Ex Post Facto Laws

EX POST FACTO LAWS AND BILLS OF ATTAINDER
THIRD DIVISION
ORLANDO L. SALVADOR, for and in behalf of
the Presidential Ad Hoc Fact-Finding
Committee on Behest Loans,
Petitioner,
G.R. No. 135080
- versus PLACIDO L. MAPA, JR., RAFAEL A. SISON,

ROLANDO M. ZOSA, CESAR C. ZALAMEA,
BENJAMIN BAROT, CASIMIRO TANEDO, J.V.
DE OCAMPO, ALICIA L. REYES, BIENVENIDO
R. TANTOCO, JR., BIENVENIDO R. TANTOCO,
SR., FRANCIS B. BANES, ERNESTO M.
CARINGAL, ROMEO V. JACINTO, and MANUEL
D. TANGLAO,
Respondents.
Present:
YNARES-SANTIAGO,
Acting C.J., Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
November 28, 2007

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
The Presidential Ad Hoc Fact-Finding Committee on Behest Loans, (the Committee), through
Atty. Orlando L. Salvador (Atty. Salvador), filed this Petition for Review on Certiorari seeking to
nullify the October 9, 1997 Resolution[1] of the Office of the Ombudsman in OMB-0-96-2428,
dismissing the criminal complaint against respondents on ground of prescription, and the July 27,
1998 Order[2] denying petitioners motion for reconsideration.
On October 8, 1992 then President Fidel V. Ramos issued Administrative Order No. 13 creating the
Presidential Ad Hoc Fact-Finding Committee on Behest Loans, which reads:
WHEREAS, Sec. 28, Article II of the 1987 Constitution provides that Subject to reasonable
conditions prescribed by law, the State adopts and implements a policy of full public disclosure of
all its transactions involving public interest;
WHEREAS, there have been allegations of loans, guarantees, and other forms of financial
accommodations granted, directly or indirectly, by government-owned and controlled bank or
financial institutions, at the behest, command, or urging by previous government officials to the
disadvantage and detriment of the Philippines government and the Filipino people;
Page3
WHEREAS, Sec. 15, Article XI of the 1987 Constitution provides that The right of the state to
recover properties unlawfully acquired by public officials or employees, from them or from their
nominees or transferees, shall not be barred by prescription, laches or estoppel;

ACCORDINGLY, an Ad-Hoc FACT FINDING COMMITTEE ON BEHEST LOANS is hereby created to be
composed of the following:
Chairman of the Presidential
Commission on Good Government
- Chairman
The Solicitor General
- Vice-Chairman
Representative from the

Office of the Executive Secretary
- Member

Department of Finance
Department of Justice
Development Bank of the Philippines
- Member
- Member
- Member

Philippine National Bank
- Member

Asset Privatization Trust
- Member
Government Corporate Counsel
- Member

Philippine Export and Foreign
Loan Guarantee Corporation
- Member
The Ad Hoc Committee shall perform the following functions:

1.
Inventory all behest loans; identify the lenders and borrowers, including the principal officers
and stockholders of the borrowing firms, as well as the persons responsible for granting the loans
or who influenced the grant thereof;
2.
Identify the borrowers who were granted friendly waivers, as well as the government
officials who granted these waivers; determine the validity of these waivers;
3.
Determine the courses of action that the government should take to recover those loans, and
to recommend appropriate actions to the Office of the President within sixty (60) days from the
date hereof.
By Memorandum Order No. 61 dated November 9, 1992, the functions of the Committee were
subsequently expanded, viz.:
Page3
The Committee is hereby empowered to call upon any department, bureau, office, agency,
instrumentality or corporation of the government, or any officer or employee thereof, for such
assistance as it may need in the discharge of its functions.[3]

WHEREAS, among the underlying purposes for the creation of the Ad Hoc Fact-Finding Committee
on Behest Loans is to facilitate the collection and recovery of defaulted loans owing governmentowned and controlled banking and/or financing institutions;
WHEREAS, this end may be better served by broadening the scope of the fact-finding mission of
the Committee to include all non-performing loans which shall embrace behest and non-behest
loans;
NOW THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the
power vested in me by law, do hereby order:
Sec. 1. The Ad Hoc Fact-Finding Committee on Behest Loans shall include in its investigation,
inventory, and study, all non-performing loans which shall embrace both behest and non-behest
loans:
The following criteria may be utilized as a frame of reference in determining a behest loan:
1.
It is under-collateralized;
2.
The borrower corporation is undercapitalized;
3.
Direct or indirect endorsement by high government officials like presence of marginal notes;
4.
Stockholders, officers or agents of the borrower corporation are identified as cronies;
5.
Deviation of use of loan proceeds from the purpose intended;
6.
Use of corporate layering;
7.
Non-feasibility of the project for which financing is being sought; and
8.
Extraordinary speed in which the loan release was made.
Moreover, a behest loan may be distinguished from a non-behest loan in that while both may
involve civil liability for non-payment or non-recovery, the former may likewise entail criminal
liability.[4]
Several loan accounts were referred to the Committee for investigation, including the loan
transactions between Metals Exploration Asia, Inc. (MEA), now Philippine Eagle Mines, Inc. (PEMI)
and the Development Bank of the Philippines (DBP).
Specifically, the investigation revealed that in 1978, PEMI applied for a foreign currency loan and
bank investment on its preferred shares with DBP. The loan application was approved on April 25,
1979per Board Resolution (B/R) No. 1297, but the loan was never released because PEMI failed to
comply with the conditions imposed by DBP. To accommodate PEMI, DBP subsequently adopted B/R
Page3
After examining and studying the documents relative to the loan transactions, the Committee
determined that they bore the characteristics of behest loans, as defined under Memorandum
Order No. 61 because the stockholders and officers of PEMI were known cronies of then President
Ferdinand Marcos; the loan was under-collateralized; and PEMI was undercapitalized at the time
the loan was granted.

No. 2315 dated June 1980, amending B/R No. 1297, authorizing the release of PEMIs foreign
currency loan proceeds, and even increasing the same. Per B/R No. 95 dated October 16, 1980,
PEMI was granted a foreign currency loan of $19,680,267.00 or P146,601,979.00, and it was
released despite non-compliance with the conditions imposed by DBP. The Committee claimed that
the loan had no sufficient collaterals and PEMI had no sufficient capital at that time because its
acquired assets were only valued at P72,045,700.00, and its paid up capital was
only P46,488,834.00.
Consequently, Atty. Orlando L. Salvador, Consultant of the Fact-Finding Committee, and
representing the Presidential Commission on Good Government (PCGG), filed with the Office of the
Ombudsman (Ombudsman) a sworn complaint for violation of Sections 3(e) and (g) of Republic Act
No. 3019, or the Anti-Graft and Corrupt Practices Act, against the respondents Placido I. Mapa, Jr.,
Rafael A. Sison; Rolando M. Zosa; Cesar C. Zalamea; Benjamin Barot, Casimiro Tanedo, J.V. de
Ocampo, Bienvenido R. Tantoco, Jr., Francis B. Banes, Ernesto M. Caringal, Romeo V. Jacinto,
Manuel D. Tanglao and Alicia Ll. Reyes.[5]
After considering the Committees allegation, the Ombudsman handed down the assailed
Resolution,[6] dismissing the complaint. The Ombudsman conceded that there was ground to
proceed with the conduct of preliminary investigation. Nonetheless, it dismissed the complaint
holding that the offenses charged had already prescribed, viz.:
[W]hile apparently, PEMI was undercapitalized at the time the subject loans were entered into; the
financial accommodations were undercollateralized at the time they were granted; the stockholders
and officers of the borrower corporation are identified cronies of then President Marcos; and the
release of the said loans was made despite non-compliance by PEMI of the conditions attached
therewith, which consequently give a semblance that the subject Foreign Currency Loans are
indeed Behest Loans, the prosecution of the offenses charged cannot, at this point, prosper on
grounds of prescription.
It bears to stress that Section 11 of R.A. No. 3019 as originally enacted, provides that the
prescriptive period for violations of the said Act (R.A. 3019) is ten (10) years. Subsequently, BP
195, enacted on March 16, 1982, amended the period of prescription from ten (10) years to fifteen
(15) years
Moreover as enunciated in [the] case of People vs. Sandiganbayan, 211 SCRA 241, the
computation of the prescriptive period of a crime violating a special law like R.A. 3019 is governed
by Act No. 3326 which provides, thus:
xxxx
Section 2. Prescription shall begin to run from the day of the commission of the violation of law,
and if the same be not known at the time, from the discovery thereof and the institution of the
judicial proceedings for its investigation and punishment.
Corollary thereto, the Supreme Court in the case of People vs. Dinsay, C.A. 40 O.G. 12th Supp., 50,
ruled that when there is nothing which was concealed or needed to be discovered because the
entire series of transactions were by public instruments, the period of prescription commenced to
run from the date the said instrument were executed.
Page3
The prescription shall be interrupted when the proceedings are instituted against the guilty person,
and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.

The aforesaid principle was further elucidated in the cases of People vs. Sandiganbayan, 211 SCRA
241, 1992, and People vs. Villalon, 192 SCRA 521, 1990, where the Supreme Court pronounced
that when the transactions are contained in public documents and the execution thereof gave rise
to unlawful acts, the violation of the law commences therefrom. Thus, the reckoning period for
purposes of prescription shall begin to run from the time the public instruments came into
existence.
In the case at bar, the subject financial accommodations were entered into by virtue of public
documents (e.g., notarized contracts, board resolutions, approved letter-request) during the period
of 1978 to 1981 and for purposes of computing the prescriptive period, the aforementioned
principles in the Dinsay, Villalon and Sandiganbayan cases will apply. Records show that the
complaint was referred and filed with this Office on October 4, 1996 or after the lapse of more than
fifteen (15) years from the violation of the law. [Deductibly] therefore, the offenses charged had
already prescribed or forever barred by Statute of Limitations.
It bears mention that the acts complained of were committed before the issuance of BP 195
on March 2, 1982. Hence, the prescriptive period in the instant case is ten (10) years as provided
in the (sic) Section 11 of R.A. 3019, as originally enacted.
Equally important to stress is that the subject financial transactions between 1978 and 1981
transpired at the time when there was yet no Presidential Order or Directive naming, classifying or
categorizing them as Behest or Non-Behest Loans.
To reiterate, the Presidential Ad Hoc Committee on Behest Loans was created on October 8,
1992 under Administrative Order No. 13. Subsequently, Memorandum Order No. 61,
dated November 9, 1992, was issued defining the criteria to be utilized as a frame of reference in
determining behest loans. Accordingly, if these Orders are to be considered the bases of charging
respondents for alleged offenses committed, they become ex-post facto laws which are proscribed
by the Constitution. The Supreme Court in the case of People v. Sandiganbayan, supra, citing
Wilensky V. Fields, Fla, 267 So 2dl, 5, held that an ex-post facto law is defined as a law which
provides for infliction of punishment upon a person for an act done which when it was committed,
was innocent.[7]
Thus, the Ombudsman disposed:
WHEREFORE, premises considered, it is hereby respectfully recommended that the instant
case be DISMISSED.
SO RESOLVED.[8]
The Committee filed a Motion for Reconsideration, but the Ombudsman denied it on July 27, 1998.
Hence, this petition positing these issues:
B.
WHETHER OR NOT ADMINISTRATIVE ORDER NO. 13 AND MEMORANDUM ORDER NO. 61
ARE EX-POST FACTO LAW[S].[9]
Page3
A.
WHETHER OR NOT THE CRIME DEFINED BY SEC. 3(e) AND (g) OF R.A. 3019 HAS ALREADY
PRESCRIBED AT THE TIME THE PETITIONER FILED ITS COMPLAINT.

The Court shall deal first with the procedural issue.
Commenting on the petition, Tantoco, Reyes, Mapa, Zalamea and Caringal argued that the petition
suffers from a procedural infirmity which warrants its dismissal. They claimed that the PCGG
availed of the wrong remedy in elevating the case to this Court.
Indeed, what was filed before this Court is a petition captioned as Petition for Review on
Certiorari. We have ruled, time and again, that a petition for review on certiorari is not the proper
mode by which resolutions of the Ombudsman in preliminary investigations of criminal cases are
reviewed by this Court. The remedy from the adverse resolution of the Ombudsman is a petition
for certiorari under Rule 65,[10] not a petition for review on certiorari under Rule 45.
However, though captioned as a Petition for Review on Certiorari, we will treat this petition
as one filed under Rule 65 since a reading of its contents reveals that petitioner imputes grave
abuse of discretion to the Ombudsman for dismissing the complaint. The averments in the
complaint, not the nomenclature given by the parties, determine the nature of the action. [11] In
previous rulings, we have treated differently labeled actions as special civil actions
for certiorari under Rule 65 for reasons such as justice, equity, and fair play.[12]
Having resolved the procedural issue, we proceed to the merits of the case.
As the Committee puts it, the issues to be resolved are: (i) whether or not the offenses subject of
its criminal complaint have prescribed, and (ii) whether Administrative Order No. 13 and
Memorandum Order No. 61 are ex post facto laws.
The issue of prescription has long been settled by this Court in Presidential Ad Hoc Fact-Finding
Committee on Behest Loans v. Desierto,[13] thus:
[I]t is well-nigh impossible for the State, the aggrieved party, to have known the violations of R.A.
No. 3019 at the time the questioned transactions were made because, as alleged, the public
officials concerned connived or conspired with the beneficiaries of the loans. Thus, we agree with
the COMMITTEE that the prescriptive period for the offenses with which the respondents in OMB-096-0968 were charged should be computed from the discovery of the commission thereof and not
from the day of such commission.[14]
The ruling was reiterated in Presidential Ad Hoc Fact-Finding Committee on Behest Loans v.
Ombudsman Desierto,[15] wherein the Court explained:
In cases involving violations of R.A. No. 3019 committed prior to the February 1986 EDSA
Revolution that ousted President Ferdinand E. Marcos, we ruled that the government as the
aggrieved party could not have known of the violations at the time the questioned transactions
were made. Moreover, no person would have dared to question the legality of those
transactions. Thus, the counting of the prescriptive period commenced from the date of discovery
of the offense in 1992 after an exhaustive investigation by the Presidential Ad Hoc Committee on
Behest Loans.[16]
Since the prescriptive period commenced to run on the date of the discovery of the offenses, and
since discovery could not have been made earlier than October 8, 1992, the date when the
Page3
This is now a well-settled doctrine which the Court has applied in subsequent cases involving the
PCGG and the Ombudsman.[17]

Committee was created, the criminal offenses allegedly committed by the respondents had not yet
prescribed when the complaint was filed on October 4, 1996.
Even the Ombudsman, in its Manifestation & Motion (In Lieu of Comment), [18] conceded that the
prescriptive period commenced from the date the Committee discovered the crime, and not from
the date the loan documents were registered with the Register of Deeds. As a matter of fact, it
requested that the record of the case be referred back to the Ombudsman for a proper evaluation
of its merit.
Likewise, we cannot sustain the Ombudsmans declaration that Administrative Order No. 13 and
Memorandum Order No. 61 violate the prohibition against ex post facto laws for ostensibly inflicting
punishment upon a person for an act done prior to their issuance and which was innocent when
done.
The constitutionality of laws is presumed. To justify nullification of a law, there must be a clear and
unequivocal breach of the Constitution, not a doubtful or arguable implication; a law shall not be
declared invalid unless the conflict with the Constitution is clear beyond reasonable doubt. The
presumption is always in favor of constitutionality. To doubt is to sustain. [19] Even this Court does
not decide a question of constitutional dimension, unless that question is properly raised and
presented in an appropriate case and is necessary to a determination of the case, i.e., the issue of
constitutionality must be the very lis mota presented.[20]
Furthermore, in Estarija v. Ranada,[21] where the petitioner raised the issue of constitutionality of
Republic Act No. 6770 in his motion for reconsideration of the Ombudsmans decision, we had
occasion to state that the Ombudsman had no jurisdiction to entertain questions on the
constitutionality of a law. The Ombudsman, therefore, acted in excess of its jurisdiction in
declaring unconstitutional the subject administrative and memorandum orders.
In any event, we hold that Administrative Order No. 13 and Memorandum Order No. 61 are not ex
post facto laws.
The constitutional doctrine that outlaws an ex post facto law generally prohibits the retrospectivity
of penal laws. Penal laws are those acts of the legislature which prohibit certain acts and establish
penalties for their violations; or those that define crimes, treat of their nature, and provide for their
punishment.[24] The subject administrative and memorandum orders clearly do not come within the
shadow of this definition. Administrative Order No. 13 creates the Presidential Ad Hoc Fact-Finding
Committee on Behest Loans, and provides for its composition and functions. It does not mete out
penalty for the act of granting behest loans. Memorandum Order No. 61 merely provides a frame
of reference for determining behest loans. Not being penal laws, Administrative Order No. 13 and
Memorandum Order No. 61 cannot be characterized as ex post facto laws. There is, therefore, no
Page3
An ex post facto law has been defined as one (a) which makes an action done before the passing
of the law and which was innocent when done criminal, and punishes such action; or (b) which
aggravates a crime or makes it greater than it was when committed; or (c) which changes the
punishment and inflicts a greater punishment than the law annexed to the crime when it was
committed; or (d) which alters the legal rules of evidence and receives less or different testimony
than the law required at the time of the commission of the offense in order to convict the
defendant.[22] This Court added two (2) more to the list, namely: (e) that which assumes to
regulate civil rights and remedies only but in effect imposes a penalty or deprivation of a right
which when done was lawful; or (f) that which deprives a person accused of a crime of some lawful
protection to which he has become entitled, such as the protection of a former conviction or
acquittal, or a proclamation of amnesty.[23]

basis for the Ombudsman to rule that the subject administrative and memorandum orders are ex
post facto.
One final note. Respondents Mapa and Zalamea, in their respective comments, moved for the
dismissal of the case against them. Mapa claims that he was granted transactional immunity from
all PCGG-initiated cases,[25] while Zalamea denied participation in the approval of the subject loans.
[26]
The arguments advanced by Mapa and Zalamea are matters of defense which should be raised
in their respective counter-affidavits. Since the Ombudsman erroneously dismissed the complaint
on ground of prescription, respondents respective defenses were never passed upon during the
preliminary investigation. Thus, the complaint should be referred back to the Ombudsman for
proper evaluation of its merit.
Page3
WHEREFORE, the petition is GRANTED. The assailed Resolution and Order of the Office of
Ombudsman in OMB-0-96-2428, are SET ASIDE. The Office of the Ombudsman is directed to
conduct with dispatch an evaluation of the merits of the complaint against the herein respondents.
THIRD DIVISION
[G.R. NO. 164815 : February 22, 2008]
SR. INSP. JERRY C. VALEROSO, Petitioner, v. THE PEOPLE OF THE
PHILIPPINES,Respondent.
DECISION
REYES, R.T., J.:
THE law looks forward, never backward. Lex prospicit, non respicit. A new law has a prospective,
not retroactive, effect.1 However, penal laws that favor a guilty person, who is not a habitual
criminal, shall be given retroactive effect.1-a These are the rule, the exception and exception to the
exception on effectivity of laws.
Ang batas ay tumitingin sa hinaharap, hindi sa nakaraan. Gayunpaman, ang parusa ng
bagong batas ay iiral kung ito ay pabor sa taong nagkasala na hindi pusakal na kriminal.
We apply the exception rather than the rule in this Petition for Review on Certiorari of the decision
of the Court of Appeals (CA), affirming with modification that of the Regional Trial Court (RTC) in
Quezon City, finding petitioner liable for illegal possession of a firearm.
The Facts
On July 10, 1996, at around 9:30 a.m., SPO2 Antonio M. Disuanco of the Criminal Investigation
Division, Central Police District Command, received a dispatch order2 from the desk officer.3 The
order directed him and three (3) other policemen to serve a warrant of arrest4 issued by Judge
Ignacio Salvador against petitioner Sr. Insp. Jerry C. Valeroso in a case for kidnapping with
ransom.5
After a briefing, the team conducted the necessary surveillance on petitioner, checking his hideouts
in Cavite, Caloocan, and Bulacan.6 Eventually, the team proceeded to the Integrated National Police
(INP) Central Station at Culiat, Quezon City, where they saw petitioner as he was about to board a
tricycle.7 SPO2 Disuanco and his team approached petitioner.8 They put him under arrest, informed
him of his constitutional rights, and bodily searched him.9 Found tucked in his waist10 was a Charter
Arms, bearing Serial Number 5231511 with five (5) live ammunition.12
Petitioner was then brought to the police station for questioning. 13
A verification of the subject firearm at the Firearms and Explosives Division at Camp Crame
revealed that it was not issued to petitioner but to a certain Raul Palencia Salvatierra of Sampaloc,
Manila.14 Epifanio Deriquito, the records verifier, presented a certification15 to that effect signed by
Edwin C. Roque, chief records officer of the Firearms and Explosive Division.16
Petitioner was then charged with illegal possession of firearm and ammunition under Presidential
Decree (P.D.) No. 1866,17 as amended. The Information read:
That on or about the 10th day of July, 1996, in Quezon City, Philippines, the said accused without
any authority of law, did then and there willfully, unlawfully and knowingly have in his/her
possession and under his/her custody and control
One (1) cal. 38 "Charter Arms" revolver bearing Serial No. 52315 with five (5) live ammo. without
first having secured the necessary license/permit issued by the proper authorities.
CONTRARY TO LAW.
Quezon City, Philippines, July 15, 1996.
(Sgd.)
GLORIA VICTORIA C. YAP
Assistant City Prosecutor18
With the assistance of his counsel de parte, Atty. Oscar Pagulayan, petitioner pleaded not guilty
when arraigned on October 9, 1996.19 Trial on the merits ensued.
SPO2 Disuanco and Deriquito testified for the prosecution in the manner stated above.
Upon the other hand, the defense version was supplied by the combined testimonies of petitioner
Sr. Insp. Jerry C. Valeroso, SPO3 Agustin R. Timbol, Jr. and Adrian Yuson.
Petitioner recounted that on July 10, 1996, he was fast asleep in the boarding house of his children
located at Sagana Homes, Barangay New Era, Quezon City.20 He was roused from his slumber when
Page3
four (4) heavily armed men in civilian clothes bolted the room.21They trained their guns at
him22 and pulled him out of the room. They then tied his hands and placed him near the
faucet.23 The raiding team went back inside and searched and ransacked the room.24 SPO2
Disuanco stood guard outside with him.25Moments later, an operative came out of the room and
exclaimed, "Hoy, may nakuha akong baril sa loob!"26
Petitioner was told by SPO2 Disuanco that "we are authorized to shoot you because there's a shoot
to kill order against you, so if you are planning do so something, do it right now." 27 He was also
told that there was a standing warrant for his arrest.28However, he was not shown any proof when
he asked for it.29 Neither was the raiding group armed with a valid search warrant. 30
According to petitioner, the search done in the boarding house was illegal. The gun seized from him
was duly licensed and covered by necessary permits. He was, however, unable to present the
documentation relative to the firearm because it was confiscated by the police. Petitioner further
lamented that when he was incarcerated, he was not allowed to engage the services of a counsel.
Neither was he allowed to see or talk to his family.31
Petitioner contended that the police had an axe to grind against him. While still with the Narcotics
Command, he turned down a request of Col. Romulo Sales to white-wash a drug-related
investigation involving friends of the said police officer. Col. Sales was likewise subject of a
complaint filed with the Ombudsman by his wife. Col. Sales was later on appointed as the head of
the unit that conducted the search in his boarding house.32
SPO3 Timbol, Jr. of the Narcotics Command testified that he issued to petitioner a Memorandum
Receipt dated July 1, 199333 covering the subject firearm and its ammunition. This was upon the
verbal instruction of Col. Angelito Moreno. SPO3 Timbol identified his signature34 on the said
receipt.35
Adrian Yuson, an occupant of the room adjacent to where petitioner was arrested, testified that on
July 10, 1996, two (2) policemen suddenly entered his room as he was preparing for school.36 They
grabbed his shoulder and led him out.37 During all those times, a gun was poked at him.38 He was
asked where petitioner was staying. Fearing for his life, he pointed to petitioner's room. 39
Four (4) policemen then entered the room.40 He witnessed how they pointed a gun at petitioner,
who was clad only in his underwear.41 He also witnessed how they forcibly brought petitioner out of
his room.42 While a policeman remained near the faucet to guard petitioner, three (3) others went
back inside the room.43 They began searching the whole place. They forcibly opened his
locker,44 which yielded the subject firearm.45
RTC and CA Dispositions
On May 6, 1998, the trial court found petitioner guilty as charged, disposing as follows:
WHEREFORE, the Court hereby finds the accused guilty beyond reasonable doubt of Violation of
Section 1 of Presidential Decree No. 1866 as amended by Republic Act No. 8294 and hereby
sentences him to suffer the penalty ofprision correccional in its maximum period or from 4 years, 2
months and 1 day as minimum to 6 years as maximum and to pay the fine in the amount of Fifteen
Thousand Pesos (P15,000.00).
The gun subject of this case is hereby ordered confiscated in favor of the government. Let the
same be put in trust in the hands of the Chief of the PNP.
SO ORDERED.46
Petitioner moved to reconsider47 but his motion was denied on August 27, 1998.48 He appealed to
the CA.
On May 4, 2004, the appellate court affirmed with modification the RTC disposition. The fallo of the
CA decision reads:
Verily, the penalty imposed by the trial court upon the accused-appellant is modified to 4 years
and 2 months as minimum up to 6 years as maximum.
WHEREFORE, withthe foregoing MODIFICATION as to the penalty, the decision appealed from is
hereby AFFIRMED in all other respects.
SO ORDERED.49
His motion for reconsideration50 having been denied through a Resolution dated August 3,
2004,51 petitioner resorted to the present petition under Rule 45.
Page3
Issues
Petitioner raises the following issues for Our consideration:
I. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW IN AFFIRMING
THE CONVICTION OF PETITIONER DESPITE THE ABSENCE OF PROOF BEYOND REASONABLE
DOUBT.
II. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF FACT AND LAW IN
SUSTAINING THE LEGALITY OF THE SEARCH AND THE VALIDITY AND ADMISSIBILITY OF THE
EVIDENCE OBTAINED THEREFROMDESPITE THE OVERWHELMING PROOF THAT THE SAME IS THE
FRUIT OF THE POISONOUS TREE.
III. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW IN NOT
UPHOLDING THE REGULARITY AND VALIDITY SURROUNDING THE ISSUANCE OF THE
MEMORANDUM RECEIPTS (SIC) IN FAVOR OF PETITIONER WHICH PROVES HIS INNOCENCE OF
THE CRIME CHARGE (SIC).52 (Underscoring supplied)cralawlibrary
Our Ruling
In illegal possession of firearm and ammunition, the prosecution has the burden of proving the twin
elements of (1) the existence of the subject firearm and ammunition, and (2) the fact that the
accused who possessed or owned the same does not have the corresponding license for it. 53
The prosecution was able to discharge its burden.
The existence of the subject firearm and its ammunition was established through the testimony of
SPO2 Disuanco.54 Defense witness Yuson also identified the firearm.55 Its existence was likewise
admitted by no less than petitioner himself.56
As for petitioner's lack of authority to possess the firearm, Deriquito testified that a verification of
the Charter Arms Caliber .38 bearing Serial No. 52315 with the Firearms and Explosives Division at
Camp Crame revealed that the seized pistol was not issued to petitioner. It was registered in the
name of a certain Raul Palencia Salvatierra of Sampaloc, Manila. 57 As proof, Deriquito presented a
certification signed by Roque, the chief records officer of the same office. 58
The Court on several occasions ruled that either the testimony of a representative of, or a
certification from, the Philippine National Police (PNP) Firearms and Explosive Office attesting that a
person is not a licensee of any firearm would suffice to prove beyond reasonable doubt the second
element of possession of illegal firearms.59 The prosecution more than complied when it presented
both.
The certification is outside the scope of the hearsay rule.
The general rule is that a witness can testify only to those facts which he knows of his personal
knowledge; that is, which are derived from his own perception.60 Otherwise, the testimony is
objectionable for being hearsay.61
On this score, the certification from the Firearms and Explosives Division is an exception to the
hearsay rule by virtue of Rule 130, Section 44 of the Rules of Court which provides:
Sec. 44. Entries in official records. - Entries in official records made in the performance of his
official duty by a public officer of the Philippines, or by a person in the performance of a duty
specifically enjoined by law, are prima facieevidence of the facts therein stated.
It may be true that the contents of said certification are only prima facie evidence of the facts
stated there. However, the failure of petitioner to present controverting evidence makes the
presumption unrebutted. Thus, the presumption stands.
Petitioner, however, raises several points which he says entitles him to no less than an acquittal.
The assessment of credibility of witnesses lies with the trial court.
First, petitioner says that the seizure of the subject firearm was invalid. The search was conducted
after his arrest and after he was taken out of the room he was occupying. 62
This contention deserves scant consideration.
Petitioner's version of the manner and place of his arrest goes into the factual findings made by the
trial court and its calibration of the credibility of witnesses. However, as aptly put by Justice YnaresSantiago in People v. Rivera:63
x x x the manner of assigning values to declarations of witnesses on the witness stand is best and
most competently performed by the trial judge who had the unmatched opportunity to observe the
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witnesses and assess their credibility by the various indicia available but not reflected on record.
The demeanor of the person on the stand can draw the line between fact and fancy or evince if the
witness is telling the truth or lying through his teeth. We have consistently ruled that when the
question arises as to which of the conflicting versions of the prosecution and the defense is worthy
of belief, the assessment of the trial courts are generally viewed as correct and entitled to great
weight. Furthermore, in an appeal, where the culpability or innocence of the accused depends on
the issue of credibility of witnesses and the veracity of their testimonies, findings of the trial court
are given the highest degree of respect if not finality.64 (Underscoring supplied)cralawlibrary
The trial court found the prosecution version worthy of credence and belief. We find no compelling
reason not to accept its observation on this score.
Worth noting is the fact that petitioner is a ranking police officer who not only claims to be highly
decorated,65 but have effected a number of successful arrests66 as well. Common sense would
dictate that he must necessarily be authorized to carry a gun. We thus agree with the Office of the
Solicitor General that framing up petitioner would have been a very risky proposition. Had the
arresting officers really intended to cause the damnation of petitioner by framing him up, they
could have easily "planted" a more incriminating evidence rather than a gun. That would have
made their nefarious scheme easier, assuming that there indeed was one.
The pieces of evidence show that petitioner is not legally authorized to possess the
subject firearm and its five (5) ammunition.
Second, petitioner insists that he is legally authorized to possess the subject firearm and its
ammunition on the basis of the Memorandum Receipt issued to him by the PNP Narcotics
Command.67
Although petitioner is correct in his submission that public officers like policemen are accorded
presumption of regularity in the performance of their official duties,68 it is only a presumption; it
may be overthrown by evidence to the contrary. The prosecution was able to rebut the presumption
when it proved that the issuance to petitioner of the Memorandum Receipt was anything but
regular.
SPO3 Timbol, Jr. testified that he issued the Memorandum Receipt to petitioner based on the verbal
instruction of his immediate superior, Col. Moreno.69 However, a reading of Timbol's testimony on
cross-examination70 would reveal that there was an unusual facility by which said receipt was
issued to petitioner. Its issuance utterly lacked the usual necessary bureaucratic constraints.
Clearly, it was issued to petitioner under questionable circumstances.
Failure to offer an unlicensed firearm as evidence is not fatal provided there is
competent testimony as to its existence.
Third, petitioner claims that the subject firearm and ammunition should have been excluded as
evidence because they were not formally offered by the prosecution 71 in violation of Section 34,
Rule 132 of the Rules of Court.72
We note that petitioner contradicted himself when he argued for the validity of the Memorandum
Receipt and, at the same time, for the exclusion in evidence of the subject firearm and its
ammunition. Petitioner's act may result to an absurd situation where the Memorandum Receipt is
declared valid, while the subject firearm and its ammunition which are supposedly covered by the
Memorandum Receipt are excluded as evidence. That would have made the Memorandum Receipt
useless.
In any case, petitioner's contention has no leg to stand on.
Contrary to petitioner's claim, the subject firearm73 and its five (5) live ammunition74were offered in
evidence by the prosecution.75 Even assuming arguendo that they were not offered, petitioner's
stance must still fail. The existence of an unlicensed firearm may be established by testimony, even
without its presentation at trial. In People v. Orehuela,76 the non-presentation of the pistol did not
prevent the conviction of the accused.
The doctrine was affirmed in the recent case of People v. Malinao.77
As previously stated, the existence of the subject firearm and its five (5) live ammunition were
established through the testimony of SPO2 Disuanco.78 Yuson also identified said
firearm.79 Petitioner even admitted its existence.80
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We hasten to add that there may also be conviction where an unlicensed firearm is presented
during trial but through inadvertence, negligence, or fortuitous event (for example, if it is lost), it is
not offered in evidence, as long as there is competent testimony as to its existence.
Penal and civil liabilities
Petitioner was charged with the crime of illegal possession of firearms and ammunition under the
first paragraph of Section 1 of P.D. No. 1866, as amended. It provides that "[t]he penalty
of reclusion temporal in its maximum period to reclusion perpetua shall be imposed upon any
person who shall unlawfully manufacture, deal in, acquire, dispose, or possess any firearm, part of
firearm, ammunition or machinery, tool or instrument used or intended to be used in the
manufacture of any firearm or ammunition."
P.D. No. 1866, as amended, was the governing law at the time petitioner committed the offense on
July 10, 1996. However, R.A. No. 8294 amended P.D. No. 1866 on July 6, 1997,81 during the
pendency of the case with the trial court. The present law now states:
SECTION 1. Unlawful Manufacture, Sale, Acquisition, Disposition or Possession of Firearms or
Ammunition or Instruments Used or Intended to be Used in the Manufacture of Firearms or
Ammunition. - The penalty of prision correccional in its maximum period and a fine of not less than
Fifteen Thousand Pesos (P15,000) shall be imposed upon any person who shall unlawfully
manufacture, deal in, acquire, dispose, or possess any low-powered firearm, such as rimfire
handgun, .380 or .32 and other firearm of similar firepower, part of firearm, ammunition, or
machinery, tool or instrument used or intended to be used in the manufacture of any firearm or
ammunition: Provided, That no other crime was committed. (Underscoring supplied)cralawlibrary
As a general rule, penal laws should not have retroactive application, lest they acquire the
character of an ex post facto law.82 An exception to this rule, however, is when the law is
advantageous to the accused. According to Mr. Chief Justice Araullo, this is "not as a right" of the
offender, "but founded on the very principles on which the right of the State to punish and the
commination of the penalty are based, and regards it not as an exception based on political
considerations, but as a rule founded on principles of strict justice." 83
Although an additional fine of P15,000.00 is imposed by R.A. No. 8294, the same is still
advantageous to the accused, considering that the imprisonment is lowered to prision
correccional in its maximum period84 from reclusion temporalin its maximum period toreclusion
perpetua85 under P.D. No. 1866.
Applying the Indeterminate Sentence Law, prision correccional maximum which ranges from four
(4) years, two (2) months and one (1) day to six (6) years, is the prescribed penalty and will form
the maximum term of the indeterminate sentence. The minimum term shall be one degree lower,
which is prision correccional in its medium period (two [2] years, four [4] months and one [1] day
to four [4] years and two [2] months).86Hence, the penalty imposed by the CA is correct. The
penalty of four (4) years and two (2) months of prision correccional medium, as minimum term, to
six (6) years of prision correccional maximum, as maximum term, is in consonance with the Court's
ruling inGonzales v. Court of Appeals87 and Barredo v. Vinarao.88
As to the subject firearm and its five (5) live ammunition, their proper disposition should be made
under Article 45 of the Revised Penal Code89 which provides, among others, that the proceeds and
instruments or tools of the crime shall be confiscated and forfeited in favor of the government.
WHEREFORE, the Decision of the Court of Appeals dated May 4, 2004 is AFFIRMED in full.
SO ORDERED.
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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 180705
November 27, 2012
EDUARDO M. COJUANGCO, JR., Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
DECISION
VELASCO, JR., J.:
The Case
Of the several coconut levy appealed cases that stemmed from certain issuances of the
Sandiganbayan in its Civil Case No. 0033, the present recourse proves to be one of the most
difficult.
In particular, the instant petition for review under Rule 45 of the Rules of Court assails and seeks to
annul a portion of the Partial Summary Judgment dated July 11, 2003, as affirmed in a Resolution
of December 28, 2004, both rendered by the Sandiganbayan in its Civil Case ("CC") No. 0033-A
(the judgment shall hereinafter be referred to as "PSJ-A"), entitled "Republic of the Philippines,
Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., Defendants, COCOFED, et al., BALLARES, et al., Class
Action Movants." CC No. 0033-A is the result of the splitting into eight (8) amended complaints of
CC No. 0033 entitled, "Republic of the Philippines v. Eduardo Cojuangco, Jr., et al.," a suit for
recovery of ill-gotten wealth commenced by the Presidential Commission on Good Government
("PCGG"), for the Republic of the Philippines ("Republic"), against Eduardo M. Cojuangco, Jr.
("Cojuangco") and several individuals, among them, Ferdinand E. Marcos, Maria Clara Lobregat
("Lobregat"), and Danilo S. Ursua ("Ursua"). Each of the eight (8) subdivided complaints, CC No.
0033-A to CC No. 0033-H, correspondingly impleaded as defendants only the alleged participants in
the transaction/s subject of the suit, or who are averred as owner/s of the assets involved.
Apart from this recourse, We clarify right off that PSJ-A was challenged in two other separate but
consolidated petitions for review, one commenced by COCOFED et al., docketed as G.R. Nos.
177857-58, and the other, interposed by Danilo S. Ursua, and docketed as G.R. No. 178193.
By Decision dated January 24, 2012, in the aforesaid G.R. Nos. 177857-58 (COCOFED et al. v.
Republic) and G.R. No. 178193 (Ursua v. Republic) consolidated cases1 (hereinafter collectively
referred to as "COCOFED v. Republic"), the Court addressed and resolved all key matters elevated
to it in relation to PSJ-A, except for the issues raised in the instant petition which have not yet been
resolved therein. In the same decision, We made clear that: (1) PSJ-A is subject of another petition
for review interposed by Eduardo Cojuangco, Jr., in G.R. No. 180705, entitled Eduardo M.
Cojuangco, Jr. v. Republic of the Philippines, which shall be decided separately by the Court, 2and
(2) the issues raised in the instant petition should not be affected by the earlier decision "save for
determinatively legal issues directly addressed therein."3
For a better perspective, the instant recourse seeks to reverse the Partial Summary Judgment 4 of
the anti-graft court dated July 11, 2003, as reiterated in a Resolution5 of December 28, 2004,
denying COCOFEDs motion for reconsideration, and the May 11, 2007 Resolution6 denying
COCOFEDs motion to set case for trial and declaring the partial summary judgment final and
appealable, all issued in PSJ-A. In our adverted January 24, 2012 Decision in COCOFED v. Republic,
we affirmed with modification PSJ-A of the Sandiganbayan, and its Partial Summary Judgment in
Civil Case No. 0033-F, dated May 7, 2004 (hereinafter referred to as "PSJ-F). 7
More specifically, We upheld the Sandiganbayans ruling that the coconut levy funds are special
public funds of the Government. Consequently, We affirmed the Sandiganbayans declaration that
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Sections 1 and 2 of Presidential Decree ("P.D.") 755, Section 3, Article III of P.D. 961 and Section
3, Article III of P.D. 1468, as well as the pertinent implementing regulations of the Philippine
Coconut Authority ("PCA"), are unconstitutional for allowing the use and/or the distribution of
properties acquired through the coconut levy funds to private individuals for their own direct
benefit and absolute ownership. The Decision also affirmed the Governments ownership of the six
CIIF companies, the fourteen holding companies, and the CIIF block of San Miguel Corporation
shares of stock, for having likewise been acquired using the coconut levy funds. Accordingly, the
properties subject of the January 24, 2012 Decision were declared owned by and ordered
reconveyed to the Government, to be used only for the benefit of all coconut farmers and for the
development of the coconut industry.
By Resolution of September 4, 2012,8 the Court affirmed the above-stated Decision promulgated on
January 24, 2012.
It bears to stress at this juncture that the only portion of the appealed Partial Summary Judgment
dated July 11, 2003 ("PSJ-A") which remains at issue revolves around the following decretal
holdings of that court relating to the "compensation" paid to petitioner for exercising his personal
and exclusive option to acquire the FUB/UCPB shares.9 It will be recalled that the Sandiganbayan
declared the Agreement between the PCA and Cojuangco containing the assailed "compensation"
null and void for not having the required valuable consideration. Consequently, the UCPB shares of
stocks that are subject of the Agreement were declared conclusively owned by the Government. It
also held that the Agreement did not have the effect of law as it was not published as part of P.D.
755, even if Section 1 thereof made reference to the same.
Facts
We reproduce, below, portions of the statement of facts in COCOFED v. Republic relevant to the
present case:10
In 1971, Republic Act No. ("R.A.") 6260 was enacted creating the Coconut Investment Company
("CIC") to administer the Coconut Investment Fund ("CIF"), which, under Section 8 thereof, was to
be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55 levy of
which the copra seller was or ought to be issued COCOFUND receipts, PhP 0.02 was placed at
the disposition of COCOFED, the national association of coconut producers declared by the
Philippine Coconut Administration ("PHILCOA" now "PCA") as having the largest membership.
The declaration of martial law in September 1972 saw the issuance of several presidential decrees
("P.D.") purportedly designed to improve the coconut industry through the collection and use of the
coconut levy fund. While coming generally from impositions on the first sale of copra, the coconut
levy fund came under various names x x x. Charged with the duty of collecting and administering
the Fund was PCA. Like COCOFED with which it had a legal linkage, the PCA, by statutory
provisions scattered in different coco levy decrees, had its share of the coco levy.
The following were some of the issuances on the coco levy, its collection and utilization, how the
proceeds of the levy will be managed and by whom and the purpose it was supposed to serve:
1. P.D. No. 276 established the Coconut Consumers Stabilization Fund ("CCSF") and declared the
proceeds of the CCSF levy as trust fund, to be utilized to subsidize the sale of coconut-based
products, thus stabilizing the price of edible oil.
2. P.D. No. 582 created the Coconut Industry Development Fund ("CIDF") to finance the operation
of a hybrid coconut seed farm.
3. Then came P.D. No. 755 providing under its Section 1 the following:
It is hereby declared that the policy of the State is to provide readily available credit facilities to the
coconut farmers at preferential rates; that this policy can be expeditiously and efficiently realized
by the implementation of the "Agreement for the Acquisition of a Commercial Bank for the benefit
of Coconut Farmers" executed by the PCA; and that the PCA is hereby authorized to distribute, for
free, the shares of stock of the bank it acquired to the coconut farmers.
Towards achieving the policy thus declared, P.D. No. 755, under its Section 2, authorized PCA to
utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF levy
collections in said bank interest free, the deposit withdrawable only when the bank has attained a
certain level of sufficiency in its equity capital. The same section also decreed that all levies PCA is
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authorized to collect shall not be considered as special and/or fiduciary funds or form part of the
general funds of the government within the contemplation of P.D. No. 711.
4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil industries.
5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised Coconut
Industry Code), read:
ARTICLE III
Levies
Section 1. Coconut Consumers Stabilization Fund Levy. The PCA is hereby empowered to impose
and collect the Coconut Consumers Stabilization Fund Levy, .
.
Section 5. Exemption. The CCSF and theCIDF as well as all disbursements as herein authorized,
shall not be construed as special and/or fiduciary funds, or as part of the general funds of the
national government within the contemplation of PD 711; the intention being that said Fund and
the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be
owned by them in their private capacities: . (Emphasis supplied)
6. Letter of Instructions No. ("LOI") 926, s. of 1979, made reference to the creation, out of other
coco levy funds, of the Coconut Industry Investment Fund ("CIIF") in P.D. No. 1468 and entrusted
a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil mills and
other private corporations, with the following equity ownership structure:
Section 2. Organization of the Cooperative Endeavor. The UCPB, in its capacity as the investment
arm of the coconut farmers thru the CIIF is hereby directed to invest, on behalf of the coconut
farmers, such portion of the CIIF in private corporations under the following guidelines:
a) The coconut farmers shall own or control at least (50%) of the outstanding voting capital
stock of the private corporation acquired thru the CIIF and/or corporation owned or controlled by
the farmers thru the CIIF . (Words in bracket added.)
Through the years, a part of the coconut levy funds went directly or indirectly to finance various
projects and/or was converted into various assets or investments. 11 Relevant to the present petition
is the acquisition of the First United Bank ("FUB"), which was subsequently renamed as United
Coconut Planters Bank ("UCPB").12
Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it would
appear that FUB was the bank of choice which Pedro Cojuangcos group (collectively, "Pedro
Cojuangco") had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos shares in
FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to PCA did not
ensue as it was made to appear that Cojuangco had the exclusive option to acquire the formers
FUB controlling interests. Emerging from this elaborate, circuitous arrangement were two deeds.
The first one was simply denominated as Agreement, dated May 1975, entered into by and
between Cojuangco for and in his behalf and in behalf of "certain other buyers", and Pedro
Cojuangco in which the former was purportedly accorded the option to buy 72.2% of FUBs
outstanding capital stock, or 137,866 shares (the "option shares," for brevity), at PhP 200 per
share. On its face, this agreement does not mention the word "option."
The second but related contract, dated May 25, 1975, was denominated as Agreement for the
Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines. It had
PCA, for itself and for the benefit of the coconut farmers, purchase from Cojuangco the shares of
stock subject of the First Agreement for PhP200.00 per share. As additional consideration for PCAs
buy-out of what Cojuangco would later claim to be his exclusive and personal option, it was
stipulated that, from PCA, Cojuangco shall receive equity in FUB amounting to 10%, or 7.22%, of
the 72.2%, or fully paid shares. And so as not to dilute Cojuangcos equity position in FUB, later
UCPB, the PCA agreed under paragraph 6 (b) of the second agreement to cede over to the former a
number of fully paid FUB shares out of the shares it (PCA) undertakes to eventually subscribe. It
was further stipulated that Cojuangco would act as bank president for an extendible period of 5
years.
Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders 6,534 shares
of which Cojuangco, as may be gathered from the records, got 10%..
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While the 64.98% portion of the option shares (72.2% 7.22% = 64.98%) ostensibly pertained to
the farmers, the corresponding stock certificates supposedly representing the farmers equity were
in the name of and delivered to PCA. There were, however, shares forming part of the aforesaid
64.98% portion, which ended up in the hands of non-farmers. The remaining 27.8% of the FUB
capital stock were not covered by any of the agreements.
Under paragraph # 8 of the second agreement, PCA agreed to expeditiously distribute the FUB
shares purchased to such "coconut farmers holding registered COCOFUND receipts" on equitable
basis.
As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount for the
purchase of the said 72.2% equity, albeit it would later reimburse itself from the coconut levy fund.
And per Cojuangcos own admission, PCA paid, out of the CCSF, the entire acquisition price for the
72.2% option shares.13
As of June 30, 1975, the list of FUB stockholders included Cojuangco with 14,440 shares and PCA
with 129,955 shares.14 It would appear later that, pursuant to the stipulation on maintaining
Cojuangcos equity position in the bank, PCA would cede to him 10% of its subscriptions to (a) the
authorized but unissued shares of FUB and (b) the increase in FUBs capital stock (the equivalent of
158,840 and 649,800 shares, respectively). In all, from the "mother" PCA shares, Cojuangco would
receive a total of 95,304 FUB (UCPB) shares broken down as follows: 14,440 shares + 10%
(158,840 shares) + 10% (649,800 shares) = 95,304.15
We further quote, from COCOFED v. Republic, facts relevant to the instant case:16
Shortly after the execution of the PCA Cojuangco Agreement, President Marcos issued, on July
29, 1975, P.D. No. 755 directing x x x as narrated, PCA to use the CCSF and CIDF to acquire a
commercial bank to provide coco farmers with "readily available credit facilities at preferential rate"
x x x.
Then came the 1986 EDSA event. One of the priorities of then President Corazon C. Aquinos
revolutionary government was the recovery of ill-gotten wealth reportedly amassed by the Marcos
family and close relatives, their nominees and associates. Apropos thereto, she issued Executive
Order Nos. (EO) 1, 2 and 14, as amended by E.O. 14-A, all series of 1986. E.O. 1 created the PCGG
and provided it with the tools and processes it may avail of in the recovery efforts;17 E.O. No. 2
asserted that the ill-gotten assets and properties come in the form of shares of stocks, etc., while
E.O. No. 14 conferred on the Sandiganbayan exclusive and original jurisdiction over ill-gotten
wealth cases, with the proviso that "technical rules of procedure and evidence shall not be applied
strictly" to the civil cases filed under the EO. Pursuant to these issuances, the PCGG issued
numerous orders of sequestration, among which were those handed out x x x against shares of
stock in UCPB purportedly owned by or registered in the names of (a) the more than a million
coconut farmers, (b) the CIIF companies and (c) Cojuangco, Jr., including the SMC shares held by
the CIIF companies. On July 31, 1987, the PCGG instituted before the Sandiganbayan a recovery
suit docketed thereat as CC No. 0033.
xxxx
3. Civil Case 0033 x x x would be subdivided into eight complaints, docketed as CC 0033-A to CC
0033-H.
xxxx
5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v. COCOFED), 18 the Court
declared the coco levy funds as prima facie public funds. And purchased as the sequestered UCPB
shares were by such funds, beneficial ownership thereon and the corollary voting rights prima facie
pertain, according to the Court, to the government.
xxxx
Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic v.
COCOFED and on the argument, among others, that the claim of COCOFED and Ballares et al., over
the subject UCPB shares is based solely on the supposed COCOFUND receipts issued for payment
of the RA 6260 CIF levy, filed a Motion for Partial Summary Judgment RE: COCOFED, et al. and
Ballares, et al. dated April 22, 2002, praying that a summary judgment be rendered declaring:
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a. That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5, Article III of P.D. No.
1468 are unconstitutional;
b. That x x x (CIF) payments under x x x (R.A.) No. 6260 are not valid and legal bases for
ownership claims over UCPB shares; and
c. That COCOFED, et al., and Ballares, et al. have not legally and validly obtained title over the
subject UCPB shares.
Right after it filed the Motion for Partial Summary Judgment RE: COCOFED, et al. and Ballares, et
al., the Republic interposed a Motion for Partial Summary Judgment Re: Eduardo M. Cojuangco, Jr.,
praying that a summary judgment be rendered:
a. Declaring that Section 1 of P.D. No. 755 is unconstitutional insofar as it validates the provisions
in the "PCA-Cojuangco Agreement x x x" dated May 25, 1975 providing payment of ten percent
(10%) commission to defendant Cojuangco with respect to the FUB, now UCPB shares subject
matter thereof;
b. Declaring that x x x Cojuangco, Jr. and his fronts, nominees and dummies, including x x x and
Danilo S. Ursua, have not legally and validly obtained title over the subject UCPB shares; and
c. Declaring that the government is the lawful and true owner of the subject UCPB shares
registered in the names of Cojuangco, Jr. and the entities and persons above-enumerated, for
the benefit of all coconut farmers. x x x
Following an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be
conclusively declared the true and absolute owner of the coconut levy funds and the UCPB shares
acquired therefrom.19
We quote from COCOFED v. Republic:20
A joint hearing on the separate motions for summary judgment to determine what material facts
exist with or without controversy then ensued. By Order of March 11, 2003, the Sandiganbayan
detailed, based on this Courts ruling in related ill-gotten cases, the parties manifestations made in
open court and the pleadings and evidence on record, the facts it found to be without substantial
controversy, together with the admissions and/or extent of the admission made by the parties
respecting relevant facts, as follows:
As culled from the exhaustive discussions and manifestations of the parties in open court of their
respective pleadings and evidence on record, the facts which exist without any substantial
controversy are set forth hereunder, together with the admissions and/or the extent or scope of the
admissions made by the parties relating to the relevant facts:
1. The late President Ferdinand E. Marcos was President x x x for two terms under the 1935
Constitution and, during the second term, he declared Martial Law through Proclamation No. 1081
dated September 21, 1972.
2. On January 17, 1973, he issued Proclamation No. 1102 announcing the ratification of the 1973
Constitution.
3. From January 17, 1973 to April 7, 1981, he x x x exercised the powers and prerogative of
President under the 1935 Constitution and the powers and prerogative of President x x x the 1973
Constitution.
He x x x promulgated various P.D.s, among which were P.D. No. 232, P.D. No. 276, P.D. No. 414,
P.D. No. 755, P.D. No. 961 and P.D. No. 1468.
4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on June 30, 1981,
he, after being elected President, "reassumed the title and exercised the powers of the President
until 25 February 1986."
5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were PCA Directors x x x during the
period 1970 to 1986 x x x.
6. Plaintiff admits the existence of the following agreements which are attached as Annexes "A"
and "B" to the Opposition dated October 10, 2002 of defendant Eduardo M. Cojuangco, Jr. to the
above-cited Motion for Partial Summary Judgment:
a) "This Agreement made and entered into this ______ day of May, 1975 at Makati, Rizal,
Philippines, by and between:
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PEDRO COJUANGCO, Filipino, of legal age and with residence at 1575 Princeton St., Mandaluyong,
Rizal, for and in his own behalf and in behalf of certain other stockholders of First United Bank
listed in Annex "A" attached hereto (hereinafter collectively called the SELLERS);
and
EDUARDO COJUANGCO, JR., Filipino, of legal age and with residence at 136 9th Street corner
Balete Drive, Quezon City, represented in this act by his duly authorized attorney-in-fact,
EDGARDO J. ANGARA, for and in his own behalf and in behalf of certain other buyers, (hereinafter
collectively called the BUYERS)";
WITNESSETH: That
WHEREAS, the SELLERS own of record and beneficially a total of 137,866 shares of stock, with a
par value of P100.00 each, of the common stock of the First United Bank (the "Bank"), a
commercial banking corporation existing under the laws of the Philippines;
WHEREAS, the BUYERS desire to purchase, and the SELLERS are willing to sell, the aforementioned
shares of stock totaling 137,866 shares (hereinafter called the "Contract Shares") owned by the
SELLERS due to their special relationship to EDUARDO COJUANGCO, JR.;
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein
contained, the parties agree as follows:
1. Sale and Purchase of Contract Shares
Subject to the terms and conditions of this Agreement, the SELLERS hereby sell, assign, transfer
and convey unto the BUYERS, and the BUYERS hereby purchase and acquire, the Contract Shares
free and clear of all liens and encumbrances thereon.
2. Contract Price
The purchase price per share of the Contract Shares payable by the BUYERS is P200.00 or an
aggregate price of P27,573,200.00 (the "Contract Price").
3. Delivery of, and payment for, stock certificates
Upon the execution of this Agreement, (i) the SELLERS shall deliver to the BUYERS the stock
certificates representing the Contract Shares, free and clear of all liens, encumbrances, obligations,
liabilities and other burdens in favor of the Bank or third parties, duly endorsed in blank or with
stock powers sufficient to transfer the shares to bearer; and (ii) BUYERS shall deliver to the
SELLERS P27,511,295.50 representing the Contract Price less the amount of stock transfer taxes
payable by the SELLERS, which the BUYERS undertake to remit to the appropriate authorities.
(Emphasis added.)
4. Representation and Warranties of Sellers
The SELLERS respectively and independently of each other represent and warrant that:
(a) The SELLERS are the lawful owners of, with good marketable title to, the Contract Shares and
that (i) the certificates to be delivered pursuant thereto have been validly issued and are fully paid
and non-assessable; (ii) the Contract Shares are free and clear of all liens, encumbrances,
obligations, liabilities and other burdens in favor of the Bank or third parties x x x.
This representation shall survive the execution and delivery of this Agreement and the
consummation or transfer hereby contemplated.
(b) The execution, delivery and performance of this Agreement by the SELLERS does not conflict
with or constitute any breach of any provision in any agreement to which they are a party or by
which they may be bound.
(c) They have complied with the condition set forth in Article X of the Amended Articles of
Incorporation of the Bank.
5. Representation of BUYERS
xxxx
6. Implementation
The parties hereto hereby agree to execute or cause to be executed such documents and
instruments as may be required in order to carry out the intent and purpose of this Agreement.
7. Notices
xxxx
Page3
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the place and on the
date first above written.
PEDRO COJUANGCO
EDUARDO COJUANGCO, JR.
(on his own behalf and in
(on his own behalf and in
behalf of the other
behalf
listed in Annex "A" hereof) Sellers of the other Buyers)
(SELLERS)
(BUYERS)
By:
EDGARDO J. ANGARA
Attorney-in-Fact
xxxx
b) "Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of
the Philippines, made and entered into this 25th day of May 1975 at Makati, Rizal, Philippines, by
and between:
EDUARDO M. COJUANGCO, JR., Filipino, of legal age, with business address at 10th Floor, Sikatuna
Building, Ayala Avenue, Makati, Rizal, hereinafter referred to as the SELLER;
and
PHILIPPINE COCONUT AUTHORITY, a public corporation created by Presidential Decree No. 232, as
amended, for itself and for the benefit of the coconut farmers of the Philippines, (hereinafter called
the BUYER)"
WITNESSETH: That
WHEREAS, on May 17, 1975, the Philippine Coconut Producers Federation ("PCPF"), through its
Board of Directors, expressed the desire of the coconut farmers to own a commercial bank which
will be an effective instrument to solve the perennial credit problems and, for that purpose, passed
a resolution requesting the PCA to negotiate with the SELLER for the transfer to the coconut
farmers of the SELLERs option to buy the First United Bank (the "Bank") under such terms and
conditions as BUYER may deem to be in the best interest of the coconut farmers and instructed
Mrs. Maria Clara Lobregat to convey such request to the BUYER;
WHEREAS, the PCPF further instructed Mrs. Maria Clara Lobregat to make representations with the
BUYER to utilize its funds to finance the purchase of the Bank;
WHEREAS, the SELLER has the exclusive and personal option to buy 144,400 shares (the "Option
Shares") of the Bank, constituting 72.2% of the present outstanding shares of stock of the Bank, at
the price of P200.00 per share, which option only the SELLER can validly exercise;
WHEREAS, in response to the representations made by the coconut farmers, the BUYER has
requested the SELLER to exercise his personal option for the benefit of the coconut farmers;
WHEREAS, the SELLER is willing to transfer the Option Shares to the BUYER at a price equal to his
option price of P200 per share;
WHEREAS, recognizing that ownership by the coconut farmers of a commercial bank is a
permanent solution to their perennial credit problems, that it will accelerate the growth and
development of the coconut industry and that the policy of the state which the BUYER is required to
implement is to achieve vertical integration thereof so that coconut farmers will become
participants in, and beneficiaries of the development and growth of the coconut industry, the
BUYER approved the request of PCPF that it acquire a commercial bank to be owned by the coconut
farmers and, appropriated, for that purpose, the sum of P150 Million to enable the farmers to buy
the Bank and capitalize the Bank to such an extension as to be in a position to adopt a credit policy
for the coconut farmers at preferential rates;
WHEREAS, x x x the BUYER is willing to subscribe to additional shares ("Subscribed Shares") and
place the Bank in a more favorable financial position to extend loans and credit facilities to coconut
farmers at preferential rates;
NOW, THEREFORE, for and in consideration of the foregoing premises and the other terms and
conditions hereinafter contained, the parties hereby declare and affirm that their principal
contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding
capital stock of the Bank; and (2) that the SELLER shall receive compensation for exercising his
Page3
personal and exclusive option to acquire the Option Shares, for transferring such shares to the
coconut farmers at the option price of P200 per share, and for performing the management
services required of him hereunder.
1. To ensure that the transfer to the coconut farmers of the Option Shares is effected with the least
possible delay and to provide for the faithful performance of the obligations of the parties
hereunder, the parties hereby appoint the Philippine National Bank as their escrow agent (the
"Escrow Agent").
Upon execution of this Agreement, the BUYER shall deposit with the Escrow Agent such amount as
may be necessary to implement the terms of this Agreement x x x.
2. As promptly as practicable after execution of this Agreement, the SELLER shall exercise his
option to acquire the Option Share and SELLER shall immediately thereafter deliver and turn over
to the Escrow Agent such stock certificates as are herein provided to be received from the existing
stockholders of the Bank by virtue of the exercise on the aforementioned option x x x.
3. To ensure the stability of the Bank and continuity of management and credit policies to be
adopted for the benefit of the coconut farmers, the parties undertake to cause the stockholders and
the Board of Directors of the Bank to authorize and approve a management contract between the
Bank and the SELLER under the following terms:
(a) The management contract shall be for a period of five (5) years, renewable for another five (5)
years by mutual agreement of the SELLER and the Bank;
(b) The SELLER shall be elected President and shall hold office at the pleasure of the Board of
Directors. While serving in such capacity, he shall be entitled to such salaries and emoluments as
the Board of Directors may determine;
(c) The SELLER shall recruit and develop a professional management team to manage and operate
the Bank under the control and supervision of the Board of Directors of the Bank;
(d) The BUYER undertakes to cause three (3) persons designated by the SELLER to be elected to
the Board of Directors of the Bank;
(e) The SELLER shall receive no compensation for managing the Bank, other than such salaries or
emoluments to which he may be entitled by virtue of the discharge of his function and duties as
President, provided x x x and
(f) The management contract may be assigned to a management company owned and controlled
by the SELLER.
4. As compensation for exercising his personal and exclusive option to acquire the Option Shares
and for transferring such shares to the coconut farmers, as well as for performing the management
services required of him, SELLER shall receive equity in the Bank amounting, in the aggregate, to
95,304 fully paid shares in accordance with the procedure set forth in paragraph 6 below;
5. In order to comply with the Central Bank program for increased capitalization of banks and to
ensure that the Bank will be in a more favorable financial position to attain its objective to extend
to the coconut farmers loans and credit facilities, the BUYER undertakes to subscribe to shares with
an aggregate par value of P80,864,000 (the "Subscribed Shares"). The obligation of the BUYER
with respect to the Subscribed Shares shall be as follows:
(a) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an
aggregate par value of P15,884,000 from the present authorized but unissued shares of the Bank;
and
(b) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an
aggregate par value of P64,980,000 from the increased capital stock of the Bank, which
subscriptions shall be deemed made upon the approval by the stockholders of the increase of the
authorized capital stock of the Bank from P50 Million to P140 Million.
The parties undertake to declare stock dividends of P8 Million out of the present authorized but
unissued capital stock of P30 Million.
6. To carry into effect the agreement of the parties that the SELLER shall receive as his
compensation 95,304 shares:
(a) The Escrow Agent shall, upon receipt from the SELLER of the stock certificates representing the
Option Shares, duly endorsed in blank or with stock powers sufficient to transfer the same to
Page3
bearer, present such stock certificates to the Transfer Agent of the Bank and shall cause such
Transfer Agent to issue stock certificates of the Bank in the following ratio: one share in the name
of the SELLER for every nine shares in the name of the BUYER.
(b) With respect to the Subscribed Shares, the BUYER undertakes, in order to prevent the dilution
of SELLERs equity position, that it shall cede over to the SELLER 64,980 fully-paid shares out of
the Subscribed Shares. Such undertaking shall be complied with in the following manner: upon
receipt of advice that the BUYER has subscribed to the Subscribed Shares upon approval by the
stockholders of the increase of the authorized capital stock of the Bank, the Escrow Agent shall
thereupon issue a check in favor of the Bank covering the total payment for the Subscribed Shares.
The Escrow Agent shall thereafter cause the Transfer Agent to issue a stock certificates of the Bank
in the following ratio: one share in the name of the SELLER for every nine shares in the name of
the BUYER.
7. The parties further undertake that the Board of Directors and management of the Bank shall
establish and implement a loan policy for the Bank of making available for loans at preferential
rates of interest to the coconut farmers x x x.
8. The BUYER shall expeditiously distribute from time to time the shares of the Bank, that shall be
held by it for the benefit of the coconut farmers of the Philippines under the provisions of this
Agreement, to such, coconut farmers holding registered COCOFUND receipts on such equitable
basis as may be determine by the BUYER in its sound discretion.
9. x x x x
10. To ensure that not only existing but future coconut farmers shall be participants in and
beneficiaries of the credit policies, and shall be entitled to the benefit of loans and credit facilities to
be extended by the Bank to coconut farmers at preferential rates, the shares held by the coconut
farmers shall not be entitled to pre-emptive rights with respect to the unissued portion of the
authorized capital stock or any increase thereof.
11. After the parties shall have acquired two-thirds (2/3) of the outstanding shares of the Bank,
the parties shall call a special stockholders meeting of the Bank:
(a) To classify the present authorized capital stock of P50,000,000 divided into 500,000 shares,
with a par value of P100.00 per share into: 361,000 Class A shares, with an aggregate par value of
P36,100,000 and 139,000 Class B shares, with an aggregate par value of P13,900,000. All of the
Option Shares constituting 72.2% of the outstanding shares, shall be classified as Class A shares
and the balance of the outstanding shares, constituting 27.8% of the outstanding shares, as Class
B shares;
(b) To amend the articles of incorporation of the Bank to effect the following changes:
(i) change of corporate name to First United Coconut Bank;
(ii) replace the present provision restricting the transferability of the shares with a limitation on
ownership by any individual or entity to not more than 10% of the outstanding shares of the Bank;
(iii) provide that the holders of Class A shares shall not be entitled to pre-emptive rights with
respect to the unissued portion of the authorized capital stock or any increase thereof; and
(iv) provide that the holders of Class B shares shall be absolutely entitled to pre-emptive rights,
with respect to the unissued portion of Class B shares comprising part of the authorized capital
stock or any increase thereof, to subscribe to Class B shares in proportion t the subscriptions of
Class A shares, and to pay for their subscriptions to Class B shares within a period of five (5) years
from the call of the Board of Directors.
(c) To increase the authorized capital stock of the Bank from P50 Million to P140 Million, divided
into 1,010,800 Class A shares and 389,200 Class B shares, each with a par value of P100 per
share;
(d) To declare a stock dividend of P8 Million payable to the SELLER, the BUYER and other
stockholders of the Bank out of the present authorized but unissued capital stock of P30 Million;
(e) To amend the by-laws of the Bank accordingly; and
(f) To authorize and approve the management contract provided in paragraph 2 above.
The parties agree that they shall vote their shares and take all the necessary corporate action in
order to carry into effect the foregoing provisions of this paragraph 11, including such other
Page3
amendments of the articles of incorporation and by-laws of the Bank as are necessary in order to
implement the intention of the parties with respect thereto.
12. It is the contemplation of the parties that the Bank shall achieve a financial and equity position
to be able to lend to the coconut farmers at preferential rates.
In order to achieve such objective, the parties shall cause the Bank to adopt a policy of
reinvestment, by way of stock dividends, of such percentage of the profits of the Bank as may be
necessary.
13. The parties agree to execute or cause to be executed such documents and instruments as may
be required in order to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF x x x
PHILIPPINE COCONUT AUTHORITY
(BUYER)
By:
EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT
(SELLER)
xxxx
7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the x x x (PCA)
was the "other buyers" represented by defendant Eduardo M. Cojuangco, Jr. in the May 1975
Agreement entered into between Pedro Cojuangco (on his own behalf and in behalf of other sellers
listed in Annex "A"of the agreement) and defendant Eduardo M. Cojuangco, Jr. (on his own behalf
and in behalf of the other buyers). Defendant Cojuangco insists he was the "only buyer" under the
aforesaid Agreement.
8. Defendant Eduardo M. Cojuangco, Jr. did not own any share in the x x x (FUB) prior to the
execution of the two Agreements x x x.
9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al. admit that in addition to
the 137,866 FUB shares of Pedro Cojuangco, et al. covered by the Agreement, other FUB
stockholders sold their shares to PCA such that the total number of FUB shares purchased by PCA
increased from 137,866 shares to 144,400 shares, the OPTION SHARES referred to in the
Agreement of May 25, 1975. Defendant Cojuangco did not make said admission as to the said
6,534 shares in excess of the 137,866 shares covered by the Agreement with Pedro Cojuangco.
10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the Agreement,
described in Section 1 of Presidential Decree (P.D.) No. 755 dated July 29, 1975 as the "Agreement
for the Acquisition of a Commercial Bank for the Benefit of Coconut Farmers" executed by the
Philippine Coconut Authority" and incorporated in Section 1 of P.D. No. 755 by reference, refers to
the "AGREEMENT FOR THE ACQUISITION OF A COMMERCIAL BANK FOR THE BENEFIT OF THE
COCONUT FARMERS OF THE PHILIPPINES" dated May 25, 1975 between defendant Eduardo M.
Cojuangco, Jr. and the PCA (Annex "B" for defendant Cojuangcos OPPOSITION TO PLAINTIFFS
MOTION FOR PARTIAL SUMMARY JUDGMENT RE: EDUARDO M. COJUANGCO, JR. dated September
18, 2002).
Plaintiff refused to make the same admission.
11. As to whether P.D. No. 755 and the text of the agreement described therein was published, the
Court takes judicial notice that P.D. No. 755 was published in x x x volume 71 of the Official
Gazette but the text of the agreement x x x was not so published with P.D. No. 755.
12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA used
public funds x x x in the total amount of P150 million, to purchase the FUB shares amounting to
72.2% of the authorized capital stock of the FUB, although the PCA was later reimbursed from the
coconut levy funds and that the PCA subscription in the increased capitalization of the FUB, which
was later renamed the x x x (UCPB), came from the said coconut levy funds x x x.
13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the authorized and the
increased capital stock of the FUB (later UCPB), entirely paid for by PCA, 64.98% of the shares
were placed in the name of the "PCA for the benefit of the coconut farmers" and 7,22% were given
to defendant Cojuangco. The remaining 27.8% shares of stock in the FUB which later became the
UCPB were not covered by the two (2) agreements referred to in item no. 6, par. (a) and (b)
Page3
above. "There were shares forming part of the aforementioned 64.98% which were later sold or
transferred to non-coconut farmers.
14. Under the May 27, 1975 Agreement, defendant Cojuangcos equity in the FUB (now UCPB) was
ten percent (10%) of the shares of stock acquired by the PCA for the benefit of the coconut
farmers.
15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by defendant x x x
Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for by the PCA in accordance
with the terms and conditions provided in the said Agreement. 16. Defendants Lobregat, et al. and
COCOFED, et al. and Ballares, et al. admit that the affidavits of the coconut farmers (specifically,
Exhibit "1-Farmer" to "70-Farmer") uniformly state that:
a. they are coconut farmers who sold coconut products;
b. in the sale thereof, they received COCOFUND receipts pursuant to R.A. No. 6260;
c. they registered the said COCOFUND receipts; and
d. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and 1468, they are allegedly
entitled to the subject UCPB shares.
but subject to the following qualifications:
a. there were other coconut farmers who received UCPB shares although they did not present said
COCOFUND receipt because the PCA distributed the unclaimed UCPB shares not only to those who
already received their UCPB shares in exchange for their COCOFUND receipts but also to the
coconut farmers determined by a national census conducted pursuant to PCA administrative
issuances;
b. there were other affidavits executed by Lobregat, Eleazar, Ballares and Aldeguer relative to the
said distribution of the unclaimed UCPB shares; and
c. the coconut farmers claim the UCPB shares by virtue of their compliance not only with the laws
mentioned in item (d) above but also with the relevant issuances of the PCA such as, PCA
Administrative Order No. 1, dated August 20, 1975 (Exh. "298-Farmer"); PCA Resolution No. 03378 dated February 16, 1978.
The plaintiff did not make any admission as to the foregoing qualifications.
17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that the UCPB
shares in question have legitimately become the private properties of the 1,405,366 coconut
farmers solely on the basis of their having acquired said shares in compliance with R.A. No. 6260,
P.D. Nos. 755, 961 and 1468 and the administrative issuances of the PCA cited above.
18. On the other hand, defendant Cojuangco, Jr. claims ownership of the UCPB shares, which he
holds, solely on the basis of the two Agreements. (Emphasis and words in brackets added.)
On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A, ruling in favor of the Republic,
disposing insofar as pertinent as follows:21
WHEREFORE, in view of the foregoing, we rule as follows:
xxxx
C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. COJUANGCO, JR.) dated
September 18, 2002 filed by plaintiff.
1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo M.
Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law because
of the non-publication of the said Agreement.
2. Regarding the questioned transfer of the shares of stock of FUB (later UCPB) by PCA to
defendant Cojuangco or the so-called "Cojuangco UCPB shares" which cost the PCA more than Ten
Million Pesos in CCSF in 1975, we declare, that the transfer of the following FUB/UCPB shares to
defendant Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore
null and void:
a. The 14,400 shares from the "Option Shares";
b. Additional Bank Shares Subscribed and Paid by PCA, consisting of:
1. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out of the authorized but unissued
shares of the bank, subscribed and paid by PCA;
Page3
2. Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock
subscribed and paid by PCA; and
3. Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the Agreement.
3. The above-mentioned shares of stock of the FUB/UCPB transferred to defendant Cojuangco are
hereby declared conclusively owned by the plaintiff Republic of the Philippines.
4. The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo M.
Cojuangco, Jr. which form part of the 72.2% shares of the FUB/UCPB paid for by the
PCA with public funds later charged to the coconut levy funds, particularly the CCSF, belong to the
plaintiff Republic of the Philippines as their true and beneficial owner.
Let trial of this Civil Case proceed with respect to the issues which have not been disposed of in this
Partial Summary Judgment. For this purpose, the plaintiffs Motion Ad Cautelam to Present
Additional Evidence dated March 28, 2001 is hereby GRANTED.22 (Emphasis and underlining
added.)
As earlier explained, the core issue in this instant petition is Part C of the dispositive portion in PSJA declaring the 7.22% FUB (now UCPB) shares transferred to Cojuangco, plus the other shares
paid by the PCA as "conclusively" owned by the Republic. Parts A and B of the same dispositive
portion have already been finally resolved and adjudicated by this Court in COCOFED v. Republic on
January 24, 2012.23
From PSJ-A, Cojuangco moved for partial reconsideration but the Sandiganbayan, by Resolution 24 of
December 28, 2004, denied the motion.
Hence, the instant petition.
The Issues
Cojuangcos petition formulates the issues in question form, as follows:25
a. Is the acquisition of the so-called Cojuangco, Jr. UCPB shares by petitioner Cojuangco x x x "not
supported by valuable consideration and, therefore, null and void"?
b. Did the Sandiganbayan have jurisdiction, in Civil Case No. 0033-A, an "ill-gotten wealth" case
brought under EO Nos. 1 and 2, to declare the Cojuangco UCPB shares acquired by virtue of the
Pedro Cojuangco, et al. Agreement and/or the PCA Agreement null and void because "not
supported by valuable consideration"?
c. Was the claim that the acquisition by petitioner Cojuangco of shares representing 7.2% of the
outstanding capital stock of FUB (later UCPB) "not supported by valuable consideration", a "claim"
pleaded in the complaint and may therefore be the basis of a "summary judgment" under Section
1, Rule 35 of the Rules of Court?
d. By declaring the Cojuangco UCPB shares as "not supported by valuable consideration, and
therefore, null and void", did the Sandiganbayan effectively nullify the PCA Agreement? May the
Sandiganbayan nullify the PCA Agreement when the parties to the Agreement, namely: x x x
concede its validity? If the PCA Agreement be deemed "null and void", should not the FUB (later
UCPB) shares revert to petitioner Cojuangco (under the PCA Agreement) or to Pedro Cojuangco, et
al. x x x? Would there be a basis then, even assuming the absence of consideration x x x, to
declare 7.2% UCPB shares of petitioner Cojuangco as "conclusively owned by the plaintiff Republic
of the Philippines"?26
The Courts Ruling
I
THE SANDIGANBAYAN HAS JURISDICTION OVER THE SUBJECT MATTER OF THE SUBDIVIDED
AMENDED COMPLAINTS, INCLUDING THE SHARES ALLEGEDLY ACQUIRED BY COJUANGCO BY
VIRTUE OF THE PCA AGREEMENTS.
The issue of jurisdiction over the subject matter of the subdivided amended complaints has
peremptorily been put to rest by the Court in its January 24, 2012 Decision in COCOFED v.
Republic. There, the Court, citing Regalado27and settled jurisprudence, stressed the following
interlocking precepts: Subject matter jurisdiction is conferred by law, not by the consent or
acquiescence of any or all of the parties. In turn, the issue on whether a suit comes within the
penumbra of a statutory conferment is determined by the allegations in the complaint, regardless
of whether or not the suitor will be entitled to recover upon all or part of the claims asserted.
Page3
The Republics material averments in its complaint subdivided in CC No. 0033-A included the
following:
CC No. 0033-A
12. Defendant Eduardo M. 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. Defendant Eduardo M. Cojuangco, Jr., taking undue advantage of his association, influence,
connection, and acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, AND THE INDIVIDUAL DEFENDANTS, embarked upon devices, schemes and stratagems, to
unjustly enrich themselves at the expense of Plaintiff and the Filipino people, such as when he
a) manipulated, beginning the year 1975 with the active collaboration of Defendants x x x Maria
Clara Lobregat, Danilo Ursua etc., the purchase by . . . (PCA) of 72.2% of the outstanding capital
stock of the x x x (FUB) which was subsequently converted into a universal bank named x x x
(UCPB) through the use of the Coconut Consumers Stabilization Fund (CCSF) being initially in the
amount of P85,773,100.00 in a manner contrary to law and to the specific purposes for which said
coconut levy funds were imposed and collected under P.D. 276, and with sinister designs and under
anomalous circumstances, to wit:
(i) Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds as a cheap, lucrative and riskfree source of funds with which to exercise his private option to buy the controlling interest in FUB;
thus, claiming that the 72.2% of the outstanding capital stock of FUB could only be purchased and
transferred through the exercise of his "personal and exclusive action option to acquire the 144,000
shares" of the bank, Defendant Eduardo M. Cojuangco, Jr. and PCA, x x x executed on May 26,
1975 a purchase agreement which provides, among others, for the payment to him in fully paid
shares as compensation thereof 95,384 shares worth P1,444,000.00 with the further condition that
he shall manage and control the bank as Director and President for a term of five (5) years
renewable for another five (5) years and to designate three (3) persons of his choice who shall be
elected as members of the Board of Directors of the Bank;
(ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government
funds to advance his own private and commercial interests, Defendant Eduardo Cojuangco, Jr.
caused the issuance by Defendant Ferdinand E. Marcos of PD 755 (a) declaring that the coconut
levy funds shall not be considered special and fiduciary and trust funds and do not form part of the
general funds of the National Government, conveniently repealing for that purpose a series of
previous decrees, PDs 276 and 414, establishing the character of the coconut levy funds as special,
fiduciary, trust and governmental funds; (b) confirming the agreement between Defendant Eduardo
Cojuangco, Jr. and PCA on the purchase of FUB by incorporating by reference said private
commercial agreement in PD 755;
(iii)To further consolidate his hold on UCPB, Defendant Eduardo Cojuangco, Jr. imposed as
consideration and conditions for the purchase that (a) he gets one out of every nine shares given
to PCA, and (b) he gets to manage and control UCPB as president for a term of five (5) years
renewable for another five (5) years;
(iv) To perpetuate his opportunity to deal with and make use of the coconut levy funds x x x
Cojuangco, Jr. caused the issuance by Defendant Ferdinand E. Marcos of an unconstitutional decree
(PD 1468) requiring the deposit of all coconut levy funds with UCPB, interest free to the prejudice
of the government.
(v) In gross violation of their fiduciary positions and in contravention of the goal to create a bank
for the coconut farmers of the country, the capital stock of UCPB as of February 25, 1986 was
actually held by the defendants, their lawyers, factotum and business associates, thereby finally
gaining control of the UCPB by misusing the names and identities of the so-called "more than one
million coconut farmers."
14. 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, and unjust enrichment, violation of the constitution
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and laws of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the
Filipino people.28
In no uncertain terms, the Court has upheld the Sandiganbayans assumption of jurisdiction over
the subject matter of Civil Case Nos. 0033-A and 0033-F.29 The Court wrote:
Judging from the allegations of the defendants illegal acts thereat made, it is fairly obvious that
both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series of
1986, the nature of ill-gotten wealth suits. Both deal with the recovery of sequestered shares,
property or business enterprises claimed, as alleged in the corresponding basic complaints, to be
ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking undue
advantage of relationships or influence and/or through or as a result of improper use, conversion or
diversion of government funds or property. Recovery of these assetsdetermined as shall
hereinafter be discussed as prima facie ill-gottenfalls within the unquestionable jurisdiction of the
Sandiganbayan.30
P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the Sandiganbayan
with, among others, original jurisdiction over civil and criminal cases instituted pursuant to and in
connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules and Regulations defines
the term "Ill-Gotten Wealth" as "any asset, property, business enterprise or material possession of
persons within the purview of E.O. Nos. 1 and 2, acquired by them directly, or indirectly thru
dummies, nominees, agents, subordinates and/or business associates by any of the following
means or similar schemes":
(1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the
public treasury;
(2) x x x x
(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government or
any of its subdivisions, agencies or instrumentalities or government-owned or controlled
corporations;
(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
other form of interest or participation in any business enterprise or undertaking;
(5) Through the establishment of agricultural, industrial or commercial monopolies or other
combination and/or by the issuance, promulgation and/or implementation of decrees and orders
intended to benefit particular persons or special interests; and
(6) By taking undue advantage of official position, authority, relationship or influence for personal
gain or benefit. (Emphasis supplied)
Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in "The
recovery of all ill-gotten wealth accumulated by former President Marcos, his immediate family,
relatives, subordinates and close associates including the takeover or sequestration of all
business enterprises and entities owned or controlled by them, during his administration, directly or
through nominees, by taking undue advantage of their public office and/or using their powers,
authority, influence, connections or relationship." Complementing the aforesaid Section 2(a) is
Section 1 of E.O. No. 2 decreeing the freezing of all assets "in which the Marcoses their close
relatives, subordinates, business associates, dummies, agents or nominees have any interest or
participation."
The Republics averments in the amended complaints, particularly those detailing the alleged
wrongful acts of the defendants, sufficiently reveal that the subject matter thereof comprises the
recovery by the Government of ill-gotten wealth acquired by then President Marcos, his cronies or
their associates and dummies through the unlawful, improper utilization or diversion of coconut
levy funds aided by P.D. No. 755 and other sister decrees. President Marcos himself issued these
decrees in a brazen bid to legalize what amounts to private taking of the said public funds.
xxxx
There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the
Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the
averments in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over the
ill-gotten wealth complaints. As previously discussed, a perusal of the allegations easily reveals the
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sufficiency of the statement of matters disclosing the claim of the government against the coco
levy funds and the assets acquired directly or indirectly through said funds as ill-gotten wealth.
Moreover, the Court finds no rule that directs the plaintiff to first prove the subject matter
jurisdiction of the court before which the complaint is filed. Rather, such burden falls on the
shoulders of defendant in the hearing of a motion to dismiss anchored on said ground or a
preliminary hearing thereon when such ground is alleged in the answer.
xxxx
Lest it be overlooked, this Court has already decided that the sequestered shares are prima facie
ill-gotten wealth rendering the issue of the validity of their sequestration and of the jurisdiction of
the Sandiganbayan over the case beyond doubt. In the case of COCOFED v. PCGG, We stated that:
It is of course not for this Court to pass upon the factual issues thus raised. That function pertains
to the Sandiganbayan in the first instance. For purposes of this proceeding, all that the Court needs
to determine is whether or not there is prima facie justification for the sequestration ordered by the
PCGG. The Court is satisfied that there is. The cited incidents, given the public character of the
coconut levy funds, place petitioners COCOFED and its leaders and officials, at least prima facie,
squarely within the purview of Executive Orders Nos. 1, 2 and 14, as construed and applied in
BASECO, to wit:
"1. that ill-gotten properties (were) amassed by the leaders and supporters of the previous regime;
"a. more particularly, that (i) Ill-gotten wealth was accumulated by x x x Marcos, his immediate
family, relatives, subordinates and close associates, x x x (and) business enterprises and entities
(came to be) owned or controlled by them, during x x x (the Marcos) administration, directly or
through nominees, by taking undue advantage of their public office and using their powers,
authority, influence, connections or relationships;
"b. otherwise stated, that there are assets and properties purportedly pertaining to the Marcoses,
their close relatives, subordinates, business associates, dummies, agents or nominees which had
been or were acquired by them directly or indirectly, through or as a result of the improper or
illegal use of funds or properties owned by the Government x x x or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their
office, authority, influence, connections or relationship, resulting in their unjust enrichment x x x;
xxxx
2. The petitioners claim that the assets acquired with the coconut levy funds are privately owned
by the coconut farmers is founded on certain provisions of law, to wit Sec. 7, RA 6260 and Sec. 5,
Art. III, PD 1468 (Words in bracket added; italics in the original).
xxxx
E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of ill-gotten
assets amassed by the Marcoses, their associates, subordinates and cronies, or through their
nominees. Be that as it may, it stands to reason that persons listed as associated with the
Marcoses refer to those in possession of such ill-gotten wealth but holding the same in behalf of the
actual, albeit undisclosed owner, to prevent discovery and consequently recovery. Certainly, it is
well-nigh inconceivable that ill-gotten assets would be distributed to and left in the hands of
individuals or entities with obvious traceable connections to Mr. Marcos and his cronies. The Court
can take, as it has in fact taken, judicial notice of schemes and machinations that have been put in
place to keep ill-gotten assets under wraps. These would include the setting up of layers after
layers of shell or dummy, but controlled, corporations31 or manipulated instruments calculated to
confuse if not altogether mislead would-be investigators from recovering wealth deceitfully
amassed at the expense of the people or simply the fruits thereof. Transferring the illegal assets to
third parties not readily perceived as Marcos cronies would be another. So it was that in PCGG v.
Pena, the Court, describing the rule of Marcos as a "well entrenched plundering regime of twenty
years," noted the magnitude of the past regimes organized pillage and the ingenuity of the
plunderers and pillagers with the assistance of experts and the best legal minds in the market. 32
Prescinding from the foregoing premises, there can no longer be any serious challenge as to the
Sandiganbayans subject matter jurisdiction. And in connection therewith, the Court wrote in
COCOFED v. Republic, that the instant petition shall be decided separately and should not be
Page3
affected by the January 24, 2012 Decision, "save for determinatively legal issues directly
addressed" therein.33 Thus:
We clarify that PSJ-A is subject of another petition for review interposed by Eduardo Cojuangco, Jr.,
in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the Philippines, which shall be
decided separately by this Court. Said petition should accordingly not be affected by this Decision
save for determinatively legal issues directly addressed herein.34 (Emphasis Ours.)
We, therefore, reiterate our holding in COCOFED v. Republic respecting the Sandiganbayans
jurisdiction over the subject matter of Civil Case No. 0033-A, including those matters whose
adjudication We shall resolve in the present case.
II
PRELIMINARILY, THE AGREEMENT BETWEEN THE PCA AND EDUARDO M. COJUANGCO, JR. DATED
MAY 25, 1975 CANNOT BE ACCORDED THE STATUS OF A LAW FOR THE LACK OF THE REQUISITE
PUBLICATION.
It will be recalled that Cojuangcos claim of ownership over the UCPB shares is hinged on two
contract documents the respective contents of which formed part of and reproduced in their
entirety in the aforecited Order35 of the Sandiganbayan dated March 11, 2003. The first contract
refers to the agreement entered into by and between Pedro Cojuangco and his group, on one hand,
and Eduardo M. Cojuangco, Jr., on the other, bearing date "May 1975"36 (hereinafter referred to as
"PC-ECJ Agreement"), while the second relates to the accord between the PCA and Eduardo M.
Cojuangco, Jr. dated May 25, 1975 (hereinafter referred to as "PCA-Cojuangco Agreement"). The
PC-ECJ Agreement allegedly contains, inter alia, Cojuangcos personal and exclusive option to
acquire the FUB ("UCPB") shares from Pedro and his group. The PCA-Cojuangco Agreement shows
PCAs acquisition of the said option from Eduardo M. Cojuangco, Jr.
Section 1 of P.D. No. 755 incorporated, by reference, the "Agreement for the Acquisition of a
Commercial Bank for the Benefit of the Coconut Farmers" executed by the PCA. Particularly, Section
1 states:
Section 1. Declaration of National Policy. It is hereby declared that the policy of the State is to
provide readily available credit facilities to the coconut farmers at preferential rates; that this policy
can be expeditiously and efficiently realized by the implementation of the "Agreement for the
Acquisition of a Commercial Bank for the benefit of the Coconut Farmers" executed by the
Philippine Coconut Authority, the terms of which "Agreement" are hereby incorporated by
reference; and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the
shares of stock of the bank it acquired to the coconut farmers under such rules and regulations it
may promulgate. (Emphasis Ours.)
It bears to stress at this point that the PCA-Cojuangco Agreement referred to above in Section 1 of
P.D. 755 was not reproduced or attached as an annex to the same law. And it is well-settled that
laws must be published to be valid. In fact, publication is an indispensable condition for the
effectivity of a law. Taada v. Tuvera37 said as much:
Publication of the law is indispensable in every case x x x.
xxxx
We note at this point the conclusive presumption that every person knows the law, which of course
presupposes that the law has been published if the presumption is to have any legal justification at
all. It is no less important to remember that Section 6 of the Bill of Rights recognizes "the right of
the people to information on matters of public concern," and this certainly applies to, among
others, and indeed especially, the legislative enactments of the government.
xxxx
We hold therefore that all statutes, including those of local application and private laws, shall be
published as a condition for their effectivity, which shall begin fifteen days after publication unless a
different effectivity date is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in
the exercise of legislative powers whenever the same are validly delegated by the legislature, or, at
present, directly conferred by the Constitution. Administrative rules and regulations must also be
Page3
published if their purpose is to enforce or implement existing law pursuant also to a valid
delegation.38
We even went further in Taada to say that:
Laws must come out in the open in the clear light of the sun instead of skulking in the shadows
with their dark, deep secrets. Mysterious pronouncements and rumored rules cannot be recognized
as binding unless their existence and contents are confirmed by a valid publication intended to
make full disclosure and give proper notice to the people. The furtive law is like a scabbarded saber
that cannot feint, parry or cut unless the naked blade is drawn.39
The publication, as further held in Taada, must be of the full text of the law since the purpose of
publication is to inform the public of the contents of the law. Mere referencing the number of the
presidential decree, its title or whereabouts and its supposed date of effectivity would not satisfy
the publication requirement.40
In this case, while it incorporated the PCA-Cojuangco Agreement by reference, Section 1 of P.D.
755 did not in any way reproduce the exact terms of the contract in the decree. Neither was acopy
thereof attached to the decree when published. We cannot, therefore, extend to the said
Agreement the status of a law. Consequently, We join the Sandiganbayan in its holding that the
PCA-Cojuangco Agreement shall be treated as an ordinary transaction between agreeing minds to
be governed by contract law under the Civil Code.
III
THE PCA-COJUANGCO AGREEMENT IS A VALID CONTRACT FOR HAVING THE REQUISITE
CONSIDERATION.
In PSJ-A, the Sandiganbayan struck down the PCA-Cojuangco Agreement as void for lack of
consideration/cause as required under Article 1318, paragraph 3 in relation to Article 1409,
paragraph 3 of the Civil Code. The Sandiganbayan stated:
In sum, the evidence on record relied upon by defendant Cojuangco negates the presence of: (1)
his claimed personal and exclusive option to buy the 137,866 FUB shares; and (2) any pecuniary
advantage to the government of the said option, which could compensate for generous payment to
him by PCA of valuable shares of stock, as stipulated in the May 25, 1975 Agreement between him
and the PCA.41
On the other hand, the aforementioned provisions of the Civil Code state:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (Emphasis supplied)42
Art. 1409. The following contracts are inexistent and void from the beginning:
xxxx
(3) Those whose cause or object did not exist at the time of the transaction; 43
The Sandiganbayan found and so tagged the alleged cause for the agreement in question, i.e.,
Cojuangcos "personal and exclusive option to acquire the Option Shares," as fictitious. A reading of
the purchase agreement between Cojuangco and PCA, so the Sandiganbayan ruled, would show
that Cojuangco was not the only seller; thus, the option was, as to him, neither personal nor
exclusive as he claimed it to be. Moreover, as the Sandiganbayan deduced, that option was
inexistent on the day of execution of the PCA-Cojuangco Agreement as the Special Power of
Attorney executed by Cojuangco in favor of now Senator Edgardo J. Angara, for the latter to sign
the PC-ECJ Agreement, was dated May 25, 1975 while the PCA-Cojuangco Agreement was also
signed on May 25, 1975. Thus, the Sandiganbayan believed that when the parties affixed their
signatures on the second Agreement, Cojuangcos option to purchase the FUB shares of stock did
not yet exist. The Sandiganbayan further ruled that there was no justification in the second
Agreement for the compensation of Cojuangco of 14,400 shares, which it viewed as exorbitant.
Additionally, the Sandiganbayan ruled that PCA could not validly enter, in behalf of FUB/UCPB, into
a veritable bank management contract with Cojuangco, PCA having a personality separate and
distinct from that of FUB. As such, the Sandiganbayan concluded that the PCA-Cojuangco
Page3
Agreement was null and void. Correspondingly, the Sandiganbayan also ruled that the sequestered
FUB (UCPB) shares of stock in the name of Cojuangco are conclusively owned by the Republic.
After a circumspect study, the Court finds as inconclusive the evidence relied upon by
Sandiganbayan to support its ruling that the PCA-Cojuangco Agreement is devoid of sufficient
consideration. We shall explain.
Rule 131, Section 3(r) of the Rules of Court states:
Sec. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted,
but may be contradicted and overcome by other evidence:
xxxx
(r) That there was a sufficient consideration for a contract;
The Court had the occasion to explain the reach of the above provision in Surtida v. Rural Bank of
Malinao (Albay), Inc.,44 to wit:
Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1)
private transactions have been fair and regular; (2) the ordinary course of business has been
followed; and (3) there was sufficient consideration for a contract. A presumption may operate
against an adversary who has not introduced proof to rebut it. The effect of a legal presumption
upon a burden of proof is to create the necessity of presenting evidence to meet the legal
presumption or the prima facie case created thereby, and which if no proof to the contrary is
presented and offered, will prevail. The burden of proof remains where it is, but by the
presumption, the one who has that burden is relieved for the time being from introducing evidence
in support of the averment, because the presumption stands in the place of evidence unless
rebutted.
The presumption that a contract has sufficient consideration cannot be overthrown by the bare
uncorroborated and self-serving assertion of petitioners that it has no consideration. To overcome
the presumption of consideration, the alleged lack of consideration must be shown by
preponderance of evidence. Petitioners failed to discharge this burden x x x. (Emphasis Ours.)
The assumption that ample consideration is present in a contract is further elucidated in
Pentacapital Investment Corporation v. Mahinay:45
Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless
the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court, the
following are disputable presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient consideration for a
contract. A presumption may operate against an adversary who has not introduced proof to rebut
it. The effect of a legal presumption upon a burden of proof is to create the necessity of presenting
evidence to meet the legal presumption or the prima facie case created thereby, and which, if no
proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is,
but by the presumption, the one who has that burden is relieved for the time being from
introducing evidence in support of the averment, because the presumption stands in the place of
evidence unless rebutted.46 (Emphasis supplied.)
The rule then is that the party who stands to profit from a declaration of the nullity of a contract on
the ground of insufficiency of considerationwhich would necessarily refer to one who asserts such
nullityhas the burden of overthrowing the presumption offered by the aforequoted Section 3(r).
Obviously then, the presumption contextually operates in favor of Cojuangco and against the
Republic, as plaintiff a quo, which then had the burden to prove that indeed there was no sufficient
consideration for the Second Agreement. The Sandiganbayans stated observation, therefore, that
based on the wordings of the Second Agreement, Cojuangco had no personal and exclusive option
to purchase the FUB shares from Pedro Cojuangco had really little to commend itself for
acceptance. This, as opposed to the fact that such sale and purchase agreement is memorialized in
a notarized document whereby both Eduardo Cojuangco, Jr. and Pedro Cojuangco attested to the
correctness of the provisions thereof, among which was that Eduardo had such option to purchase.
A notarized document, Lazaro v. Agustin47 teaches, "generally carries the evidentiary weight
conferred upon it with respect to its due execution, and documents acknowledged before a notary
public have in their favor the disputable presumption of regularity."
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In Samanilla v. Cajucom,48 the Court clarified that the presumption of a valid consideration cannot
be discarded on a simple claim of absence of consideration, especially when the contract itself
states that consideration was given:
x x x This presumption appellants cannot overcome by a simple assertion of lack of consideration.
Especially may not the presumption be so lightly set aside when the contract itself states that
consideration was given, and the same has been reduced into a public instrument will all due
formalities and solemnities as in this case. (Emphasis ours.)
A perusal of the PCA-Cojuangco Agreement disclosed an express statement of consideration for the
transaction:
NOW, THEREFORE, for and in consideration of the foregoing premises and the other terms and
conditions hereinafter contained, the parties hereby declare and affirm that their principal
contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding
capital stock of the Bank, and (2) that the SELLER shall receive compensation for exercising his
personal and exclusive option to acquire the Option Shares, for transferring such shares to the
coconut farmers at the option price of P200 per share, and for performing the management
services required of him hereunder.
xxxx
4. As compensation for exercising his personal and exclusive option to acquire the Option
ShareApplying Samanilla to the case at bar, the express and positive declaration by the parties of
the presence of adequate consideration in the contract makes conclusive the presumption of
sufficient consideration in the PCA Agreement. Moreover, the option to purchase shares and
management services for UCPB was already availed of by petitioner Cojuangco for the benefit of
the PCA. The exercise of such right resulted in the execution of the PC-ECJ Agreement, which fact
is not disputed. The document itself is incontrovertible proof and hard evidence that petitioner
Cojuangco had the right to purchase the subject FUB (now UCPB) shares. Res ipsa loquitur.
The Sandiganbayan, however, pointed to the perceived "lack of any pecuniary value or advantage
to the government of the said option, which could compensate for the generous payment to him by
PCA of valuable shares of stock, as stipulated in the May 25, 1975 Agreement between him and the
PCA."49
Inadequacy of the consideration, however, does not render a contract void under Article 1355 of
the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied.)
Alsua-Betts v. Court of Appeals50 is instructive that lack of ample consideration does not nullify the
contract:
Inadequacy of consideration does not vitiate a contract unless it is proven which in the case at bar
was not, that there was fraud, mistake or undue influence. (Article 1355, New Civil Code). We do
not find the stipulated price as so inadequate to shock the courts conscience, considering that the
price paid was much higher than the assessed value of the subject properties and considering that
the sales were effected by a father to her daughter in which case filial love must be taken into
account. (Emphasis supplied.)s and for transferring such shares to the coconut farmers, as well as
for performing the management services required of him, SELLER shall receive equity in the Bank
amounting, in the aggregate, to 95,304 fully paid shares in accordance with the procedure set forth
in paragraph 6 below. (Emphasis supplied.)
Vales v. Villa51 elucidates why a bad transaction cannot serve as basis for voiding a contract:
x x x Courts cannot follow one every step of his life and extricate him from bad bargains, protect
him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish
acts. x x x Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose
money by them indeed, all they have in the world; but not for that alone can the law intervene
and restore. There must be, in addition, a violation of law, the commission of what the law knows
as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it.
(Emphasis ours.)
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While one may posit that the PCA-Cojuangco Agreement puts PCA and the coconut farmers at a
disadvantage, the facts do not make out a clear case of violation of any law that will necessitate
the recall of said contract. Indeed, the anti-graft court has not put forward any specific stipulation
therein that is at war with any law, or the Constitution, for that matter. It is even clear as day that
none of the parties who entered into the two agreements with petitioner Cojuangco contested nor
sought the nullification of said agreements, more particularly the PCA who is always provided legal
advice in said transactions by the Government corporate counsel, and a battery of lawyers and
presumably the COA auditor assigned to said agency. A government agency, like the PCA, stoops
down to level of an ordinary citizen when it enters into a private transaction with private
individuals. In this setting, PCA is bound by the law on contracts and is bound to comply with the
terms of the PCA-Cojuangco Agreement which is the law between the parties. With the silence of
PCA not to challenge the validity of the PCA-Cojuangco Agreement and the inability of government
to demonstrate the lack of ample consideration in the transaction, the Court is left with no other
choice but to uphold the validity of said agreements.
While consideration is usually in the form of money or property, it need not be monetary. This is
clear from Article 1350 which reads:
Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure beneficence, the mere liability of the
benefactor. (Emphasis supplied.)
Gabriel v. Monte de Piedad y Caja de Ahorros52 tells us of the meaning of consideration:
x x x A consideration, in the legal sense of the word, is some right, interest, benefit, or advantage
conferred upon the promisor, to which he is otherwise not lawfully entitled, or any detriment,
prejudice, loss, or disadvantage suffered or undertaken by the promisee other than to such as he is
at the time of consent bound to suffer. (Emphasis Ours.)
The Court rules that the transfer of the subject UCPB shares is clearly supported by valuable
consideration.
To justify the nullification of the PCA-Cojuangco Agreement, the Sandiganbayan centered on the
alleged imaginary option claimed by petitioner to buy the FUB shares from the Pedro Cojuangco
group. It relied on the phrase "in behalf of certain other buyers" mentioned in the PC-ECJ
Agreement as basis for the finding that petitioners option is neither personal nor exclusive. The
pertinent portion of said agreement reads:
EDUARDO COJUANGCO, JR., Filipino, of legal age and with residence at 136 9th Street corner
Balete Drive, Quezon City, represented in this act by his duly authorized attorney-in-fact,
EDGARDO J. ANGARA, for and in his own behalf and in behalf of certain other buyers, (hereinafter
collectively called the "BUYERS"); x x x.
A plain reading of the aforequoted description of petitioner as a party to the PC-ECJ Agreement
reveals that petitioner is not only the buyer. He is the named buyer and there are other buyers who
were unnamed. This is clear from the word "BUYERS." If petitioner is the only buyer, then his
description as a party to the sale would only be "BUYER." It may be true that petitioner intended to
include other buyers. The fact remains, however, that the identities of the unnamed buyers were
not revealed up to the present day. While one can conjure or speculate that PCA may be one of the
buyers, the fact that PCA entered into an agreement to purchase the FUB shares with petitioner
militates against such conjecture since there would be no need at all to enter into the second
agreement if PCA was already a buyer of the shares in the first contract. It is only the parties to the
PC-ECJ Agreement that can plausibly shed light on the import of the phrase "certain other buyers"
but, unfortunately, petitioner was no longer allowed to testify on the matter and was precluded
from explaining the transactions because of the motion for partial summary judgment and the
eventual promulgation of the July 11, 2003 Partial Summary Judgment.
Even if conceding for the sake of argument that PCA is one of the buyers of the FUB shares in the
PC-ECJ Agreement, still it does not necessarily follow that petitioner had no option to buy said
shares from the group of Pedro Cojuangco. In fact, the very execution of the first agreement
undeniably shows that he had the rights or option to buy said shares from the Pedro Cojuangco
Page3
group. Otherwise, the PC-ECJ Agreement could not have been consummated and enforced. The
conclusion is incontestable that petitioner indeed had the right or option to buy the FUB shares as
buttressed by the execution and enforcement of the very document itself.
We can opt to treat the PC-ECJ Agreement as a totally separate agreement from the PCACojuangco Agreement but it will not detract from the fact that petitioner actually acquired the
rights to the ownership of the FUB shares from the Pedro Cojuangco group. The consequence is he
can legally sell the shares to PCA. In this scenario, he would resell the shares to PCA for a profit
and PCA would still end up paying a higher price for the FUB shares. The "profit" that will accrue to
petitioner may just be equal to the value of the shares that were given to petitioner as commission.
Still we can only speculate as to the true intentions of the parties. Without any evidence adduced
on this issue, the Court will not venture on any unproven conclusion or finding which should be
avoided in judicial adjudication.
The anti-graft court also inferred from the date of execution of the special power of attorney in
favor of now Senator Edgardo J. Angara, which is May 25, 1975, that the PC-ECJ Agreement
appears to have been executed on the same day as the PCA-Cojuangco Agreement (dated May 25,
1975). The coincidence on the dates casts "doubts as to the existence of defendant Cojuangcos
prior personal and exclusive option to the FUB shares."
The fact that the execution of the SPA and the PCA-Cojuangco Agreement occurred sequentially on
the same day cannot, without more, be the basis for the conclusion as to the non-existence of the
option of petitioner. Such conjecture cannot prevail over the fact that without petitioner Cojuangco,
none of the two agreements in question would have been executed and implemented and the FUB
shares could not have been successfully conveyed to PCA.
Again, only the parties can explain the reasons behind the execution of the two agreements and
the SPA on the same day. They were, however, precluded from elucidating the reasons behind such
occurrence. In the absence of such illuminating proof, the proposition that the option does not exist
has no leg to stand on.
More importantly, the fact that the PC-ECJ Agreement was executed not earlier than May 25, 1975
proves that petitioner Cojuangco had an option to buy the FUB shares prior to that date. Again, it
must be emphasized that from its terms, the first Agreement did not create the option.It, however,
proved the exercise of the option by petitioner.
The execution of the PC-ECJ Agreement on the same day as the PCA-Cojuangco Agreement more
than satisfies paragraph 2 thereof which requires petitioner to exercise his option to purchase the
FUB shares as promptly as practicable after, and not before, the execution of the second
agreement, thus:
2. As promptly as practicable after execution of this Agreement, the SELLER shall exercise his
option to acquire the Option Shares and SELLER shall immediately thereafter deliver and turn over
to the Escrow Agent such stock certificates as are herein provided to be received from the existing
stockholders of the bank by virtue of the exercise on the aforementioned option. The Escrow Agent
shall thereupon issue its check in favor of the SELLER covering the purchase price for the shares
delivered. (Emphasis supplied.)
The Sandiganbayan viewed the compensation of petitioner of 14,400 FUB shares as exorbitant. In
the absence of proof to the contrary and considering the absence of any complaint of illegality or
fraud from any of the contracting parties, then the presumption that "private transactions have
been fair and regular"53 must apply.
Lastly, respondent interjects the thesis that PCA could not validly enter into a bank management
agreement with petitioner since PCA has a personality separate and distinct from that of FUB.
Evidently, it is PCA which has the right to challenge the stipulations on the management contract as
unenforceable. However, PCA chose not to assail said stipulations and instead even complied with
and implemented its prestations contained in said stipulations by installing petitioner as Chairman
of UCPB. Thus, PCA has waived and forfeited its right to nullify said stipulations and is now
estopped from questioning the same.
In view of the foregoing, the Court is left with no option but to uphold the validity of the two
agreements in question.
Page3
IV
COJUANGCO IS NOT ENTITLED TO THE UCPB SHARES WHICH WERE BOUGHT WITH PUBLIC FUNDS
AND HENCE, ARE PUBLIC PROPERTY.
The coconut levy funds were exacted for a
special public purpose. Consequently, any
use or transfer of the funds that directly
benefits private individuals should be
invalidated.
The issue of whether or not taxpayers money, or funds and property acquired through the
imposition of taxes may be used to benefit a private individual is once again posed. Preliminarily,
the instant case inquires whether the coconut levy funds, and accordingly, the UCPB shares
acquired using the coconut levy funds are public funds. Indeed, the very same issue took center
stage, discussed and was directly addressed in COCOFED v. Republic. And there is hardly any
question about the subject funds public and special character. The following excerpts from
COCOFED v. Republic,54 citing Republic v. COCOFED and related cases, settle once and for all this
core, determinative issue:
Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the States
inherent power of taxation. As We wrote in Republic v. COCOFED:
Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced
proportional contributions from persons and properties, exacted by the State by virtue of its
sovereignty for the support of government and for all public needs.
Based on its definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty;
and c) it is levied for the support of the government. The coconut levy funds fall squarely into these
elements for the following reasons:
(a) They were generated by virtue of statutory enactments imposed on the coconut farmers
requiring the payment of prescribed amounts. Thus, PD No. 276, which created the (CCSF),
mandated the following:
"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut
products, shall be imposed on every first sale, in accordance with the mechanics established under
RA 6260, effective at the start of business hours on August 10, 1973.
"The proceeds from the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust
fund which shall not form part of the general fund of the government."
The coco levies were further clarified in amendatory laws, specifically PD No. 961 and PD No. 1468
in this wise:
"The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the
Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its
equivalent delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other
end-users of copra or its equivalent in other coconut products. The levy shall be paid by such copra
exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut
products under such rules and regulations as the Authority may prescribe. Until otherwise
prescribed by the Authority, the current levy being collected shall be continued."
Like other tax measures, they were not voluntary payments or donations by the people. They were
enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:
"3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing
administrative and special law, pay a fine of not less than P2, 500 or more than P10,000, or suffer
cancellation of licenses to operate, or both, at the discretion of the Court."
Such penalties were later amended thus: .
(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative
authorities of the State. Indeed, the CCSF was collected under PD No. 276, ."
Page3
(c) They were clearly imposed for a public purpose. There is absolutely no question that they were
collected to advance the governments avowed policy of protecting the coconut industry.
This Court takes judicial notice of the fact that the coconut industry is one of the great economic
pillars of our nation, and coconuts and their byproducts occupy a leading position among the
countrys export products; .
Taxation is done not merely to raise revenues to support the government, but also to provide
means for the rehabilitation and the stabilization of a threatened industry, which is so affected with
public interest as to be within the police power of the State .
Even if the money is allocated for a special purpose and raised by special means, it is still public in
character. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises "were
organized and financed with revenues derived from coconut levies imposed under a succession of
law of the late dictatorship with deposed Ferdinand Marcos and his cronies as the suspected
authors and chief beneficiaries of the resulting coconut industry monopoly." The Court continued:
". It cannot be denied that the coconut industry is one of the major industries supporting the
national economy. It is, therefore, the States concern to make it a strong and secure source not
only of the livelihood of a significant segment of the population, but also of export earnings the
sustained growth of which is one of the imperatives of economic stability. (Emphasis Ours.)
The following parallel doctrinal lines from Pambansang Koalisyon ng mga Samahang Magsasaka at
Manggagawa sa Niyugan (PKSMMN) v. Executive Secretary55 came next:
The Court was satisfied that the coco-levy funds were raised pursuant to law to support a proper
governmental purpose. They were raised with the use of the police and taxing powers of the State
for the benefit of the coconut industry and its farmers in general. The COA reviewed the use of the
funds. The Bureau of Internal Revenue (BIR) treated them as public funds and the very laws
governing coconut levies recognize their public character.
The Court has also recently declared that the coco-levy funds are in the nature of taxes and can
only be used for public purpose. Taxes are enforced proportional contributions from persons and
property, levied by the State by virtue of its sovereignty for the support of the government and for
all its public needs. Here, the coco-levy funds were imposed pursuant to law, namely, R.A. 6260
and P.D. 276. The funds were collected and managed by the PCA, an independent government
corporation directly under the President. And, as the respondent public officials pointed out, the
pertinent laws used the term levy, which means to tax, in describing the exaction.
Of course, unlike ordinary revenue laws, R.A. 6260 and P.D. 276 did not raise money to boost the
governments general funds but to provide means for the rehabilitation and stabilization of a
threatened industry, the coconut industry, which is so affected with public interest as to be within
the police power of the State. The funds sought to support the coconut industry, one of the main
economic backbones of the country, and to secure economic benefits for the coconut farmers and
far workers. The subject laws are akin to the sugar liens imposed by Sec. 7(b) of P.D. 388, and the
oil price stabilization funds under P.D. 1956, as amended by E.O. 137.
From the foregoing, it is at once apparent that any property acquired by means of the coconut levy
funds, such as the subject UCPB shares, should be treated as public funds or public property,
subject to the burdens and restrictions attached by law to such property. COCOFED v. Republic,
delved into such limitations, thusly:
We have ruled time and again that taxes are imposed only for a public purpose. "They cannot be
used for purely private purposes or for the exclusive benefit of private persons." When a law
imposes taxes or levies from the public, with the intent to give undue benefit or advantage to
private persons, or the promotion of private enterprises, that law cannot be said to satisfy the
requirement of public purpose. In Gaston v. Republic Planters Bank, the petitioning sugar
producers, sugarcane planters and millers sought the distribution of the shares of stock of the
Republic Planters Bank (RPB), alleging that they are the true beneficial owners thereof. In that
case, the investment, i.e., the purchase of RPB, was funded by the deduction of PhP 1.00 per picul
from the sugar proceeds of the sugar producers pursuant to P.D. No. 388. In ruling against the
petitioners, the Court held that to rule in their favor would contravene the general principle that
revenues received from the imposition of taxes or levies "cannot be used for purely private
Page3
purposes or for the exclusive benefit of private persons." The Court amply reasoned that the sugar
stabilization fund is to "be utilized for the benefit of the entire sugar industry, and all its
components, stabilization of the domestic market including foreign market, the industry being of
vital importance to the countrys economy and to national interest."
Similarly in this case, the coconut levy funds were sourced from forced exactions decreed under
P.D. Nos. 232, 276 and 582, among others, with the end-goal of developing the entire coconut
industry. Clearly, to hold therefore, even by law, that the revenues received from the imposition of
the coconut levies be used purely for private purposes to be owned by private individuals in their
private capacity and for their benefit, would contravene the rationale behind the imposition of taxes
or levies.
Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of special
funds into a private fund for the benefit of private individuals. In the same vein, We cannot
subscribe to the idea of what appears to be an indirect if not exactly direct conversion of special
funds into private funds, i.e., by using special funds to purchase shares of stocks, which in turn
would be distributed for free to private individuals. Even if these private individuals belong to, or
are a part of the coconut industry, the free distribution of shares of stocks purchased with special
public funds to them, nevertheless cannot be justified. The ratio in Gaston, as articulated below,
applies mutatis mutandis to this case:
The stabilization fees in question are levied by the State for a special purpose that of "financing
the growth and development of the sugar industry and all its components, stabilization of the
domestic market including the foreign market." The fact that the State has taken possession of
moneys pursuant to law is sufficient to constitute them as state funds even though they are held
for a special purpose.
That the fees were collected from sugar producers etc., and that the funds were channeled to the
purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their
benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the
fees be collected from them since it is also they who are benefited from the expenditure of the
funds derived from it. .56
In this case, the coconut levy funds were being exacted from copra exporters, oil millers,
desiccators and other end-users of copra or its equivalent in other coconut products. 57 Likewise so,
the funds here were channeled to the purchase of the shares of stock in UCPB. Drawing a clear
parallelism between Gaston and this case, the fact that the coconut levy funds were collected from
the persons or entities in the coconut industry, among others, does not and cannot entitle them to
be beneficial owners of the subject funds or more bluntly, owners thereof in their private
capacity. Parenthetically, the said private individuals cannot own the UCPB shares of stocks so
purchased using the said special funds of the government. 58 (Emphasis Ours.)
As the coconut levy funds partake of the nature of taxes and can only be used for public purpose,
and importantly, for the purpose for which it was exacted, i.e., the development, rehabilitation and
stabilization of the coconut industry, they cannot be used to benefitwhether directly or
indirectly private individuals, be it by way of a commission, or as the subject Agreement
interestingly words it, compensation. Consequently, Cojuangco cannot stand to benefit by
receiving, in his private capacity, 7.22% of the FUB shares without violating the constitutional
caveat that public funds can only be used for public purpose. Accordingly, the 7.22% FUB (UCPB)
shares that were given to Cojuangco shall be returned to the Government, to be used "only for the
benefit of all coconut farmers and for the development of the coconut industry." 59
The ensuing are the underlying rationale for declaring, as unconstitutional, provisions that convert
public property into private funds to be used ultimately for personal benefit:
not only were the laws unconstitutional for decreeing the distribution of the shares of stock for
free to the coconut farmers and therefore negating the public purposed declared by P.D. No. 276,
i.e., to stabilize the price of edible oil and to protect the coconut industry. They likewise reclassified
the coconut levy fund as private fund, to be owned by private individuals in their private capacities,
contrary to the original purpose for the creation of such fund. To compound the situation, the
offending provisions effectively removed the coconut levy fund away from the cavil of public funds
Page3
which normally can be paid out only pursuant to an appropriation made by law. The conversion of
public funds into private assets was illegally allowed, in fact mandated, by these provisions. Clearly
therefore, the pertinent provisions of P.D. Nos. 755, 961 and 1468 are unconstitutional for violating
Article VI, Section 29 (3) of the Constitution. In this context, the distribution by PCA of the UCPB
shares purchased by means of the coconut levy fund a special fund of the government to the
coconut farmers is, therefore, void.60
It is precisely for the foregoing that impels the Court to strike down as unconstitutional the
provisions of the PCA-Cojuangco Agreement that allow petitioner Cojuangco to personally and
exclusively own public funds or property, the disbursement of which We so greatly protect if only to
give light and meaning to the mandates of the Constitution.
As heretofore amply discussed, taxes are imposed only for a public purpose.61 They must,
therefore, be used for the benefit of the public and not for the exclusive profit or gain of private
persons.62 Otherwise, grave injustice is inflicted not only upon the Government but most especially
upon the citizenrythe taxpayersto whom We owe a great deal of accountability.
In this case, out of the 72.2% FUB (now UCPB) shares of stocks PCA purchased using the coconut
levy funds, the May 25, 1975 Agreement between the PCA and Cojuangco provided for the transfer
to the latter, by way of compensation, of 10% of the shares subject of the agreement, or a total of
7.22% fully paid shares. In sum, Cojuangco received public assets in the form of FUB (UCPB)
shares with a value then of ten million eight hundred eighty-six thousand pesos (PhP 10,886,000)
in 1975, paid by coconut levy funds. In effect, Cojuangco received the aforementioned asset as a
result of the PCA-Cojuangco Agreement, and exclusively benefited himself by owning property
acquired using solely public funds. Cojuangco, no less, admitted that the PCA paid, out of the CCSF,
the entire acquisition price for the 72.2% option shares.63 This is in clear violation of the
prohibition, which the Court seeks to uphold.1wphi1
We, therefore, affirm, on this ground, the decision of the Sandiganbayan nullifying the shares of
stock transfer to Cojuangco. Accordingly, the UCPB shares of stock representing the 7.22% fully
paid shares subject of the instant petition, with all dividends declared, paid or issued thereon, as
well as any increments thereto arising from, but not limited to, the exercise of pre-emptive rights,
shall be reconveyed to the Government of the Republic of the Philippines, which as We previously
clarified, shall "be used only for the benefit of all coconut farmers and for the development of the
coconut industry."64
But apart from the stipulation in the PCA-Cojuangco Agreement, more specifically paragraph 4 in
relation to paragraph 6 thereof, providing for the transfer to Cojuangco for the UCPB shares
adverted to immediately above, other provisions are valid and shall be enforced, or shall be
respected, if the corresponding prestation had already been performed. Invalid stipulations that are
independent of, and divisible from, the rest of the agreement and which can easily be separated
therefrom without doing violence to the manifest intention of the contracting minds do not nullify
the entire contract.65
WHEREFORE, Part C of the appealed Partial Summary Judgment in Sandiganbayan Civil Case No.
0033-A is AFFIRMED with modification. As MODIFIED, the dispositive portion in Part C of the
Sandiganbayans Partial Summary Judgment in Civil Case No. 0033-A, shall read as follows:
C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. COJUANGCO, JR.) dated
September 18, 2002 filed by Plaintiff.
1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo M.
Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law because
of the non-publication of the said Agreement.
2. The Agreement between PCA and defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 is a
valid contract for having the requisite consideration under Article 1318 of the Civil Code.
3. The transfer by PCA to defendant Eduardo M. Cojuangco, Jr. of 14,400 shares of stock of FUB
(later UCPB) from the "Option Shares" and the additional FUB shares subscribed and paid by PCA,
consisting of
a. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out of the authorized but unissued
shares of the bank, subscribed and paid by PCA;
Page3
Page3
b. Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock
subscribed and paid by PCA; and
c. Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the PCACojuangco Agreement dated May 25, 1975. or the so-called "Cojuangco-UCPB shares" is declared
unconstitutional, hence null and void.1wphi1
4. The above-mentioned shares of stock of the FUB/UCPB transferred to defendant Cojuangco are
hereby declared conclusively owned by the Republic of the Philippines to be used only for the
benefit of all coconut farmers and for the development of the coconut industry, and ordered
reconveyed to the Government.
5. The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo M.
Cojuangco, Jr. which form part of the 72.2% shares of the FUB/UCPB paid for by the PCA with
public funds later charged to the coconut levy funds, particularly the CCSF, belong to the plaintiff
Republic of the Philippines as their true and beneficial owner.
Accordingly, the instant petition is hereby DENIED.
Costs against petitioner Cojuangco.
SO ORDERED.
Page3

EN BANC
BUREAU OF CUSTOMS EMPLOYEES
ASSOCIATION (BOCEA), represented by its
National President (BOCEA National
Executive Council) Mr. Romulo A. Pagulayan,
Petitioner,
- versus -
HON. MARGARITO B. TEVES, in his capacity

as Secretary of the Department of Finance,
HON. NAPOLEON L. MORALES, in his
capacity as Commissioner of the Bureau of
Customs, HON. LILIAN B. HEFTI, in her
capacity as Commissioner of the Bureau of
Internal Revenue,
Respondents.
G.R. No. 181704

Present:
CORONA,C.J.,
CARPIO,
VELASCO, JR.,*
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
Promulgated:
December 6, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
In Abakada Guro Party List v. Purisima[4] (Abakada), we said of R.A. No. 9335:
RA [No.] 9335 was enacted to optimize the revenue-generation capability and collection of the
Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage
BIR and BOC officials and employees to exceed their revenue targets by providing a system of
rewards and sanctions through the creation of a Rewards and Incentives Fund (Fund) and a
Revenue Performance Evaluation Board (Board). It covers all officials and employees of the BIR
and the BOC with at least six months of service, regardless of employment status.
The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets
for the year, as determined by the Development Budget and Coordinating Committee (DBCC). Any
incentive or reward is taken from the fund and allocated to the BIR and the BOC in proportion to
their contribution in the excess collection of the targeted amount of tax revenue.
The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance
(DOF) or his/her Undersecretary, the Secretary of the Department of Budget and Management
(DBM) or his/her Undersecretary, the Director General of the National Economic Development
Authority (NEDA) or his/her Deputy Director General, the Commissioners of the BIR and the BOC or
Page3
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition[1] for certiorari and prohibition with prayer for injunctive
relief/s under Rule 65 of the 1997 Rules of Civil Procedure, as amended, to declare Republic Act
(R.A.) No. 9335,[2] otherwise known as the Attrition Act of 2005, and its Implementing Rules and
Regulations[3] (IRR) unconstitutional, and the implementation thereof be enjoined permanently.
The Facts
On January 25, 2005, former President Gloria Macapagal-Arroyo signed into law R.A. No.
9335 which took effect on February 11, 2005.
b.)
That he/she will cascade and/or allocate to respective Appraisers/Examiners or
Employees under his/her section the said Revenue Collection Target and require them to execute a
Performance Contract, and direct them to accept their individual target. The Performance Contract
executed by the respective Examiners/Appraisers/Employees shall be submitted to the Office of the
Commissioner through the LAIC on or before March 31, 2008.
Page3
their Deputy Commissioners, two representatives from the rank-and-file employees and a
representative from the officials nominated by their recognized organization.
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and
release of the Fund; (2) set criteria and procedures for removing from the service officials and
employees whose revenue collection falls short of the target; (3) terminate personnel in
accordance with the criteria adopted by the Board; (4) prescribe a system for performance
evaluation; (5) perform other functions, including the issuance of rules and regulations and (6)
submit an annual report to Congress.
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to
promulgate and issue the implementing rules and regulations of RA [No.] 9335, to be approved by
a Joint Congressional Oversight Committee created for such purpose.[5]
The Joint Congressional Oversight Committee approved the assailed IRR on May 22, 2006.
Subsequently, the IRR was published on May 30, 2006 in two newspapers of general circulation,
thePhilippine Star and the Manila Standard, and became effective fifteen (15) days later.[6]
Contending that the enactment and implementation of R.A. No. 9335 are tainted with
constitutional infirmities in violation of the fundamental rights of its members, petitioner Bureau of
Customs Employees Association (BOCEA), an association of rank-and-file employees of the Bureau
of Customs (BOC), duly registered with the Department of Labor and Employment (DOLE) and the
Civil Service Commission (CSC), and represented by its National President, Mr. Romulo A.
Pagulayan (Pagulayan), directly filed the present petition before this Court against
respondents Margarito B. Teves, in his capacity as Secretary of the Department of Finance (DOF),
Commissioner Napoleon L. Morales (Commissioner Morales), in his capacity as BOC Commissioner,
and Lilian B. Hefti, in her capacity as Commissioner of the Bureau of Internal Revenue (BIR). In its
petition, BOCEA made the following averments:
Sometime in 2008, high-ranking officials of the BOC pursuant to the mandate of R.A. No.
9335 and its IRR, and in order to comply with the stringent deadlines thereof, started to
disseminate Collection District Performance Contracts [7] (Performance Contracts) for the lower
ranking officials and rank-and-file employees to sign. The Performance Contract pertinently
provided:
xxxx
WHEREAS, pursuant to the provisions of Sec. 25 (b) of the Implementing Rules and Regulations
(IRR) of the Attrition Act of 2005, that provides for the setting of criteria and procedures for
removing from the service Officials and Employees whose revenue collection fall short of the target
in accordance with Section 7 of Republic Act 9335.
xxxx
NOW, THEREFORE, for and in consideration of the foregoing premises, parties unto this
Agreement hereby agree and so agreed to perform the following:
xxxx
2. The Section 2, PA/PE hereby accepts the allocated Revenue Collection Target and further
accepts/commits to meet the said target under the following conditions:
a.)
That he/she will meet the allocated Revenue Collection Target and thereby
undertakes and binds himself/herself that in the event the revenue collection falls short of
the target with due consideration of all relevant factors affecting the level of collection
as provided in the rules and regulations promulgated under the Act and its IRR, he/she
will voluntarily submit to the provisions of Sec. 25 (b) of the IRR and Sec. 7 of the Act ;
and

x x x x[8]
BOCEA opined that the revenue target was impossible to meet due to the Governments own
policies on reduced tariff rates and tax breaks to big businesses, the occurrence of natural
calamities and because of other economic factors. BOCEA claimed that some BOC employees were
coerced and forced to sign the Performance Contract. The majority of them, however, did not sign.
In particular, officers of BOCEA were summoned and required to sign the Performance Contracts
but they also refused. To ease the brewing tension, BOCEA claimed that its officers sent letters,
and sought several dialogues with BOC officials but the latter refused to heed them.
In addition, BOCEA alleged that Commissioner Morales exerted heavy pressure on the District
Collectors, Chiefs of Formal Entry Divisions, Principal Customs Appraisers and Principal Customs
Examiners of the BOC during command conferences to make them sign their Performance
Contracts. Likewise, BOC Deputy Commissioner Reynaldo Umali (Deputy Commissioner Umali)
individually spoke to said personnel to convince them to sign said contracts. Said personnel were
threatened that if they do not sign their respective Performance Contracts, they would face possible
reassignment, reshuffling, or worse, be placed on floating status. Thus, all the District Collectors,
except a certain Atty. Carlos So of the Collection District III of the Ninoy Aquino International
Airport (NAIA), signed the Performance Contracts.
BOCEA further claimed that Pagulayan was constantly harassed and threatened with lawsuits.
Pagulayan approached Deputy Commissioner Umali to ask the BOC officials to stop all forms of
harassment, but the latter merely said that he would look into the matter. On February 5, 2008,
BOCEA through counsel wrote the Revenue Performance Evaluation Board (Board) to desist from
implementing R.A. No. 9335 and its IRR and from requiring rank-and-file employees of the BOC
and BIR to sign Performance Contracts. [9] In his letter-reply[10] dated February 12, 2008, Deputy
Commissioner Umali denied having coerced any BOC employee to sign a Performance Contract. He
also defended the BOC, invoking its mandate of merely implementing the law. Finally, Pagulayan
and BOCEAs counsel, on separate occasions, requested for a certified true copy of the Performance
Contract from Deputy Commissioner Umali but the latter failed to furnish them a copy.[11]
This petition was filed directly with this Court on March 3, 2008. BOCEA asserted that in
view of the unconstitutionality of R.A. No. 9335 and its IRR, and their adverse effects on the
constitutional rights of BOC officials and employees, direct resort to this Court is justified. BOCEA
argued, among others, that its members and other BOC employees are in great danger of losing
their jobs should they fail to meet the required quota provided under the law, in clear violation of
their constitutional right to security of tenure, and at their and their respective families prejudice.
In its Reply,[13] BOCEA claimed that R.A. No. 9335 employs means that are unreasonable to
achieve its stated objectives; that the law is unduly oppressive of BIR and BOC employees as it
shifts the extreme burden upon their shoulders when the Government itself has adopted measures
that make collection difficult such as reduced tariff rates to almost zero percent and tax exemption
of big businesses; and that the law is discriminatory of BIR and BOC employees. BOCEA manifested
that only the high-ranking officials of the BOC benefited largely from the reward system under R.A.
Page3
In their Comment,[12] respondents, through the Office of the Solicitor General (OSG),
countered that R.A. No. 9335 and its IRR do not violate the right to due process and right to
security of tenure of BIR and BOC employees. The OSG stressed that the guarantee of security of
tenure under the 1987 Constitution is not a guarantee of perpetual employment. R.A. No. 9335 and
its IRR provided a reasonable and valid ground for the dismissal of an employee which is germane
to the purpose of the law. Likewise, R.A. No. 9335 and its IRR provided that an employee may only
be separated from the service upon compliance with substantive and procedural due process. The
OSG added that R.A. No. 9335 and its IRR must enjoy the presumption of constitutionality.

No. 9335 despite the fact that they were not the ones directly toiling to collect revenue. Moreover,
despite the BOCEAs numerous requests, [14] BOC continually refused to provide BOCEA the
Expenditure Plan on how such reward was distributed.
Since BOCEA was seeking similar reliefs as that of the petitioners in Abakada Guro Party List v.
Purisima, BOCEA filed a Motion to Consolidate [15] the present case with Abakada on April 16,
2008. However, pending action on said motion, the Court rendered its decision
in Abakada on August 14, 2008. Thus, the consolidation of this case with Abakada was rendered no
longer possible.[16]
In Abakada, this Court, through then Associate Justice, now Chief Justice Renato C. Corona,
declared Section 12[17] of R.A. No. 9335 creating a Joint Congressional Oversight Committee to
approve the IRR as unconstitutional and violative of the principle of separation of
powers. However, the constitutionality of the remaining provisions of R.A. No. 9335 was upheld
pursuant to Section 13[18] of R.A. No. 9335. The Court also held that until the contrary is shown,
the IRR of R.A. No. 9335 is presumed valid and effective even without the approval of the Joint
Congressional Oversight Committee.[19]
Notwithstanding our ruling in Abakada, both parties complied with our Resolution[20] dated February
10, 2009, requiring them to submit their respective Memoranda.
The Issues
BOCEA raises the following issues:
I.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS IMPLEMENTING
RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE VIOLATE THE RIGHT TO DUE
PROCESS OF THE COVERED BIR AND BOC OFFICIALS AND EMPLOYEES[;]
II.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS IMPLEMENTING
RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE VIOLATE THE RIGHT OF BIR AND
BOC OFFICIALS AND EMPLOYEES TO THE EQUAL PROTECTION OF THE LAWS[;]
III.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND REGULATIONS
VIOLATE THE RIGHT TO SECURITY OF TENURE OF BIR AND BOC OFFICIALS AND EMPLOYEES AS
ENSHRINED UNDER SECTION 2 (3), ARTICLE IX (B) OF THE CONSTITUTION[;]
IV.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND REGULATIONS
ARE UNCONSTITUTIONAL AS THEY CONSTITUTE UNDUE DELEGATION OF LEGISLATIVE POWERS
TO THE REVENUE PERFORMANCE EVALUATION BOARD IN VIOLATION OF THE PRINCIPLE OF
SEPARATION OF POWERS ENSHRINED IN THE CONSTITUTION[; AND]
V.
BOCEA manifested that while waiting for the Court to give due course to its petition, events
unfolded showing the patent unconstitutionality of R.A. No. 9335. It narrated that during the first
Page3
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 IS A BILL OF ATTAINDER AND HENCE[,]
UNCONSTITUTIONAL BECAUSE IT INFLICTS PUNISHMENT THROUGH LEGISLATIVE FIAT UPON A
PARTICULAR GROUP OR CLASS OF OFFICIALS AND EMPLOYEES WITHOUT TRIAL.[21]

year of the implementation of R.A. No. 9335, BOC employees exerted commendable efforts to
attain their revenue target of P196 billion which they surpassed by as much as P2 billion for that
year alone. However, this was attained only because oil companies made advance tax payments to
BOC. Moreover, BOC employees were given their reward for surpassing said target only in 2008,
the distribution of which they described as unjust, unfair, dubious and fraudulent because only top
officials of BOC got the huge sum of reward while the employees, who did the hard task of
collecting, received a mere pittance of aroundP8,500.00. In the same manner, the Bonds Division
of BOC-NAIA collected 400+% of its designated target but the higher management gave out to the
employees a measly sum of P8,500.00 while the top level officials partook of millions of the excess
collections. BOCEA relies on a piece of information revealed by a newspaper showing the list of
BOC officials who apparently earned huge amounts of money by way of reward. [22] It claims that
the recipients thereof included lawyers, support personnel and other employees, including a
dentist, who performed no collection functions at all. These alleged anomalous selection,
distribution and allocation of rewards was due to the failure of R.A. No. 9335 to set out clear
guidelines.[23]
In addition, BOCEA avers that the Board initiated the first few cases of attrition for the Fiscal
Year 2007 by subjecting five BOC officials from the Port of Manila to attrition despite the fact that
the Portof Manila substantially complied with the provisions of R.A. No. 9335. It is thus submitted
that the selection of these officials for attrition without proper investigation was nothing less than
arbitrary. Further, the legislative and executive departments promulgation of issuances and the
Governments accession to regional trade agreements have caused a significant diminution of the
tariff rates, thus, decreasing over-all collection. These unrealistic settings of revenue targets
seriously affect BIR and BOC employees tasked with the burden of collection, and worse, subjected
them to attrition.[24]
BOCEA assails the constitutionality of R.A. No. 9335 and its IRR on the following grounds:
1.
R.A. No. 9335 and its IRR violate the BIR and BOC employees right to due process because
the termination of employees who had not attained their revenue targets for the year is
peremptory and done without any form of hearing to allow said employees to ventilate their side.
Moreover, R.A. No. 9335 and its IRR do not comply with the requirements under CSC rules and
regulations as the dismissal in this case is immediately executory. Such immediately executory
nature of the Boards decision negates the remedies available to an employee as provided under
the CSC rules.
2.
R.A. No. 9335 and its IRR violate the BIR and BOC employees right to equal protection of
the law because R.A. No. 9335 and its IRR unduly discriminates against BIR and BOC employees as
compared to employees of other revenue generating government agencies like the Philippine
Amusement and Gaming Corporation, Department of Transportation and Communication, the Air
Transportation Office, the Land Transportation Office, and the Philippine Charity Sweepstakes
Office, among others, which are not subject to attrition.
4.
R.A. No. 9335 and its IRR violate the 1987 Constitution because Congress granted to the
Revenue Performance Evaluation Board (Board) the unbridled discretion of formulating the criteria
for termination, the manner of allocating targets, the distribution of rewards and the determination
of relevant factors affecting the targets of collection, which is tantamount to undue delegation of
legislative power.
Page3
3.
R.A. No. 9335 and its IRR violate the BIR and BOC employees right to security of tenure
because R.A. No. 9335 and its IRR effectively removed remedies provided in the ordinary course of
administrative procedure afforded to government employees. The law likewise created another
ground for dismissal, i.e., non-attainment of revenue collection target, which is not provided under
CSC rules and which is, by its nature, unpredictable and therefore arbitrary and unreasonable.

5.
R.A. No. 9335 is a bill of attainder because it inflicts punishment upon a particular group or
class of officials and employees without trial. This is evident from the fact that the law confers upon
the Board the power to impose the penalty of removal upon employees who do not meet their
revenue targets; that the same is without the benefit of hearing; and that the removal from service
is immediately executory. Lastly, it disregards the presumption of regularity in the performance of
the official functions of a public officer.[25]
On the other hand, respondents through the OSG stress that except for Section 12 of R.A.
No. 9335, R.A. No. 9335 and its IRR are constitutional, as per our ruling in Abakada. Nevertheless,
the OSG argues that the classification of BIR and BOC employees as public officers under R.A. No.
9335 is based on a valid and substantial distinction since the revenue generated by the BIR and
BOC is essentially in the form of taxes, which is the lifeblood of the State, while the revenue
produced by other agencies is merely incidental or secondary to their governmental functions; that
in view of their mandate, and for purposes of tax collection, the BIR and BOC are sui generis; that
R.A. No. 9335 complies with the completeness and sufficient standard tests for the permissive
delegation of legislative power to the Board; that the Board exercises its delegated power
consistent with the policy laid down in the law, that is, to optimize the revenue generation
capability and collection of the BIR and the BOC; that parameters were set in order that the Board
may identify the officials and employees subject to attrition, and the proper procedure for their
removal in case they fail to meet the targets set in the Performance Contract were provided; and
that the rights of BIR and BOC employees to due process of law and security of tenure are duly
accorded by R.A. No. 9335. The OSG likewise maintains that there was no encroachment of judicial
power in the enactment of R.A. No. 9335 amounting to a bill of attainder since R.A. No. 9335 and
its IRR merely defined the offense and provided for the penalty that may be imposed. Finally, the
OSG reiterates that the separation from the service of any BIR or BOC employee under R.A. No.
9335 and its IRR shall be done only upon due consideration of all relevant factors affecting the level
of collection, subject to Civil Service laws, rules and regulations, and in compliance with
substantive and procedural due process. The OSG opines that the Performance Contract, far from
violating the BIR and BOC employees right to due process, actually serves as a notice of the
revenue target they have to meet and the possible consequences of failing to meet the
same. More, there is nothing in the law which prevents the aggrieved party from appealing the
unfavorable decision of dismissal.[26]
In essence, the issues for our resolution are:
1.
Whether there is undue delegation of legislative power to the Board;
2.
Whether R.A. No. 9335 and its IRR violate the rights of BOCEAs members to: (a) equal
protection of laws, (b) security of tenure and (c) due process; and
Whether R.A. No. 9335 is a bill of attainder.
Our Ruling
Prefatorily, we note that it is clear, and in fact uncontroverted, that BOCEA has locus standi.
BOCEA impugns the constitutionality of R.A. No. 9335 and its IRR because its members, who are
rank-and-file employees of the BOC, are actually covered by the law and its IRR. BOCEAs
members have a personal and substantial interest in the case, such that they have sustained or will
sustain, direct injury as a result of the enforcement of R.A. No. 9335 and its IRR.[27]
However, we find no merit in the petition and perforce dismiss the same.
It must be noted that this is not the first time the constitutionality of R.A. No. 9335 and its
IRR are being challenged. The Court already settled the majority of the same issues raised by
BOCEA in our decision in Abakada, which attained finality on September 17, 2008. As such, our
ruling therein is worthy of reiteration in this case.
We resolve the first issue in the negative.
Page3
3.

The principle of separation of powers ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere.[28] Necessarily imbedded in this doctrine is the principle of nondelegation of powers, as expressed in the Latin maxim potestas delegata non delegari
potest, which means what has been delegated, cannot be delegated. This doctrine is based on the
ethical principle that such delegated power constitutes not only a right but a duty to be performed
by the delegate through the instrumentality of his own judgment and not through the intervening
mind of another.[29] However, this principle of non-delegation of powers admits of numerous
exceptions,[30] one of which is the delegation of legislative power to various specialized
administrative agencies like the Board in this case.
The rationale for the aforementioned exception was clearly explained in our ruling in Gerochi
v. Department of Energy,[31] to wit:
In the face of the increasing complexity of modern life, delegation of legislative power to
various specialized administrative agencies is allowed as an exception to this principle. Given the
volume and variety of interactions in todays society, it is doubtful if the legislature can promulgate
laws that will deal adequately with and respond promptly to the minutiae of everyday life. Hence,
the need to delegate to administrative bodies the principal agencies tasked to execute laws in
their specialized fields the authority to promulgate rules and regulations to implement a given
statute and effectuate its policies. All that is required for the valid exercise of this power of
subordinate legislation is that the regulation be germane to the objects and purposes of the law
and that the regulation be not in contradiction to, but in conformity with, the standards prescribed
by the law. These requirements are denominated as the completeness test and the sufficient
standard test.[32]
Thus, in Abakada, we held,
Two tests determine the validity of delegation of legislative power: (1) the completeness test and
(2) the sufficient standard test. A law is complete when it sets forth therein the policy to be
executed, carried out or implemented by the delegate. It lays down a sufficient standard when it
provides adequate guidelines or limitations in the law to map out the boundaries of the delegates
authority and prevent the delegation from running riot. To be sufficient, the standard must specify
the limits of the delegates authority, announce the legislative policy and identify the conditions
under which it is to be implemented.
RA [No.] 9335 adequately states the policy and standards to guide the President in fixing revenue
targets and the implementing agencies in carrying out the provisions of the law. Section 2 spells
out the policy of the law:
SEC. 2. Declaration of Policy. It is the policy of the State to optimize the revenue-generation
capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC)
by providing for a system of rewards and sanctions through the creation of a Rewards and
Incentives Fund and a Revenue Performance Evaluation Board in the above agencies for the
purpose of encouraging their officials and employees to exceed their revenue targets.
Section 4 canalized within banks that keep it from overflowing the delegated power to the
President to fix revenue targets:
Excess of Collection [Over]

the Revenue Targets
Percent (%) of the Excess

Collection to Accrue to the
Fund
Page3
SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund, hereinafter referred to
as the Fund, is hereby created, to be sourced from the collection of the BIR and the BOC in excess
of their respective revenue targets of the year, as determined by the Development
Budget and Coordinating Committee (DBCC), in the following percentages:

30% or below
More than 30%
15%
15% of the first 30% plus
20% of the remaining excess
The Fund shall be deemed automatically appropriated the year immediately following the year
when the revenue collection target was exceeded and shall be released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection expected of the
BIR and the BOC for a given fiscal year as stated in the Budget of Expenditures and
Sources of Financing (BESF) submitted by the President to Congress. The BIR and the BOC
shall submit to the DBCC the distribution of the agencies revenue targets as allocated among its
revenue districts in the case of the BIR, and the collection districts in the case of the BOC.
xxx
xxx
x x x
Revenue targets are based on the original estimated revenue collection expected respectively of
the BIR and the BOC for a given fiscal year as approved by the DBCC and stated in the BESF
submitted by the President to Congress. Thus, the determination of revenue targets does not rest
solely on the President as it also undergoes the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Boards authority and identifies the
conditions under which officials and employees whose revenue collection falls short of the target by
at least 7.5% may be removed from the service:
SEC. 7. Powers and Functions of the Board. The Board in the agency shall have the following
powers and functions:
xxx
xxx
xxx
(b) To set the criteria and procedures for removing from service officials and employees
whose revenue collection falls short of the target by at least seven and a half percent
(7.5%), with due consideration of all relevant factors affecting the level of collection as
provided in the rules and regulations promulgated under this Act, subject to civil service laws,
rules and regulations and compliance with substantive and procedural due
process: Provided, That the following exemptions shall apply:
1.
Where the district or area of responsibility is newly-created, not exceeding two years in
operation, and has no historical record of collection performance that can be used as basis for
evaluation; and
(c) To terminate personnel in accordance with the criteria adopted in the preceding
paragraph: Provided, That such decision shall be immediately executory: Provided, further,
That the application of the criteria for the separation of an official or employee from
service under this Act shall be without prejudice to the application of other relevant laws
on accountability of public officers and employees, such as the Code of Conduct and
Page3
2.
Where the revenue or customs official or employee is a recent transferee in the middle of the
period under consideration unless the transfer was due to nonperformance of revenue targets or
potential nonperformance of revenue targets: Provided, however, That when the district or area of
responsibility covered by revenue or customs officials or employees has suffered from economic
difficulties brought about by natural calamities or force majeureor economic causes as may be
determined by the Board, termination shall be considered only after careful and proper review by
the Board.

Ethical Standards of Public Officers and Employees and the Anti-Graft and Corrupt
Practices Act;
xxx
xxx
x x x
At any rate, this Court has recognized the following as sufficient standards: public interest,
justice and equity, public convenience and welfare and simplicity, economy and welfare. In
this case, the declared policy of optimization of the revenue-generation capability and collection of
the BIR and the BOC is infused with public interest.[33]
We could not but deduce that the completeness test and the sufficient standard test were
fully satisfied by R.A. No. 9335, as evident from the aforementioned Sections 2, 4 and 7 thereof.
Moreover, Section 5[34] of R.A. No. 9335 also provides for the incentives due to District Collection
Offices. While it is apparent that the last paragraph of Section 5 provides that [t]he allocation,
distribution and release of the district reward shall likewise be prescribed by the rules and
regulations of the Revenue Performance and Evaluation Board, Section 7 (a)[35] of R.A. No. 9335
clearly mandates and sets the parameters for the Board by providing that such rules and guidelines
for the allocation, distribution and release of the fund shall be in accordance with Sections 4 and 5
of R.A. No. 9335. In sum, the Court finds that R.A. No. 9335, read and appreciated in its entirety,
is complete in all its essential terms and conditions, and that it contains sufficient standards as to
negate BOCEAs supposition of undue delegation of legislative power to the Board.
Similarly, we resolve the second issue in the negative.
Equal protection simply provides that all persons or things similarly situated should be
treated in a similar manner, both as to rights conferred and responsibilities imposed. The purpose
of the equal protection clause is to secure every person within a states jurisdiction against
intentional and arbitrary discrimination, whether occasioned by the express terms of a statute or by
its improper execution through the states duly constituted authorities. In other words, the concept
of equal justice under the law requires the state to govern impartially, and it may not draw
distinctions between individuals solely on differences that are irrelevant to a legitimate
governmental objective.[36]
Thus, on the issue on equal protection of the laws, we held in Abakada:
The equal protection clause recognizes a valid classification, that is, a classification that has a
reasonable foundation or rational basis and not arbitrary. With respect to RA [No.] 9335, its
expressed public policy is the optimization of the revenue-generation capability and collection of
the BIR and the BOC. Since the subject of the law is the revenue-generation capability and
collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should
logically pertain to the said agencies. Moreover, the law concerns only the BIR and the BOC
because they have the common distinct primary function of generating revenues for the national
government through the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue, which shall be
headed by and subject to the supervision and control of the Commissioner of Internal Revenue,
who shall be appointed by the President upon the recommendation of the Secretary [of the DOF],
shall have the following functions:
(1)
(2)
(3)
(4)
(5)
xx
Assess and collect all taxes, fees and charges and account for all revenues collected;
Exercise duly delegated police powers for the proper performance of its functions and duties;
Prevent and prosecute tax evasions and all other illegal economic activities;
Exercise supervision and control over its constituent and subordinate units; and
Perform such other functions as may be provided by law.
x
xxx
x x x
Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed and subject to
the management and control of the Commissioner of Customs, who shall be appointed by the
Page3
On the other hand, the BOC has the following functions:
Clearly, RA [No.] 9335 in no way violates the security of tenure of officials and employees of the
BIR and the BOC. The guarantee of security of tenure only means that an employee cannot be
dismissed from the service for causes other than those provided by law and only after due process
is accorded the employee. In the case of RA [No.] 9335, it lays down a reasonable yardstick for
removal (when the revenue collection falls short of the target by at least 7.5%) with due
consideration of all relevant factors affecting the level of collection. This standard is analogous to
inefficiency and incompetence in the performance of official duties, a ground for disciplinary action
under civil service laws. The action for removal is also subject to civil service laws, rules and
regulations and compliance with substantive and procedural due process.[38]
In addition, the essence of due process is simply an opportunity to be heard, or as applied
to administrative proceedings, a fair and reasonable opportunity to explain ones side. [39] BOCEAs
apprehension of deprivation of due process finds its answer in Section 7 (b) and (c) of R.A. No.
9335.[40] The concerned BIR or BOC official or employee is not simply given a target revenue
collection and capriciously left without any quarter. R.A. No. 9335 and its IRR clearly give due
consideration to all relevant factors[41] that may affect the level of collection. In the same manner,
exemptions[42] were set, contravening BOCEAs claim that its members may be removed for
unattained target collection even due to causes which are beyond their control. Moreover, an
employees right to be heard is not at all prevented and his right to appeal is not deprived of him.
[43]
In fine, a BIR or BOC official or employee in this case cannot be arbitrarily removed from the
service without according him his constitutional right to due process. No less than R.A. No. 9335
in accordance with the 1987 Constitution guarantees this.
We have spoken, and these issues were finally laid to rest. Now, the Court proceeds to
resolve the last, but new issue raised by BOCEA, that is, whether R.A. No. 9335 is a bill of attainder
proscribed under Section 22,[44] Article III of the 1987 Constitution.
On this score, we hold that R.A. No. 9335 is not a bill of attainder. A bill of attainder is a
legislative act which inflicts punishment on individuals or members of a particular group without a
judicial trial. Essential to a bill of attainder are a specification of certain individuals or a group of
individuals, the imposition of a punishment, penal or otherwise, and the lack of judicial trial. [45]
Page3
President upon the recommendation of the Secretary [of the DOF] and hereinafter referred to as
Commissioner, shall have the following functions:
(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs laws;
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of
entry;
(5) Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts
in all ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.
xxx
xxx
x x x
Both the BIR and the BOC are bureaus under the DOF. They principally perform the special
function of being the instrumentalities through which the State exercises one of its great inherent
functions taxation. Indubitably, such substantial distinction is germane and intimately related to
the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC
under RA [No.] 9335 fully satisfy the demands of equal protection.[37]
As it was imperatively correlated to the issue on equal protection, the issues on the security
of tenure of affected BIR and BOC officials and employees and their entitlement to due process
were also settled in Abakada:
Page3
In his Concurring Opinion in Tuason v. Register of Deeds, Caloocan City,[46] Justice

Florentino P. Feliciano traces the roots of a Bill of Attainder, to wit:
Bills of attainder are an ancient instrument of tyranny. In England a few centuries back,
Parliament would at times enact bills or statutes which declared certain persons attainted and their
blood corrupted so that it lost all heritable quality (Ex Parte Garland, 4 Wall. 333, 18 L.Ed. 366
[1867]). In more modern terms, a bill of attainder is essentially a usurpation of judicial power by a
legislative body. It envisages and effects the imposition of a penalty the deprivation of life or
liberty or property not by the ordinary processes of judicial trial, but by legislative fiat. While
cast in the form of special legislation, a bill of attainder (or bill of pains and penalties, if
it prescribed a penalty other than death) is in intent and effect a penal judgment visited
upon an identified person or group of persons (and not upon the general community)
without a prior charge or demand, without notice and hearing, without an opportunity to
defend, without any of the civilized forms and safeguards of the judicial process as we
know it (People v. Ferrer, 48 SCRA 382 [1972]; Cummings and Missouri, 4 Wall. 277, 18 L. Ed.
356 [1867]; U.S. v. Lovett, 328, U.S. 303, 90 L.Ed. 1252 [1945]; U.S. v. Brown, 381 U.S. 437, 14
L.Ed. 2d. 484 [1965]. Such is the archetypal bill of attainder wielded as a means of legislative
oppression. x x x[47]
R.A. No. 9335 does not possess the elements of a bill of attainder. It does not seek to inflict
punishment without a judicial trial. R.A. No. 9335 merely lays down the grounds for the termination
of a BIR or BOC official or employee and provides for the consequences thereof. The democratic
processes are still followed and the constitutional rights of the concerned employee are amply
protected.
A final note.
We find that BOCEAs petition is replete with allegations of defects and anomalies in
allocation, distribution and receipt of rewards. While BOCEA intimates that it intends to curb graft
and corruption in the BOC in particular and in the government in general which is nothing but
noble, these intentions do not actually pertain to the constitutionality of R.A. No. 9335 and its IRR,
but rather in the faithful implementation thereof. R.A. No. 9335 itself does not tolerate these
pernicious acts of graft and corruption. [48] As the Court is not a trier of facts, the investigation on
the veracity of, and the proper action on these anomalies are in the hands of the Executive branch.
Correlatively, the wisdom for the enactment of this law remains within the domain of the Legislative
branch. We merely interpret the law as it is. The Court has no discretion to give statutes a meaning
detached from the manifest intendment and language thereof.[49] Just like any other law, R.A. No.
9335 has in its favor the presumption of constitutionality, and to justify its nullification, there must
be a clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or
argumentative.[50] We have so declared in Abakada, and we now reiterate that R.A. No. 9335 and
its IRR are constitutional.
WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive
relief/s is DISMISSED.
No costs.
SO ORDERED.

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EX POST FACTO LAWS AND BILLS OF ATTAINDER

G.R. No. 135080

- versus PLACIDO L. MAPA, JR., RAFAEL A. SISON,

November 28, 2007