Sunday, September 23, 2018
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SC voids 2 Estrada’s Eos to use coco levy funds

The Supreme Court has voided two executive orders of deposed President Joseph “Erap” Estrada that sought to privatize the 27 percent share in San Miguel Corp. (SMC) stock that had been bought with coconut levy funds, ostensibly to help coconut farmers and the country’s agriculture sector.

The high court said Executive Order No. 312 and EO 313 should be struck down, saying that the coco levy funds are public funds and should not be outside the audit jurisdiction of the Commission on Audit (COA).


“Since coco levy funds are taxes, the provisions of EOs 312 and 313 that remove such funds and the assets acquired through them from the jurisdiction of the COA violate the 1987 Constitution,” said the decision dated April 19 and written by Associate Justice Roberto Abad.

“And there is no legitimate reason why such funds should be shielded from COA review and audit. The PCA (Philippine Coconut Authority) which implements the coco levy laws and collects the coco levy funds is a government-owned and -controlled corporation subject to COA review and audit,” it added.


Eleven justices, including Chief Justice Renato Corona, voted to void Estrada’s executive orders. Justices Antonio Carpio, Teresita Leonardo-de Castro and Diosdado Peralta did not participate in the deliberations.

Levy funds declared private

Estrada issued EO 312 in November 2000 declaring the coco levy funds private and providing for the establishment of a Sagip Niyugan Program (Coconut Industry Rescue) and sought to “immediately supplement” the income of coconut farmers by creating a P1-billion fund through the sale of assets acquired with the coco levy funds.

EO 313, issued at the same time, provided for the creation of an “irrevocable trust fund” of P50 billion to provide financial assistance to coconut farmers, the coconut industry and other agri-related programs.

The trust fund’s initial capital stocks were to come from the proceeds of the sale of the sequestered 27 percent SMC shares that had been acquired with the coco levy funds.

EO 313 repealed EOs 481 and 277 issued by President Fidel Ramos which had declared the coco levy funds as public funds pending the courts’ resolution of their ownership.

It also directed the Presidential Commission on Good Government and the Office of the Solicitor General to exclude the 27 percent SMC block of shares from the court suit and lift the sequestration order on them to enable the government to set up the trust fund.


The 27 percent SMC shares were part of the 47 percent block of shares that the PCGG sequestered in 1986, on the ground that they were acquired with funds from the coco levy, a forced tax that the dictator Ferdinand Marcos levied on the coconut industry from 1973 to 1982.

Ownership of the SMC shares was being contested in court between the PCGG and a group led by Marcos crony businessman Eduardo Cojuangco Jr., who had been appointed administrator of the levy by the dictator and was claiming ownership of 20 percent of the 47 percent sequestered block of shares.

Even before the ownership issue of the coco levy funds and the assets acquired with them could be settled by the courts, Estrada went into a compromise deal with Cojuangco in which Cojuangco agreed to give up claims to the 27 percent block, which would go to finance the trust fund, and would be allowed to keep the 20 percent stake that he was claiming.

(Upon Estrada’s election in 1998, Cojuangco regained voting rights over the sequestered shares, enabling his election as SMC chair.)

EOs scrapped

Immediately after she became president in 2001 following Estrada’s ouster in the second Edsa People Power Revolution, Gloria Macapagal-Arroyo scrapped Estrada’s two executive orders, upholding Ramos’ declaration that the coco levy funds were public and had been used to acquire the SMC stake.

Coconut farmers’ groups, party-list representatives and the Multisectoral Task Force (MST) on coco levy funds then went to the Supreme Court to challenge the constitutionality of the “highly questionable” EOs 312 and 313.

The petitioners said the EOs were unconstitutional because they impinged on the COA’s power to audit and examine funds held in trust by the government; the control, management and disposition of public funds were now in the hands of the private sector; the utilization and disposition of the coco levy funds were beyond the mandated purposes and encroached on the legislative powers of Congress; and since the ownership issue of the levy funds was not yet settled, the EOs were a usurpation of judicial authority.

Prima facie public funds

In its April 19 ruling, the high court reiterated that the coco levy funds were “prima facie public funds.”

“Prima facie means a fact presumed to be true unless disproved by some evidence to the contrary,” it said.

“An executive order cannot repeal a presidential decree which has the same standing as a statute enacted by Congress,” it said.

“The court has also recently declared that the coco levy funds are in the nature of taxes and can only be used for public purposes,” it added.

The high tribunal noted that EO 313 apparently intended to create a trust fund out of the coco levy funds “to provide economic assistance to the coconut farmers and, ultimately, benefit the coconut industry.”

Strays from special purpose

“But on closer look, EO 313 strays from the special purpose for which the law raises coco levy funds in that it permits the use of coco levy funds for improving productivity in other food areas,” it said.

The court said EO 313 ran counter to the constitutional provision directing all money collected on any tax levied for a special purpose shall be treated “as a special fund and paid out for such purpose only.”

“Assisting other agriculturally related programs is way off the coco fund’s objective of promoting the general interests of the coconut industry and its farmers,” the tribunal said.

The court also said that the two executive orders erred in creating committees that would manage the assistance funds to be generated from the sale of coco levy fund-acquired assets.

“In effect, the above transfers of power to allocate, use and disburse coco levy funds that Presidential Decree No. 232 vested in the PCA and transferred the same, without legislative authorization and in violation of PD 232, to the committees mentioned above,” the court said.

Courts finally decide

In December 2001, the Supreme Court declared the coco levy funds as “prima facie public funds,” but left the Sandiganbayan to determine the owner of the assets acquired with the funds.

In May 2004, the Sandigabayan awarded the 27 percent block of SMC shares to the government, in trust for the country’s coconut farmers.

The 27 percent stake has since been reduced to about 24 percent after it was diluted with the investment of Japanese brewer Kirin in SMC.

In 2007, the Sandiganbayan declared that the PCGG had failed to prove that coco levy funds had been used to purchase the 20 percent block of shares personally claimed by Cojuangco.

On April 12, 2011, the Supreme Court upheld the 2007 Sandiganbayan decision, declaring the 20 percent block of SMC shares as “the exclusive property of Cojuangco et al.”

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TAGS: Associate Justice Roberto Abad, coco levy funds, Danding Cojuangco, deposed President Joseph “Erap” Estrada, Executive Order No. 312 and EO 313, San Miguel Corp., SMC stock, Supreme Court
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