Cojuangco upheld on SMC

BAGUIO CITY—Businessman Eduardo “Danding” Cojuangco Jr., an uncle of President Benigno Aquino III and crony of the late dictator Ferdinand Marcos, is the legitimate owner of a fifth of shares in San Miguel Corp., which government claims he acquired using the controversial coconut levy funds.

SMC is the country’s biggest food and beverage conglomerate, which has diversified into power generation, telecommunications and other businesses.

The Supreme Court, sitting en banc, affirmed a 2007 decision issued by the Sandiganbayan and declared “that the block of shares in SMC in the names of respondents Cojuangco et al. … is the exclusive property of Cojuangco et al. as registered owners.”

The government had been contesting 20 percent of SMC’s capital stock or 16,276,879 shares that Cojuangco allegedly acquired through the coco levy when he headed the United Coconut Planters Bank (UCPB). [SMC closed Tuesday at P153 a share in the Philippine Stock Exchange and San Miguel Brewery Inc. at P30.6.]

The government maintains that the coco levy is public in nature, which means that the state owns 20 percent of the SMC stocks in the name of Cojuangco et al.

Cojuangco already has control of a block of 33 million shares through holding firms owned by the oil mills of the Coconut Industry Investment Fund, according to the government complaint.

7 for Cojuangco, 4 against

Seven justices voted in favor of Cojuangco—Chief Justice Renato Corona, and Associate Justices Lucas Bersamin, Presbitero Velasco Jr., Mariano del Castillo, Roberto Abad, Jose Portugal Perez and Martin Villarama Jr.

Four dissented: Associate Justices Arturo Brion and Conchita Carpio-Morales, who wrote dissenting opinions; and Jose Catral Mendoza and Maria Lourdes Sereno.

The other four justices took no part in the deliberations: Associate Justice Antonio Carpio identified himself as one of the petitioners who sought to declare the coco levy funds as public funds; Antonio Eduardo Nachura, who noted that he signed the government pleadings as solicitor general; Teresita Leonardo-de Castro and Diosdado Peralta.

The decision begins with the following context: “For over two decades, the issue of whether the sequestered sizable blocks of shares representing 20 percent of the outstanding capital stock of SMC at the time of acquisition belonged to their registered owners or to the coconut farmers has remained unresolved.

“Through this decision, the court aims to finally resolve the issue and terminate the uncertainty that has plagued [these shares].”

The high court also declared as lawful previous decisions that lifted eight writs of sequestration imposed by the Presidential Commission on Good Government (PCGG) against Cojuangco’s assets.

In their ruling, the justices observed that the government failed to offer clear evidence to prove that Cojuangco amassed his wealth illegally.

For example, the court said the nullification of the writs of sequestration against Cojuangco was valid because in some instances, the PCGG had failed to determine prima facie basis for sequestration.

The decision dwelt on “the concept and genesis of ill-gotten wealth in the Philippine setting” in addressing Cojuangco’s situation.

Then President Corazon Aquino’s first official act on Feb. 28, 1986, was to recover all ill-gotten wealth amassed by Marcos, his immediate family, relatives and close associates both here and abroad through the creation of the PCGG.

The court said that by definition, “ill-gotten wealth would not include all properties of President Marcos… but only part that originated from the ‘vast resources of government.’”

The court also ruled that to be “ill-gotten, the assets must have originated from government itself… [or] taken by [Marcos and his associates] by illegal means.”

The tribunal said “identifying other persons who might be the close associates of President Marcos presented an inherent difficulty, because it was not fair and just to include within the term ‘close associates’ everyone who had had any association with President Marcos, his immediate family and relatives.”

In any case, the court said “the Republic did not discharge its burden as the plaintiff to establish by preponderance of evidence that the respondents’ SMC shares were illegally acquired with coconut levy funds.”

The government tried to argue that Cojuangco obtained loans from UCPB to buy the SMC shares through a letter of instruction issued by Marcos. It said this violated rules restricting bank officials from taking advantage of their own deposits and assets.

But the court said government failed to establish any breach of Cojuangco’s “fiduciary duties” as a bank official.

“The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implications,” the court said, because the debtor acquires proprietary control over the loan once it is transferred.

“A debtor can appropriate the thing loaned without any responsibility or duty to his creditor to return the very thing that was loaned or to report how the proceeds were used,” it said.

Cojuangco’s only liability, it said, was to pay the loan and its interest as stipulated by law.