly, affirms the decision promulgated by the Sandiganbayan on November 28, 2007 in Civil Case No. 0033-F.

 

The Court declares that the block of shares in San Miguel Corporation in the names of respondents Cojuangco, et al. subject of Civil Case No. 0033-F is the exclusive property of Cojuangco, et al. as registered owners.

 

Accordingly, the lifting and setting aside of the Writs of Sequestration affecting said block of shares (namely: Writ of Sequestration No. 86-0062 dated April 21, 1986; Writ of Sequestration No. 86-0069 dated April 22, 1986; Writ of Sequestration No. 86-0085 dated May 9, 1986; Writ of Sequestration No. 86-0095 dated May 16, 1986; Writ of Sequestration No. 86-0096 dated May 16, 1986; Writ of Sequestration No. 86-0097 dated May 16, 1986; Writ of Sequestration No. 86-0098 dated May 16, 1986; Writ of Sequestration No. 86-0042 dated April 8, 1986; and Writ of Sequestration No. 87-0218 dated May 27, 1987) are affirmed; and the annotation of the conditions prescribed in the Resolutions promulgated on October 8, 2003 and June 24, 2005 is cancelled.

 

          SO ORDERED.

 

 

 

 

 

                                                                    LUCAS P. BERSAMIN

                                                                          Associate Justice

 

WE CONCUR:

 

 

 

 

RENATO C. CORONA

Chief Justice

 

 

 

 

No part. I am one of petitioners in a petition to declare the coco levy funds public funds.

ANTONIO T. CARPIO

Associate Justice

Please see my Dissenting Opinion

CONCHITA CARPIO MORALES

Associate Justice

 

 

 

 

 

 

PRESBITERO J. VELASCO, JR.

Associate Justice

No part. Signed pleading as Sol Gen

ANTONIO EDUARDO B. NACHURA

Associate Justice

 

 

 

 

 

 

 

No part

TERESITA J. LEONARDO DE CASTRO

Associate Justice

 

 

 

 

 

 

 

See: My Dissenting Opinion

ARTURO D. BRION

Associate Justice

 

 

 

 

 

No part

DIOSDADO M. PERALTA

Associate Justice

 

 

 

 

MARIANO C. DEL CASTILLO

Associate Justice

 

 

 

 

 

ROBERTO A. ABAD

Associate Justice

 

 

 

 

 

MARTIN S. VILLARAMA, JR.

Associate Justice

 

 

 

 

JOSE PORTUGAL PEREZ

Associate Justice

 

 

 

 

I join the position of J. Brion
JOSE CATRAL MENDOZA

Associate Justice

 

 

 

 

I join the dissent of J. Carpio Morales
MARIA LOURDES P. A. SERENO

Associate Justice

 

 

C E R T I F I C A T I O N

 

 

            Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

 

 

 

 

                                                                   RENATO C. CORONA

                                                                            Chief Justice

 



[1]     Rollo (G.R. No. 166859), pp. 2-48.

[2]     Rollo (G.R. No. 169023), pp. 2-39.

[3]     Rollo (G.R. No. 180702), Vol. 2, pp. 397-459.

[4]     Rollo (G.R. No. 166859), pp. 49-63

[5]     Rollo (G.R. No. 169023), pp. 40-55.

[6]     Id., pp. 74-82.

[7]     Rollo (G.R. No. 180702), Vol. 2, pp. 461-514.

[8]     Id., pp. 516-590.

[9]       Namely: Agricultural Consultancy Services, Incorporated, Archipelago Realty Corporation, Autonomous Development Corporation, Balete Ranch, Incorporated, Black Stallion Ranch, Incorporated, Christensen Plantation Company, Cocoa Investors, Incorporated, Davao Agicultural Aviation, Incorporated, Discovery Realty Corporation, Dream Pastures, Incorporated, Echo Ranch, Incorporated, ECJ & Sons Agri. Ent., Incorporated, Far East Ranch, Incorporated, FILSOV Shipping Company, Incorporated,  First United Transport, Incorporated, Habagat Realty Development, Incorporated, HYCO Agrocultural, Incorporated, Kalawakan Resorts, Incorporated, Kaunlaran Agricultural Corporation, Labayog Air Terminals, Incorporated, Landair International Marketing Corporation, LHL Cattle Corporation, Meadow Lark Plantations, Incorporated, Metroplex Commodities, Incorporated, Misty Mountain Agricultural Corporation, Northeast Contract Traders, Incorporated, Northern Carriers Corporation, Oceanside Maritime Enterprises, Incorporated, Oro Verde Services, Incorporated, Pastoral Farms, Incorporated, PCY Oil Manufacturing Corporation, Philippine Radio Corporation, Incorporated, Philippine Technologies, Incorporated, Primavera Farms, Incorporated, Punong-Bayan Housing Development Corporation, Pura Electric Company, Incorporated, Radio Audience Developers Integrated Organization, Incorporated, Radio Pilipino Corporation, Rancho Grande, Incorporated, Reddee Developers, Incorporated, San Esteban Development Corporation, Silver Leaf Plantation, Incorporated, Southern Services Traders, Incorporated, Southern Star Cattle Corporation, Spade 1 Resorts Corporation, Tagum Agricultural Development Corporation, Thilagro Edible Oil Mills, Incorporated, Unexplored Land Developers, Incorporated, Ventures Securities, Incorporated, Verdant Plantations, Inc., Vesta Agricultural Corporation, and Wings Resorts Corporation.

[10]    Rollo (G.R. No. 180702), Vol. 2, pp. 516-545.

[11]    Id., pp. 525-533.

[12]     G.R. No. 105938, September 20, 1996, 262 SCRA 122.

[13]     Ibid.

[14]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p. 478.

[15]     Rollo, (G.R. 180702), Vol. 2, pp. 591-610.

[16]    Id., pp. 611-625.

[17]    Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7,  pp. 471-473.

[18]    Id., pp. 473-476.

[19]     Id., pp. 476-477.

[20]     Id., p. 479.

[21]     Id.

[22]     Id., p. 480.

[23]     Id., p. 481.

[24]     Rollo (G.R. No. 169203),  pp. 320-323-A.

[25]     Id.

[26]     G.R. No. 133197, January 27, 1999, 302 SCRA 217.

[27]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, pp. 483-484.

[28]     Id., p. 484.

[29]     Rollo (G.R. No. 180702), Vol. 2, pp. 642-684.

[30]    Id., pp.  685-738.

[31]    Id., pp. 738A-807.

[32]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p. 485.

[33]     Id., p. 485.

[34]     Id.

[35]     Id.

[36]     Rollo (G.R. No. 169203), pp. 40-55; the resolution, although dated September 17, 2003, was promulgated only on October 8, 2003; it was penned by Associate Justice Diosdado M. Peralta (later Presiding Justice, now a Member of the Court), and concurred in by Associate Justice Teresita J. Leonardo-De Castro (later Presiding Justice, now a Member of the Court) who wrote a concurring and dissenting opinion, Associate Justice Gregory S. Ong, Associate Justice Godofredo Legaspi (retired), and Associate Justice Francisco H. Villaruz, Jr., who submitted a separate concurring opinion.

[37]     Resolution dated October 8, 2003 in Civil Case No. 0033-F, supra, note 5, pp. 53-55.

[38]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p.  486.

[39]     Id.

[40]    Resolution dated June 24, 2005, supra, note 6, p. 81.

[41]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p. 487.

[42]    Id.

[43]    Id.

[44]    Id.

[45]     Id., p. 488.

[46]    Rollo (G.R. No. 169203), pp. 655-718.

[47]    Id., pp. 717-718.

[48]    Decision dated November 28, 2007 in Civil Case No. 0033-F, supra,  note 7, p. 489.

[49]    Id.

[50]    Id.

[51]    Id.

[52]     Resolution dated December 10, 2004 in Civil Case No. 0033-F, supra, note 4, pp. 61-63; it was penned by Associate Justice Leonardo-De Castro, and concurred in by Associate Justice Peralta and Associate Justice Roland B. Jurado; bold emphasis supplied.

[53]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p. 490.

[54]    Id.

[55]    Id.

[56]    Id.

[57]    Id.

[58]    Id., p. 491.

[59]    Id.

[60]    Id., p. 492.

[61]     Id.

[62]     Id.

[63]    Id., pp. 492-493.

[64]    Id., pp. 493-494.

[65]    Id., p. 494.

[66]    Id.

[67]    Id.

[68]     Id., pp. 494-495.

[69]     Id., p. 495.

[70]    Id.

[71]     Id.

[72]    Rollo (G.R. No. 180702), Vol. 3, pp. 882-884.

[73]    Id.

[74]    Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, p. 496.

[75]    Id.

[76]    Id., p. 497.

[77]     Rollo (G.R. No. 166859),  pp. 2-48.

[78]     The four conditions were the following:

(1)   any sale, pledge, mortgage or other disposition of any of the shares of the Defendants Eduardo Cojuangco, et al. shall be subject to the outcome of this case;

(2)  the Republic  through the PCGG shall be given twenty (20) days written notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge, mortgage or other disposition of the shares;

(3)  in the event of sale, mortgage or other disposition of the shares, by the Defendants Cojuangco, et al., the consideration therefore, whether in cash or in kind, shall be placed in escrow with Land Bank of the Philippines, subject to disposition only upon further orders of this Court; and

(4)   any cash dividends that are declared on the shares shall be placed in escrow with the Land Bank of the Philippines, subject to disposition only upon further orders of this Court.  If in case stock dividends are declared, the conditions on the sale, pledge, mortgage and other disposition of any of the shares as above-mentioned in conditions 1, 2 and 3, shall likewise apply.

[79]     The modified conditions were reduced to only two, namely:

        (a)  any sale, pledge, mortgage or other disposition of any of the shares of the Defendants Eduardo Cojuangco, et al. shall be subject to the outcome of this case.

        (b)   the Republic through the PCGG shall be given twenty (20) days written notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge, mortgage or other disposition of the shares.

[80]    Rollo (G.R. No. 169203), pp. 2-39.

[81]    Id., p. 11.

[82]     Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7;  it was penned by Associate Justice Peralta, with the concurrence of Presiding Justice Leonardo-De Castro and Associate Justice Efren N. De la Cruz;.

[83]     Petition, p. 26; supra, note 3, p. 421.

[84]     Id., pp. 420-421.

[85]    Rollo, (G.R. No. 180702), Volume 1, pp. 18-77.

[86]     Republic v. Sandiganbayan, G.R. No. 119292, July 31, 1998, 293 SCRA 440, 455-456.

[87]     Bold emphasis supplied.

[88]     (4) Prohibit former President Ferdinand Marcos and/or his wife, Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees from transferring, conveying, encumbering, concealing or dissipating said assets or properties in the Philippines and abroad, pending the outcome of appropriate proceedings in the Philippines to determine whether any such assets or properties were acquired by them through or as a result of improper or illegal use of or the conversion of funds belonging to the Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their official position, authority, relationship, connection or influence to unjustly enrich themselves at the expense and to the grave damage and prejudice of the Filipino people and the Republic of the Philippines.

[89]     G.R. No. L-75885, May 27, 1987, 150 SCRA 181, 209.

[90]     Bold emphasis supplied.

[91]     G.R. No. 173553-56, December 7, 2007, 539 SCRA 464, 481.

[92]     G.R. No. 130716, December 9, 1998, 299 SCRA 744, 768-769.

[93]     G.R. No. 89483, August 30, 1990, 189 SCRA 289.

[94]     G.R. No. 94595, February 26, 1991, 194 SCRA 474.

[95]     G.R. No. 104768, July 21, 2003, 407 SCRA 10.

[96]     Bataan Shipyard and Engineering Co., Inc. v. Presidential Commission on Good Government, supra, note 89, pp. 206-208.

[97]     Bold emphasis supplied.

[98]     Bold emphasis supplied.

[99]     Bold emphasis supplied.

[100]    Bold emphasis is in the original.

[101]    Bold emphasis is in the original.

[102]    Bold emphasis supplied.

[103]    Decision dated November 28, 2007 in Civil Case No. 0033-F, supra, note 7, pp. 505-509.

[104]    G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462.

[105]    Rollo (G.R. No. 180702), Vol. 2, pp. 427-428.

[106]    Supra,  note 104.

[107]    Friedenthal, et al., Civil Procedure, 2nd Edition, §§5.18 and 5.19.

[108]    Section 11, Rule 8, Rules of Court, provides:

Section 11. Allegations not specifically denied deemed admitted. ̶  Material averment in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied. Allegations of usury in a complaint to recover usurious interest are deemed admitted if not denied under oath. (1a,R9).

[109]    Section 10. Specific denial. — A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny only the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial. (10a)

[110]    G.R. No. 123553, July 13, 1998, 292 SCRA 503, 520.

[111]    Petition, pp. 40-41; rollo (G.R. No. 180702), Vol. 2, pp. 435-436.

[112]    Id., p. 436.

[113]    CMS Logging, Inc. v. Court of Appeals, G.R. No. 41420, July 10, 1992, 211 SCRA 374, 380-381; citing Bank of the Philippine Islands v. Fidelity & Surety Co., 51 Phil. 57, 64 (‘a statement is not competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which is sought to be proved by it’. An admission or declaration to be competent must have been expressed in definite, certain and unequivocal language.”

[114]    Section 6. Pre-trial brief. — The parties shall file with the court and serve on the adverse party, in such manner as shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs which shall contain, among others:

        (a) A statement of their willingness to enter into amicable settlement or alternative modes of dispute resolution, indicating the desired terms thereof;

        (b) A summary of admitted facts and proposed stipulation of facts;

        (c) The issues to be tried or resolved;

        (d) The documents or exhibits to be presented, stating the purpose thereof;

        (e) A manifestation of their having availed or their intention to avail themselves of discovery procedures or referral to commissioners; and

        (f) The number and names of the witnesses, and the substance of their respective testimonies.

        Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial. (n)

[115]    Rollo (G.R. No. 180702), Vol. 2, p 634 (Pre-Trial Brief (Re: Acquisition of San Miguel Corporation [SMC]) filed by Cojuangco, et al., p. 9).

[116]    Martin v. Court of Appeals, 205 SCRA 591, 596 [1995]; Luxuria Homes, Inc. v. Court of Appeals, 302 SCRA 315 [1999].

[117]    I Jones on Evidence, (1992) §3.12; see also Vitarich Corporation v. Losin, G.R. No. 181560, November 15, 2010; Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex  Association, Inc., G.R. No. 173881,  December 1, 2010; Reyes v. Century Canning Corporation, G.R. No. 165377, February 16, 2010 (It is a basic rule in evidence that each party to a case must prove his own affirmative allegations by the degree of evidence required by law. In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, or that evidence that is of greater weight or is more convincing than that which is in opposition to it. It does not mean absolute truth; rather, it means that the testimony of one side is more believable than that of the other side, and that the probability of truth is on one side than on the other.)

[118]    Section 3, Rule 35, Rules of Court; see Excelsa Industries, Inc. v. Court of Appeals, G.R. No. 105455, August 23, 1995, 247 SCRA 560, 566; Solid Manila Corporation v. Bio Hong Trading Co., Inc., G.R. No. 90596, April 8, 1991, 195 SCRA 748, 756; Arradaza v. Court of Appeals, G.R. No. 50422, February 8, 1989, 170 SCRA 12; De Leon v. Faustino, 110 Phil. 249.

[119]    Viajar v. Estenzo, G.R. No. L-45321, April 30, 1979, 89 SCRA 685, 696; Bayang v. Court of Appeals, G.R. No. L-53564, February 27, 1987, 148 SCRA 91, 94.

[120]    Gatchalian v. Pavilin, G.R. No. L-17619, October 31, 1962, 6 SCRA 508, 512.

[121]    Paz v. Court of Appeals, G.R. No. 85332, January 11, 1990, 181 SCRA 26, 30; Garcia v. Court of Appeals, G.R. Nos. L-82282-83, November 24, 1988, 167 SCRA 815; Cadirao v. Estenzo, G.R. No. L-42408, September 21, 1984, 132 SCRA 93, 100; Vergara, Sr. v. Suelto, G.R. No. L-74766, December 21, 1987, 156 SCRA 753; Philippine National Bank v. Noah’s Ark Sugar Refinery, G.R. No. 107243, September 1, 1993, 226 SCRA 36, 42.

[122]    Cotabato Timberland Co., Inc. v. C. Alcantara and Sons, Inc., G.R. No. 145469, May 28, 2004, 430 SCRA 227; Viajar v. Estenzo, supra; Paz v. Court of Appeals, supra.

[123]    Estrada v. Consolacion, G.R. No. L-40948, June 29, 1976, 71 SCRA 523, 529.

[124]    Archipelago Builders v. Intermediate Appellate Court, G.R. No. 75282, February 19, 1991, 194 SCRA 207, 210; Viajar v. Estenzo, supra; Paz v. Court of Appeals, supra.

[125]    Id., citing Republic v. COCOFED, supra, note 111; and Republic v. Sandiganbayan (First Division), G.R. No. 118661, January 22, 2007, 512 SCRA 25.

[126]    DOSRI is the acronym derived from the first letters of the words Directors, Officers, Stockholders and their Related Interests. The DOSRI restriction is designed to prevent undue advantage to be granted to such bank officers and their related interests in the grant of bank loans, credit accommodations, and guarantees that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests; and limits the outstanding loans, credit accommodations, and guarantees that a bank may extend to each of its stockholders, directors, or officers and their related interest to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contributions in the bank. 

        The applicable DOSRI provision was Section 83 of Republic Act No. 337 (General Banking Law), as amended by P.D. No. 1795, to wit:

Section 83.  No director or officer of any banking institution shall, either directly or indirectly, for himself or as the representative or agent of other, borrow any of the deposits of funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for money borrowed from the bank or loaned by it, except with the written approval of the majority of the directors of the bank, excluding the director concerned.  Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the Superintendent of Banks.  The office of any director or officer of a bank who violates the provisions of this section shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos.

The Monetary Board may regulate the amount of credit accommodations that may be extended, directly or indirectly, by banking institutions to their directors, officers, or stockholders.  However, the outstanding credit accommodations which a bank may extend to each of its stockholders owning two per cent (2%) or more of the subscribed capital stock, its directors, or its officers, shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank:  Provided, however, That loans and advances to officers in the form of fringe benefits granted in accordance with rules and regulations as may be prescribed by the Monetary Board shall not be subject to the preceding limitation.

[127]    E.g., Section 66, Republic Act No. 8791 (General Banking Law of 2000), viz:

        Section 66. Penalty for Violations of this Act. – Unless otherwise herein provided, the violation of any of the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. If the offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary Board may also suspend or remove such director or officer. If the violation is committed by a corporation, such corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General.

[128]    Ng Wee v. Tankiansee, G.R. No. 171124, February 13, 2008, 545 SCRA 263.

[129]    Article 1933, Civil Code.

[130]    See Article 1953, Civil Code.

[131]    Article 428, Civil Code.

[132]    See Yong Chan Kim v. People, G.R. No. 84719, January 5, 1991, 193 SCRA 344, 353-354, where the Court has ruled that there can be no fiduciary relationship created when the ownership of money was transferred, and for which a criminal action for estafa cannot prosper.

[133]    Oak Ridge Precision Industries, Inc. v. First Tennessee Bank National Association, 835 S.W.2d 25, 30 (Tenn. Ct. App. 1992); Foster Business Park, LLC v. Winfree, No. M2006-02340-COA-R3-CV, 2009 WL 113242 (Tenn. Ct. App., 2009).

[134]    Consolidated Bank and Trust Corporation v. Court of Appeals, G.R. No. 114286, April 19, 2001, 356 SCRA 671,680; citing Colinares v. Court of Appeals, G.R. No. 90828, September 5, 2000, 339 SCRA 609, 623.

[135]    De Leon, Comments and Cases on Credit Transactions, 2006 Edition, p. 30.