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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.