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Giovanni Christian D.

Ladines

October 2, 2013

Republic v. Sandiganbayan G.R. No. 166859, G.R. No. 169203, G.R. No. 180702, April 12, 2011 FACTS:
The Republic commenced Civil Case No. 0033 in the Sandiganbayan by complaint, impleading as defendants respondent Eduardo M. Cojuangco, Jr. (Cojuangco) and 59 individual defendants. Cojuangco allegedly purchased a block of 33,000,000 shares of SMC stock through the 14 holding companies owned by the CIIF Oil Mills. For this reason, the block of 33,133,266 shares of SMC stock shall be referred to as the CIIF block of shares. Contention of the Republic of the Philippines: That Cojuangco is the undisputed "coconut king" with unlimited powers to deal with the coconut levy funds, who took undue advantage of his association, influence and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos, misused coconut levy funds to buy out majority of the outstanding shares of stock of San Miguel Corporation. Defendants Eduardo Cojuangco, Jr., and ACCRA law offices plotted, devised, schemed, conspired and confederated with each other in setting up, through the use of coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK. CIC, and more than twenty other coconut levy-funded corporations, including the acquisition of San Miguel Corporation shares and its institutionalization through presidential directives of the coconut monopoly. Ruling of the Sandiganbayan: Amended Complaint in Civil Case No. 0033-F was dismissed for failure of plaintiff to prove by preponderance of evidence its causes of action against defendants with respect to the twenty percent (20%) outstanding shares of stock of San Miguel Corporation registered in defendants names Republic of the Philippines appealed the case to the Supreme Court invoking that coconut levy funds are public funds. The SMC shares, which were acquired by respondents Cojuangco, Jr. and the Cojuangco companies with the use of coconut levy funds in violation of respondent Cojuangco, Jr.s fiduciary obligation are, necessarily, public in character and should be reconveyed to the government.

ISSUE: Whether Respondent Cojuangco Jr. used the coconut levy funds to acquire SMC shares in violation of the his fiduciary obligation as a public officer.

Ruling of the Supreme Court: Cojuangco violated no fiduciary duties

It does not suffice, as in this case, that the respondent is or was a government official or employee during the administration of former Pres. Marcos. There must be a prima facie showing that the respondent unlawfully accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or his wife. Republics burden to establish by preponderance of evidence that respondents SMC shares had been illegally acquired with coconut-levy funds was not discharged. The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the trustee using trust funds to purchase, or a person acquiring property through mistake or fraud), and Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting for or assenting to patently unlawful acts of the corporation, among others) require factual foundations to be first laid out in appropriate judicial proceedings. Hence, concluding that Cojuangco breached fiduciary duties as an officer and member of the Board of Directors of the UCPB without competent evidence thereon would be unwarranted and unreasonable. Thus, the Sandiganbayan could not fairly find that Cojuangco had committed breach of any fiduciary duties as an officer and member of the Board of Directors of the UCPB. For one, the Amended Complaint contained no clear factual allegation on which to predicate the application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation Code. Although the trust relationship supposedly arose from Cojuangcos being an officer and member of the Board of Directors of the UCPB, the link between this alleged fact and the borrowings or advances was not established. Nor was there evidence on the loans or borrowings, their amounts, the approving authority, etc. As trial court, the Sandiganbayan could not presume his breach of fiduciary duties without evidence showing so, for fraud or breach of trust is never presumed, but must be alleged and proved. The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implication but is more inclined to be a contract of loan. To say that a relationship is fiduciary when existing laws do not provide for such requires evidence that confidence is reposed by one party in another who exercises dominion and influence. Absent any special facts and circumstances proving a higher degree of responsibility, any dealings between a lender and borrower are not fiduciary in nature. DISPOSITION: The Court DISMISSES the petitions for certiorari and, AFFIRMS the decision promulgated by the Sandiganbayan on November 28, 2007 in Civil Case No. 0033-F. The Court declares that the block of shares in San Miguel Corporation in the names of respondents Cojuangco, et al. subject of Civil Case No. 0033-F is the exclusive property of Cojuangco, et al. as registered owners.