Phil. Coconut Producers vs Republic Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No.

961
and Article III, Section 5 of P.D. No. 1468, are unconstitutional.
G.R. Nos. 177857-58. January 24, 2012
1) The coconut levy funds are in the nature of taxes and can only be used for
Facts: FACTS: In 1971, RA 6260 was enacted, creating the Coconut Investment public purpose. Consequently, they cannot be used to purchase shares of stocks to
Company (CIC) to administer the Coconut Investment Fund (CIF). The fund was be given for free to private individuals.
to be sourved from a PhP0.55 levy on the sale of every 100 kg of copra. Under the
regime of Marcial Law, PD 276 and 582 were enacted creating more funds, 2) Coconut levy funds are special public funds of the government.
specifically the CCSF (Coconut Consumers Stabilization Fund) and CIDF
(Coconut 3) The coconut levy funds can only be used for the special purpose and the balance
Industry Development Fund) PD 755 was enacted to provide credit facilities to thereof should revert back to the general fund. Consequently, their subsequent
coconut farmers. reclassification as a private fund to be owned by private individuals in their private
-The Philippine Coconut Administration (PCA) is authorized to handle the funds capacities under P.D. Nos. 755, 961 and 1468 are unconstitutional.
- The PCA were authorized to use the funds to acquire a bank and to deposit the
portions of fund levies. They purchased the First United Bank (FUB), later
renamed UCPB, but reimbursed the money from the funds. Ratio:
- The funds were for the benefit of coconut farmers. The funds were used to pay
for the financial commitments of farmers and provided them with free shares of the
1) Coconut levy funds partake of the nature of taxes, which, in general, are
bank.
enforced proportional contributions from persons and properties, exacted by the
- The stock certificates for the farmers were in the name of the PCA but were
State by virtue of its sovereignty for the support of government and for all public
supposed to be distributed to the farmers who possessed COCOFUND receipts
needs. They were clearly imposed for a public purpose. There is absolutely no
(PCA Administrative Order No. 1)
question that they were collected to advance the government's avowed policy of
Eduardo Cojuangco Jr. was one of the mediators of the PCA funds and it was
protecting the coconut industry. The revenues received from the imposition of the
discovered that he caused the issuance of PD 1468 (Revised Coconut Industry
coconut levies be used purely for private purposes to be owned by private
Code) through collaboration with Marcos.
individuals in their private capacity and for their benefit, would contravene the
The Aquino Administration initiated the recovery of ill-gotten gains through the
rationale behind the imposition of taxes or levies.
implementation of the following executive orders
- EO 1 – establishment of the Presidential Committee on Good Governance
2) Plainly enough, the coconut levy funds are public funds. SC has ruled in
(PCGG)
Republic v. COCOFED that the coconut levy funds are not only affected with
- EO 2 – “Ill-gotten gains” included shares of stocks
public interest; they are prima facie public funds. P.D. No. 1234 expressly stated
- EO 14 – The Sandiganbayan has exclusive jurisdiction
that coconut levies are special funds to be remitted to the Treasury in the General
The Sandiganbayan ordered the sequestration against stocks in banks owned by
Fund of the State, but treated as Special Accounts.
more than a million coconut farmers and CIIF companies.
3) Article VI, Section 29 (3) of the 1987 Constitution, restating a general principle
on taxation, enjoins the disbursement of a special fund in accordance with the
Issue: W/N Sections 1 and 2 of PD 755, Article 3, Section 5 of PD 961, and special purpose for which it was collected, the balance, if there be any, after the
Article III, Section 5 of PD 1468 are unconstitutional? purpose has been fulfilled or is no longer forthcoming, to be transferred to the
general funds of the government. not only were the challenged presidential
Ruling: issuances unconstitutional for decreeing the distribution of the shares of stock for
free to the coconut farmers and, therefore, negating the public purpose declared by
CONSTI 1 DIGEST – ARTICLE 6, SEC. 29
P.D. No. 276, i.e. , to stabilize the price of edible oil 136 and to protect the coconut
industry. 137 They likewise reclassified, nay treated, the coconut levy fund as
private fund to be disbursed and/or invested for the benefit of private individuals in
their private capacities, contrary to the original purpose for which the fund was
created. To compound the situation, the offending provisions effectively removed
the coconut levy fund away from the cavil of public funds which normally can be
paid out only pursuant to an appropriation made by law. 138 The conversion of
public funds into private assets was illegally allowed, in fact mandated, by these
provisions. Clearly therefore, the pertinent provisions of P.D. Nos. 755, 961 and
1468 are unconstitutional for violating Article VI, Section 29 (3) of the
Constitution. In this context, the distribution by PCA of the UCPB shares
purchased by means of the coconut levy fund — a special fund of the government
— to the coconut farmers, is therefore void.

CONSTI 1 DIGEST – ARTICLE 6, SEC. 29