Republic of the Philippines v.

Cojuanco
G.R. No. 166859 April 12, 2011

FACTS:
Defendant Eduardo 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. Having fully
established himself as the undisputed coconut king with unlimited powers to deal with
the coconut levy funds, the stage was now set for Defendant Eduardo M. Cojuangco,
Jr. to launch his predatory forays into almost all aspects of Philippine economic
activity namely: softdrinks, agribusiness, oil mills, shipping, cement manufacturing,
and textile.
Defendant Eduardo Cojuangco, Jr. taking undue advantage of his association,
influence and connection, acting in unlawful concert with Defendants Ferdinand E.
Marcos and Imelda R. Marcos, and the individual defendants, embarked upon devices,
schemes and stratagems, including the use of defendant corporations as fronts, to
unjustly enrich themselves at the expense of Plaintiff and the Filipino people such as
when he misused coconut levy funds to buy out majority of the outstanding shares of
stock of San Miguel Corporation in order to control the largest agri-business, foods
and beverage company in the Philippines.
He entered SMC in early 1983 when he bought most of the 20 million shares
Enrique Zobel owned in the Company. The shares, worth $49 million, represented
20% of SMC. Later that year, Cojuangco also acquired the Soriano stocks through a
series of complicated and secret agreements, a key feature of which was a voting trust
agreement that stipulated that Andres, Jr. or his heir would proxy over the vote of the
shares owned by Soriano and Cojuangco. This agreement, which accounted for 30% of
the outstanding shares of SMC and which lasted for five (5) years, enabled the
Sorianos to retain management control of SMC for the same period.
Furthermore, in exchange for an SMC investment of $45 million in non-voting
preferred shares in UCPB, Soriano served as the vice-chairman of the supposed bank
of the coconut farmers, UCPB, and in return, Cojuangco, for investing funds from the
coconut levy, was named vice-chairman of SMC. Consequently, Cojuangco enjoyed the
privilege of appointing his nominees to the SMC Board, to which he appointed key
members of the ACCRA Law Firm (herein Defendants) instead of coconut farmers
whose money really funded the sale.
The scheme of Cojuangco to use the lawyers of the said Firm was revealed in a
document which he signed entitled Principles and Framework of Mutual Cooperation
and Assistance which governed the rules for the conduct of management of SMC and
the disposition of the shares which he bought. Altogether, Cojuangco purchased 33
million shares of the SMC through 14 holding companies. The same fourteen
companies were in turn owned by the following six (6) so-called CIIF Companies.
 Mr. Eduardo M. Cojuangco, Jr., acquired a total of 16,276,879 shares of San
Miguel Corporation from the Ayala group: of said shares, a total of 8,138,440 were
placed in the names of Meadowlark Plantations, Inc. and Primavera Farms, Inc. The
Articles of Incorporation of these three companies show that Atty. Jose C. Concepcion
of ACCRA owns 99.6% of the entire outstanding stock. The same shareholder executed
three separate Declaration of Trust and Assignment of Subscription in favor of a
BLANK assignee pertaining to his shareholdings in Primavera Farms, Inc., Silver Leaf
Plantations, Inc. and Meadowlark Plantations, Inc.
The other respondent Corporations are owned by interlocking shareholders who
are likewise lawyers in the ACCRA Law Offices and had admitted their status as
nominee stockholders only.
These companies, which ACCRA Law Offices organized for Defendant Cojuangco
to be able to control more than 60% of SMC shares, were funded by institutions which
depended upon the coconut levy such as the UCPB, UNICOM, United Coconut
Planters Assurance Corp. (COCOLIFE), among others. Cojuangco and his ACCRA
lawyers used the funds from 6 large coconut oil mills and 10 copra trading companies
to borrow money from the UCPB and purchase these holding companies and the SMC
stocks. Cojuangco used $150 million from the coconut levy. The entire amount came
from the coconut levy, some passing through the Unicom Oil mills, others directly
from the UCPB.
Defendant Cojuangco controlled SMC from 1983 until his co-defendant Marcos
was deposed in 1986. Along with Cojuangco, Defendant Enrile and ACCRA also had
interests in SMC.
Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion,
Teodoro Regala, Avelino Cruz, Rogelio Vinluan, Eduardo U. Escueta and Paraja G.
Hayudini of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA)
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. Through insidious means and
machinations, ACCRA, being the wholly-owned investment arm, ACCRA Investments
Corporation, became the holder of approximately fifteen million shares representing
roughly 3.3% of the total outstanding capital stock of UCPB. This ranks ACCRA
Investments Corporation number 44 among the top 100 biggest stockholders of UCPB
which has approximately 1,400,000 shareholders.
ISSUES:
a. Did the Republic adduced evidence to substantiate its allegations against
Respondent?

b. Is there a violation of DOSRI and Single Borrower’s Limit restrictions?

RULING:

a. No. The Plaintiff did not present any other evidence during the trial of this case
but instead made its manifestation of purposes, that later served as its offer of
evidence in the instant case, that merely used the same evidence it had already relied
upon when it moved for partial summary judgment over the Cojuangco block of SMC
shares. Altogether, the Court finds the same insufficient to prove plaintiff’s allegations
in the complaint because more than judicial notices, the factual issues require the
presentation of admissible, competent and relevant evidence in accordance with
Sections 3 and 4, Rule 128 of the Rules on Evidence.

Moreover, the propriety of taking judicial notice of plaintiff’s exhibits is aptly

questioned by defendants Cojuangco, et al. Certainly, the Court can take judicial
notice of laws pertaining to the coconut levy funds as well as decisions of the Supreme
Court relative thereto, but taking judicial notice does not mean that the Court would
accord full probative value to these exhibits. Judicial notice is based upon convenience
and expediency for it would certainly be superfluous, inconvenient, and expensive
both to parties and the court to require proof, in the ordinary way, of facts which are
already known to courts. However, a court cannot take judicial notice of a factual
matter in controversy. Certainly, there are genuine factual matters in the instant case,
as above-cited, which plaintiff ought to have proven with relevant and competent
evidence other than the exhibits it offered.

Referring to plaintiff’s causes of action against defendants Cojuangco, et al., the

Court finds its evidence insufficient to prove that the source of funds used to purchase
SMC shares indeed came from coconut levy funds. In fact, there is no direct link that
the loans obtained by defendant Cojuangco, Jr. were the same money used to pay for
the SMC shares. The scheme alleged to have been taken by defendant Cojuangco, Jr.
was not even established by any paper trail or testimonial evidence that would have
identified the same. On account of his positions in the UCPB, PCA and the CIIF Oil
Mills, the Court cannot conclude that he violated the fiduciary obligations of the
positions he held in the absence of proof that he was so actuated and that he abused
his positions.

It was plain, indeed, that Cojuangco, et al. had tendered genuine issues
through their responsive pleadings and did not admit that the acquisition of the
Cojuangco block of SMC shares had been illegal, or had been made with public funds.
As a result, the Republic needed to establish its allegations with preponderant
competent evidence, because, as earlier stated, the fact that property was ill gotten
could not be presumed but must be substantiated with competent proof adduced in
proper judicial proceedings. That the Republic opted not to adduce competent
evidence thereon despite stern reminders and warnings from the Sandiganbayan to do
so revealed that the Republic did not have the competent evidence to prove its
allegations against Cojuangco, et al.

The Honorable Sandiganbayan failed to consider legal precepts and procedural

principles vis-à-vis the records of the case showing that the funds or various loans or
advances used in the acquisition of the disputed SMC Shares ultimately came from
the coconut levy funds. To begin with, it is notable that the decision of November 28,
2007 did not rule on whether coconut levy funds were public funds or not. The silence
of the Sandiganbayan on the matter was probably due to its not seeing the need for
such ruling following its conclusion that the Republic had not preponderantly
established the source of the funds used to pay the purchase price of the concerned
SMC shares, and whether the shares had been acquired with the use of coconut levy
funds.

Secondly, the ruling in Republic v. COCOFED determined only whether certain

stockholders of the UCPB could vote in the stockholders’ meeting that had been called.
The issue now before the Court could not be controlled by the ruling in Republic v.
COCOFED, however, for even as that ruling determined the issue of voting, the Court
was forthright enough about not thereby preempting the Sandiganbayan’s decisions
on the merits on ill-gotten wealth in the several cases then pending, including this
one, viz:

Thirdly, the Republic’s assertion that coconut levy funds had been used to
source the payment for the Cojuangco block of SMC shares was premised on its
allegation that the UCPB and the CIIF Oil Mills were public corporations. But the
premise was grossly erroneous and overly presumptuous because the fact of the UCPB
and the CIIF Oil Mills being public corporations or government-owned or government-
controlled corporations precisely remained controverted by Cojuangco, et al. in light of
the lack of any competent to that effect being in the records. Cojuangco explicitly
averred in his Answer that the UCPB was a private corporation and the Republic did
not competently identify or establish which ones of the Cojuangco corporations had
supposedly received advances from the CIIF Oil Mills.

b. No. There is no violation of DOSRI and Single Borrower’s Limit Restriction.

Firstly, as earlier pointed out, the Republic adduced no evidence on the
significant particulars of the supposed loan, like the amount, the actual borrower, the
approving official, etc. It did not also establish whether or not the loans were DOSRI or
issued in violation of the Single Borrower’s Limit. Secondly, the Republic could not
outrightly assume that President Marcos had issued LOI 926 for the purpose of
allowing the loans by the UCPB in favor of Cojuangco. There must be competent
evidence to that effect. And, finally, the loans, assuming that they were of a DOSRI
nature or without the benefit of the required approvals or in excess of the Single
Borrower’s Limit, would not be void for that reason. Instead, the bank or the officers
responsible for the approval and grant of the DOSRI loan would be subject only to
sanctions under the law.