Republic of the Philippines v. Cocofed
REITERATIONFacts
The Antecedents: Following the 1986 EDSA Revolution, the Presidential Commission on Good Government (PCGG) was created to recover ill-gotten wealth. Pursuant to its mandate, the PCGG sequestered shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the 'one million coconut farmers,' the Coconut Industry Investment Fund (CIIF) companies, and Private Respondent Eduardo Cojuangco Jr. These shares were alleged to have been acquired using coconut levy funds, which were collected from coconut farmers during the Marcos administration. Procedural History: The PCGG filed Civil Case No. 0033 with the Sandiganbayan for reconveyance, reversion, accounting, restitution, and damages. In 1990, the Sandiganbayan issued a resolution lifting the sequestration, which the Supreme Court later nullified in its January 23, 1995 decision in G.R. No. 96073. During the pendency of that case, the Supreme Court issued a Resolution on February 16, 1993, which allowed the PCGG to continue voting the sequestered shares, reasoning that the coconut levy funds were 'clearly affected with public interest.' After six years of inaction following the 1995 decision, the Board of Directors of UCPB, upon demand from COCOFED, called for a stockholders' meeting scheduled for March 6, 2001. The Petition: Respondents COCOFED, et al. and Ballares, et al. filed a 'Class Action Omnibus Motion' before the Sandiganbayan to enjoin the PCGG from voting the sequestered UCPB shares. On February 28, 2001, the Sandiganbayan issued the assailed Order, granting the motion and authorizing the registered stockholders (COCOFED, Cojuangco, et al.) to vote their shares. The Republic of the Philippines, represented by the PCGG, then filed the instant Petition for Certiorari under Rule 65 before the Supreme Court, arguing that the Sandiganbayan committed grave abuse of discretion by contravening established jurisprudence and allowing private individuals to vote shares that were purchased with public funds.
Issue(s)
Whether the Sandiganbayan committed grave abuse of discretion when it issued the disputed Order allowing respondents to vote the sequestered UCPB shares of stock registered in their names, considering the nature of the funds used to acquire said shares and the applicable legal tests for determining voting rights.
Ruling
Yes. The Petition is GRANTED and the assailed Order of the Sandiganbayan dated February 28, 2001 is SET ASIDE. The PCGG shall continue voting the sequestered shares until Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F are finally and completely resolved. The Sandiganbayan is ordered to decide the aforesaid civil cases with finality within a period of six (6) months from notice.
Ratio Decidendi
On the issue of who may vote the sequestered shares: The Supreme Court held that the Sandiganbayan committed grave abuse of discretion. The Court clarified the rules on voting sequestered shares by distinguishing between two scenarios. The general rule, known as the 'two-tiered test' established in PCGG v. Cojuangco Jr., applies when sequestered shares registered in private names are alleged to have been acquired with ill-gotten wealth. Under this test, the PCGG may only be granted voting rights if it can (1) show prima facie evidence that the shares are ill-gotten and (2) demonstrate an imminent danger of dissipation. However, the Court ruled that this test was erroneously applied by the Sandiganbayan because the UCPB shares fall under a specific exception. The applicable rule is the 'public character' exception, derived from Baseco v. PCGG and Cojuangco Jr. v. Roxas. This exception applies where the sequestered shares, although in private hands, were acquired with funds that are prima facie public in character. In such cases, the government is considered the prima facie beneficial owner and is thus entitled to exercise the right to vote. The Court found it undisputed that the UCPB shares were purchased with coconut levy funds. It then proceeded to declare that these funds are not merely 'affected with public interest' but are, in fact, prima facie public funds. The Court provided six reasons for this conclusion: (1) the coconut levies were raised through the State's police and taxing powers; (2) they were imposed for a public purpose, i.e., to support the coconut industry; (3) respondents had judicially admitted the shares were bought with these funds; (4) the Commission on Audit (COA) has authority to audit them; (5) the Bureau of Internal Revenue (BIR) has treated them as public funds; and (6) the very laws governing the levies recognize their public character. Since the shares were acquired with public funds, the government is the prima facie owner and should be allowed to vote them through the PCGG, pending the final outcome of the main cases in the Sandiganbayan. The Sandiganbayan's failure to apply the correct test and its contravention of existing jurisprudence constituted grave abuse of discretion.
Main Doctrine
The right to vote sequestered shares of stock depends on the source of the funds used for their acquisition. The general rule, or the 'two-tiered test,' which requires the PCGG to show prima facie evidence that the shares are ill-gotten and that there is an imminent danger of dissipation, applies only to shares acquired with private funds. This test does not apply when the sequestered shares were acquired with funds that are prima facie public in character, such as the coconut levy funds. In such cases, the 'public character' test prevails, and the right to vote the shares is exercised by the government as the prima facie beneficial owner, pending a final judicial determination of ownership.