Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

180705 November 27, 2012

EDUARDO M. COJUANGCO, JR., Petitioner, vs. REPUBL C O! T"E P" L PP NES, Respondent. DECISI #ELASCO, JR., J.: !he Case f the several coconut lev" appealed cases that ste##ed fro# certain issuances of the Sandi$anba"an in its Civil Case No. %%&&, the present recourse proves to be one of the #ost difficult. In particular, the instant petition for revie' under Rule () of the Rules of Court assails and see*s to annul a portion of the Partial Su##ar" +ud$#ent dated +ul" ,,, -%%&, as affir#ed in a Resolution of Dece#ber -., -%%(, both rendered b" the Sandi$anba"an in its Civil Case /0CC01 No. %%&&2A /the 3ud$#ent shall hereinafter be referred to as 0PS+2A01, entitled 0Republic of the Philippines, Plaintiff, v. Eduardo M. Co3uan$co, +r., et al., Defendants, C C 4ED, et al., BA55ARES, et al., Class Action Movants.0 CC No. %%&&2A is the result of the splittin$ into ei$ht /.1 a#ended co#plaints of CC No. %%&& entitled, 0Republic of the Philippines v. Eduardo Co3uan$co, +r., et al.,0 a suit for recover" of ill2$otten 'ealth co##enced b" the Presidential Co##ission on 6ood 6overn#ent /0PC6601, for the Republic of the Philippines /0Republic01, a$ainst Eduardo M. Co3uan$co, +r. /0Co3uan$co01 and several individuals, a#on$ the#, 4erdinand E. Marcos, Maria Clara 5obre$at /05obre$at01, and Danilo S. 7rsua /07rsua01. Each of the ei$ht /.1 subdivided co#plaints, CC No. %%&&2A to CC No. %%&&28, correspondin$l" i#pleaded as defendants onl" the alle$ed participants in the transaction9s sub3ect of the suit, or 'ho are averred as o'ner9s of the assets involved. Apart fro# this recourse, :e clarif" ri$ht off that PS+2A 'as challen$ed in t'o other separate but consolidated petitions for revie', one co##enced b" C C 4ED et al., doc*eted as 6.R. Nos. ,;;.);2)., and the other, interposed b" Danilo S. 7rsua, and doc*eted as 6.R. No. ,;.,<&. B" Decision dated +anuar" -(, -%,-, in the aforesaid 6.R. Nos. ,;;.);2). /C C 4ED et al. v. Republic1 and 6.R. No. ,;.,<& /7rsua v. Republic1 consolidated cases, /hereinafter collectivel" referred to as 0C C 4ED v. Republic01, the Court addressed and resolved all *e" #atters elevated to it in relation to PS+2A, N

e=cept for the issues raised in the instant petition 'hich have not "et been resolved therein. In the sa#e decision, :e #ade clear that> /,1 PS+2A is sub3ect of another petition for revie' interposed b" Eduardo Co3uan$co, +r., in 6.R. No. ,.%;%), entitled Eduardo M. Co3uan$co, +r. v. Republic of the Philippines, 'hich shall be decided separatel" b" the Court,-and /-1 the issues raised in the instant petition should not be affected b" the earlier decision 0save for deter#inativel" le$al issues directl" addressed therein.0& 4or a better perspective, the instant recourse see*s to reverse the Partial Su##ar" +ud$#ent( of the anti2$raft court dated +ul" ,,, -%%&, as reiterated in a Resolution) of Dece#ber -., -%%(, den"in$ C C 4ED?s #otion for reconsideration, and the Ma" ,,, -%%; Resolution@ den"in$ C C 4ED?s #otion to set case for trial and declarin$ the partial su##ar" 3ud$#ent final and appealable, all issued in PS+2A. In our adverted +anuar" -(, -%,- Decision in C C 4ED v. Republic, 'e affir#ed 'ith #odification PS+2A of the Sandi$anba"an, and its Partial Su##ar" +ud$#ent in Civil Case No. %%&&24, dated Ma" ;, -%%( /hereinafter referred to as 0PS+24?1. ; More specificall", :e upheld the Sandi$anba"an?s rulin$ that the coconut lev" funds are special public funds of the 6overn#ent. ConseAuentl", :e affir#ed the Sandi$anba"an?s declaration that Sections , and - of Presidential Decree /0P.D.01 ;)), Section &, Article III of P.D. <@, and Section &, Article III of P.D. ,(@., as 'ell as the pertinent i#ple#entin$ re$ulations of the Philippine Coconut Authorit" /0PCA01, are unconstitutional for allo'in$ the use and9or the distribution of properties acAuired throu$h the coconut lev" funds to private individuals for their o'n direct benefit and absolute o'nership. !he Decision also affir#ed the 6overn#ent?s o'nership of the si= CII4 co#panies, the fourteen holdin$ co#panies, and the CII4 bloc* of San Mi$uel Corporation shares of stoc*, for havin$ li*e'ise been acAuired usin$ the coconut lev" funds. Accordin$l", the properties sub3ect of the +anuar" -(, -%,- Decision 'ere declared o'ned b" and ordered reconve"ed to the 6overn#ent, to be used onl" for the benefit of all coconut far#ers and for the develop#ent of the coconut industr". B" Resolution of Septe#ber (, -%,-,. the Court affir#ed the above2stated Decision pro#ul$ated on +anuar" -(, -%,-. It bears to stress at this 3uncture that the onl" portion of the appealed Partial Su##ar" +ud$#ent dated +ul" ,,, -%%& /0PS+2A01 'hich re#ains at issue revolves around the follo'in$ decretal holdin$s of that court relatin$ to the 0co#pensation0 paid to petitioner for e=ercisin$ his personal and e=clusive option to acAuire the 47B97CPB shares.< It 'ill be recalled that the Sandi$anba"an declared the A$ree#ent bet'een the PCA and Co3uan$co containin$ the assailed 0co#pensation0 null and void for not havin$ the reAuired valuable consideration. ConseAuentl", the 7CPB shares of stoc*s that are sub3ect of the A$ree#ent 'ere declared conclusivel" o'ned b" the 6overn#ent. It also held that the A$ree#ent did not have the effect of la' as it 'as not published as part of P.D. ;)), even if Section , thereof #ade reference to the sa#e.

4acts :e reproduce, belo', portions of the state#ent of facts in C C 4ED v. Republic relevant to the present case>,% In ,<;,, Republic Act No. /0R.A.01 @-@% 'as enacted creatin$ the Coconut Invest#ent Co#pan" /0CIC01 to ad#inister the Coconut Invest#ent 4und /0CI401, 'hich, under Section . thereof, 'as to be sourced fro# a PhP %.)) lev" on the sale of ever" ,%% *$. of copra. f the PhP %.)) lev" of 'hich the copra seller 'as B or ou$ht to be B issued C C 47ND receipts, PhP %.%- 'as placed at the disposition of C C 4ED, the national association of coconut producers declared b" the Philippine Coconut Ad#inistration /0P8I5C A0 no' 0PCA01 as havin$ the lar$est #e#bership. !he declaration of #artial la' in Septe#ber ,<;- sa' the issuance of several presidential decrees /0P.D.01 purportedl" desi$ned to i#prove the coconut industr" throu$h the collection and use of the coconut lev" fund. :hile co#in$ $enerall" fro# i#positions on the first sale of copra, the coconut lev" fund ca#e under various na#es = = =. Char$ed 'ith the dut" of collectin$ and ad#inisterin$ the 4und 'as PCA. 5i*e C C 4ED 'ith 'hich it had a le$al lin*a$e, the PCA, b" statutor" provisions scattered in different coco lev" decrees, had its share of the coco lev". !he follo'in$ 'ere so#e of the issuances on the coco lev", its collection and utiliCation, ho' the proceeds of the lev" 'ill be #ana$ed and b" 'ho# and the purpose it 'as supposed to serve> ,. P.D. No. -;@ established the Coconut Consu#ers StabiliCation 4und /0CCS401 and declared the proceeds of the CCS4 lev" as trust fund, to be utiliCed to subsidiCe the sale of coconut2based products, thus stabiliCin$ the price of edible oil. -. P.D. No. ).- created the Coconut Industr" Develop#ent 4und /0CID401 to finance the operation of a h"brid coconut seed far#. &. !hen ca#e P.D. No. ;)) providin$ under its Section , the follo'in$> It is hereb" declared that the polic" of the State is to provide readil" available credit facilities to the coconut far#ers at preferential ratesD that this polic" can be e=peditiousl" and efficientl" realiCed b" the i#ple#entation of the 0A$ree#ent for the AcAuisition of a Co##ercial Ban* for the benefit of Coconut 4ar#ers0 e=ecuted b" the PCAED and that the PCA is hereb" authoriCed to distribute, for free, the shares of stoc* of the ban* it acAuired to the coconut far#ersE. !o'ards achievin$ the polic" thus declared, P.D. No. ;)), under its Section -, authoriCed PCA to utiliCe the CCS4 and the

CID4 collections to acAuire a co##ercial ban* and deposit the CCS4 lev" collections in said ban* interest free, the deposit 'ithdra'able onl" 'hen the ban* has attained a certain level of sufficienc" in its eAuit" capital. !he sa#e section also decreed that all levies PCA is authoriCed to collect shall not be considered as special and9or fiduciar" funds or for# part of the $eneral funds of the $overn#ent 'ithin the conte#plation of P.D. No. ;,,. (. P.D. No. <@, codified the various la's relatin$ to the develop#ent of coconut9pal# oil industries. ). !he relevant provisions of P.D. No. <@,, as later a#ended b" P.D. No. ,(@. /Revised Coconut Industr" Code1, read> AR!IC5E III 5evies Section ,. Coconut Consu#ers StabiliCation 4und 5ev". F !he PCA is hereb" e#po'ered to i#pose and collect E the Coconut Consu#ers StabiliCation 4und 5ev", E. E. Section ). E=e#ption. F !he CCS4 and theCID4 as 'ell as all disburse#ents as herein authoriCed, shall not be construed E as special and9or fiduciar" funds, or as part of the $eneral funds of the national $overn#ent 'ithin the conte#plation of PD ;,,D E the intention bein$ that said 4und and the disburse#ents thereof as herein authoriCed for the benefit of the coconut far#ers shall be o'ned b" the# in their private capacities> E. /E#phasis supplied1 @. 5etter of Instructions No. /05 I01 <-@, s. of ,<;<, #ade reference to the creation, out of other coco lev" funds, of the Coconut Industr" Invest#ent 4und /0CII401 in P.D. No. ,(@. and entrusted a portion of the CII4 lev" to 7CPB for invest#ent, on behalf of coconut far#ers, in oil #ills and other private corporations, 'ith the follo'in$ eAuit" o'nership structure> Section -. r$aniCation of the Cooperative Endeavor. B !he 7CPB, in its capacit" as the invest#ent ar# of the coconut far#ers thru the CII4 E is hereb" directed to invest, on behalf of the coconut far#ers, such portion of the CII4 E in private corporations E under the follo'in$ $uidelines> a1 !he coconut far#ers shall o'n or control at least E /)%G1 of the outstandin$ votin$ capital stoc* of the private corporation

acAuired thru the CII4 and9or corporation o'ned or controlled b" the far#ers thru the CII4 E. /:ords in brac*et added.1 !hrou$h the "ears, a part of the coconut lev" funds 'ent directl" or indirectl" to finance various pro3ects and9or 'as converted into various assets or invest#ents.,, Relevant to the present petition is the acAuisition of the 4irst 7nited Ban* /047B01, 'hich 'as subseAuentl" rena#ed as 7nited Coconut Planters Ban* /07CPB01. ,Apropos the intended acAuisition of a co##ercial ban* for the purpose stated earlier, it 'ould appear that 47B 'as the ban* of choice 'hich Pedro Co3uan$co?s $roup /collectivel", 0Pedro Co3uan$co01 had control of. !he plan, then, 'as for PCA to bu" all of Pedro Co3uan$co?s shares in 47B. 8o'ever, as later events unfolded, a si#ple direct sale fro# the seller /Pedro1 to PCA did not ensue as it 'as #ade to appear that Co3uan$co had the e=clusive option to acAuire the for#er?s 47B controllin$ interests. E#er$in$ fro# this elaborate, circuitous arran$e#ent 'ere t'o deeds. !he first one 'as si#pl" deno#inated as A$ree#ent, dated Ma" ,<;), entered into b" and bet'een Co3uan$co for and in his behalf and in behalf of 0certain other bu"ers0, and Pedro Co3uan$co in 'hich the for#er 'as purportedl" accorded the option to bu" ;-.-G of 47B?s outstandin$ capital stoc*, or ,&;,.@@ shares /the 0option shares,0 for brevit"1, at PhP -%% per share. n its face, this a$ree#ent does not #ention the 'ord 0option.0 !he second but related contract, dated Ma" -), ,<;), 'as deno#inated as A$ree#ent for the AcAuisition of a Co##ercial Ban* for the Benefit of the Coconut 4ar#ers of the Philippines. It had PCA, for itself and for the benefit of the coconut far#ers, purchase fro# Co3uan$co the shares of stoc* sub3ect of the 4irst A$ree#ent for PhP-%%.%% per share. As additional consideration for PCA?s bu"2out of 'hat Co3uan$co 'ould later clai# to be his e=clusive and personal option, it 'as stipulated that, fro# PCA, Co3uan$co shall receive eAuit" in 47B a#ountin$ to ,%G, or ;.--G, of the ;-.-G, or full" paid shares. And so as not to dilute Co3uan$co?s eAuit" position in 47B, later 7CPB, the PCA a$reed under para$raph @ /b1 of the second a$ree#ent to cede over to the for#er a nu#ber of full" paid 47B shares out of the shares it /PCA1 underta*es to eventuall" subscribe. It 'as further stipulated that Co3uan$co 'ould act as ban* president for an e=tendible period of ) "ears. Apart fro# the afore#entioned ;-.-G, PCA purchased fro# other 47B shareholders @,)&( shares of 'hich Co3uan$co, as #a" be $athered fro# the records, $ot ,%G.. :hile the @(.<.G portion of the option shares /;-.-G B ;.--G H @(.<.G1 ostensibl" pertained to the far#ers, the correspondin$ stoc* certificates supposedl" representin$ the far#ers? eAuit" 'ere in the

na#e of and delivered to PCA. !here 'ere, ho'ever, shares for#in$ part of the aforesaid @(.<.G portion, 'hich ended up in the hands of non2far#ers. !he re#ainin$ -;..G of the 47B capital stoc* 'ere not covered b" an" of the a$ree#ents. 7nder para$raph I . of the second a$ree#ent, PCA a$reed to e=peditiousl" distribute the 47B shares purchased to such 0coconut far#ers holdin$ re$istered C C 47ND receipts0 on eAuitable basis. As found b" the Sandi$anba"an, the PCA appropriated, out of its o'n fund, an a#ount for the purchase of the said ;-.-G eAuit", albeit it 'ould later rei#burse itself fro# the coconut lev" fund. And per Co3uan$co?s o'n ad#ission, PCA paid, out of the CCS4, the entire acAuisition price for the ;-.-G option shares. ,& As of +une &%, ,<;), the list of 47B stoc*holders included Co3uan$co 'ith ,(,((% shares and PCA 'ith ,-<,<)) shares.,( It 'ould appear later that, pursuant to the stipulation on #aintainin$ Co3uan$co?s eAuit" position in the ban*, PCA 'ould cede to hi# ,%G of its subscriptions to /a1 the authoriCed but unissued shares of 47B and /b1 the increase in 47B?s capital stoc* /the eAuivalent of ,).,.(% and @(<,.%% shares, respectivel"1. In all, fro# the 0#other0 PCA shares, Co3uan$co 'ould receive a total of <),&%( 47B /7CPB1 shares bro*en do'n as follo's> ,(,((% shares J ,%G /,).,.(% shares1 J ,%G /@(<,.%% shares1 H <),&%(. ,) :e further Auote, fro# C C 4ED v. Republic, facts relevant to the instant case> ,@ Shortl" after the e=ecution of the PCA B Co3uan$co A$ree#ent, President Marcos issued, on +ul" -<, ,<;), P.D. No. ;)) directin$ = = = as narrated, PCA to use the CCS4 and CID4 to acAuire a co##ercial ban* to provide coco far#ers 'ith 0readil" available credit facilities at preferential rate0 = = =. !hen ca#e the ,<.@ EDSA event. ne of the priorities of then President CoraCon C. AAuino?s revolutionar" $overn#ent 'as the recover" of ill2$otten 'ealth reportedl" a#assed b" the Marcos fa#il" and close relatives, their no#inees and associates. Apropos thereto, she issued E=ecutive rder Nos. /E 1 ,, - and ,(, as a#ended b" E. . ,(2A, all series of ,<.@. E. . , created the PC66 and provided it 'ith the tools and processes it #a" avail of in the recover" effortsD ,; E. . No. - asserted that the ill2 $otten assets and properties co#e in the for# of shares of stoc*s, etc., 'hile E. . No. ,( conferred on the Sandi$anba"an e=clusive and ori$inal 3urisdiction over ill2 $otten 'ealth cases, 'ith the proviso that 0technical rules of procedure and evidence shall not be applied strictl"0 to the civil cases filed under the E . Pursuant to these issuances, the PC66 issued nu#erous orders of seAuestration, a#on$ 'hich 'ere those handed out = = = a$ainst shares of stoc* in 7CPB purportedl" o'ned b" or re$istered in the na#es of /a1 the #ore than a #illion coconut far#ers, /b1 the CII4 co#panies and /c1 Co3uan$co, +r., includin$ the SMC shares held b" the CII4 co#panies. n +ul" &,, ,<.;, the PC66 instituted before the Sandi$anba"an a recover" suit doc*eted thereat as CC No. %%&&.

==== &. Civil Case %%&& = = = 'ould be subdivided into ei$ht co#plaints, doc*eted as CC %%&&2A to CC %%&&28. ==== ). B" Decision of Dece#ber ,(, -%%,, in 6.R. Nos. ,(;%@-2@( /Republic v. C C 4ED1,,. the Court declared the coco lev" funds as pri#a facie public funds. And purchased as the seAuestered 7CPB shares 'ere b" such funds, beneficial o'nership thereon and the corollar" votin$ ri$hts pri#a facie pertain, accordin$ to the Court, to the $overn#ent. ==== Correlativel", the Republic, on the stren$th of the Dece#ber ,(, -%%, rulin$ in Republic v. C C 4ED and on the ar$u#ent, a#on$ others, that the clai# of C C 4ED and Ballares et al., over the sub3ect 7CPB shares is based solel" on the supposed C C 47ND receipts issued for pa"#ent of the RA @-@% CI4 lev", filed a Motion for Partial Su##ar" +ud$#ent RE> C C 4ED, et al. and Ballares, et al. dated April --, -%%-, pra"in$ that a su##ar" 3ud$#ent be rendered declarin$> a. !hat Section - of KPDL ;)), Section ), Article III of P.D. <@, and Section ), Article III of P.D. No. ,(@. are unconstitutionalD b. !hat = = = /CI41 pa"#ents under = = = /R.A.1 No. @-@% are not valid and le$al bases for o'nership clai#s over 7CPB sharesD and c. !hat C C 4ED, et al., and Ballares, et al. have not le$all" and validl" obtained title over the sub3ect 7CPB shares. Ri$ht after it filed the Motion for Partial Su##ar" +ud$#ent RE> C C 4ED, et al. and Ballares, et al., the Republic interposed a Motion for Partial Su##ar" +ud$#ent Re> Eduardo M. Co3uan$co, +r., pra"in$ that a su##ar" 3ud$#ent be rendered> a. Declarin$ that Section , of P.D. No. ;)) is unconstitutional insofar as it validates the provisions in the 0PCA2Co3uan$co A$ree#ent = = =0 dated Ma" -), ,<;) providin$ pa"#ent of ten percent /,%G1 co##ission to defendant Co3uan$co 'ith respect to the 47B, no' 7CPB shares sub3ect #atter thereofD b. Declarin$ that = = = Co3uan$co, +r. and his fronts, no#inees and du##ies, includin$ = = = and Danilo S. 7rsua, have not le$all" and validl" obtained title over the sub3ect 7CPB sharesD and c. Declarin$ that the $overn#ent is the la'ful and true o'ner of the sub3ect 7CPB shares re$istered in the na#es of E Co3uan$co, +r. and the entities and persons above2enu#erated, for the benefit of all coconut far#ers. = = =

4ollo'in$ an e=chan$e of pleadin$s, the Republic filed its sur2re3oinder pra"in$ that it be conclusivel" declared the true and absolute o'ner of the coconut lev" funds and the 7CPB shares acAuired therefro#.,< :e Auote fro# C C 4ED v. Republic>-% A 3oint hearin$ on the separate #otions for su##ar" 3ud$#ent to deter#ine 'hat #aterial facts e=ist 'ith or 'ithout controvers" then ensued. B" rder of March ,,, -%%&, the Sandi$anba"an detailed, based on this Court?s rulin$ in related ill2$otten cases, the parties? #anifestations #ade in open court and the pleadin$s and evidence on record, the facts it found to be 'ithout substantial controvers", to$ether 'ith the ad#issions and9or e=tent of the ad#ission #ade b" the parties respectin$ relevant facts, as follo's> As culled fro# the e=haustive discussions and #anifestations of the parties in open court of their respective pleadin$s and evidence on record, the facts 'hich e=ist 'ithout an" substantial controvers" are set forth hereunder, to$ether 'ith the ad#issions and9or the e=tent or scope of the ad#issions #ade b" the parties relatin$ to the relevant facts> ,. !he late President 4erdinand E. Marcos 'as President = = = for t'o ter#s under the ,<&) Constitution and, durin$ the second ter#, he declared Martial 5a' throu$h Procla#ation No. ,%., dated Septe#ber -,, ,<;-. -. n +anuar" ,;, ,<;&, he issued Procla#ation No. ,,%- announcin$ the ratification of the ,<;& Constitution. &. 4ro# +anuar" ,;, ,<;& to April ;, ,<.,, he = = = e=ercised the po'ers and prero$ative of President under the ,<&) Constitution and the po'ers and prero$ative of President = = = the ,<;& Constitution. 8e = = = pro#ul$ated various P.D.s, a#on$ 'hich 'ere P.D. No. -&-, P.D. No. -;@, P.D. No. (,(, P.D. No. ;)), P.D. No. <@, and P.D. No. ,(@.. (. n April ,;, ,<.,, a#end#ents to the ,<;& Constitution 'ere effected and, on +une &%, ,<.,, he, after bein$ elected President, 0reassu#ed the title and e=ercised the po'ers of the President until -) 4ebruar" ,<.@.0 ). Defendants Maria Clara 5obre$at and +ose R. EleaCar, +r. 'ere PCA Directors = = = durin$ the period ,<;% to ,<.@ = = =. @. Plaintiff ad#its the e=istence of the follo'in$ a$ree#ents 'hich are attached as Anne=es 0A0 and 0B0 to the pposition dated ctober ,%, -%%- of defendant Eduardo M. Co3uan$co, +r. to the above2cited Motion for Partial Su##ar" +ud$#ent>

a1 0!his A$ree#ent #ade and entered into this MMMMMM da" of Ma", ,<;) at Ma*ati, RiCal, Philippines, b" and bet'een> PEDR C +7AN6C , 4ilipino, of le$al a$e and 'ith residence at ,);) Princeton St., Mandalu"on$, RiCal, for and in his o'n behalf and in behalf of certain other stoc*holders of 4irst 7nited Ban* listed in Anne= 0A0 attached hereto /hereinafter collectivel" called the SE55ERS1D B and B ED7ARD C +7AN6C , +R., 4ilipino, of le$al a$e and 'ith residence at ,&@ <th Street corner Balete Drive, NueCon Cit", represented in this act b" his dul" authoriCed attorne"2in2fact, ED6ARD +. AN6ARA, for and in his o'n behalf and in behalf of certain other bu"ers, /hereinafter collectivel" called the B7OERS10D :I!NESSE!8> !hat :8EREAS, the SE55ERS o'n of record and beneficiall" a total of ,&;,.@@ shares of stoc*, 'ith a par value of P,%%.%% each, of the co##on stoc* of the 4irst 7nited Ban* /the 0Ban*01, a co##ercial ban*in$ corporation e=istin$ under the la's of the PhilippinesD :8EREAS, the B7OERS desire to purchase, and the SE55ERS are 'illin$ to sell, the afore#entioned shares of stoc* totalin$ ,&;,.@@ shares /hereinafter called the 0Contract Shares01 o'ned b" the SE55ERS due to their special relationship to ED7ARD C +7AN6C , +R.D N :, !8ERE4 RE, for and in consideration of the pre#ises and the #utual covenants herein contained, the parties a$ree as follo's> ,. Sale and Purchase of Contract Shares Sub3ect to the ter#s and conditions of this A$ree#ent, the SE55ERS hereb" sell, assi$n, transfer and conve" unto the B7OERS, and the B7OERS hereb" purchase and acAuire, the Contract Shares free and clear of all liens and encu#brances thereon. -. Contract Price

!he purchase price per share of the Contract Shares pa"able b" the B7OERS is P-%%.%% or an a$$re$ate price of P-;,);&,-%%.%% /the 0Contract Price01. &. Deliver" of, and pa"#ent for, stoc* certificates 7pon the e=ecution of this A$ree#ent, /i1 the SE55ERS shall deliver to the B7OERS the stoc* certificates representin$ the Contract Shares, free and clear of all liens, encu#brances, obli$ations, liabilities and other burdens in favor of the Ban* or third parties, dul" endorsed in blan* or 'ith stoc* po'ers sufficient to transfer the shares to bearerD and /ii1 B7OERS shall deliver to the SE55ERS P-;,),,,-<).)% representin$ the Contract Price less the a#ount of stoc* transfer ta=es pa"able b" the SE55ERS, 'hich the B7OERS underta*e to re#it to the appropriate authorities. /E#phasis added.1 (. Representation and :arranties of Sellers !he SE55ERS respectivel" and independentl" of each other represent and 'arrant that> /a1 !he SE55ERS are the la'ful o'ners of, 'ith $ood #ar*etable title to, the Contract Shares and that /i1 the certificates to be delivered pursuant thereto have been validl" issued and are full" paid and non2assessableD /ii1 the Contract Shares are free and clear of all liens, encu#brances, obli$ations, liabilities and other burdens in favor of the Ban* or third parties = = =. !his representation shall survive the e=ecution and deliver" of this A$ree#ent and the consu##ation or transfer hereb" conte#plated. /b1 !he e=ecution, deliver" and perfor#ance of this A$ree#ent b" the SE55ERS does not conflict 'ith or constitute an" breach of an" provision in an" a$ree#ent to 'hich the" are a part" or b" 'hich the" #a" be bound. /c1 !he" have co#plied 'ith the condition set forth in Article P of the A#ended Articles of Incorporation of the Ban*. ). Representation of B7OERS

==== @. I#ple#entation !he parties hereto hereb" a$ree to e=ecute or cause to be e=ecuted such docu#ents and instru#ents as #a" be reAuired in order to carr" out the intent and purpose of this A$ree#ent. ;. Notices ==== IN :I!NESS :8ERE 4, the parties hereto have hereunto set their hands at the place and on the date first above 'ritten. PEDR C +7AN6C /on his o'n behalf and in behalf of the other listed in Anne= 0A0 hereof1 /SE55ERS1 B"> ED6ARD +. AN6ARA Attorne"2in24act ==== b1 0A$ree#ent for the AcAuisition of a Co##ercial Ban* for the Benefit of the Coconut 4ar#ers of the Philippines, #ade and entered into this -)th da" of Ma" ,<;) at Ma*ati, RiCal, Philippines, b" and bet'een> ED7ARD M. C +7AN6C , +R., 4ilipino, of le$al a$e, 'ith business address at ,%th 4loor, Si*atuna Buildin$, A"ala Avenue, Ma*ati, RiCal, hereinafter referred to as the SE55ERD B and B P8I5IPPINE C C N7! A7!8 RI!O, a public corporation created b" Presidential Decree No. -&-, as a#ended, for itself and for the benefit of the coconut far#ers of the Philippines, /hereinafter called the B7OER10 :I!NESSE!8> !hat ED7ARD C +7AN6C , +R. /on his o'n behalf and in behalf Sellers of the other Bu"ers1 /B7OERS1

:8EREAS, on Ma" ,;, ,<;), the Philippine Coconut Producers 4ederation /0PCP401, throu$h its Board of Directors, e=pressed the desire of the coconut far#ers to o'n a co##ercial ban* 'hich 'ill be an effective instru#ent to solve the perennial credit proble#s and, for that purpose, passed a resolution reAuestin$ the PCA to ne$otiate 'ith the SE55ER for the transfer to the coconut far#ers of the SE55ER?s option to bu" the 4irst 7nited Ban* /the 0Ban*01 under such ter#s and conditions as B7OER #a" dee# to be in the best interest of the coconut far#ers and instructed Mrs. Maria Clara 5obre$at to conve" such reAuest to the B7OERD :8EREAS, the PCP4 further instructed Mrs. Maria Clara 5obre$at to #a*e representations 'ith the B7OER to utiliCe its funds to finance the purchase of the Ban*D :8EREAS, the SE55ER has the e=clusive and personal option to bu" ,((,(%% shares /the 0 ption Shares01 of the Ban*, constitutin$ ;-.-G of the present outstandin$ shares of stoc* of the Ban*, at the price of P-%%.%% per share, 'hich option onl" the SE55ER can validl" e=erciseD :8EREAS, in response to the representations #ade b" the coconut far#ers, the B7OER has reAuested the SE55ER to e=ercise his personal option for the benefit of the coconut far#ersD :8EREAS, the SE55ER is 'illin$ to transfer the ption Shares to the B7OER at a price eAual to his option price of P-%% per shareD :8EREAS, reco$niCin$ that o'nership b" the coconut far#ers of a co##ercial ban* is a per#anent solution to their perennial credit proble#s, that it 'ill accelerate the $ro'th and develop#ent of the coconut industr" and that the polic" of the state 'hich the B7OER is reAuired to i#ple#ent is to achieve vertical inte$ration thereof so that coconut far#ers 'ill beco#e participants in, and beneficiaries of the develop#ent and $ro'th of the coconut industr", the B7OER approved the reAuest of PCP4 that it acAuire a co##ercial ban* to be o'ned b" the coconut far#ers and, appropriated, for that purpose, the su# of P,)% Million to enable the far#ers to bu" the Ban* and capitaliCe the Ban* to such an e=tension as to be in a position to adopt a credit polic" for the coconut far#ers at preferential ratesD :8EREAS, = = = the B7OER is 'illin$ to subscribe to additional shares /0Subscribed Shares01 and place the Ban* in

a #ore favorable financial position to e=tend loans and credit facilities to coconut far#ers at preferential ratesD N :, !8ERE4 RE, for and in consideration of the fore$oin$ pre#ises and the other ter#s and conditions hereinafter contained, the parties hereb" declare and affir# that their principal contractual intent is /,1 to ensure that the coconut far#ers o'n at least @%G of the outstandin$ capital stoc* of the Ban*D and /-1 that the SE55ER shall receive co#pensation for e=ercisin$ his personal and e=clusive option to acAuire the ption Shares, for transferrin$ such shares to the coconut far#ers at the option price of P-%% per share, and for perfor#in$ the #ana$e#ent services reAuired of hi# hereunder. ,. !o ensure that the transfer to the coconut far#ers of the ption Shares is effected 'ith the least possible dela" and to provide for the faithful perfor#ance of the obli$ations of the parties hereunder, the parties hereb" appoint the Philippine National Ban* as their escro' a$ent /the 0Escro' A$ent01. 7pon e=ecution of this A$ree#ent, the B7OER shall deposit 'ith the Escro' A$ent such a#ount as #a" be necessar" to i#ple#ent the ter#s of this A$ree#ent = = =. -. As pro#ptl" as practicable after e=ecution of this A$ree#ent, the SE55ER shall e=ercise his option to acAuire the ption Share and SE55ER shall i##ediatel" thereafter deliver and turn over to the Escro' A$ent such stoc* certificates as are herein provided to be received fro# the e=istin$ stoc*holders of the Ban* b" virtue of the e=ercise on the afore#entioned option = = =. &. !o ensure the stabilit" of the Ban* and continuit" of #ana$e#ent and credit policies to be adopted for the benefit of the coconut far#ers, the parties underta*e to cause the stoc*holders and the Board of Directors of the Ban* to authoriCe and approve a #ana$e#ent contract bet'een the Ban* and the SE55ER under the follo'in$ ter#s> /a1 !he #ana$e#ent contract shall be for a period of five /)1 "ears, rene'able for another five /)1 "ears b" #utual a$ree#ent of the SE55ER and the Ban*D

/b1 !he SE55ER shall be elected President and shall hold office at the pleasure of the Board of Directors. :hile servin$ in such capacit", he shall be entitled to such salaries and e#olu#ents as the Board of Directors #a" deter#ineD /c1 !he SE55ER shall recruit and develop a professional #ana$e#ent tea# to #ana$e and operate the Ban* under the control and supervision of the Board of Directors of the Ban*D /d1 !he B7OER underta*es to cause three /&1 persons desi$nated b" the SE55ER to be elected to the Board of Directors of the Ban*D /e1 !he SE55ER shall receive no co#pensation for #ana$in$ the Ban*, other than such salaries or e#olu#ents to 'hich he #a" be entitled b" virtue of the dischar$e of his function and duties as President, provided = = = and /f1 !he #ana$e#ent contract #a" be assi$ned to a #ana$e#ent co#pan" o'ned and controlled b" the SE55ER. (. As co#pensation for e=ercisin$ his personal and e=clusive option to acAuire the ption Shares and for transferrin$ such shares to the coconut far#ers, as 'ell as for perfor#in$ the #ana$e#ent services reAuired of hi#, SE55ER shall receive eAuit" in the Ban* a#ountin$, in the a$$re$ate, to <),&%( full" paid shares in accordance 'ith the procedure set forth in para$raph @ belo'D ). In order to co#pl" 'ith the Central Ban* pro$ra# for increased capitaliCation of ban*s and to ensure that the Ban* 'ill be in a #ore favorable financial position to attain its ob3ective to e=tend to the coconut far#ers loans and credit facilities, the B7OER underta*es to subscribe to shares 'ith an a$$re$ate par value of P.%,.@(,%%% /the 0Subscribed Shares01. !he obli$ation of the B7OER 'ith respect to the Subscribed Shares shall be as follo's> /a1 !he B7OER underta*es to subscribe, for the benefit of the coconut far#ers, to shares 'ith an a$$re$ate par value of P,),..(,%%% fro# the

present authoriCed but unissued shares of the Ban*D and /b1 !he B7OER underta*es to subscribe, for the benefit of the coconut far#ers, to shares 'ith an a$$re$ate par value of P@(,<.%,%%% fro# the increased capital stoc* of the Ban*, 'hich subscriptions shall be dee#ed #ade upon the approval b" the stoc*holders of the increase of the authoriCed capital stoc* of the Ban* fro# P)% Million to P,(% Million. !he parties underta*e to declare stoc* dividends of P. Million out of the present authoriCed but unissued capital stoc* of P&% Million. @. !o carr" into effect the a$ree#ent of the parties that the SE55ER shall receive as his co#pensation <),&%( shares> /a1 !he Escro' A$ent shall, upon receipt fro# the SE55ER of the stoc* certificates representin$ the ption Shares, dul" endorsed in blan* or 'ith stoc* po'ers sufficient to transfer the sa#e to bearer, present such stoc* certificates to the !ransfer A$ent of the Ban* and shall cause such !ransfer A$ent to issue stoc* certificates of the Ban* in the follo'in$ ratio> one share in the na#e of the SE55ER for ever" nine shares in the na#e of the B7OER. /b1 :ith respect to the Subscribed Shares, the B7OER underta*es, in order to prevent the dilution of SE55ER?s eAuit" position, that it shall cede over to the SE55ER @(,<.% full"2paid shares out of the Subscribed Shares. Such underta*in$ shall be co#plied 'ith in the follo'in$ #anner> upon receipt of advice that the B7OER has subscribed to the Subscribed Shares upon approval b" the stoc*holders of the increase of the authoriCed capital stoc* of the Ban*, the Escro' A$ent shall thereupon issue a chec* in favor of the Ban* coverin$ the total pa"#ent for the Subscribed Shares. !he Escro' A$ent shall thereafter cause the !ransfer A$ent to issue a stoc* certificates of the Ban* in the follo'in$ ratio> one share in the na#e of the

SE55ER for ever" nine shares in the na#e of the B7OER. ;. !he parties further underta*e that the Board of Directors and #ana$e#ent of the Ban* shall establish and i#ple#ent a loan polic" for the Ban* of #a*in$ available for loans at preferential rates of interest to the coconut far#ers = = =. .. !he B7OER shall e=peditiousl" distribute fro# ti#e to ti#e the shares of the Ban*, that shall be held b" it for the benefit of the coconut far#ers of the Philippines under the provisions of this A$ree#ent, to such, coconut far#ers holdin$ re$istered C C 47ND receipts on such eAuitable basis as #a" be deter#ine b" the B7OER in its sound discretion. <. = = = = ,%. !o ensure that not onl" e=istin$ but future coconut far#ers shall be participants in and beneficiaries of the credit policies, and shall be entitled to the benefit of loans and credit facilities to be e=tended b" the Ban* to coconut far#ers at preferential rates, the shares held b" the coconut far#ers shall not be entitled to pre2e#ptive ri$hts 'ith respect to the unissued portion of the authoriCed capital stoc* or an" increase thereof. ,,. After the parties shall have acAuired t'o2thirds /-9&1 of the outstandin$ shares of the Ban*, the parties shall call a special stoc*holders? #eetin$ of the Ban*> /a1 !o classif" the present authoriCed capital stoc* of P)%,%%%,%%% divided into )%%,%%% shares, 'ith a par value of P,%%.%% per share into> &@,,%%% Class A shares, 'ith an a$$re$ate par value of P&@,,%%,%%% and ,&<,%%% Class B shares, 'ith an a$$re$ate par value of P,&,<%%,%%%. All of the ption Shares constitutin$ ;-.-G of the outstandin$ shares, shall be classified as Class A shares and the balance of the outstandin$ shares, constitutin$ -;..G of the outstandin$ shares, as Class B sharesD /b1 !o a#end the articles of incorporation of the Ban* to effect the follo'in$ chan$es> /i1 chan$e of corporate na#e to 4irst 7nited Coconut Ban*D /ii1 replace the present provision restrictin$ the transferabilit" of the shares 'ith a li#itation on

o'nership b" an" individual or entit" to not #ore than ,%G of the outstandin$ shares of the Ban*D /iii1 provide that the holders of Class A shares shall not be entitled to pre2e#ptive ri$hts 'ith respect to the unissued portion of the authoriCed capital stoc* or an" increase thereofD and /iv1 provide that the holders of Class B shares shall be absolutel" entitled to pre2e#ptive ri$hts, 'ith respect to the unissued portion of Class B shares co#prisin$ part of the authoriCed capital stoc* or an" increase thereof, to subscribe to Class B shares in proportion t the subscriptions of Class A shares, and to pa" for their subscriptions to Class B shares 'ithin a period of five /)1 "ears fro# the call of the Board of Directors. /c1 !o increase the authoriCed capital stoc* of the Ban* fro# P)% Million to P,(% Million, divided into ,,%,%,.%% Class A shares and &.<,-%% Class B shares, each 'ith a par value of P,%% per shareD /d1 !o declare a stoc* dividend of P. Million pa"able to the SE55ER, the B7OER and other stoc*holders of the Ban* out of the present authoriCed but unissued capital stoc* of P&% MillionD /e1 !o a#end the b"2la's of the Ban* accordin$l"D and /f1 !o authoriCe and approve the #ana$e#ent contract provided in para$raph - above. !he parties a$ree that the" shall vote their shares and ta*e all the necessar" corporate action in order to carr" into effect the fore$oin$ provisions of this para$raph ,,, includin$ such other a#end#ents of the articles of incorporation and b"2la's of the Ban* as are necessar" in order to i#ple#ent the intention of the parties 'ith respect thereto. ,-. It is the conte#plation of the parties that the Ban* shall achieve a financial and eAuit" position to be able to lend to the coconut far#ers at preferential rates. In order to achieve such ob3ective, the parties shall cause the Ban* to adopt a polic" of reinvest#ent, b" 'a" of stoc* dividends, of such percenta$e of the profits of the Ban* as #a" be necessar".

,&. !he parties a$ree to e=ecute or cause to be e=ecuted such docu#ents and instru#ents as #a" be reAuired in order to carr" out the intent and purpose of this A$ree#ent. IN :I!NESS :8ERE 4 = = = P8I5IPPINE C C N7! A7!8 RI!O /B7OER1 B"> ED7ARD C +7AN6C , +R. /SE55ER1 ==== ;. Defendants 5obre$at, et al. and C C 4ED, et al. and Ballares, et al. ad#it that the = = = /PCA1 'as the 0other bu"ers0 represented b" defendant Eduardo M. Co3uan$co, +r. in the Ma" ,<;) A$ree#ent entered into bet'een Pedro Co3uan$co /on his o'n behalf and in behalf of other sellers listed in Anne= 0A0of the a$ree#ent1 and defendant Eduardo M. Co3uan$co, +r. /on his o'n behalf and in behalf of the other bu"ers1. Defendant Co3uan$co insists he 'as the 0onl" bu"er0 under the aforesaid A$ree#ent. .. Defendant Eduardo M. Co3uan$co, +r. did not o'n an" share in the = = = /47B1 prior to the e=ecution of the t'o A$ree#ents = = =. <. Defendants 5obre$at, et al., and C C 4ED, et al., and Ballares, et al. ad#it that in addition to the ,&;,.@@ 47B shares of Pedro Co3uan$co, et al. covered b" the A$ree#ent, other 47B stoc*holders sold their shares to PCA such that the total nu#ber of 47B shares purchased b" PCA E increased fro# ,&;,.@@ shares to ,((,(%% shares, the P!I N S8ARES referred to in the A$ree#ent of Ma" -), ,<;). Defendant Co3uan$co did not #a*e said ad#ission as to the said @,)&( shares in e=cess of the ,&;,.@@ shares covered b" the A$ree#ent 'ith Pedro Co3uan$co. ,%. Defendants 5obre$at, et al. and C C 4ED, et al. and Ballares, et al. ad#it that the A$ree#ent, described in Section , of Presidential Decree /P.D.1 No. ;)) dated +ul" -<, ,<;) as the 0A$ree#ent for the AcAuisition of a Co##ercial Ban* for the Benefit of Coconut 4ar#ers0 e=ecuted b" the Philippine Coconut Authorit"0 and incorporated in Section , of P.D. No. ;)) b" reference, refers to the 0A6REEMEN! 4 R !8E ACN7ISI!I N 4 A C MMERCIA5 BANQ 4 R !8E BENE4I! 4 !8E C C N7! 4ARMERS 4 !8E P8I5IPPINES0 dated Ma" -), ,<;) bet'een defendant Eduardo M. Co3uan$co, +r. and the PCA /Anne= 0B0 for defendant Co3uan$co?s PP SI!I N ! P5AIN!I44?S M !I N 4 R PAR!IA5 S7MMARO +7D6MEN! RE> ED7ARD M. C +7AN6C , +R. dated Septe#ber ,., -%%-1. Plaintiff refused to #a*e the sa#e ad#ission. MARIA C5ARA 5. 5 BRE6A!

,,. As to 'hether P.D. No. ;)) and the te=t of the a$ree#ent described therein 'as published, the Court ta*es 3udicial notice that P.D. No. ;)) 'as published in = = = volu#e ;, of the fficial 6aCette but the te=t of the a$ree#ent = = = 'as not so published 'ith P.D. No. ;)). ,-. Defendants 5obre$at, et al. and C C 4ED, et al. and Ballares, et al. ad#it that the PCA used public funds = = = in the total a#ount of P,)% #illion, to purchase the 47B shares a#ountin$ to ;-.-G of the authoriCed capital stoc* of the 47B, althou$h the PCA 'as later rei#bursed fro# the coconut lev" funds and that the PCA subscription in the increased capitaliCation of the 47B, 'hich 'as later rena#ed the = = = /7CPB1, ca#e fro# the said coconut lev" funds = = =. ,&. Pursuant to the Ma" -), ,<;) A$ree#ent, out of the ;-.-G shares of the authoriCed and the increased capital stoc* of the 47B /later 7CPB1, entirel" paid for b" PCA, @(.<.G of the shares 'ere placed in the na#e of the 0PCA for the benefit of the coconut far#ers0 and ;,--G 'ere $iven to defendant Co3uan$co. !he re#ainin$ -;..G shares of stoc* in the 47B 'hich later beca#e the 7CPB 'ere not covered b" the t'o /-1 a$ree#ents referred to in ite# no. @, par. /a1 and /b1 above. 0!here 'ere shares for#in$ part of the afore#entioned @(.<.G 'hich 'ere later sold or transferred to non2coconut far#ers. ,(. 7nder the Ma" -;, ,<;) A$ree#ent, defendant Co3uan$co?s eAuit" in the 47B /no' 7CPB1 'as ten percent /,%G1 of the shares of stoc* acAuired b" the PCA for the benefit of the coconut far#ers. ,). !hat the full" paid <).&%( shares of the 47B, later the 7CPB, acAuired b" defendant = = = Co3uan$co, +r. pursuant to the Ma" -), ,<;) A$ree#ent 'ere paid for b" the PCA in accordance 'ith the ter#s and conditions provided in the said A$ree#ent. ,@. Defendants 5obre$at, et al. and C C 4ED, et al. and Ballares, et al. ad#it that the affidavits of the coconut far#ers /specificall", E=hibit 0,24ar#er0 to 0;%24ar#er01 unifor#l" state that> a. the" are coconut far#ers 'ho sold coconut productsD b. in the sale thereof, the" received C C 47ND receipts pursuant to R.A. No. @-@%D c. the" re$istered the said C C 47ND receiptsD and d. b" virtue thereof, and under R.A. No. @-@%, P.D. Nos. ;)), <@, and ,(@., the" are alle$edl" entitled to the sub3ect 7CPB shares. but sub3ect to the follo'in$ Aualifications> a. there 'ere other coconut far#ers 'ho received 7CPB shares althou$h the" did not present said C C 47ND receipt because the PCA distributed the unclai#ed 7CPB shares not onl" to those 'ho alread" received their 7CPB shares in e=chan$e for their C C 47ND

receipts but also to the coconut far#ers deter#ined b" a national census conducted pursuant to PCA ad#inistrative issuancesD b. there 'ere other affidavits e=ecuted b" 5obre$at, EleaCar, Ballares and Alde$uer relative to the said distribution of the unclai#ed 7CPB sharesD and c. the coconut far#ers clai# the 7CPB shares b" virtue of their co#pliance not onl" 'ith the la's #entioned in ite# /d1 above but also 'ith the relevant issuances of the PCA such as, PCA Ad#inistrative rder No. ,, dated Au$ust -%, ,<;) /E=h. 0-<.24ar#er01D PCA Resolution No. %&&2;. dated 4ebruar" ,@, ,<;.E. !he plaintiff did not #a*e an" ad#ission as to the fore$oin$ Aualifications. ,;. Defendants 5obre$at, et al. and C C 4ED, et al. and Ballares, et al. clai# that the 7CPB shares in Auestion have le$iti#atel" beco#e the private properties of the ,,(%),&@@ coconut far#ers solel" on the basis of their havin$ acAuired said shares in co#pliance 'ith R.A. No. @-@%, P.D. Nos. ;)), <@, and ,(@. and the ad#inistrative issuances of the PCA cited above. ,.. n the other hand, defendant E Co3uan$co, +r. clai#s o'nership of the 7CPB shares, 'hich he holds, solel" on the basis of the t'o A$ree#entsE. /E#phasis and 'ords in brac*ets added.1 n +ul" ,,, -%%&, the Sandi$anba"an issued the assailed PS+2A, rulin$ in favor of the Republic, disposin$ insofar as pertinent as follo's> -, :8ERE4 RE, in vie' of the fore$oin$, 'e rule as follo's> ==== C. Re> M !I N 4 R PAR!IA5 S7MMARO +7D6MEN! /RE> ED7ARD C +7AN6C , +R.1 dated Septe#ber ,., -%%- filed b" plaintiff. M.

,. Sec. , of P.D. No. ;)) did not validate the A$ree#ent bet'een PCA and defendant Eduardo M. Co3uan$co, +r. dated Ma" -), ,<;) nor did it $ive the A$ree#ent the bindin$ force of a la' because of the non2publication of the said A$ree#ent. -. Re$ardin$ the Auestioned transfer of the shares of stoc* of 47B /later 7CPB1 b" PCA to defendant Co3uan$co or the so2called 0Co3uan$co 7CPB shares0 'hich cost the PCA #ore than !en Million Pesos in CCS4 in ,<;), 'e declare, that the transfer of the follo'in$ 47B97CPB shares to defendant Eduardo M. Co3uan$co, +r. 'as not supported b" valuable consideration, and therefore null and void> a. !he ,(,(%% shares fro# the 0 ption Shares0D

b. Additional Ban* Shares Subscribed and Paid b" PCA, consistin$ of> ,. 4ifteen !housand Ei$ht 8undred Ei$ht"24our /,),..(1 shares out of the authoriCed but unissued shares of the ban*, subscribed and paid b" PCAD -. Si=t" 4our !housand Nine 8undred Ei$ht" /@(,<.%1 shares of the increased capital stoc* subscribed and paid b" PCAD and &. Stoc* dividends declared pursuant to para$raph ) and para$raph ,, /iv1 /d1 of the A$ree#ent. &. !he above2#entioned shares of stoc* of the 47B97CPB transferred to defendant Co3uan$co are hereb" declared conclusivel" o'ned b" the plaintiff Republic of the Philippines. (. !he 7CPB shares of stoc* of the alle$ed fronts, no#inees and du##ies of defendant Eduardo M. Co3uan$co, +r. 'hich for# part of the ;-.-G shares of the 47B97CPB paid for b" the PCA 'ith public funds later char$ed to the coconut lev" funds, particularl" the CCS4, belon$ to the plaintiff Republic of the Philippines as their true and beneficial o'ner. 5et trial of this Civil Case proceed 'ith respect to the issues 'hich have not been disposed of in this Partial Su##ar" +ud$#ent. 4or this purpose, the plaintiff?s Motion Ad Cautela# to Present Additional Evidence dated March -., -%%, is hereb" 6RAN!ED. -- /E#phasis and underlinin$ added.1 As earlier e=plained, the core issue in this instant petition is Part C of the dispositive portion in PS+2A declarin$ the ;.--G 47B /no' 7CPB1 shares transferred to Co3uan$co, plus the other shares paid b" the PCA as 0conclusivel"0 o'ned b" the Republic. Parts A and B of the sa#e dispositive portion have alread" been finall" resolved and ad3udicated b" this Court in C C 4ED v. Republic on +anuar" -(, -%,-.-& 4ro# PS+2A, Co3uan$co #oved for partial reconsideration but the Sandi$anba"an, b" Resolution-( of Dece#ber -., -%%(, denied the #otion. 8ence, the instant petition. !he Issues Co3uan$co?s petition for#ulates the issues in Auestion for#, as follo's> -)

a. Is the acAuisition of the so2called Co3uan$co, +r. 7CPB shares b" petitioner Co3uan$co = = = 0not supported b" valuable consideration and, therefore, null and void0R b. Did the Sandi$anba"an have 3urisdiction, in Civil Case No. %%&&2A, an 0ill2 $otten 'ealth0 case brou$ht under E Nos. , and -, to declare the Co3uan$co 7CPB shares acAuired b" virtue of the Pedro Co3uan$co, et al. A$ree#ent and9or the PCA A$ree#ent null and void because 0not supported b" valuable consideration0R c. :as the clai# that the acAuisition b" petitioner Co3uan$co of shares representin$ ;.-G of the outstandin$ capital stoc* of 47B /later 7CPB1 0not supported b" valuable consideration0, a 0clai#0 pleaded in the co#plaint and #a" therefore be the basis of a 0su##ar" 3ud$#ent0 under Section ,, Rule &) of the Rules of CourtR d. B" declarin$ the Co3uan$co 7CPB shares as 0not supported b" valuable consideration, and therefore, null and void0, did the Sandi$anba"an effectivel" nullif" the PCA A$ree#entR Ma" the Sandi$anba"an nullif" the PCA A$ree#ent 'hen the parties to the A$ree#ent, na#el"> = = = concede its validit"R If the PCA A$ree#ent be dee#ed 0null and void0, should not the 47B /later 7CPB1 shares revert to petitioner Co3uan$co /under the PCA A$ree#ent1 or to Pedro Co3uan$co, et al. = = =R :ould there be a basis then, even assu#in$ the absence of consideration = = =, to declare ;.-G 7CPB shares of petitioner Co3uan$co as 0conclusivel" o'ned b" the plaintiff Republic of the Philippines0R-@ !he Court?s Rulin$ I !8E SANDI6ANBAOAN 8AS +7RISDIC!I N SER !8E S7B+EC! MA!!ER !8E S7BDISIDED AMENDED C MP5AIN!S, INC57DIN6 !8E S8ARES A55E6ED5O ACN7IRED BO C +7AN6C BO SIR!7E 4 !8E PCA A6REEMEN!S. 4

!he issue of 3urisdiction over the sub3ect #atter of the subdivided a#ended co#plaints has pere#ptoril" been put to rest b" the Court in its +anuar" -(, -%,Decision in C C 4ED v. Republic. !here, the Court, citin$ Re$alado -;and settled 3urisprudence, stressed the follo'in$ interloc*in$ precepts> Sub3ect #atter 3urisdiction is conferred b" la', not b" the consent or acAuiescence of an" or all of the parties. In turn, the issue on 'hether a suit co#es 'ithin the penu#bra of a statutor" confer#ent is deter#ined b" the alle$ations in the co#plaint, re$ardless of 'hether or not the suitor 'ill be entitled to recover upon all or part of the clai#s asserted. !he Republic?s #aterial aver#ents in its co#plaint subdivided in CC No. %%&&2A included the follo'in$>

CC No. %%&&2A ,-. Defendant Eduardo M. Co3uan$co, +r. served as a public officer durin$ the Marcos ad#inistration. Durin$ the period of his incu#benc" as a public officer, he acAuired assets, funds and other propert" $rossl" and #anifestl" disproportionate to his salaries, la'ful inco#e and inco#e fro# le$iti#atel" acAuired propert". ,&. Defendant Eduardo M. Co3uan$co, +r., ta*in$ undue advanta$e of his association, influence, connection, and actin$ in unla'ful concert 'ith Defendants 4erdinand E. Marcos and I#elda R. Marcos, AND !8E INDISID7A5 DE4ENDAN!S, e#bar*ed upon devices, sche#es and strata$e#s, to un3ustl" enrich the#selves at the e=pense of Plaintiff and the 4ilipino people, such as 'hen he B a1 #anipulated, be$innin$ the "ear ,<;) 'ith the active collaboration of Defendants = = = Maria Clara 5obre$at, Danilo 7rsua etc., the purchase b" . . . /PCA1 of ;-.-G of the outstandin$ capital stoc* of the = = = /47B1 'hich 'as subseAuentl" converted into a universal ban* na#ed = = = /7CPB1 throu$h the use of the Coconut Consu#ers StabiliCation 4und /CCS41 bein$ initiall" in the a#ount of P.),;;&,,%%.%% in a #anner contrar" to la' and to the specific purposes for 'hich said coconut lev" funds 'ere i#posed and collected under P.D. -;@, and 'ith sinister desi$ns and under ano#alous circu#stances, to 'it> /i1 Defendant Eduardo Co3uan$co, +r. coveted the coconut lev" funds as a cheap, lucrative and ris*2free source of funds 'ith 'hich to e=ercise his private option to bu" the controllin$ interest in 47BD thus, clai#in$ that the ;-.-G of the outstandin$ capital stoc* of 47B could onl" be purchased and transferred throu$h the e=ercise of his 0personal and e=clusive action option to acAuire the ,((,%%% shares0 of the ban*, Defendant Eduardo M. Co3uan$co, +r. and PCA, = = = e=ecuted on Ma" -@, ,<;) a purchase a$ree#ent 'hich provides, a#on$ others, for the pa"#ent to hi# in full" paid shares as co#pensation thereof <),&.( shares 'orth P,,(((,%%%.%% 'ith the further condition that he shall #ana$e and control the ban* as Director and President for a ter# of five /)1 "ears rene'able for another five /)1 "ears and to desi$nate three /&1 persons of his choice 'ho shall be elected as #e#bers of the Board of Directors of the Ban*D /ii1 to le$iti#iCe a posteriori his hi$hl" ano#alous and irre$ular use and diversion of $overn#ent funds to advance his o'n private and co##ercial interests, Defendant Eduardo Co3uan$co, +r. caused the issuance b" Defendant 4erdinand E. Marcos of PD ;)) /a1 declarin$ that the coconut lev" funds shall not be considered special and fiduciar" and trust funds and do not for# part of the $eneral funds of the National 6overn#ent, convenientl" repealin$ for that purpose a series of previous decrees, PDs -;@ and (,(, establishin$ the character of the coconut lev" funds as special, fiduciar", trust and $overn#ental fundsD /b1 confir#in$ the a$ree#ent bet'een Defendant

Eduardo Co3uan$co, +r. and PCA on the purchase of 47B b" incorporatin$ b" reference said private co##ercial a$ree#ent in PD ;))D /iii1!o further consolidate his hold on 7CPB, Defendant Eduardo Co3uan$co, +r. i#posed as consideration and conditions for the purchase that /a1 he $ets one out of ever" nine shares $iven to PCA, and /b1 he $ets to #ana$e and control 7CPB as president for a ter# of five /)1 "ears rene'able for another five /)1 "earsD /iv1 !o perpetuate his opportunit" to deal 'ith and #a*e use of the coconut lev" funds = = = Co3uan$co, +r. caused the issuance b" Defendant 4erdinand E. Marcos of an unconstitutional decree /PD ,(@.1 reAuirin$ the deposit of all coconut lev" funds 'ith 7CPB, interest free to the pre3udice of the $overn#ent. /v1 In $ross violation of their fiduciar" positions and in contravention of the $oal to create a ban* for the coconut far#ers of the countr", the capital stoc* of 7CPB as of 4ebruar" -), ,<.@ 'as actuall" held b" the defendants, their la'"ers, factotu# and business associates, thereb" finall" $ainin$ control of the 7CPB b" #isusin$ the na#es and identities of the so2called 0#ore than one #illion coconut far#ers.0 ,(. !he acts of Defendants, sin$l" or collectivel", and9or in unla'ful concert 'ith one another, constitute $ross abuse of official position and authorit", fla$rant breach of public trust and fiduciar" obli$ations, braCen abuse of ri$ht and po'er, and un3ust enrich#ent, violation of the constitution and la's of the Republic of the Philippines, to the $rave and irreparable da#a$e of Plaintiff and the 4ilipino people.-. In no uncertain ter#s, the Court has upheld the Sandi$anba"an?s assu#ption of 3urisdiction over the sub3ect #atter of Civil Case Nos. %%&&2A and %%&&24. -< !he Court 'rote> +ud$in$ fro# the alle$ations of the defendants? ille$al acts thereat #ade, it is fairl" obvious that both CC Nos. %%&&2A and CC %%&&24 parta*e, in the conte=t of E Nos. ,, - and ,(, series of ,<.@, the nature of ill2$otten 'ealth suits. Both deal 'ith the recover" of seAuestered shares, propert" or business enterprises clai#ed, as alle$ed in the correspondin$ basic co#plaints, to be ill2$otten assets of President Marcos, his cronies and no#inees and acAuired b" ta*in$ undue advanta$e of relationships or influence and9or throu$h or as a result of i#proper use, conversion or diversion of $overn#ent funds or propert". Recover" of these assetsBBdeter#ined as shall hereinafter be discussed as pri#a facie ill2$ottenBBfalls 'ithin the unAuestionable 3urisdiction of the Sandi$anba"an. &% P.D. No. ,@%@, as a#ended b" R.A. ;<;) and E. . No. ,(, Series of ,<.@, vests the Sandi$anba"an 'ith, a#on$ others, ori$inal 3urisdiction over civil and cri#inal cases instituted pursuant to and in connection 'ith E. . Nos. ,, -, ,( and ,(2A.

Correlativel", the PC66 Rules and Re$ulations defines the ter# 0Ill26otten :ealth0 as 0an" asset, propert", business enterprise or #aterial possession of persons 'ithin the purvie' of E. . Nos. , and -, acAuired b" the# directl", or indirectl" thru du##ies, no#inees, a$ents, subordinates and9or business associates b" an" of the follo'in$ #eans or si#ilar sche#es0> /,1 !hrou$h #isappropriation, conversion, #isuse or #alversation of public funds or raids on the public treasur"D /-1 = = = = /&1 B" the ille$al or fraudulent conve"ance or disposition of assets belon$in$ to the $overn#ent or an" of its subdivisions, a$encies or instru#entalities or $overn#ent2o'ned or controlled corporationsD /(1 B" obtainin$, receivin$ or acceptin$ directl" or indirectl" an" shares of stoc*, eAuit" or an" other for# of interest or participation in an" business enterprise or underta*in$D /)1 !hrou$h the establish#ent of a$ricultural, industrial or co##ercial #onopolies or other co#bination and9or b" the issuance, pro#ul$ation and9or i#ple#entation of decrees and orders intended to benefit particular persons or special interestsD and /@1 B" ta*in$ undue advanta$e of official position, authorit", relationship or influence for personal $ain or benefit. /E#phasis supplied1 Section -/a1 of E. . No. , char$ed the PC66 'ith the tas* of assistin$ the President in 0!he recover" of all ill2$otten 'ealth accu#ulated b" for#er E President Marcos, his i##ediate fa#il", relatives, subordinates and close associates E includin$ the ta*eover or seAuestration of all business enterprises and entities o'ned or controlled b" the#, durin$ his ad#inistration, directl" or throu$h no#inees, b" ta*in$ undue advanta$e of their public office and9or usin$ their po'ers, authorit", influence, connections or relationship.0 Co#ple#entin$ the aforesaid Section -/a1 is Section , of E. . No. - decreein$ the freeCin$ of all assets 0in 'hich the Marcoses their close relatives, subordinates, business associates, du##ies, a$ents or no#inees have an" interest or participation.0 !he Republic?s aver#ents in the a#ended co#plaints, particularl" those detailin$ the alle$ed 'ron$ful acts of the defendants, sufficientl" reveal that the sub3ect #atter thereof co#prises the recover" b" the 6overn#ent of ill2$otten 'ealth acAuired b" then President Marcos, his cronies or their associates and du##ies throu$h the unla'ful, i#proper utiliCation or diversion of coconut lev" funds aided b" P.D. No. ;)) and other sister decrees. President Marcos hi#self issued these decrees in a braCen bid to le$aliCe 'hat a#ounts to private ta*in$ of the said public funds. ====

!here 'as no actual need for Republic, as plaintiff a Auo, to adduce evidence to sho' that the Sandi$anba"an has 3urisdiction over the sub3ect #atter of the co#plaints as it leaned on the aver#ents in the initiator" pleadin$s to #a*e visible the 3urisdiction of the Sandi$anba"an over the ill2$otten 'ealth co#plaints. As previousl" discussed, a perusal of the alle$ations easil" reveals the sufficienc" of the state#ent of #atters disclosin$ the clai# of the $overn#ent a$ainst the coco lev" funds and the assets acAuired directl" or indirectl" throu$h said funds as ill2$otten 'ealth. Moreover, the Court finds no rule that directs the plaintiff to first prove the sub3ect #atter 3urisdiction of the court before 'hich the co#plaint is filed. Rather, such burden falls on the shoulders of defendant in the hearin$ of a #otion to dis#iss anchored on said $round or a preli#inar" hearin$ thereon 'hen such $round is alle$ed in the ans'er. ==== 5est it be overloo*ed, this Court has alread" decided that the seAuestered shares are pri#a facie ill2$otten 'ealth renderin$ the issue of the validit" of their seAuestration and of the 3urisdiction of the Sandi$anba"an over the case be"ond doubt. In the case of C C 4ED v. PC66, :e stated that> It is of course not for this Court to pass upon the factual issues thus raised. !hat function pertains to the Sandi$anba"an in the first instance. 4or purposes of this proceedin$, all that the Court needs to deter#ine is 'hether or not there is pri#a facie 3ustification for the seAuestration ordered b" the PC66. !he Court is satisfied that there is. !he cited incidents, $iven the public character of the coconut lev" funds, place petitioners C C 4ED and its leaders and officials, at least pri#a facie, sAuarel" 'ithin the purvie' of E=ecutive rders Nos. ,, - and ,(, as construed and applied in BASEC , to 'it> 0,. that ill2$otten properties /'ere1 a#assed b" the leaders and supporters of the previous re$i#eD 0a. #ore particularl", that T/i1 Ill2$otten 'ealth 'as accu#ulated b" = = = Marcos, his i##ediate fa#il", relatives, subordinates and close associates, = = = /and1 business enterprises and entities /ca#e to be1 o'ned or controlled b" the#, durin$ = = = /the Marcos1 ad#inistration, directl" or throu$h no#inees, b" ta*in$ undue advanta$e of their public office and usin$ their po'ers, authorit", influence, connections or relationships?D 0b. other'ise stated, that Tthere are assets and properties purportedl" pertainin$ to the Marcoses, their close relatives, subordinates, business associates, du##ies, a$ents or no#inees 'hich had been or 'ere acAuired b" the# directl" or indirectl", throu$h or as a result of the i#proper or ille$al use of funds or properties o'ned b" the 6overn#ent = = = or an" of its branches, instru#entalities, enterprises, ban*s or financial institutions, or b" ta*in$ undue advanta$e of their office, authorit", influence, connections or relationship, resultin$ in their un3ust enrich#ent = = =D ====

-. !he petitioners? clai# that the assets acAuired 'ith the coconut lev" funds are privatel" o'ned b" the coconut far#ers is founded on certain provisions of la', to 'it Sec. ;, RA @-@% and Sec. ), Art. III, PD ,(@.E /:ords in brac*et addedD italics in the ori$inal1. ==== E. . ,, -, ,( and ,(2A, it bears to stress, 'ere issued precisel" to effect the recover" of ill2$otten assets a#assed b" the Marcoses, their associates, subordinates and cronies, or throu$h their no#inees. Be that as it #a", it stands to reason that persons listed as associated 'ith the Marcoses refer to those in possession of such ill2$otten 'ealth but holdin$ the sa#e in behalf of the actual, albeit undisclosed o'ner, to prevent discover" and conseAuentl" recover". Certainl", it is 'ell2ni$h inconceivable that ill2$otten assets 'ould be distributed to and left in the hands of individuals or entities 'ith obvious traceable connections to Mr. Marcos and his cronies. !he Court can ta*e, as it has in fact ta*en, 3udicial notice of sche#es and #achinations that have been put in place to *eep ill2$otten assets under 'raps. !hese 'ould include the settin$ up of la"ers after la"ers of shell or du##", but controlled, corporations&, or #anipulated instru#ents calculated to confuse if not alto$ether #islead 'ould2be investi$ators fro# recoverin$ 'ealth deceitfull" a#assed at the e=pense of the people or si#pl" the fruits thereof. !ransferrin$ the ille$al assets to third parties not readil" perceived as Marcos cronies 'ould be another. So it 'as that in PC66 v. Pena, the Court, describin$ the rule of Marcos as a 0'ell entrenched plunderin$ re$i#e of t'ent" "ears,0 noted the #a$nitude of the past re$i#e?s or$aniCed pilla$e and the in$enuit" of the plunderers and pilla$ers 'ith the assistance of e=perts and the best le$al #inds in the #ar*et. &Prescindin$ fro# the fore$oin$ pre#ises, there can no lon$er be an" serious challen$e as to the Sandi$anba"an?s sub3ect #atter 3urisdiction. And in connection there'ith, the Court 'rote in C C 4ED v. Republic, that the instant petition shall be decided separatel" and should not be affected b" the +anuar" -(, -%,- Decision, 0save for deter#inativel" le$al issues directl" addressed0 therein. && !hus> :e clarif" that PS+2A is sub3ect of another petition for revie' interposed b" Eduardo Co3uan$co, +r., in 6.R. No. ,.%;%) entitled, Eduardo M. Co3uan$co, +r. v. Republic of the Philippines, 'hich shall be decided separatel" b" this Court. Said petition should accordin$l" not be affected b" this Decision save for deter#inativel" le$al issues directl" addressed herein.&( /E#phasis urs.1 :e, therefore, reiterate our holdin$ in C C 4ED v. Republic respectin$ the Sandi$anba"an?s 3urisdiction over the sub3ect #atter of Civil Case No. %%&&2A, includin$ those #atters 'hose ad3udication :e shall resolve in the present case. II PRE5IMINARI5O, !8E A6REEMEN! BE!:EEN !8E PCA AND ED7ARD M. C +7AN6C , +R. DA!ED MAO -), ,<;) CANN ! BE ACC RDED !8E S!A!7S 4 A 5A: 4 R !8E 5ACQ 4 !8E REN7ISI!E P7B5ICA!I N.

It 'ill be recalled that Co3uan$co?s clai# of o'nership over the 7CPB shares is hin$ed on t'o contract docu#ents the respective contents of 'hich for#ed part of and reproduced in their entiret" in the aforecited rder &) of the Sandi$anba"an dated March ,,, -%%&. !he first contract refers to the a$ree#ent entered into b" and bet'een Pedro Co3uan$co and his $roup, on one hand, and Eduardo M. Co3uan$co, +r., on the other, bearin$ date 0Ma" ,<;)0 &@ /hereinafter referred to as 0PC2EC+ A$ree#ent01, 'hile the second relates to the accord bet'een the PCA and Eduardo M. Co3uan$co, +r. dated Ma" -), ,<;) /hereinafter referred to as 0PCA2Co3uan$co A$ree#ent01. !he PC2EC+ A$ree#ent alle$edl" contains, inter alia, Co3uan$co?s personal and e=clusive option to acAuire the 47B /07CPB01 shares fro# Pedro and his $roup. !he PCA2Co3uan$co A$ree#ent sho's PCA?s acAuisition of the said option fro# Eduardo M. Co3uan$co, +r. Section , of P.D. No. ;)) incorporated, b" reference, the 0A$ree#ent for the AcAuisition of a Co##ercial Ban* for the Benefit of the Coconut 4ar#ers0 e=ecuted b" the PCA. Particularl", Section , states> Section ,. Declaration of National Polic". It is hereb" declared that the polic" of the State is to provide readil" available credit facilities to the coconut far#ers at preferential ratesD that this polic" can be e=peditiousl" and efficientl" realiCed b" the i#ple#entation of the 0A$ree#ent for the AcAuisition of a Co##ercial Ban* for the benefit of the Coconut 4ar#ers0 e=ecuted b" the Philippine Coconut Authorit", the ter#s of 'hich 0A$ree#ent0 are hereb" incorporated b" referenceD and that the Philippine Coconut Authorit" is hereb" authoriCed to distribute, for free, the shares of stoc* of the ban* it acAuired to the coconut far#ers under such rules and re$ulations it #a" pro#ul$ate. /E#phasis urs.1 It bears to stress at this point that the PCA2Co3uan$co A$ree#ent referred to above in Section , of P.D. ;)) 'as not reproduced or attached as an anne= to the sa#e la'. And it is 'ell2settled that la's #ust be published to be valid. In fact, publication is an indispensable condition for the effectivit" of a la'. !aUada v. !uvera &; said as #uch> Publication of the la' is indispensable in ever" case = = =. ==== :e note at this point the conclusive presu#ption that ever" person *no's the la', 'hich of course presupposes that the la' has been published if the presu#ption is to have an" le$al 3ustification at all. It is no less i#portant to re#e#ber that Section @ of the Bill of Ri$hts reco$niCes 0the ri$ht of the people to infor#ation on #atters of public concern,0 and this certainl" applies to, a#on$ others, and indeed especiall", the le$islative enact#ents of the $overn#ent. ====

:e hold therefore that all statutes, includin$ those of local application and private la's, shall be published as a condition for their effectivit", 'hich shall be$in fifteen da"s after publication unless a different effectivit" date is fi=ed b" the le$islature. Covered b" this rule are presidential decrees and e=ecutive orders pro#ul$ated b" the President in the e=ercise of le$islative po'ers 'henever the sa#e are validl" dele$ated b" the le$islature, or, at present, directl" conferred b" the Constitution. Ad#inistrative rules and re$ulations #ust also be published if their purpose is to enforce or i#ple#ent e=istin$ la' pursuant also to a valid dele$ation. &. :e even 'ent further in !aUada to sa" that> 5a's #ust co#e out in the open in the clear li$ht of the sun instead of s*ul*in$ in the shado's 'ith their dar*, deep secrets. M"sterious pronounce#ents and ru#ored rules cannot be reco$niCed as bindin$ unless their e=istence and contents are confir#ed b" a valid publication intended to #a*e full disclosure and $ive proper notice to the people. !he furtive la' is li*e a scabbarded saber that cannot feint, parr" or cut unless the na*ed blade is dra'n. &< !he publication, as further held in !aUada, #ust be of the full te=t of the la' since the purpose of publication is to infor# the public of the contents of the la'. Mere referencin$ the nu#ber of the presidential decree, its title or 'hereabouts and its supposed date of effectivit" 'ould not satisf" the publication reAuire#ent. (% In this case, 'hile it incorporated the PCA2Co3uan$co A$ree#ent b" reference, Section , of P.D. ;)) did not in an" 'a" reproduce the e=act ter#s of the contract in the decree. Neither 'as acop" thereof attached to the decree 'hen published. :e cannot, therefore, e=tend to the said A$ree#ent the status of a la'. ConseAuentl", :e 3oin the Sandi$anba"an in its holdin$ that the PCA2Co3uan$co A$ree#ent shall be treated as an ordinar" transaction bet'een a$reein$ #inds to be $overned b" contract la' under the Civil Code. III !8E PCA2C +7AN6C A6REEMEN! IS A SA5ID C N!RAC! 4 R 8ASIN6 !8E REN7ISI!E C NSIDERA!I N. In PS+2A, the Sandi$anba"an struc* do'n the PCA2Co3uan$co A$ree#ent as void for lac* of consideration9cause as reAuired under Article ,&,., para$raph & in relation to Article ,(%<, para$raph & of the Civil Code. !he Sandi$anba"an stated> In su#, the evidence on record relied upon b" defendant Co3uan$co ne$ates the presence of> /,1 his clai#ed personal and e=clusive option to bu" the ,&;,.@@ 47B sharesD and /-1 an" pecuniar" advanta$e to the $overn#ent of the said option, 'hich could co#pensate for $enerous pa"#ent to hi# b" PCA of valuable shares of stoc*, as stipulated in the Ma" -), ,<;) A$ree#ent bet'een hi# and the PCA. (,

n the other hand, the afore#entioned provisions of the Civil Code state> Art. ,&,.. !here is no contract unless the follo'in$ reAuisites concur> /,1 Consent of the contractin$ partiesD /-1 b3ect certain 'hich is the sub3ect #atter of the contractD

/&1 Cause of the obli$ation 'hich is established. /E#phasis supplied1 (Art. ,(%<. !he follo'in$ contracts are ine=istent and void fro# the be$innin$> ==== /&1 !hose 'hose cause or ob3ect did not e=ist at the ti#e of the transactionD (& !he Sandi$anba"an found and so ta$$ed the alle$ed cause for the a$ree#ent in Auestion, i.e., Co3uan$co?s 0personal and e=clusive option to acAuire the ption Shares,0 as fictitious. A readin$ of the purchase a$ree#ent bet'een Co3uan$co and PCA, so the Sandi$anba"an ruled, 'ould sho' that Co3uan$co 'as not the onl" sellerD thus, the option 'as, as to hi#, neither personal nor e=clusive as he clai#ed it to be. Moreover, as the Sandi$anba"an deduced, that option 'as ine=istent on the da" of e=ecution of the PCA2Co3uan$co A$ree#ent as the Special Po'er of Attorne" e=ecuted b" Co3uan$co in favor of no' Senator Ed$ardo +. An$ara, for the latter to si$n the PC2EC+ A$ree#ent, 'as dated Ma" -), ,<;) 'hile the PCA2Co3uan$co A$ree#ent 'as also si$ned on Ma" -), ,<;). !hus, the Sandi$anba"an believed that 'hen the parties affi=ed their si$natures on the second A$ree#ent, Co3uan$co?s option to purchase the 47B shares of stoc* did not "et e=ist. !he Sandi$anba"an further ruled that there 'as no 3ustification in the second A$ree#ent for the co#pensation of Co3uan$co of ,(,(%% shares, 'hich it vie'ed as e=orbitant. Additionall", the Sandi$anba"an ruled that PCA could not validl" enter, in behalf of 47B97CPB, into a veritable ban* #ana$e#ent contract 'ith Co3uan$co, PCA havin$ a personalit" separate and distinct fro# that of 47B. As such, the Sandi$anba"an concluded that the PCA2Co3uan$co A$ree#ent 'as null and void. Correspondin$l", the Sandi$anba"an also ruled that the seAuestered 47B /7CPB1 shares of stoc* in the na#e of Co3uan$co are conclusivel" o'ned b" the Republic. After a circu#spect stud", the Court finds as inconclusive the evidence relied upon b" Sandi$anba"an to support its rulin$ that the PCA2Co3uan$co A$ree#ent is devoid of sufficient consideration. :e shall e=plain. Rule ,&,, Section &/r1 of the Rules of Court states> Sec. &. Disputable presu#ptions.F!he follo'in$ presu#ptions are satisfactor" if uncontradicted, but #a" be contradicted and overco#e b" other evidence> ====

/r1 !hat there 'as a sufficient consideration for a contractD !he Court had the occasion to e=plain the reach of the above provision in Surtida v. Rural Ban* of Malinao /Alba"1, Inc.,(( to 'it> 7nder Section &, Rule ,&, of the Rules of Court, the follo'in$ are disputable presu#ptions> /,1 private transactions have been fair and re$ularD /-1 the ordinar" course of business has been follo'edD and /&1 there 'as sufficient consideration for a contract. A presu#ption #a" operate a$ainst an adversar" 'ho has not introduced proof to rebut it. !he effect of a le$al presu#ption upon a burden of proof is to create the necessit" of presentin$ evidence to #eet the le$al presu#ption or the pri#a facie case created thereb", and 'hich if no proof to the contrar" is presented and offered, 'ill prevail. !he burden of proof re#ains 'here it is, but b" the presu#ption, the one 'ho has that burden is relieved for the ti#e bein$ fro# introducin$ evidence in support of the aver#ent, because the presu#ption stands in the place of evidence unless rebutted. !he presu#ption that a contract has sufficient consideration cannot be overthro'n b" the bare uncorroborated and self2servin$ assertion of petitioners that it has no consideration. !o overco#e the presu#ption of consideration, the alle$ed lac* of consideration #ust be sho'n b" preponderance of evidence. Petitioners failed to dischar$e this burden = = =. /E#phasis urs.1 !he assu#ption that a#ple consideration is present in a contract is further elucidated in Pentacapital Invest#ent Corporation v. Mahina"> () 7nder Article ,&)( of the Civil Code, it is presu#ed that consideration e=ists and is la'ful unless the debtor proves the contrar". Moreover, under Section &, Rule ,&, of the Rules of Court, the follo'in$ are disputable presu#ptions> /,1 private transactions have been fair and re$ularD /-1 the ordinar" course of business has been follo'edD and /&1 there 'as sufficient consideration for a contract. A presu#ption #a" operate a$ainst an adversar" 'ho has not introduced proof to rebut it. !he effect of a le$al presu#ption upon a burden of proof is to create the necessit" of presentin$ evidence to #eet the le$al presu#ption or the pri#a facie case created thereb", and 'hich, if no proof to the contrar" is presented and offered, 'ill prevail. !he burden of proof re#ains 'here it is, but b" the presu#ption, the one 'ho has that burden is relieved for the ti#e bein$ fro# introducin$ evidence in support of the aver#ent, because the presu#ption stands in the place of evidence unless rebutted.(@ /E#phasis supplied.1 !he rule then is that the part" 'ho stands to profit fro# a declaration of the nullit" of a contract on the $round of insufficienc" of considerationBB'hich 'ould necessaril" refer to one 'ho asserts such nullit"BBhas the burden of overthro'in$ the presu#ption offered b" the aforeAuoted Section &/r1. bviousl" then, the presu#ption conte=tuall" operates in favor of Co3uan$co and a$ainst the Republic, as plaintiff a Auo, 'hich then had the burden to prove that indeed there 'as no sufficient consideration for the Second A$ree#ent. !he Sandi$anba"an?s stated observation, therefore, that based on the 'ordin$s of the Second A$ree#ent,

Co3uan$co had no personal and e=clusive option to purchase the 47B shares fro# Pedro Co3uan$co had reall" little to co##end itself for acceptance. !his, as opposed to the fact that such sale and purchase a$ree#ent is #e#orialiCed in a notariCed docu#ent 'hereb" both Eduardo Co3uan$co, +r. and Pedro Co3uan$co attested to the correctness of the provisions thereof, a#on$ 'hich 'as that Eduardo had such option to purchase. A notariCed docu#ent, 5aCaro v. A$ustin (; teaches, 0$enerall" carries the evidentiar" 'ei$ht conferred upon it 'ith respect to its due e=ecution, and docu#ents ac*no'led$ed before a notar" public have in their favor the disputable presu#ption of re$ularit".0 In Sa#anilla v. Ca3uco#,(. the Court clarified that the presu#ption of a valid consideration cannot be discarded on a si#ple clai# of absence of consideration, especiall" 'hen the contract itself states that consideration 'as $iven> = = = !his presu#ption appellants cannot overco#e b" a si#ple assertion of lac* of consideration. Especiall" #a" not the presu#ption be so li$htl" set aside 'hen the contract itself states that consideration 'as $iven, and the sa#e has been reduced into a public instru#ent 'ill all due for#alities and sole#nities as in this case. /E#phasis ours.1 A perusal of the PCA2Co3uan$co A$ree#ent disclosed an e=press state#ent of consideration for the transaction> N :, !8ERE4 RE, for and in consideration of the fore$oin$ pre#ises and the other ter#s and conditions hereinafter contained, the parties hereb" declare and affir# that their principal contractual intent is /,1 to ensure that the coconut far#ers o'n at least @%G of the outstandin$ capital stoc* of the Ban*, and /-1 that the SE55ER shall receive co#pensation for e=ercisin$ his personal and e=clusive option to acAuire the ption Shares, for transferrin$ such shares to the coconut far#ers at the option price of P-%% per share, and for perfor#in$ the #ana$e#ent services reAuired of hi# hereunder. ==== (. As co#pensation for e=ercisin$ his personal and e=clusive option to acAuire the ption ShareAppl"in$ Sa#anilla to the case at bar, the e=press and positive declaration b" the parties of the presence of adeAuate consideration in the contract #a*es conclusive the presu#ption of sufficient consideration in the PCA A$ree#ent. Moreover, the option to purchase shares and #ana$e#ent services for 7CPB 'as alread" availed of b" petitioner Co3uan$co for the benefit of the PCA. !he e=ercise of such ri$ht resulted in the e=ecution of the PC2EC+ A$ree#ent, 'hich fact is not disputed. !he docu#ent itself is incontrovertible proof and hard evidence that petitioner Co3uan$co had the ri$ht to purchase the sub3ect 47B /no' 7CPB1 shares. Res ipsa loAuitur. !he Sandi$anba"an, ho'ever, pointed to the perceived 0lac* of an" pecuniar" value or advanta$e to the $overn#ent of the said option, 'hich could co#pensate for the

$enerous pa"#ent to hi# b" PCA of valuable shares of stoc*, as stipulated in the Ma" -), ,<;) A$ree#ent bet'een hi# and the PCA.0 (< InadeAuac" of the consideration, ho'ever, does not render a contract void under Article ,&)) of the Civil Code> Art. ,&)). E=cept in cases specified b" la', lesion or inadeAuac" of cause shall not invalidate a contract, unless there has been fraud, #ista*e or undue influence. /E#phasis supplied.1 Alsua2Betts v. Court of Appeals)% is instructive that lac* of a#ple consideration does not nullif" the contract> InadeAuac" of consideration does not vitiate a contract unless it is proven 'hich in the case at bar 'as not, that there 'as fraud, #ista*e or undue influence. /Article ,&)), Ne' Civil Code1. :e do not find the stipulated price as so inadeAuate to shoc* the court?s conscience, considerin$ that the price paid 'as #uch hi$her than the assessed value of the sub3ect properties and considerin$ that the sales 'ere effected b" a father to her dau$hter in 'hich case filial love #ust be ta*en into account. /E#phasis supplied.1s and for transferrin$ such shares to the coconut far#ers, as 'ell as for perfor#in$ the #ana$e#ent services reAuired of hi#, SE55ER shall receive eAuit" in the Ban* a#ountin$, in the a$$re$ate, to <),&%( full" paid shares in accordance 'ith the procedure set forth in para$raph @ belo'. /E#phasis supplied.1 Sales v. Silla), elucidates 'h" a bad transaction cannot serve as basis for voidin$ a contract> = = = Courts cannot follo' one ever" step of his life and e=tricate hi# fro# bad bar$ains, protect hi# fro# un'ise invest#ents, relieve hi# fro# one2sided contracts, or annul the effects of foolish acts. = = = Men #a" do foolish thin$s, #a*e ridiculous contracts, use #iserable 3ud$#ent, and lose #one" b" the# B indeed, all the" have in the 'orldD but not for that alone can the la' intervene and restore. !here #ust be, in addition, a violation of la', the co##ission of 'hat the la' *no's as an actionable 'ron$, before the courts are authoriCed to la" hold of the situation and re#ed" it. /E#phasis ours.1 :hile one #a" posit that the PCA2Co3uan$co A$ree#ent puts PCA and the coconut far#ers at a disadvanta$e, the facts do not #a*e out a clear case of violation of an" la' that 'ill necessitate the recall of said contract. Indeed, the anti2$raft court has not put for'ard an" specific stipulation therein that is at 'ar 'ith an" la', or the Constitution, for that #atter. It is even clear as da" that none of the parties 'ho entered into the t'o a$ree#ents 'ith petitioner Co3uan$co contested nor sou$ht the nullification of said a$ree#ents, #ore particularl" the PCA 'ho is al'a"s provided le$al advice in said transactions b" the 6overn#ent corporate counsel, and a batter" of la'"ers and presu#abl" the C A auditor assi$ned to said a$enc". A $overn#ent a$enc", li*e the PCA, stoops do'n to level of an ordinar" citiCen 'hen it enters into a private transaction 'ith private individuals. In this settin$, PCA is bound b" the la'

on contracts and is bound to co#pl" 'ith the ter#s of the PCA2Co3uan$co A$ree#ent 'hich is the la' bet'een the parties. :ith the silence of PCA not to challen$e the validit" of the PCA2Co3uan$co A$ree#ent and the inabilit" of $overn#ent to de#onstrate the lac* of a#ple consideration in the transaction, the Court is left 'ith no other choice but to uphold the validit" of said a$ree#ents. :hile consideration is usuall" in the for# of #one" or propert", it need not be #onetar". !his is clear fro# Article ,&)% 'hich reads> Art. ,&)%. In onerous contracts the cause is understood to be, for each contractin$ part", the prestation or pro#ise of a thin$ or service b" the otherD in re#unerator" ones, the service or benefit 'hich is re#uneratedD and in contracts of pure beneficence, the #ere liabilit" of the benefactor. /E#phasis supplied.1 6abriel v. Monte de Piedad " Ca3a de Ahorros )- tells us of the #eanin$ of consideration> = = = A consideration, in the le$al sense of the 'ord, is so#e ri$ht, interest, benefit, or advanta$e conferred upon the pro#isor, to 'hich he is other'ise not la'full" entitled, or an" detri#ent, pre3udice, loss, or disadvanta$e suffered or underta*en b" the pro#isee other than to such as he is at the ti#e of consent bound to suffer. /E#phasis urs.1 !he Court rules that the transfer of the sub3ect 7CPB shares is clearl" supported b" valuable consideration. !o 3ustif" the nullification of the PCA2Co3uan$co A$ree#ent, the Sandi$anba"an centered on the alle$ed i#a$inar" option clai#ed b" petitioner to bu" the 47B shares fro# the Pedro Co3uan$co $roup. It relied on the phrase 0in behalf of certain other bu"ers0 #entioned in the PC2EC+ A$ree#ent as basis for the findin$ that petitioner?s option is neither personal nor e=clusive. !he pertinent portion of said a$ree#ent reads> ED7ARD C +7AN6C , +R., 4ilipino, of le$al a$e and 'ith residence at ,&@ <th Street corner Balete Drive, NueCon Cit", represented in this act b" his dul" authoriCed attorne"2in2fact, ED6ARD +. AN6ARA, for and in his o'n behalf and in behalf of certain other bu"ers, /hereinafter collectivel" called the 0B7OERS01D = = =. A plain readin$ of the aforeAuoted description of petitioner as a part" to the PC2EC+ A$ree#ent reveals that petitioner is not onl" the bu"er. 8e is the na#ed bu"er and there are other bu"ers 'ho 'ere unna#ed. !his is clear fro# the 'ord 0B7OERS.0 If petitioner is the onl" bu"er, then his description as a part" to the sale 'ould onl" be 0B7OER.0 It #a" be true that petitioner intended to include other bu"ers. !he fact re#ains, ho'ever, that the identities of the unna#ed bu"ers 'ere not revealed up to the present da". :hile one can con3ure or speculate that PCA #a" be one of the bu"ers, the fact that PCA entered into an a$ree#ent to purchase the 47B shares 'ith petitioner #ilitates a$ainst such con3ecture since there 'ould be no need at all to enter into the second a$ree#ent if PCA 'as alread" a bu"er of the shares in the

first contract. It is onl" the parties to the PC2EC+ A$ree#ent that can plausibl" shed li$ht on the i#port of the phrase 0certain other bu"ers0 but, unfortunatel", petitioner 'as no lon$er allo'ed to testif" on the #atter and 'as precluded fro# e=plainin$ the transactions because of the #otion for partial su##ar" 3ud$#ent and the eventual pro#ul$ation of the +ul" ,,, -%%& Partial Su##ar" +ud$#ent. Even if concedin$ for the sa*e of ar$u#ent that PCA is one of the bu"ers of the 47B shares in the PC2EC+ A$ree#ent, still it does not necessaril" follo' that petitioner had no option to bu" said shares fro# the $roup of Pedro Co3uan$co. In fact, the ver" e=ecution of the first a$ree#ent undeniabl" sho's that he had the ri$hts or option to bu" said shares fro# the Pedro Co3uan$co $roup. ther'ise, the PC2EC+ A$ree#ent could not have been consu##ated and enforced. !he conclusion is incontestable that petitioner indeed had the ri$ht or option to bu" the 47B shares as buttressed b" the e=ecution and enforce#ent of the ver" docu#ent itself. :e can opt to treat the PC2EC+ A$ree#ent as a totall" separate a$ree#ent fro# the PCA2Co3uan$co A$ree#ent but it 'ill not detract fro# the fact that petitioner actuall" acAuired the ri$hts to the o'nership of the 47B shares fro# the Pedro Co3uan$co $roup. !he conseAuence is he can le$all" sell the shares to PCA. In this scenario, he 'ould resell the shares to PCA for a profit and PCA 'ould still end up pa"in$ a hi$her price for the 47B shares. !he 0profit0 that 'ill accrue to petitioner #a" 3ust be eAual to the value of the shares that 'ere $iven to petitioner as co##ission. Still 'e can onl" speculate as to the true intentions of the parties. :ithout an" evidence adduced on this issue, the Court 'ill not venture on an" unproven conclusion or findin$ 'hich should be avoided in 3udicial ad3udication. !he anti2$raft court also inferred fro# the date of e=ecution of the special po'er of attorne" in favor of no' Senator Ed$ardo +. An$ara, 'hich is Ma" -), ,<;), that the PC2EC+ A$ree#ent appears to have been e=ecuted on the sa#e da" as the PCA2 Co3uan$co A$ree#ent /dated Ma" -), ,<;)1. !he coincidence on the dates casts 0doubts as to the e=istence of defendant Co3uan$co?s prior Tpersonal and e=clusive? option to the 47B shares.0 !he fact that the e=ecution of the SPA and the PCA2Co3uan$co A$ree#ent occurred seAuentiall" on the sa#e da" cannot, 'ithout #ore, be the basis for the conclusion as to the non2e=istence of the option of petitioner. Such con3ecture cannot prevail over the fact that 'ithout petitioner Co3uan$co, none of the t'o a$ree#ents in Auestion 'ould have been e=ecuted and i#ple#ented and the 47B shares could not have been successfull" conve"ed to PCA. A$ain, onl" the parties can e=plain the reasons behind the e=ecution of the t'o a$ree#ents and the SPA on the sa#e da". !he" 'ere, ho'ever, precluded fro# elucidatin$ the reasons behind such occurrence. In the absence of such illu#inatin$ proof, the proposition that the option does not e=ist has no le$ to stand on. More i#portantl", the fact that the PC2EC+ A$ree#ent 'as e=ecuted not earlier than Ma" -), ,<;) proves that petitioner Co3uan$co had an option to bu" the 47B shares prior to that date. A$ain, it #ust be e#phasiCed that fro# its ter#s, the first

A$ree#ent did not create the option.It, ho'ever, proved the e=ercise of the option b" petitioner. !he e=ecution of the PC2EC+ A$ree#ent on the sa#e da" as the PCA2Co3uan$co A$ree#ent #ore than satisfies para$raph - thereof 'hich reAuires petitioner to e=ercise his option to purchase the 47B shares as pro#ptl" as practicable after, and not before, the e=ecution of the second a$ree#ent, thus> -. As pro#ptl" as practicable after e=ecution of this A$ree#ent, the SE55ER shall e=ercise his option to acAuire the ption Shares and SE55ER shall i##ediatel" thereafter deliver and turn over to the Escro' A$ent such stoc* certificates as are herein provided to be received fro# the e=istin$ stoc*holders of the ban* b" virtue of the e=ercise on the afore#entioned option. !he Escro' A$ent shall thereupon issue its chec* in favor of the SE55ER coverin$ the purchase price for the shares delivered. /E#phasis supplied.1 !he Sandi$anba"an vie'ed the co#pensation of petitioner of ,(,(%% 47B shares as e=orbitant. In the absence of proof to the contrar" and considerin$ the absence of an" co#plaint of ille$alit" or fraud fro# an" of the contractin$ parties, then the presu#ption that 0private transactions have been fair and re$ular0 )& #ust appl". 5astl", respondent inter3ects the thesis that PCA could not validl" enter into a ban* #ana$e#ent a$ree#ent 'ith petitioner since PCA has a personalit" separate and distinct fro# that of 47B. Evidentl", it is PCA 'hich has the ri$ht to challen$e the stipulations on the #ana$e#ent contract as unenforceable. 8o'ever, PCA chose not to assail said stipulations and instead even co#plied 'ith and i#ple#ented its prestations contained in said stipulations b" installin$ petitioner as Chair#an of 7CPB. !hus, PCA has 'aived and forfeited its ri$ht to nullif" said stipulations and is no' estopped fro# Auestionin$ the sa#e. In vie' of the fore$oin$, the Court is left 'ith no option but to uphold the validit" of the t'o a$ree#ents in Auestion. IS C +7AN6C IS N ! EN!I!5ED ! !8E 7CPB S8ARES :8IC8 :ERE B 768! :I!8 P7B5IC 47NDS AND 8ENCE, ARE P7B5IC PR PER!O. !he coconut lev" funds 'ere e=acted for a special public purpose. ConseAuentl", an" use or transfer of the funds that directl" benefits private individuals should be invalidated. !he issue of 'hether or not ta=pa"ers? #one", or funds and propert" acAuired throu$h the i#position of ta=es #a" be used to benefit a private individual is once a$ain posed. Preli#inaril", the instant case inAuires 'hether the coconut lev" funds, and accordin$l", the 7CPB shares acAuired usin$ the coconut lev" funds are public

funds. Indeed, the ver" sa#e issue too* center sta$e, discussed and 'as directl" addressed in C C 4ED v. Republic. And there is hardl" an" Auestion about the sub3ect funds? public and special character. !he follo'in$ e=cerpts fro# C C 4ED v. Republic,)( citin$ Republic v. C C 4ED and related cases, settle once and for all this core, deter#inative issue> Indeed, :e have hitherto discussed, the coconut lev" 'as i#posed in the e=ercise of the State?s inherent po'er of ta=ation. As :e 'rote in Republic v. C C 4ED> Indeed, coconut lev" funds parta*e of the nature of ta=es, 'hich, in $eneral, are enforced proportional contributions fro# persons and properties, e=acted b" the State b" virtue of its soverei$nt" for the support of $overn#ent and for all public needs. Based on its definition, a ta= has three ele#ents, na#el"> a1 it is an enforced proportional contribution fro# persons and propertiesD b1 it is i#posed b" the State b" virtue of its soverei$nt"D and c1 it is levied for the support of the $overn#ent. !he coconut lev" funds fall sAuarel" into these ele#ents for the follo'in$ reasons> /a1 !he" 'ere $enerated b" virtue of statutor" enact#ents i#posed on the coconut far#ers reAuirin$ the pa"#ent of prescribed a#ounts. !hus, PD No. -;@, 'hich created the E /CCS41, #andated the follo'in$> 0a. A lev", initiall", of P,).%% per ,%% *ilo$ra#s of copra resecada or its eAuivalent in other coconut products, shall be i#posed on ever" first sale, in accordance 'ith the #echanics established under RA @-@%, effective at the start of business hours on Au$ust ,%, ,<;&. 0!he proceeds fro# the lev" shall be deposited 'ith the Philippine National Ban* or an" other $overn#ent ban* to the account of the Coconut Consu#ers StabiliCation 4und, as a separate trust fund 'hich shall not for# part of the $eneral fund of the $overn#ent.0 !he coco levies 'ere further clarified in a#endator" la's, specificall" PD No. <@, and PD No. ,(@. B in this 'ise> 0!he Authorit" /PCA1 is hereb" e#po'ered to i#pose and collect a lev", to be *no'n as the Coconut Consu#ers StabiliCation 4und 5ev", on ever" one hundred *ilos of copra resecada, or its eAuivalent E delivered to, and9or purchased b", copra e=porters, oil #illers, desiccators and other end2users of copra or its eAuivalent in other coconut products. !he lev" shall be paid b" such copra e=porters, oil #illers, desiccators and other end2users of copra or its eAuivalent in other coconut products under such rules and re$ulations as the Authorit" #a" prescribe. 7ntil other'ise prescribed b" the Authorit", the current lev" bein$ collected shall be continued.0 5i*e other ta= #easures, the" 'ere not voluntar" pa"#ents or donations b" the people. !he" 'ere enforced contributions e=acted on pain of penal sanctions, as provided under PD No. -;@>

0&. An" person or fir# 'ho violates an" provision of this Decree or the rules and re$ulations pro#ul$ated thereunder, shall, in addition to penalties alread" prescribed under e=istin$ ad#inistrative and special la', pa" a fine of not less than P-, )%% or #ore than P,%,%%%, or suffer cancellation of licenses to operate, or both, at the discretion of the Court.0 Such penalties 'ere later a#ended thus> E. /b1 !he coconut levies 'ere i#posed pursuant to the la's enacted b" the proper le$islative authorities of the State. Indeed, the CCS4 'as collected under PD No. -;@, E.0 /c1 !he" 'ere clearl" i#posed for a public purpose. !here is absolutel" no Auestion that the" 'ere collected to advance the $overn#ent?s avo'ed polic" of protectin$ the coconut industr". !his Court ta*es 3udicial notice of the fact that the coconut industr" is one of the $reat econo#ic pillars of our nation, and coconuts and their b"products occup" a leadin$ position a#on$ the countr"?s e=port productsD E. !a=ation is done not #erel" to raise revenues to support the $overn#ent, but also to provide #eans for the rehabilitation and the stabiliCation of a threatened industr", 'hich is so affected 'ith public interest as to be 'ithin the police po'er of the State E. Even if the #one" is allocated for a special purpose and raised b" special #eans, it is still public in characterE. In Cocofed v. PC66, the Court observed that certain a$encies or enterprises 0'ere or$aniCed and financed 'ith revenues derived fro# coconut levies i#posed under a succession of la' of the late dictatorship E 'ith deposed 4erdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resultin$ coconut industr" #onopol".0 !he Court continued> 0E. It cannot be denied that the coconut industr" is one of the #a3or industries supportin$ the national econo#". It is, therefore, the State?s concern to #a*e it a stron$ and secure source not onl" of the livelihood of a si$nificant se$#ent of the population, but also of e=port earnin$s the sustained $ro'th of 'hich is one of the i#peratives of econo#ic stabilit". /E#phasis urs.1 !he follo'in$ parallel doctrinal lines fro# Pa#bansan$ Qoalis"on n$ #$a Sa#ahan$ Ma$sasa*a at Man$$a$a'a sa Ni"u$an /PQSMMN1 v. E=ecutive Secretar" )) ca#e ne=t> !he Court 'as satisfied that the coco2lev" funds 'ere raised pursuant to la' to support a proper $overn#ental purpose. !he" 'ere raised 'ith the use of the police and ta=in$ po'ers of the State for the benefit of the coconut industr" and its far#ers in $eneral. !he C A revie'ed the use of the funds. !he Bureau of Internal Revenue /BIR1 treated the# as public funds and the ver" la's $overnin$ coconut levies reco$niCe their public character.

!he Court has also recentl" declared that the coco2lev" funds are in the nature of ta=es and can onl" be used for public purpose. !a=es are enforced proportional contributions fro# persons and propert", levied b" the State b" virtue of its soverei$nt" for the support of the $overn#ent and for all its public needs. 8ere, the coco2lev" funds 'ere i#posed pursuant to la', na#el", R.A. @-@% and P.D. -;@. !he funds 'ere collected and #ana$ed b" the PCA, an independent $overn#ent corporation directl" under the President. And, as the respondent public officials pointed out, the pertinent la's used the ter# lev", 'hich #eans to ta=, in describin$ the e=action. f course, unli*e ordinar" revenue la's, R.A. @-@% and P.D. -;@ did not raise #one" to boost the $overn#ent?s $eneral funds but to provide #eans for the rehabilitation and stabiliCation of a threatened industr", the coconut industr", 'hich is so affected 'ith public interest as to be 'ithin the police po'er of the State. !he funds sou$ht to support the coconut industr", one of the #ain econo#ic bac*bones of the countr", and to secure econo#ic benefits for the coconut far#ers and far 'or*ers. !he sub3ect la's are a*in to the su$ar liens i#posed b" Sec. ;/b1 of P.D. &.., and the oil price stabiliCation funds under P.D. ,<)@, as a#ended b" E. . ,&;. 4ro# the fore$oin$, it is at once apparent that an" propert" acAuired b" #eans of the coconut lev" funds, such as the sub3ect 7CPB shares, should be treated as public funds or public propert", sub3ect to the burdens and restrictions attached b" la' to such propert". C C 4ED v. Republic, delved into such li#itations, thusl"> :e have ruled ti#e and a$ain that ta=es are i#posed onl" for a public purpose. 0!he" cannot be used for purel" private purposes or for the e=clusive benefit of private persons.0 :hen a la' i#poses ta=es or levies fro# the public, 'ith the intent to $ive undue benefit or advanta$e to private persons, or the pro#otion of private enterprises, that la' cannot be said to satisf" the reAuire#ent of public purpose. In 6aston v. Republic Planters Ban*, the petitionin$ su$ar producers, su$arcane planters and #illers sou$ht the distribution of the shares of stoc* of the Republic Planters Ban* /RPB1, alle$in$ that the" are the true beneficial o'ners thereof. In that case, the invest#ent, i.e., the purchase of RPB, 'as funded b" the deduction of PhP ,.%% per picul fro# the su$ar proceeds of the su$ar producers pursuant to P.D. No. &... In rulin$ a$ainst the petitioners, the Court held that to rule in their favor 'ould contravene the $eneral principle that revenues received fro# the i#position of ta=es or levies 0cannot be used for purel" private purposes or for the e=clusive benefit of private persons.0 !he Court a#pl" reasoned that the su$ar stabiliCation fund is to 0be utiliCed for the benefit of the entire su$ar industr", and all its co#ponents, stabiliCation of the do#estic #ar*et includin$ forei$n #ar*et, the industr" bein$ of vital i#portance to the countr"?s econo#" and to national interest.0 Si#ilarl" in this case, the coconut lev" funds 'ere sourced fro# forced e=actions decreed under P.D. Nos. -&-, -;@ and ).-, a#on$ others, 'ith the end2$oal of developin$ the entire coconut industr". Clearl", to hold therefore, even b" la', that the revenues received fro# the i#position of the coconut levies be used purel" for private purposes to be o'ned b" private individuals in their private capacit" and for their benefit, 'ould contravene the rationale behind the i#position of ta=es or levies.

Needless to stress, courts do not, as the" cannot, allo' b" 3udicial fiat the conversion of special funds into a private fund for the benefit of private individuals. In the sa#e vein, :e cannot subscribe to the idea of 'hat appears to be an indirect B if not e=actl" direct B conversion of special funds into private funds, i.e., b" usin$ special funds to purchase shares of stoc*s, 'hich in turn 'ould be distributed for free to private individuals. Even if these private individuals belon$ to, or are a part of the coconut industr", the free distribution of shares of stoc*s purchased 'ith special public funds to the#, nevertheless cannot be 3ustified. !he ratio in 6aston, as articulated belo', applies #utatis #utandis to this case> !he stabiliCation fees in Auestion are levied b" the State E for a special purpose B that of 0financin$ the $ro'th and develop#ent of the su$ar industr" and all its co#ponents, stabiliCation of the do#estic #ar*et includin$ the forei$n #ar*et.0 !he fact that the State has ta*en possession of #one"s pursuant to la' is sufficient to constitute the# as state funds even thou$h the" are held for a special purposeE. !hat the fees 'ere collected fro# su$ar producers etc., and that the funds 'ere channeled to the purchase of shares of stoc* in respondent Ban* do not convert the funds into a trust fund for their benefit nor #a*e the# the beneficial o'ners of the shares so purchased. It is but rational that the fees be collected fro# the# since it is also the" 'ho are benefited fro# the e=penditure of the funds derived fro# it. E. )@ In this case, the coconut lev" funds 'ere bein$ e=acted fro# copra e=porters, oil #illers, desiccators and other end2users of copra or its eAuivalent in other coconut products.); 5i*e'ise so, the funds here 'ere channeled to the purchase of the shares of stoc* in 7CPB. Dra'in$ a clear parallelis# bet'een 6aston and this case, the fact that the coconut lev" funds 'ere collected fro# the persons or entities in the coconut industr", a#on$ others, does not and cannot entitle the# to be beneficial o'ners of the sub3ect funds B or #ore bluntl", o'ners thereof in their private capacit". Parentheticall", the said private individuals cannot o'n the 7CPB shares of stoc*s so purchased usin$ the said special funds of the $overn#ent. ). /E#phasis urs.1 As the coconut lev" funds parta*e of the nature of ta=es and can onl" be used for public purpose, and i#portantl", for the purpose for 'hich it 'as e=acted, i.e., the develop#ent, rehabilitation and stabiliCation of the coconut industr", the" cannot be used to benefitBB'hether directl" or indirectl"BB private individuals, be it b" 'a" of a co##ission, or as the sub3ect A$ree#ent interestin$l" 'ords it, co#pensation. ConseAuentl", Co3uan$co cannot stand to benefit b" receivin$, in his private capacit", ;.--G of the 47B shares 'ithout violatin$ the constitutional caveat that public funds can onl" be used for public purpose. Accordin$l", the ;.--G 47B /7CPB1 shares that 'ere $iven to Co3uan$co shall be returned to the 6overn#ent, to be used 0onl" for the benefit of all coconut far#ers and for the develop#ent of the coconut industr".0)< !he ensuin$ are the underl"in$ rationale for declarin$, as unconstitutional, provisions that convert public propert" into private funds to be used ulti#atel" for personal benefit>

E not onl" 'ere the la's unconstitutional for decreein$ the distribution of the shares of stoc* for free to the coconut far#ers and therefore ne$atin$ the public purposed declared b" P.D. No. -;@, i.e., to stabiliCe the price of edible oil and to protect the coconut industr". !he" li*e'ise reclassified the coconut lev" fund as private fund, to be o'ned b" private individuals in their private capacities, contrar" to the ori$inal purpose for the creation of such fund. !o co#pound the situation, the offendin$ provisions effectivel" re#oved the coconut lev" fund a'a" fro# the cavil of public funds 'hich nor#all" can be paid out onl" pursuant to an appropriation #ade b" la'. !he conversion of public funds into private assets 'as ille$all" allo'ed, in fact #andated, b" these provisions. Clearl" therefore, the pertinent provisions of P.D. Nos. ;)), <@, and ,(@. are unconstitutional for violatin$ Article SI, Section -< /&1 of the Constitution. In this conte=t, the distribution b" PCA of the 7CPB shares purchased b" #eans of the coconut lev" fund B a special fund of the $overn#ent B to the coconut far#ers is, therefore, void. @% It is precisel" for the fore$oin$ that i#pels the Court to stri*e do'n as unconstitutional the provisions of the PCA2Co3uan$co A$ree#ent that allo' petitioner Co3uan$co to personall" and e=clusivel" o'n public funds or propert", the disburse#ent of 'hich :e so $reatl" protect if onl" to $ive li$ht and #eanin$ to the #andates of the Constitution. As heretofore a#pl" discussed, ta=es are i#posed onl" for a public purpose. @, !he" #ust, therefore, be used for the benefit of the public and not for the e=clusive profit or $ain of private persons.@- ther'ise, $rave in3ustice is inflicted not onl" upon the 6overn#ent but #ost especiall" upon the citiCenr"BBthe ta=pa"ersBBto 'ho# :e o'e a $reat deal of accountabilit". In this case, out of the ;-.-G 47B /no' 7CPB1 shares of stoc*s PCA purchased usin$ the coconut lev" funds, the Ma" -), ,<;) A$ree#ent bet'een the PCA and Co3uan$co provided for the transfer to the latter, b" 'a" of co#pensation, of ,%G of the shares sub3ect of the a$ree#ent, or a total of ;.--G full" paid shares. In su#, Co3uan$co received public assets B in the for# of 47B /7CPB1 shares 'ith a value then of ten #illion ei$ht hundred ei$ht"2si= thousand pesos /PhP ,%,..@,%%%1 in ,<;), paid b" coconut lev" funds. In effect, Co3uan$co received the afore#entioned asset as a result of the PCA2Co3uan$co A$ree#ent, and e=clusivel" benefited hi#self b" o'nin$ propert" acAuired usin$ solel" public funds. Co3uan$co, no less, ad#itted that the PCA paid, out of the CCS4, the entire acAuisition price for the ;-.-G option shares.@& !his is in clear violation of the prohibition, 'hich the Court see*s to uphold.
1wphi1

:e, therefore, affir#, on this $round, the decision of the Sandi$anba"an nullif"in$ the shares of stoc* transfer to Co3uan$co. Accordin$l", the 7CPB shares of stoc* representin$ the ;.--G full" paid shares sub3ect of the instant petition, 'ith all dividends declared, paid or issued thereon, as 'ell as an" incre#ents thereto arisin$ fro#, but not li#ited to, the e=ercise of pre2e#ptive ri$hts, shall be reconve"ed to the 6overn#ent of the Republic of the Philippines, 'hich as :e previousl" clarified, shall 0be used onl" for the benefit of all coconut far#ers and for the develop#ent of the coconut industr".0 @(

But apart fro# the stipulation in the PCA2Co3uan$co A$ree#ent, #ore specificall" para$raph ( in relation to para$raph @ thereof, providin$ for the transfer to Co3uan$co for the 7CPB shares adverted to i##ediatel" above, other provisions are valid and shall be enforced, or shall be respected, if the correspondin$ prestation had alread" been perfor#ed. Invalid stipulations that are independent of, and divisible fro#, the rest of the a$ree#ent and 'hich can easil" be separated therefro# 'ithout doin$ violence to the #anifest intention of the contractin$ #inds do not nullif" the entire contract.@) :8ERE4 RE, Part C of the appealed Partial Su##ar" +ud$#ent in Sandi$anba"an Civil Case No. %%&&2A is A44IRMED 'ith #odification. As M DI4IED, the dispositive portion in Part C of the Sandi$anba"an?s Partial Su##ar" +ud$#ent in Civil Case No. %%&&2A, shall read as follo's> C. Re> M !I N 4 R PAR!IA5 S7MMARO +7D6MEN! /RE> ED7ARD C +7AN6C , +R.1 dated Septe#ber ,., -%%- filed b" Plaintiff. M.

,. Sec. , of P.D. No. ;)) did not validate the A$ree#ent bet'een PCA and defendant Eduardo M. Co3uan$co, +r. dated Ma" -), ,<;) nor did it $ive the A$ree#ent the bindin$ force of a la' because of the non2publication of the said A$ree#ent. -. !he A$ree#ent bet'een PCA and defendant Eduardo M. Co3uan$co, +r. dated Ma" -), ,<;) is a valid contract for havin$ the reAuisite consideration under Article ,&,. of the Civil Code. &. !he transfer b" PCA to defendant Eduardo M. Co3uan$co, +r. of ,(,(%% shares of stoc* of 47B /later 7CPB1 fro# the 0 ption Shares0 and the additional 47B shares subscribed and paid b" PCA, consistin$ of a. 4ifteen !housand Ei$ht 8undred Ei$ht"24our /,),..(1 shares out of the authoriCed but unissued shares of the ban*, subscribed and paid b" PCAD b. Si=t" 4our !housand Nine 8undred Ei$ht" /@(,<.%1 shares of the increased capital stoc* subscribed and paid b" PCAD and c. Stoc* dividends declared pursuant to para$raph ) and para$raph ,, /iv1 /d1 of the PCA2Co3uan$co A$ree#ent dated Ma" -), ,<;). or the so2called 0Co3uan$co27CPB shares0 is declared unconstitutional, hence null and void.
1wphi1

(. !he above2#entioned shares of stoc* of the 47B97CPB transferred to defendant Co3uan$co are hereb" declared conclusivel" o'ned b" the Republic of the Philippines to be used onl" for the benefit of all coconut far#ers and for the develop#ent of the coconut industr", and ordered reconve"ed to the 6overn#ent.

). !he 7CPB shares of stoc* of the alle$ed fronts, no#inees and du##ies of defendant Eduardo M. Co3uan$co, +r. 'hich for# part of the ;-.-G shares of the 47B97CPB paid for b" the PCA 'ith public funds later char$ed to the coconut lev" funds, particularl" the CCS4, belon$ to the plaintiff Republic of the Philippines as their true and beneficial o'ner. Accordin$l", the instant petition is hereb" DENIED. Costs a$ainst pe