COCOFED vs.

Republic,
GR Nos. 177857-58, January 24, 2012
FACTS:
In 1971, Republic Act No. 6260 was enacted creating the Coconut InvestmentFund (CIF).
The source of the CIF was a P0.55 levy on the sale of every 100 kg. of copra. The
Philippine Coconut Administration was tasked to collect and administer theFund. Out of
the 0.55 levy, P0.02 was placed at the disposition of the COCOFED, therecognized
national association of coconut producers declared by the PCA. Cocofundreceipts were
ought to be issued to every copra seller.During the Martial Law regime, then President
Ferdinand Marcos issued severalPresidential Decrees purportedly for the improvement of
the coconut industry. The mostrelevant among these is P.D. No. 755 which permitted the
use of the Fund for the acquisition of a commercial bank for the benefit of coconut
farmers and the distribution of the shares of the stock of the bank it [PCA] acquired free
to the coconut farmers (Sec.2). Thus, the PCA acquired the First United Bank, later
renamed the United Coconut Planters Bank (UCPB). The PCA bought the 72.2% of PUBs
outstanding capital stock or 137,866 shares at P200 per share (P27, 573,200.00) from
Pedro Cojuangco in behalf of the coconut farmers.
The rest of the Fund was deposited to the UCPB interest free.Farmers who had paid the
CIF and registered their receipts with PCA were giventheir corresponding UCPB stock
certificates. Only 16 million worth of COCOFUNDreceipts were registered and a large
number of the coconut farmers opted to sell all/partof their UCPB shares to private
individuals.Simply put, parts of the coconut levy funds went directly or indirectly to
variousprojects and/or was converted into different assets or investments through the
years. After the EDSA Revolution, President Corazon Aquino issued Executive Order
1which created the Presidential Commission on Good Government (PCGG).The PCGG
aimed to assist the President in the recovery of ill-gotten wealthaccumulated by the
Marcoses and their cronies. PCGG was empowered to file casesfor sequestration in the
Sandiganbayan. Among the sequestered properties were the shares of stock in the
UCPBregistered in the name of over a million coconut farmers held in trust by the
PCA. The Sandiganbayan allowed the sequestration by ruling in a Partial Summary
Judgment thatthe Coconut Levy Funds are prima facie public funds and that Section 1
and 2 of PDNo. 755 (and some other PDs) were unconstitutional. The COCOFED
representing the over a million coconut farmers via Petition for review under Rule 45
sought the reversal of the ruling contending among others that the sequestration
amounted to taking of private property without just compensation and impairment of
vested right of ownership.
ISSUE:
What is the NATURE of the Coconut Levy Fund?
RULING:
The SC ruled in favor of the REPUBLIC.
To begin with, the Coconut Levy was imposed in the exercise of the States
inherent power of taxation. Indeed, the Coconut Levy Funds partake the nature of TAXES.
The Funds were generated by virtue of statutory enactments by the proper legislative
authorities and for public purpose.The Funds were collected to
advance the government avowed policy ofprotecting the coconut industry. The SC took
judicial notice of the fact that thecoconut industry is one of the great economic pillars of

our nation, and coconuts and their byproducts occupy a leading position among the
countries export products. Taxation is done not merely to raise revenues to support the
government, but also toprovide means for the rehabilitation and the stabilization of a
threatened industry ,which is so affected with
public interest