Danding's 20% stake in SMC legitimate, SC rules

Posted at 04/13/2011 4:26 AM | Updated as of 04/13/2011 7:39 PM

MANILA, Philippines (UPDATED)  - The Supreme Court has affirmed a Sandiganbayan decision that declared businessman Eduardo "Danding" Cojuangco, Jr.'s 20% stake representing 20-million shares in San  Miguel Corporation (SMC) was not illegally acquired using ill-gotten wealth that rightfully belonged to farmers.

In a 73-page decision penned by Associate Justice Lucas Bersamin, the Court en banc dismissed the petition filed by government through the Presidential Commission on Good Government (PCGG) - a special body created by the late President Corazon Aquino to recover ill-gotten wealth accumulated during the 21-year regime of former President Ferdinand Marcos.

“The Court declares that the block of shares in San Miguel Corp. in the names of respondents Cojuangco, et al... is the exclusive property of Cojuangco, et al. as registered owners,” the decision read.

The decision essentially declared that Cojuangco's stake in diversifying conglomerate SMC was not part of the multi-billion peso coconut levy funds imposed upon the country's coconut farmers from August 1973 to August 1982.

"Republic's burden to establish by preponderance of evidence that respondents' SMC shares had been illegally acquired with coconut levy funds was not discharged...the Republic should have adduced evidence to substantiate its allegations against the Respondents," the decision read.

Cojuangco, chairman and chief executive officer of SMC to date, bought his 20% stake in SMC in 1983 for a price of US $45-million. His shares in SMC were estimated to be worth more than P18.8 billion in 2007.

Close ties with Marcos not proven

In its decision, the Court stressed that its previous judicial pronouncements regarding ill-gotten wealth "demand two concurring elements to be present before assets or properties were considered as ill-gotten wealth, namely:(a) they must have 'originated from the government itself,' and (b) they must have been taken by former President Marcos, his immediate family, relatives, and close associates by illegal means."

"In this regard, identifying former President Marcos, his immediate family, and relatives was not difficult, but identifying other persons who might be the close associates of former President Marcos presented an inherent difficulty, because it was not fair and just to include within the term close associates everyone who had any association with President Marcos, his immediate family and relatives," the decision read.

To establish who these so-called close associates of Marcos are who benefited from ill-gotten wealth, the Court said "the Republic should furnish to the Sandiganbayan in proper judicial proceedings the competent evidence proving who were the close associates of President Marcos who had amassed assets and properties that would be rightly considered as ill-gotten wealth."

In the civil action filed by government before the Sandiganbayan, the PCGG claimed that Cojuangco "acquired assets, funds, and other property grossly and manifestly disproportionate to his salaries, lawful income and income from legitimately acquired property" which included the SMC shares.

On November 28, 2007, the Sandiganbayan ruled that Cojuangco was the rightful owner of the contested SMC shares and lifted sequestration orders over said shares. 

Lifting of sequestration orders on SMC shares valid, legal

The Court, in its ruling, affirmed the lifting of 9 Writs of Sequestration (WOS) issued over the SMC shares  for violation of PCGG rules, and held that the lifting of the WOS did not constitute grave abuse of discretion.

Cojuangco was director of the Coconut Industry Investment Fund (CIIF); director of the Philippine Coconut Authority (PCA); and chairman of the United Coconut Planters Bank (UCPB) - the bank of coconut farmers - at the time the SMC shares were acquired. Thus, the government claimed he took advantage of his positions in these entities and breached fiduciary duties or the trust and confidence of  the CIIF, PCA and UCPB's share holders when he "took money from the bank...treating the funds of UCPB and the CIIF as his own personal capital to buy 'his' SMC shares."

Abuse of positions in UCPB, CIIF, PCA not established

Government insisted that the contested shares were acquired through borrowings or advances from UCPB and the CIIF Oil Mills, and therefore illegal.

But the Court was not convinced.

"[C]oncluding 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 any breach of fiduciary duties..." the decision read.

"Although the trust relationship supposedly arose from Cojuangco's 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..." the Court stressed.

The Court also ruled that Cojuangco did not violate the Single Borrower's Limit restrictions.

How they voted

Those who voted with Associate Justice Bersamin in favor of the decision included Chief Justice Renato Corona, Associate Justice Roberto Abad, Associate Justice Mariano del Castillo, Associate Justice Jose Perez, Associate Justice Presbitero Velasco Jr. and Associate Justice Martin Villarama.

Those who dissented were Associate Justice Arturo Brion, Associate Justice Jose Mendoza, Associate Justice Conchita Carpio Morales and Associate Justice Ma. Lourdes Sereno.

Those who abstained from voting included Associate Justice Antonio Carpio, being one of the petitioners in a petition to declare the coconut levy funds public funds; Associate Justice Diosdado Peralta, the ponente of the November 28, 2007 Sandiganbayan decision; Associate Justice Teresita Leonardo-De Castro, who was presiding justice of the Sandiganbayan when the 2007 decision was handed down; Associate Justice Antonio Eduardo Nachura, who signed pleadings on the coconut levy funds during his stint as Solicitor General.