REPUBLIC v SANDIGANBAYAN

FACTS:

 On July 31, 1987, the Republic commenced Civil Case No. 0033 in the Sandiganbayan by
complaint, impleading as defendants respondent Eduardo M. Cojuangco, Jr. (Cojuangco) and
59 individual defendants.
 in addition to Cojuangco, President Marcos, and First Lady Imelda R. Marcos nine other
individuals, namely: Edgardo J. Angara, Jose C. Concepcion, Avelino V. Cruz, Eduardo U.
Escueta, Paraja G. Hayudini, Juan Ponce Enrile, Teodoro D. Regala, and Rogelio Vinluan,
collectively, the ACCRA lawyers, and Danilo Ursua, and 71 corporations.
 Allegedly, Cojuangco purchased a block of 33,000,000 shares of SMC stock through the 14
holding companies owned by the CIIF Oil Mills. For this reason, the block of 33,133,266
shares of SMC stock shall be referred to as the CIIF block of shares.
 That Eduardo Cojuangco, Jr., served as a public officer during the Marcos administration.
During the period of his incumbency as a public officer, he acquired assets, funds, and other
property grossly and manifestly disproportionate to his salaries, lawful income and income
from legitimately acquired property.
 Having fully established himself as the undisputed “coconut king” with unlimited powers to
deal with the coconut levy funds, the stage was now set for Defendant Eduardo M. Cojuangco,
Jr. to launch his predatory forays into almost all aspects of Philippine economic activity
namely: softdrinks, agribusiness, oil mills, shipping, cement manufacturing, textile
 taking undue advantage of his association, influence and connection, acting in unlawful
concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and the individual
defendants, embarked upon devices, schemes and stratagems, including the use of defendant
corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and the
Filipino people, such as when he – misused coconut levy funds to buy out majority of the
outstanding shares of stock of San Miguel Corporation in order to control the largest agri-
business, foods and beverage company in the Philippines
 He entered SMC in early 1983 when he bought most of the 20 million shares Enrique Zobel
owned in the Company. The shares, worth $49 million, represented 20% of SMC;
 Later that year, Cojuangco also acquired the Soriano stocks through a series of complicated
and secret agreements, a key feature of which was a “voting trust agreement” that stipulated
that Andres, Jr. or his heir would proxy over the vote of the shares owned by Soriano and
Cojuangco. This agreement, which accounted for 30% of the outstanding shares of SMC and
which lasted for five (5) years, enabled the Sorianos to retain management control of SMC for
the same period;
 Consequently, Cojuangco enjoyed the privilege of appointing his nominees to the SMC
Board, to which he appointed key members of the ACCRA Law Firm (herein Defendants)
instead of coconut farmers whose money really funded the sale;
 They plotted, devised, schemed, conspired and confederated with each other in setting up,
through the use of coconut levy funds, the financial and corporate framework and structures
that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK. CIC, and
more than twenty other coconut levy-funded corporations, including the acquisition of San
Miguel Corporation shares and its institutionalization through presidential directives of the
coconut monopoly.
 For over two decades, the issue of whether the sequestered sizable block of shares
representing 20% of the outstanding capital stock of San Miguel Corporation (SMC) at the
time of acquisition belonged to their registered owners or to the coconut farmers has remained
unresolved.
 REPUBLIC is assailing the decision of SANDIGANBAYAN nullifying of the writs of
sequestration issued against properties of Cojuangco

ISSUE + RATIO (RELEVANT)

 W/N COJUANGCO VIOLATED ANY FIDUCIARY DUTIES (NO)

 Did his acquisition and holding of the contested SMC shares come under a constructive trust
in favor of the Republic? (NO)
  CIVIL CODE:

Article 1455. When any trustee, guardian or other person holding a

fiduciary relationship uses trust funds for the purchase of property and causes
the conveyance to be made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds belong.

 Article 1456. If property is acquired through mistake or fraud, the person obtaining it s by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.
 CORPORATION CODE

Article 1455. When any trustee, guardian or other person holding a

fiduciary relationship uses trust funds for the purchase of property and causes
the conveyance to be made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds belong.

 Article 1456. If property is acquired through mistake or fraud, the person obtaining it s by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.
 The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the trustee
using trust funds to purchase, or a person acquiring property through mistake or fraud), and
Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting
for or assenting to patently unlawful acts of the corporation, among others) require factual
foundations to be first laid out in appropriate judicial proceedings. Hence, concluding that
Cojuangco breached fiduciary duties as an officer and member of the Board of Directors of
the UCPB without competent evidence thereon would be unwarranted and unreasonable.
 For one, the Amended Complaint contained no clear factual allegation on which to predicate
the application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the
Corporation Code. Although the trust relationship supposedly arose from Cojuangco’s
being an officer and member of the Board of Directors of the UCPB, the link between
this alleged fact and the borrowings or advances was not established.
 Nor was there evidence on the loans or borrowings, their amounts, the approving authority,
etc. As trial court, the Sandiganbayan could not presume his breach of fiduciary duties without
evidence showing so, for fraud or breach of trust is never presumed, but must be alleged and
proved.
 To say that a relationship is fiduciary when existing laws do not provide for such requires
evidence that confidence is reposed by one party in another who exercises dominion and
influence. Absent any special facts and circumstances proving a higher degree of
responsibility, any dealings between a lender and borrower are not fiduciary in nature.
This explains why, for example, a trust receipt transaction is not classified as a simple loan
and is characterized as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the
dishonesty and abuse of confidence in the handling of money or goods to the prejudice of
another regardless of whether the latter is the owner.
 a debtor can appropriate the thing loaned without any responsibility or duty to his creditor to
return the very thing that was loaned or to report how the proceeds were used. Nor can he be
compelled to return the proceeds and fruits of the loan, for there is nothing under our laws that
compel a debtor in a contract of loan to do so. As owner, the debtor can dispose of the thing
borrowed and his act will not be considered misappropriation of the thing. The only liability
on his part is to pay the loan together with the interest that is either stipulated or provided
under existing laws.

DISMISSED