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ENBANC

PetitionerOrganizations,namely:G.R.Nos.14703637
PAMBANSANGKOALISYONNGMGA
SAMAHANGMAGSASAKAATMANGGAGAWA
SANIYUGAN(PKSMMN),COCONUTINDUSTRY
REFORMMOVEMENT(COIR),BUKLODNG
MALAYANGMAGBUBUKID,PAMBANSANG
KILUSANNGMGASAMAHANGMAGSASAKA
(PAKISAMA),CENTERFORAGRARIANREFORM,
EMPOWERMENTANDTRANSFORMATION
(CARET),PAMBANSANGKATIPUNANNGMGA
SAMAHANSAKANAYUNAN(PKSK)Petitioner
Legislator:REPRESENTATIVELORETAANN
ROSALESandPetitionerIndividuals,namely:
VIRGILIOV.DAVID,JOSEMARIEFAUSTINO,
JOSECONCEPCION,ROMEOROYANDOYAN,
JOSEV.ROMERO,JR.,ATTY.CAMILOL.
SABIO,andATTY.ANTONIOT.CARPIO,
Petitioners,Present:
CORONA,C.J.,
CARPIO,
VELASCO,JR.,
LEONARDODECASTRO,
BRION,
versusPERALTA,
BERSAMIN,
DELCASTILLO,
ABAD,
VILLARAMA,JR.,
PEREZ,
MENDOZA,
SERENO,
REYES,and
PERLASBERNABE,JJ.
EXECUTIVESECRETARY,SECRETARYOF
AGRICULTURE,SECRETARYOFAGRARIAN
REFORM,PRESIDENTIALCOMMISSIONON
GOODGOVERNMENT,THESOLICITOR
GENERAL,PHILIPPINECOCONUTPRODUCERS
FEDERATION,INC.(COCOFED),andUNITED
COCONUTPLANTERSBANK(UCPB),
Respondents.
xx

TEODOROJ.AMOR,representingthePeasantG.R.No.147811
AllianceofSamarandLeyte(PASALEY),
DOMINGOC.ENCALLADO,representing
AnibanngMagsasakaatManggagawasaNiyugan
(AMMANI),andVIDALM.PILIIN,representing
theLagunaCoalition,
Petitioners,

versus

EXECUTIVESECRETARY,SECRETARYOF
AGRICULTURE,SECRETARYOFAGRARIAN
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REFORM,PRESIDENTIALCOMMISSIONON
GOODGOVERNMENT,THESOLICITOR
GENERAL,PHILIPPINECOCONUT
PRODUCERSFEDERATION,UNITEDPromulgated:
COCONUTPLANTERSBANK,
Respondents.April10,2012

xx

DECISION

ABAD,J.:

These are consolidated petitions to declare unconstitutional certain presidential decrees and executive orders of the
martiallawerarelatingtotheraisinganduseofcocolevyfunds.

TheFactsandtheCase

[1]
On June 19, 1971 Congress enacted Republic Act (R.A.) 6260 that established a Coconut Investment Fund (CI
[2]
Fund) for the development of the coconut industry through capital financing. Coconut farmers were to capitalize
[3]
andadministertheFundthroughtheCoconutInvestmentCompany(CIC) whoseobjectivewas,amongothers,to
advancethecoconutfarmersinterests.Forthispurpose,thelawimposedalevyofP0.55onthecoconutfarmersfirst
domesticsaleofevery100kilogramsofcopra,oritsequivalent,forwhichlevyhewastogetareceiptconvertibleinto
[4]
CICsharesofstock.

AboutayearfollowinghisproclamationofmartiallawinthecountryoronAugust20,1973PresidentFerdinandE.
[5]
Marcos issued Presidential Decree (P.D.) 276, which established a Coconut Consumers Stabilization Fund (CCS
Fund),toaddressthecrisisatthattimeinthedomesticmarketforcoconutbasedconsumergoods.TheCCSFundwas
[6]
tobebuiltupthroughtheimpositionofaP15.00levyforeveryfirstsaleof100kilogramsofcopraresecada. The
levywastoceaseafterayearorearlierprovidedthecrisiswasover.AnyremainingbalanceoftheFundwastorevert
[7]
totheCIFundestablishedunderR.A.6260.

[8]
A year later or on November 14, 1974 President Marcos issued P.D. 582, creating a permanent fund called the
CoconutIndustryDevelopmentFund(CIDFund)tochannelfortheultimatedirectbenefitofcoconutfarmerspartof
the levies that they were already paying. The Philippine Coconut Authority (PCA) was to provide P100 million as
initialcapitaloftheCIDFundand,thereafter,givetheFundatleastP0.20perkilogramofcopraresecadaoutofthe
PCAs collection of coconut consumers stabilization levy. In case of the lifting of this levy, the PCA was then to
[9]
imposeapermanentlevyofP0.20onthefirstsaleofeverykilogramofcopratoformpartoftheCIDFund. Also,
under P.D. 582, the Philippine National Bank (PNB), then owned by the Government, was to receive on deposit,
[10]
administer,andusetheCIDFund.
P.D.582authorizedthePNBtoinvesttheunusedportionoftheCIDFundin
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[11]
easilyconvertibleinvestments,theearningsofwhichweretoformpartoftheFund.
[12]
In1975PresidentMarcosenactedP.D.755
whichapprovedtheacquisitionofacommercialbankforthebenefit
[13]
ofthecoconutfarmerstoenablesuchbanktopromptlyandefficientlyrealizetheindustryscreditpolicy.
Thus,the
[14]
PCAbought72.2%ofthesharesofstockofFirstUnitedBank,headedbyPedroCojuangco.
Duetochangesinits
corporateidentityandpurpose,thebanksarticlesofincorporationwereamendedinJuly1975,resultinginachangein
[15]
thebanksnamefromFirstUnitedBanktoUnitedCoconutPlantersBank(UCPB).

[16]
OnJuly14,1976PresidentMarcosenactedP.D.961,
theCoconutIndustryCode,whichconsolidatedandcodified
existinglawsrelatingtothecoconutindustry.TheCodeprovidedthatsurplusesfromtheCCSFundandtheCIDFund
collections,notusedforreplantingandotherauthorizedpurposes,weretobeinvestedbyacquiringsharesofstockof
corporations,includingtheSanMiguelCorporation(SMC),engagedinundertakingsrelatedtothecoconutandpalm
[17]
[18]
oilindustries.
UCPBwastomakesuchinvestmentsandequitablydistributetheseforfreetococonutfarmers.
TheseinvestmentsconstitutedtheCoconutIndustryInvestmentFund(CIIF).P.D.961alsoprovidedthatthecoconut
[19]
levyfunds(cocolevyfunds)shallbeownedbythecoconutfarmersintheirprivatecapacities.
Thiswasreiterated
[20]
inthePD1468
amendmentofJune11,1978.

[21]
In1980,PresidentMarcosissuedP.D.1699,
suspendingthecollectionsoftheCCSFundandtheCIDFund.Butin
[22]
1981heissuedP.D.1841
whichrevivedthecollectionofcoconutlevies.P.D.1841renamedtheCCSFundinto
[23]
the Coconut Industry Stabilization Fund (CIS Fund).
This Fund was to be earmarked proportionately among
several development programs, such as coconut hybrid replanting program, insurance coverage for the coconut
[24]
farmers,andscholarshipprogramfortheirchildren.

[25]
InNovember2000thenPresidentJosephEstradaissuedExecutiveOrder(E.O.)312,
establishingaSagipNiyugan
Programwhichsoughttoprovideimmediateincomesupplementtococonutfarmersandencouragethecreationofa
[26]
sustainable local market demand for coconut oil and other coconut products.
The Executive Order sought to
establish a P1billion fund by disposing of assets acquired using cocolevy funds or assets of entities supported by
[27]
[28]
thosefunds.
Acommitteewascreatedtomanagethefundunderthisprogram.
Amajorityvoteofitsmembers
[29]
couldengagetheservicesofareputableauditingfirmtoconductperiodicaudits.

[30]
Ataboutthesametime,PresidentEstradaissuedE.O.313,
whichcreatedanirrevocabletrustfundknownasthe
CoconutTrustFund(theTrustFund).Thisaimedtoprovidefinancial assistance to coconut farmers, to the coconut
[31]
industry,andtootheragrirelatedprograms.
ThesharesofstockofSMCweretoserveastheTrustFundsinitial
[32]
capital.
TheseshareswereacquiredwithCIIFundsandconstitutedapproximately27%oftheoutstandingcapital
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stockofSMC.E.O.313designatedUCPB,throughitsTrustDepartment,astheTrustFundstrusteebank.The Trust
[33]
Fund Committee would administer, manage, and supervise the operations of the Trust Fund.
The Committee
woulddesignateanexternalauditortodoanannualauditorasoftenasneededbutitmayalsorequesttheCommission
[34]
onAudit(COA)tointervene.
To implement its mandate, E.O. 313 directed the Presidential Commission on Good Government, the Office of the
SolicitorGeneral,andothergovernmentagenciestoexcludethe27%CIIFSMCsharesfromCivilCase0033,entitled
RepublicofthePhilippinesv.EduardoCojuangco,Jr.,etal.,whichwasthenpendingbeforetheSandiganbayanand
[35]
toliftthesequestrationoverthoseshares.

OnJanuary26,2001,however,formerPresidentGloriaMacapagalArroyoorderedthesuspensionofE.O.s312and
[36]
313.
Thisnotwithstanding,onMarch1,2001petitionerorganizationsandindividualsbroughtthepresentactionin
G.R.14703637todeclareE.O.s312and313aswellasArticleIII,Section5ofP.D.1468unconstitutional.OnApril
24,2001theothersetsofpetitionerorganizationsandindividualsinstitutedG.R.147811tonullifySection2ofP.D.
755andArticleIII,Section5ofP.D.s961and1468alsoforbeingunconstitutional.

TheIssuesPresented

Thepartiessubmitthefollowingissuesforadjudication:

Procedurally

1.WhetherornotpetitionersspecialcivilactionsofcertiorariunderRule65constitutedtheproperremedyfor
theiractionsand
2.Whetherornotpetitionershavelegalstandingtobringthesametocourt.

Onthesubstance

3.Whetherornotthecocolevyfundsarepublicfundsand

4.Whetherornot(a)Section2ofP.D.755,(b)ArticleIII,Section5ofP.D.s961and1468,(c)E.O.312,and
(d)E.O.313areunconstitutional.

TheRulingsoftheCourt

First.UCPBquestionstheproprietyofthepresentpetitionsforcertiorariandmandamusunderRule65onthe
ground that there are no ongoing proceedings in any tribunal or board or before a government official exercising
[37]
judicial,quasijudicial,orministerialfunctions.
UCPBinsiststhattheCourtexercisesappellatejurisdictionwith
[38]
respecttoissuesofconstitutionalityorvalidityoflawsandpresidentialorders.

But,astheCourtpreviouslyheld,wherethereareseriousallegationsthatalawhasinfringedtheConstitution,it
becomes not only the right but the duty of the Court to look into such allegations and, when warranted, uphold the
[39]
supremacyoftheConstitution.
Moreover,wheretheissuesraisedareofparamountimportancetothepublic,asin
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[40]
thiscase,theCourthasthediscretiontobrushasidetechnicalitiesofprocedure.

Second. The Court has to uphold petitioners right to institute these petitions. The petitioner organizations in
these cases represent coconut farmers on whom the burden of the cocolevies attaches. It is also primarily for their
benefitthatthelevieswereimposed.

Theindividualpetitioners,ontheotherhand,jointhepetitionsastaxpayers.TheCourtrecognizestheirrightto
[41]
restrainofficialsfromwastingpublicfundsthroughtheenforcementofanunconstitutionalstatute.
Thissocalled
taxpayerssuitisbasedonthetheorythatexpenditureofpublicfundsforthepurposeofexecutinganunconstitutional
[42]
actisamisapplicationofsuchfunds.

Besides, the 1987 Constitution accords to the citizens a greater participation in the affairs of government.
Indeed,itprovidesforpeople'sinitiative,therighttoinformationonmattersofpublicconcern(includingtherightto
know the state of health of their President), as well as the right to file cases questioning the factual bases for the
suspensionoftheprivilegeofwritofhabeascorpusordeclarationofmartiallaw.Theseprovisionsenlargethepeoples
rightinthepoliticalaswellasthejudicialfield.Itgrantsthemtherighttointerfereintheaffairsofgovernmentand
challengeanyacttendingtoprejudicetheirinterest.

Third.Forsometime,differentandconflictingnotionshadbeenformedastothenatureandownershipofthe
cocolevyfunds.TheCourt,however,finallyputanendtothedisputewhenitcategoricallyruledinRepublicofthe
[43]
Philippines v. COCOFED
that these funds are not only affected with public interest they are, in fact, prima
faciepublicfunds.Primafaciemeansafactpresumedtobetrueunlessdisprovedbysomeevidencetothecontrary.
[44]

TheCourtwassatisfiedthatthecocolevyfundswereraisedpursuanttolawtosupportapropergovernmental
purpose. They were raised with the use of the police and taxing powers of the State for the benefit of the coconut
industryanditsfarmersingeneral.TheCOAreviewedtheuseofthefunds.TheBureauofInternalRevenue(BIR)
[45]
treatedthemaspublicfundsandtheverylawsgoverningcoconutleviesrecognizetheirpubliccharacter.

TheCourthasalsorecentlydeclaredthatthecocolevyfundsareinthenatureoftaxesandcanonlybeusedfor
[46]
publicpurpose.
Taxesareenforcedproportionalcontributionsfrompersonsandproperty,leviedbytheStateby
[47]
virtueofitssovereigntyforthesupportofthegovernmentandforallitspublicneeds.
Here,thecocolevyfunds
wereimposedpursuanttolaw,namely,R.A.6260andP.D.276.ThefundswerecollectedandmanagedbythePCA,
[48]
an independent government corporation directly under the President.
And, as the respondent public officials
[49]
[50]
pointedout,thepertinentlawsusedthetermlevy,
whichmeanstotax,
indescribingtheexaction.

Ofcourse,unlikeordinaryrevenuelaws,R.A.6260andP.D.276didnotraisemoneytoboostthegovernments
general funds but to provide means for the rehabilitation and stabilization of a threatened industry, the coconut
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[51]
industry,whichissoaffectedwithpublicinterestastobewithinthepolicepoweroftheState.
Thefundssoughtto
supportthecoconutindustry,oneofthemaineconomicbackbonesofthecountry,andtosecureeconomicbenefitsfor
thecoconutfarmersandfarmworkers.ThesubjectlawsareakintothesugarliensimposedbySec.7(b)ofP.D.388,
[52]
[53]
[54]
andtheoilpricestabilizationfundsunderP.D.1956,
asamendedbyE.O.137.

Respondent UCPB suggests that the cocolevy funds are closely similar to the Social Security System (SSS)
funds,whichhavebeendeclaredtobenotpublicfundsbutpropertiesoftheSSSmembersandheldmerelyintrustby
[55]
[56]
thegovernment.
ButtheSSSLaw
collectspremiumcontributions.Itdoesnotcollecttaxesfrommembersfor
aspecificpublicpurpose.Theypaycontributionsinexchangeforinsuranceprotectionandbenefitslikeloans,medical
orhealthservices,andretirementpackages.ThebenefitsaccruetoeverySSSmember,nottothepublic,ingeneral.
[57]

Furthermore,SSSmembersdonotloseownershipoftheircontributions.Thegovernmentmerelyholdsthesein
[58]
trust,togetherwithhisemployerscontribution,toanswerforhisfuturebenefits.
Thecocolevyfunds,ontheother
hand,belongtothegovernmentandaresubjecttoitsadministrationanddisposition.Thus,thesefunds,includingits
incomes, interests, proceeds, or profits, as well as all its assets, properties, and shares of stocks procured with such
[59]
fundsmustbetreated,used,administered,andmanagedaspublicfunds.

[60]
Lastly,thecocolevyfundsareevidentlyspecialfunds.InGastonv.RepublicPlantersBank,
theCourtheld
thattheStatecollectedstabilizationfeesfromsugarmillers,planters,andproducersforaspecialpurpose:tofinance
thegrowthanddevelopmentofthesugarindustryandallitscomponents.Thefeeswereleviedforaspecialpurpose
and,therefore,constitutedspecialfundwhencollected.Itscharacterassuchfundwasmadeclearbythefactthatthey
weredepositedinthePNB(thenawhollyownedgovernmentbank)andnotinthePhilippineTreasury.InOsmea v.
[61]
Orbos,
theCourtheldthattheoilpricestabilizationfundwasaspecialfundmainlybecausethiswassegregated
from the general fund and placed in what the law referred to as a trust account. Yet it remained subject to COA
scrutinyandreview.TheCourtfindsnosubstantialdistinctionbetweenthesefundsandthecocolevyfunds,exceptas
totheindustrytheyeachsupport.

Fourth. Petitioners in G.R. 147811 assert that Section 2 of P.D. 755 above is void and unconstitutional for
disregardingthepubliccharacterofcocolevyfunds.Thesubjectsectionprovides:

Section2.FinancialAssistance.xxxandsincetheoperations,andactivitiesofthePhilippineCoconutAuthority
areallinaccordwiththepresentsocialeconomicplansandprogramsoftheGovernment,allcollectionsandlevieswhich
the Philippine Coconut Authority is authorized to levy and collect such as but not limited to the Coconut Consumers
StabilizationLevy,andtheCoconutIndustryDevelopmentFundasprescribedbyPresidentialDecreeNo.582shallnotbe
consideredorconstrued,underanylaworregulation,specialand/orfiduciaryfundsanddonotformpartofthe
generalfundsofthenationalgovernmentwithinthecontemplationofPresidentialDecreeNo.711.(Emphasisours)

TheCourthas,however,alreadypasseduponthisquestioninPhilippine Coconut Producers Federation, Inc.

[62]
(COCOFED) v. Republic of the Philippines.
It held as unconstitutional Section 2 of P.D. 755 for effectively
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authorizingthePCAtoutilizeportionsoftheCCSFund to pay the financial commitment of the farmers to acquire

UCPBandtodepositportionsoftheCCSFundlevieswithUCPBinterestfree.Andastherealsoprovided,theCCS
Fund,CIDFundandlikeleviesthatPCAisauthorizedtocollectshallbeconsideredasnonspecialorfiduciaryfunds
tobetransferredtothegeneralfundoftheGovernment,meaningtheyshallbedeemedprivatefunds.

Identicalprovisionsofsubsequentpresidentialdecreeslikewisedeclaredcocolevyfundsprivatepropertiesof
coconutfarmers.ArticleIII,Section5ofP.D.961reads:

Section5.Exemptions.TheCoconutConsumersStabilizationFundandtheCoconutIndustryDevelopmentFund
aswellasalldisbursementsofsaidfundsforthebenefitofthecoconutfarmersashereinauthorizedshallnotbeconstrued
orinterpreted,underanylaworregulation,asspecialand/orfiduciaryfunds,oraspartofthegeneralfundsofthe
nationalgovernmentwithinthecontemplationofP.D.No.711norasasubsidy,donation,levy,governmentfunded
investment,orgovernmentsharewithinthecontemplationofP.D.898,theintentionbeingthatsaidFundandthe
disbursementsthereofashereinauthorizedforthebenefitofthecoconutfarmersshallbeownedbythemintheir
ownprivatecapacities.(Emphasisours)

Section5ofP.D.1468basicallyreproducestheaboveprovision,thus

Section5.Exemption.TheCoconutConsumersStabilizationFundandtheCoconutIndustryDevelopmentFund,
aswellasalldisbursementsashereinauthorized,shallnotbeconstruedorinterpreted,underanylaworregulation,as
specialand/orfiduciaryfunds,oraspartofthegeneralfundsofthenationalgovernmentwithinthecontemplationof
P.D. 711 nor as subsidy, donation, levy government funded investment, or government share within the
contemplationofP.D.898,theintentionbeingthatsaidFundandthedisbursementsthereofashereinauthorizedfor
the benefit of the coconut farmers shall be owned by them in their private capacities: Provided, however, That the
PresidentmayatanytimeauthorizetheCommissiononAuditoranyotherofficerofthegovernmenttoauditthebusiness
affairs,administration,andconditionofpersonsandentitieswhoreceivesubsidyforcoconutbasedconsumerproductsxx
x.(Emphasisours)

Notably,theraisingofmoneybylevyoncoconutfarmproduction,aformoftaxationasalreadystated,beganin
1971forthepurposeofdevelopingthecoconutindustryandpromotingtheinterestofcoconutfarmers.Theuseofthe
fundwasexpandedin1973toincludethestabilizationofthedomesticmarketforcoconutbasedconsumergoodsand
in1974todivertpartofthefundsforobtainingdirectbenefittococonutfarmers.Afterfiveyearsorin1976,however,
P.D.961declaredthecocolevyfundsprivatepropertyofthefarmers.P.D.1468reiteratedthisdeclarationin1978.
Butneitherpresidentialdecreeactuallyturnedoverpossessionorcontrolofthefundstothefarmersintheirprivate
capacity.The government continued to wield undiminished authority over the management and disposition of those
funds.

In any event, such declaration is void. There is ownership when a thing pertaining to a person is completely
[63]
subjectedtohiswillineverythingthatisnotprohibitedbylawortheconcurrencewiththerightsofanother.
An
owner is free to exercise all attributes of ownership: the right, among others, to possess, use and enjoy, abuse or
[64]
consume,anddisposeoralienatethethingowned.
Theownerisofcoursefreetowaiveallorsomeoftheserights
infavorofothers.Butinthecaseofthecoconutfarmers,theycouldnot,individuallyorcollectively,waivewhathave
notbeenandcouldnotbelegallyimpartedtothem.

Section 2 of P.D. 755, Article III, Section 5 of P.D. 961, and Article III, Section 5 of P.D. 1468 completely
ignorethefactthatcocolevyfundsarepublicfundsraisedthroughtaxation.Andsincetaxescouldbeexactedonlyfor
a public purpose, they cannot be declared private properties of individuals although such individuals fall within a
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[65]
distinctgroupofpersons.

TheCourtofcoursegrantsthatthereisnohardandfastrulefordeterminingwhatconstitutespublicpurpose.It
is an elastic concept that could be made to fit into modern standards. Public purpose, for instance, is no longer
restrictedtotraditionalgovernmentfunctionslikebuildingroadsandschoolhousesorsafeguardingpublichealthand
safety.Publicpurposehasbeenconstruedasincludingthepromotionofsocialjustice.Thus,publicfundsmaybeused
forrelocatingillegalsettlers,buildinglowcosthousingforthem,andfinancingbothurbanandagrarianreformsthat
benefitcertainpoorindividuals.Still,theseusesrelievevolatileiniquitiesinsocietyand,therefore,impactonpublic
orderandwelfareasawhole.

Buttheassailedprovisions,whichremovedthecocolevyfundsfromthegeneralfundsofthegovernmentand
declaredthemprivatepropertiesofcoconutfarmers,donotappeartohaveacolorofsocialjusticefortheirpurpose.
Thelevyoncoprathatfarmersproduceappears,inthefirstplace,tobeabusinesstaxjudgingbyitstaxbase. The
conceptoffarmersbusinessmenisincompatiblewiththeideathatcoconutfarmersarevictimsofsocialinjusticeand
soshouldbebeneficiariesofthetaxesraisedfromtheirearnings.

It would altogether be different of course if the laws mentioned set apart a portion of the cocolevy fund for
improving the lives of destitute coconut farm owners or workers for their social amelioration to establish a proper
governmentpurpose.Thesupportforthepoorisgenerallyrecognizedasapublicdutyandhaslongbeenanaccepted
[66]
exerciseofpolicepowerinthepromotionofthecommongood.
Butthedeclarationsdonotdistinguishbetween
wealthycoconutfarmersandtheimpoverishedones.Andeveniftheydid,theGovernmentcannotjustembarkona
[67]
philanthropicorgyofinordinatedoleoutsformotivespoliticalorotherwise.
Consequently,suchdeclarationsare
voidsincetheyappropriatepublicfundsforprivatepurposeand,therefore,violatethecitizensrighttosubstantivedue
[68]
process.
Onanotherpoint,instatingthatthecocolevyfundshallnotbeconstruedorinterpreted,underanylaworregulation,
asspecialand/orfiduciaryfunds,oraspartofthegeneralfundsofthenationalgovernment,P.D.s961and1468seek
toremovesuchfundfromCOAscrutiny.

ThisisalsothefaultofPresidentEstradasE.O.312whichdealswithP1billiontobegeneratedoutofthesaleof
cocofundacquiredassets.Thus

Section5.AuditofFundandSubmissionofReport.TheCommittee,byamajorityvote,shallengagetheservices
ofareputableauditingfirmtoconductperiodicauditsofthefund.Itshallrenderaquarterlyreportonallpertinent
transactions and availments of the fund to the Office of the President within the first three (3) working days of the
succeedingquarter.(Emphasisours)

E.O.313hasasubstantiallyidenticalprovisiongoverningthemanagementanddispositionoftheCoconutTrust
FundcapitalizedwiththesubstantialSMCsharesofstockthatthecocofundacquired.Thus

Section13.Accounting.xxx

The Fund shall be audited annually or as often as necessary by an external auditor designated by the
Committee.TheCommitteemayalsorequesttheCommissiononAudittoconductanauditoftheFund.(Emphasisours)
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But,sincecocolevyfundsaretaxes,theprovisionsofP.D.s755,961and1468aswellasthoseofE.O.s312
and313thatremovesuchfundsandtheassetsacquiredthroughthemfromthejurisdictionoftheCOAviolateArticle
[69]
IXD,Section2(1)
ofthe1987Constitution.Section2(1)vestsintheCOAthepowerandauthoritytoexamine
[70]
uses of government money and property. The cited P.D.s and E.O.s also contravene Section 2
of P.D. 898
(ProvidingfortheRestructuringoftheCommissiononAudit),whichhastheforceofastatute.

AndthereisnolegitimatereasonwhysuchfundsshouldbeshieldedfromCOAreviewandaudit. The PCA,

which implements the cocolevy laws and collects the cocolevy funds, is a governmentowned and controlled
corporationsubjecttoCOAreviewandaudit.

E.O. 313 suffers from an additional infirmity. Its title, Rationalizing the Use of the Coconut Levy Funds by
ConstitutingaFundforAssistancetoCoconutFarmersasanIrrevocableTrustFundandCreatingaCoconutTrust
FundCommitteefortheManagementthereoftendstomislead.Apparently,itintendstocreateatrustfundoutofthe
cocolevyfundstoprovideeconomicassistancetothecoconutfarmersand,ultimately,benefitthecoconutindustry.
[71]
Butoncloserlook,E.O.313straysfromthespecialpurposeforwhichthelawraisescocolevyfundsinthatit
permitstheuseofcocolevyfundsforimprovingproductivityinotherfoodareas.Thus:

Section2.PurposeoftheFund.TheFundshallbeestablishedforthepurposeoffinancingprogramsofassistance
forthebenefitofthecoconutfarmers,thecoconutindustry,andotheragrirelatedprogramsintendedtomaximizefood
productivity, develop business opportunities in the countryside, provide livelihood alternatives, and promote anti
povertyprograms.(Emphasisours)

xxxx

Section9.UseandDispositionoftheTrustIncome.TheCoconutTrustFundCommittee,onanannualbasis,shall
determineandestablishtheamountcomprisingtheTrustIncome.Aftersuchdetermination,theCommitteeshallearmark,
allocateanddisbursetheTrustIncomeforthefollowingpurposes,namely:

xxxx

(d)Thirtypercent(30%)oftheTrustIncomeshallbeusedtoassistandfundagriculturallyrelatedprograms
for the Government, as reasonably determined by the Trust Fund Committee, implemented for the purpose of: (i)
maximizingfoodproductivityintheagricultureareasofthecountry,(ii)enhancingtheupliftmentandwellbeingofthe
living conditions of farmers and agricultural workers, (iii) developing viable industries and business opportunities in the
countryside, (iv) providing alternative means of livelihood to the direct dependents of agriculture businesses and
enterprises, and (v) providing financial assistance and support to coconut farmers in times of economic hardship due to
extremely low prices of copra and other coconut products, natural calamities, world market dislocation and similar
occurrences,includingfinancialsupporttotheERAPsSagipNiyuganProgramestablishedunderExecutiveOrderNo.312
datedNovember3,2000xxx.(Emphasisours)

Clearly,E.O.313aboverunscountertotheconstitutionalprovisionwhichdirectsthatallmoneycollectedon
[72]
anytaxleviedforaspecialpurposeshallbetreatedasaspecialfundandpaidoutforsuchpurposeonly.
Assisting
other agriculturallyrelated programs is way off the cocofunds objective of promoting the general interests of the
coconutindustryanditsfarmers.

[73]
[74]
A final point, the E.O.s also transgress P.D. 1445,
Section 84(2),
the first part by the previously
mentionedsectionsofE.O.313andthesecondpartbySection4ofE.O.312andSections6and7ofE.O.313.E.O.
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313 vests the power to administer, manage, and supervise the operations and disbursements of the Trust Fund it
established(capitalizedwithSMCsharesboughtoutofcocolevyfunds)inaCoconutTrustFundCommittee.Thus

Section 6. Creation of the Coconut Trust Fund Committee. A Committee is hereby created to administer,
manageandsupervisetheoperationsoftheTrustFund,chairedbythePresidentwithten(10)members,asfollows:

(a)four(4)representativesfromthegovernmentsector,twoofwhomshallbetheSecretaryofAgriculture
andtheSecretaryofAgrarianReformwhoshallactasViceChairmen
(b) four (4) representatives from coconut farmers organizations, one of whom shall come from a list of
nomineesfromthePhilippineCoconutProducersFederationInc.(COCOFED)
(c)arepresentativefromtheCIIFand
(d) a representative from a nongovernment organization (NGO) involved in agricultural and rural
development.
AlldecisionsoftheCoconutTrustFundCommitteeshallbedeterminedbyamajorityvoteofallthemembers.

TheCoconutTrustFundCommitteeshallperformthefunctionsanddutiessetforthinSection7hereof,withtheskill,care,
prudenceanddiligencenecessaryunderthecircumstancesthenprevailingthataprudentmanactinginlikecapacitywould
exercise.
The members of the Coconut Trust Fund Committee shall be appointed by the President and shall hold office at his
pleasure.
TheCoconutTrustFundCommitteeisauthorizedtohireadministrative,technicaland/orsupportstaffasmayberequired
toenableittoeffectivelyperformitsfunctionsandresponsibilities.(Emphasisours)

Section7. Functions and Responsibilities of the Committee. The Coconut Trust Fund Committee shall have the
followingfunctionsandresponsibilities:
(a)settheinvestmentpolicyoftheTrustFund
(b)establish priorities for assistance giving preference to small coconut farmers and farmworkers which shall be
reviewedperiodicallyandrevisedasnecessaryinaccordancewithchangingconditions
(c)receive,processandapproveprojectproposalsforfinancingbytheTrustFund
(d)decide on the use of the Trust Funds income or net earnings including final action on applications for
assistance,grantsand/orloans
(e)availofprofessionalcounselandservicesbyretaininganinvestmentandfinancialmanager,ifdesired
(f)formulate the rules and regulations governing the allocation, utilization and disbursement of the Fund
and
(g)performsuchotheractsandthingsasmaybenecessaryproperorconducivetoattainthepurposesoftheFund.
(Emphasisours)

Section4ofE.O.312doesessentiallythesamething.Itveststhemanagementanddispositionoftheassistance
fundgeneratedfromthesaleofcocolevyfundacquiredassetsintoaCommitteeoffivemembers.Thus,Section4of
E.O.312provides

Section4.Funding.Assetsacquiredthroughthecoconutlevyfundsorbyentitiesfinancedbythecoconutlevy
fundsidentifiedbythePresidentforappropriatedisposalorsale,shallbesoldordisposedtogenerateamaximumfundof
ONE BILLION PESOS (P1,000,000,000.00) which shall be managed by a Committee composed of a Chairman and
four (4) members to be appointed by the President whose term shall be coterminus with the Program. x x x
(Emphasisours)

Ineffect,theabovetransfersthepowertoallocate,use,anddisbursecocolevyfundsthatP.D.232vestedinthe
PCA and transferred the same, without legislative authorization and in violation of P.D. 232, to the Committees
mentioned above. An executive order cannot repeal a presidential decree which has the same standing as a statute
enactedbyCongress.
UCPBinvokestheprincipleofseparabilitytosavetheassailedlawsfrombeingstruckdown.Thegeneralruleis
thatwherepartofastatuteisvoidasrepugnanttotheConstitution,whileanotherpartisvalid,thevalidportion,if
susceptibletobeingseparatedfromtheinvalid,maystandandbeenforced.Whenthepartsofastatute,however,are
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G.R.Nos.14703637

somutuallydependentandconnected,asconditions,considerations,orcompensationsforeachother,astowarranta
beliefthatthelegislatureintendedthemasawhole,thenullityofonepartwillvitiatetherest.Inwhichcase,ifsome
parts are unconstitutional, all the other provisions which are thus dependent, conditional, or connected must
[75]
consequentlyfallwiththem.

But,giventhattheprovisionsofE.O.s312and313,whichasalreadystatedinvalidlytransferredpowersover
thefundstotwocommitteesthatPresidentEstradacreated,therestoftheirprovisionsbecamenonoperational.It is
evidentthatPresidentEstradawouldnothavecreatedthenewfundingprogramsiftheyweretobemanagedbysome
otherentity.Indeed,hemadehimselfChairmanoftheCoconutTrustFundandlefttohisdiscretiontheappointmentof
themembersoftheothercommittee.

WHEREFORE,theCourtGRANTSthepetitioninG.R.14703637,PARTLYGRANTSthepetitioninG.R.
147811,anddeclaresthefollowingVOID:

a)E.O.312,forbeingrepugnanttoSection84(2)ofP.D.1445,andArticleIXD,Section2(1)of
theConstitutionand

b)E.O.313,forbeingincontraventionofSection84(2)ofP.D.1445,andArticleIXD,Section
2(1)andArticleVI,Section29(3)oftheConstitution.

The Court has previously declared Section 2 of P.D. 755 and Article III, Section 5 of P.D.s 961 and 1468
unconstitutional.

SOORDERED.

ROBERTOA.ABAD
AssociateJustice

WECONCUR:

RENATOC.CORONA
ChiefJustice

ANTONIOT.CARPIOPRESBITEROJ.VELASCO,JR.
AssociateJusticeAssociateJustice

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TERESITAJ.LEONARDODECASTROARTUROD.BRION
AssociateJusticeAssociateJustice

DIOSDADOM.PERALTALUCASP.BERSAMIN
AssociateJusticeAssociateJustice

MARIANOC.DELCASTILLOMARTINS.VILLARAMA,JR.
AssociateJusticeAssociateJustice

JOSEPORTUGALPEREZJOSECATRALMENDOZA
AssociateJusticeAssociateJustice

MARIALOURDESP.A.SERENOBIENVENIDOL.REYES
AssociateJusticeAssociateJustice

(OnOfficialLeave)
ESTELAM.PERLASBERNABE
AssociateJustice

CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,itisherebycertifiedthattheconclusionsintheabove
DecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourt.

RENATOC.CORONA
ChiefJustice

[1]
Entitled AN ACT INSTITUTING A COCONUT INVESTMENT FUND AND CREATING A COCONUT INVESTMENT COMPANY FOR THE
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ADMINISTRATIONTHEREOF.
[2]
Id.,Section2.
[3]
Id.
[4]
Id.,Section8.
[5]
EntitledESTABLISHINGACOCONUTCONSUMERSSTABILIZATIONFUND.
[6]
Id.,Section1(a).
[7]
Id.,Section2.
[8]
EntitledFURTHERAMENDINGPRESIDENTIALDECREENO.232,ASAMENDED.
[9]
Id.,Section3B(c).
[10]
Id.,Section3B.
[11]
Supranote9.
[12]
EntitledAPPROVINGTHECREDITPOLICYFORTHECOCONUTINDUSTRYASRECOMMENDEDBYTHEPHILIPPINECOCONUTAUTHORITY
ANDPROVIDINGFUNDSTHEREFOR.
[13]
Id.,Section1.
[14]
RepublicofthePhilippinesv.Sandiganbayan,G.R.No.118661,January22,2007,512SCRA25.
[15]
Id.
[16]
EntitledANACTTOCODIFYTHELAWSDEALINGWITHTHEDEVELOPMENTOFTHECOCONUTANDOTHERPALMOILINDUSTRYAND
FOROTHERPURPOSES.
[17]
Id.,ArticleIII,Section9.
[18]
Id.,ArticleIII,Section10.
[19]
Id.,ArticleIII,Section5.
[20]
EntitledREVISINGPRESIDENTIALDECREENUMBEREDNINEHUNDREDSIXTYONE.
[21]
EntitledANACTSUSPENDINGTHECOLLECTIONOFTHECOCONUTCONSUMERSSTABILIZATIONFUNDLEVYANDSIMILARLEVIESAND
PROVIDING IN CONNECTION THEREWITH APPROPRIATE MEASURES TO CUSHION THE ADVERSE EFFECTS THEREOF ON THE COCONUT
FARMERS.
[22]
Entitled PRESCRIBING A SYSTEM OF FINANCING THE SOCIOECONOMIC AND DEVELOPMENTAL PROGRAM FOR THE BENEFIT OF THE
COCONUTFARMERSANDACCORDINGLYAMENDINGTHELAWSTHEREON.
[23]
Id.,Section5.
[24]
Id.,Section1.
[25]
EntitledESTABLISHINGTHEERAPSSAGIPNIYUGANPROGRAMASANEMERGENCYMEASURETOALLEVIATETHEPLIGHTOFCOCONUT
FARMERSADVERSELYAFFECTEDBYLOWPRICESOFCOPRAANDOTHERCOCONUTPRODUCTS,ANDPROVIDINGFUNDSTHEREFOR.
[26]
Id.,Section1.
[27]
Id.,Section4.
[28]
Id.
[29]
Id.,Section5.
[30]
EntitledRATIONALIZINGTHEUSEOFTHECOCONUTLEVYFUNDSBYCONSTITUTINGAFUNDFORASSISTANCETOCOCONUTFARMERS
ASANIRREVOCABLETRUSTFUNDANDCREATINGACOCONUTTRUSTFUNDCOMMITTEEFORTHEMANAGEMENTTHEREOF.
[31]
Id.,Section2.
[32]
Id.,Section3.
[33]
Id.,Section6.
[34]
Id.,Section13.
[35]
Id.,Section14.
[36]
http://www.afrim.org.ph/Archives/2001/BusinessWorld/September/17/Estrada%20s%20EOs%20creating%20coco%20levy%20trust%20fund%20challenged.txt
(lastaccessedJuly8,2011).
[37]
Macalintalv.CommissiononElections,453Phil.586,625(2003).
[38]
1987Constitution,ArticleVIII,Section5.TheSupremeCourtshallhavethefollowingpowers:
(1)Exerciseoriginaljurisdictionovercasesaffectingambassadors,otherpublicministersandconsuls,andoverpetitionsforcertiorari,prohibition,mandamus,
quowarranto,andhabeascorpus.
(2)Review,revise,modify,oraffirmonappealorcertiorari,asthelawortheRulesofCourtmayprovide,finaljudgmentsandordersoflowercourtsin:
(a)Allcasesinwhichtheconstitutionalityorvalidityofanytreaty,internationalorexecutiveagreement,law,presidentialdecree,proclamation,order,
instruction,ordinance,orregulationisinquestion.
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(b)Allcasesinvolvingthelegalityofanytax,impost,assessment,ortoll,oranypenaltyimposedinrelationthereto.xxx(Emphasisours)
[39]
Taadav.Angara,338Phil.546,574(1997).
[40]
IntegratedBarofthePhilippinesv.Zamora,392Phil.618,634(2000).
[41]
Phil.ConstitutionAssn.,Inc.v.Mathay,124Phil.890,898(1966).
[42]
Tanv.Macapagal,150Phil.778,783(1972).
[43]
423Phil.735(2001).
[44]
BlacksLawDictionary(5thed.,1979),p.1071.
[45]
Supranote43,at772.
[46]
PhilippineCoconutProducersFederation,Inc.(COCOFED)v.RepublicofthePhilippines,G.R.Nos.17785758and178193,January24,2012.
[47]
TAXPRINCIPLESANDREMEDIES,JaparB.Dimaampao,(2nd ed.,2005),p.1citing1Cooley62.
[48]
Supranote20,ArticleII,Section1.
[49]
R.A.6260
Section8.TheCoconutInvestmentFund.Thereshallbeleviedonthecoconutfarmerasumequivalenttofiftyfivecentavos(P0.55)onthefirstdomestic
saleofeveryonehundredkilogramsofcopra,oritsequivalentintermsofothercoconutproducts,forwhichheshallbeissuedareceiptwhichshallbeconverted
intosharesofstockoftheCompanyuponitsincorporationasaprivateentityinaccordancewithSectionsevenhereof.xxx(Emphasisours)

P.D.276
1.xxx
(a)Alevy,initially,ofP15.00per100kilogramsofcopraresecadaoritsequivalentinothercoconutproducts,shallbeimposedoneveryfirstsale,in
accordancewiththemechanicsestablishedunderR.A.6260,effectiveatthestartofbusinesshoursonAugust10,1973.
TheproceedsfromthelevyshallbedepositedwiththePhilippineNationalBankoranyothergovernmentbanktotheaccountoftheCoconutConsumers
StabilizationFund,asaseparatetrustfundwhichshallnotformpartofthegeneralfundofthegovernment.(Emphasisours)

P.D.582
Section3B.CoconutIndustryDevelopmentFund.xxx

c)xxxAstheinitialfundsoftheCoconutIndustryDevelopmentFund,theAuthorityisherebydirectedtopaytotheCoconutIndustryDevelopmentFund
theamountofOneHundredMillionPesos(P100,000,000.00)outofitscollectionsofthecoconutconsumersstabilizationlevyandthereaftertheAuthorityshall
paytothesaidFundanamountequaltoatleasttwentycentavos(P0.20)perkilogramofcopraresecadaoritsequivalentoutofitscurrentcollectionsofthecoconut
consumers stabilization levy. In the event that the coconut consumers stabilization levy is lifted, a permanent levy of twenty centavos (P0.20) is thereafter
automaticallyimposedonthefirstsaleofeverykilogramofcopraoritsequivalentintermsofothercoconutproductsxxx.(Emphasisours)
[50]
BlacksLawDictionary(5thed.,1979),p.816.
[51]
RepublicofthePhilippinesv.COCOFED,supranote43,at765,citingCaltexPhilippines,Inc.v.CommissiononAudit,G.R.No.92585,May8,1992,208
SCRA726,756andOsmeav.Orbos,G.R.No.99886,March31,1993,220SCRA703,711.
[52]
EntitledCREATINGTHEPHILIPPINESUGARCOMMISSION.
[53]
EntitledIMPOSINGANADVALOREMTAXONCERTAINMANUFACTUREDOILSANDOTHERFUELSBUNKERFUELOILANDDIESELFUEL
OILREVISINGTHERATESOFSPECIFICTAXTHEREONABOLISHINGTHEOILINDUSTRYSPECIALFUNDANDFOROTHERPURPOSES.
[54]
Entitled EXPANDING THE SOURCES AND UTILIZATION OF THE OIL PRICE STABILIZATION FUND (OPSF) BY AMENDING PRESIDENTIAL
DECREENO.1956.
[55]
CatholicArchbishopofManilav.SocialSecurityCommission,110Phil.616,622(1961).
[56]
RepublicAct1161.
[57]
Rollo(G.R.14703637),p.362,PublicRespondentsREPLYtoCOMMENTofUCPB.
[58]
REVIEWERINLABORANDSOCIALLEGISLATION,SamsonS.AlcantaraandSamsonB.Alcantara,Jr.,(2004ed.,with2007Supplement),p.982.
[59]
RepublicofthePhilippinesv.COCOFED,supranote43,at776,citingExecutiveOrder277,DIRECTINGTHEMODEOFTREATMENTUTILIZATION,
ADMINISTRATIONANDMANAGEMENTOFTHECOCONUTLEVYFUNDS,September24,1995.
[60]
242Phil.377(1988).
[61]
Osmeav.Orbos,supranote51.
[62]
Supranote46.
[63]
Cojuangcov.Sandiganbayan,G.R.No.183278,April24,2009,586SCRA790,796.
[64]
Id.at797.
[65]
PlantersProducts,Inc.v.FertiphilCorporation,G.R.No.166006,March14,2008,548SCRA485,510,citingCONSTITUTIONALLAW, Isagani Cruz,
(1998ed.),p.90.
[66]
Binayv.Domingo,G.R.No.92389,September11,1991,201SCRA508,516.
[67]
Id.
[68]
PepsiColaBottlingCompanyofthePhilippines,Inc.v.MunicipalityofTanauan,Leyte,161Phil.591,602(1976).
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[69]
Section2.(1)TheCommissiononAuditshallhavethepower,authority,anddutytoexamine,audit,andsettleallaccountspertainingtotherevenueand
receiptsof,andexpendituresorusesoffundsandproperty,ownedorheldintrustby,orpertainingto,theGovernment,oranyofitssubdivisions,agencies,or
instrumentalities,includinggovernmentownedorcontrolledcorporationswithoriginalcharters,andonapostauditbasis:(a)constitutionalbodies,commissions
and offices that have been granted fiscal autonomy under this Constitution (b) autonomous state colleges and universities (c) other governmentowned or
controlled corporations and their subsidiaries and (d) such nongovernmental entities receiving subsidy or equity, directly or indirectly, from or through the
Government,whicharerequiredbylaworthegrantinginstitutiontosubmittosuchauditasaconditionofsubsidyorequityxxx.(Emphasisours)
[70]
Section2.JurisdictionofTheCommissiononAudit.TheAuthorityandpowersoftheCommissiononAuditshallextendtoandcomprehendallmatters
relatingtoauditingandaccountingprocedures,systems,andcontrols,includinginquiryintotheutilizationofresourcesandoperatingperformance,thekeepingof
thegeneralaccountsoftheGovernment,thepreservationofvoucherspertainingthereto,theexaminationandinspectionofthebooks,records,andpapersrelatingto
thoseaccountsandtheauditandsettlementoftheaccountsofallpersonsrespectingfundsorpropertyreceivedorheldbytheminanaccountablecapacity,aswell
as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and
instrumentalities.Thesaidjurisdictionextendstoallgovernmentownedorcontrolledcorporationsandotherselfgoverningboards,commissions,oragencies
of the Government, and as herein prescribed, including nongovernmental entities subsidized by the Government, those funded by donations through the
Government,thoserequiredtopayleviesorgovernmentshare,andthosepartlyfundedbytheGovernment.(Emphasisours)
[71]
Supranote30,Whereasclauses.
[72]
Supranote38,ArticleVI,Section29.xxx
(3)Allmoneycollectedonanytaxleviedforaspecialpurposeshallbetreatedasaspecialfundandpaidoutforsuchpurposeonly.Ifthepurposefor
whichaspecialfundwascreatedhasbeenfulfilledorabandoned,thebalance,ifany,shallbetransferredtothegeneralfundsoftheGovernment.(Emphasisours)
[73]
EntitledORDAININGANDINSTITUTINGAGOVERNMENTAUDITINGCODEOFTHEPHILIPPINES.
[74]
Section84.Disbursementofgovernmentfunds.
xxxx
2.Trust funds shall not be paid out of any public treasury or depository except in fulfillment of the purpose for which the trust was created or funds
received,anduponauthorizationofthelegislativebody,orheadofanyotheragencyofthegovernmenthavingcontrolthereof,andsubjecttopertinentbudgetlaw,
rulesandregulations.
[75]
STATUTORYCONSTRUCTION,RubenE.Agpalo,(5th ed.,2003),pp.3738.

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