DONNA MARIE S. AGUIRRE, complainant, vs. EDWIN L.

RANA, respondent.

DECISION
CARPIO, J.:

The Case

Before one is admitted to the Philippine Bar, he must possess the requisite
moral integrity for membership in the legal profession. Possession of moral
integrity is of greater importance than possession of legal learning. The practice
of law is a privilege bestowed only on the morally fit. A bar candidate who is
morally unfit cannot practice law even if he passes the bar examinations.

The Facts

Respondent Edwin L. Rana (respondent) was among those who passed the
2000 Bar Examinations.
On 21 May 2001, one day before the scheduled mass oath-taking of
successful bar examinees as members of the Philippine Bar, complainant
Donna Marie Aguirre (complainant) filed against respondent a Petition for
Denial of Admission to the Bar. Complainant charged respondent with
unauthorized practice of law, grave misconduct, violation of law, and grave
misrepresentation.
The Court allowed respondent to take his oath as a member of the Bar
during the scheduled oath-taking on 22 May 2001 at the Philippine International
Convention Center. However, the Court ruled that respondent could not sign
the Roll of Attorneys pending the resolution of the charge against him. Thus,
respondent took the lawyers oath on the scheduled date but has not signed the
Roll of Attorneys up to now.
Complainant charges respondent for unauthorized practice of law and grave
misconduct. Complainant alleges that respondent, while not yet a lawyer,
appeared as counsel for a candidate in the May 2001 elections before the
Municipal Board of Election Canvassers (MBEC) of Mandaon,
Masbate. Complainant further alleges that respondent filed with the MBEC a
pleading dated 19 May 2001 entitled Formal Objection to the Inclusion in the
Canvassing of Votes in Some Precincts for the Office of Vice-Mayor. In this
pleading, respondent represented himself as counsel for and in behalf of Vice
Mayoralty Candidate, George Bunan, and signed the pleading as counsel for
George Bunan (Bunan).
On the charge of violation of law, complainant claims that respondent is a
municipal government employee, being a secretary of the Sangguniang Bayan
of Mandaon, Masbate. As such, respondent is not allowed by law to act as
counsel for a client in any court or administrative body.
On the charge of grave misconduct and misrepresentation, complainant
accuses respondent of acting as counsel for vice mayoralty candidate George
Bunan (Bunan) without the latter engaging respondents services. Complainant
claims that respondent filed the pleading as a ploy to prevent the proclamation
of the winning vice mayoralty candidate.
On 22 May 2001, the Court issued a resolution allowing respondent to take
the lawyers oath but disallowed him from signing the Roll of Attorneys until he
is cleared of the charges against him. In the same resolution, the Court required
respondent to comment on the complaint against him.
In his Comment, respondent admits that Bunan sought his specific
assistance to represent him before the MBEC. Respondent claims that he
decided to assist and advice Bunan, not as a lawyer but as a person who knows
the law. Respondent admits signing the 19 May 2001 pleading that objected to
the inclusion of certain votes in the canvassing. He explains, however, that he
did not sign the pleading as a lawyer or represented himself as an attorney in
the pleading.
On his employment as secretary of the Sangguniang Bayan, respondent
claims that he submitted his resignation on 11 May 2001 which was allegedly
accepted on the same date. He submitted a copy of the Certification of Receipt
of Revocable Resignation dated 28 May 2001 signed by Vice-Mayor Napoleon
Relox. Respondent further claims that the complaint is politically motivated
considering that complainant is the daughter of Silvestre Aguirre, the losing
candidate for mayor of Mandaon, Masbate. Respondent prays that the
complaint be dismissed for lack of merit and that he be allowed to sign the Roll
of Attorneys.
On 22 June 2001, complainant filed her Reply to respondents Comment and
refuted the claim of respondent that his appearance before the MBEC was only
to extend specific assistance to Bunan. Complainant alleges that on 19 May
2001 Emily Estipona-Hao (Estipona-Hao) filed a petition for proclamation as the
winning candidate for mayor. Respondent signed as counsel for Estipona-Hao
in this petition. When respondent appeared as counsel before the MBEC,
complainant questioned his appearance on two grounds: (1) respondent had
not taken his oath as a lawyer; and (2) he was an employee of the government.
Respondent filed a Reply (Re: Reply to Respondents Comment) reiterating
his claim that the instant administrative case is motivated mainly by political
vendetta.
On 17 July 2001, the Court referred the case to the Office of the Bar
Confidant (OBC) for evaluation, report and recommendation.

OBCs Report and Recommendation

The OBC found that respondent indeed appeared before the MBEC as
counsel for Bunan in the May 2001 elections. The minutes of the MBEC
proceedings show that respondent actively participated in the proceedings. The
OBC likewise found that respondent appeared in the MBEC proceedings even
before he took the lawyers oath on 22 May 2001. The OBC believes that
respondents misconduct casts a serious doubt on his moral fitness to be a
member of the Bar. The OBC also believes that respondents unauthorized
practice of law is a ground to deny his admission to the practice of law. The
OBC therefore recommends that respondent be denied admission to the
Philippine Bar.
On the other charges, OBC stated that complainant failed to cite a law which
respondent allegedly violated when he appeared as counsel for Bunan while he
was a government employee. Respondent resigned as secretary and his
resignation was accepted. Likewise, respondent was authorized by Bunan to
represent him before the MBEC.

The Courts Ruling

We agree with the findings and conclusions of the OBC that respondent
engaged in the unauthorized practice of law and thus does not deserve
admission to the Philippine Bar.
Respondent took his oath as lawyer on 22 May 2001. However, the records
show that respondent appeared as counsel for Bunan prior to 22 May 2001,
before respondent took the lawyers oath. In the pleading entitled Formal
Objection to the Inclusion in the Canvassing of Votes in Some Precincts for the
Office of Vice-Mayor dated 19 May 2001, respondent signed as counsel for
George Bunan. In the first paragraph of the same pleading respondent stated
that he was the (U)ndersigned Counsel for, and in behalf of Vice Mayoralty
Candidate, GEORGE T. BUNAN. Bunan himself wrote the MBEC on 14 May
2001 that he had authorized Atty. Edwin L. Rana as his counsel to represent
him before the MBEC and similar bodies.
On 14 May 2001, mayoralty candidate Emily Estipona-Hao also retained
respondent as her counsel. On the same date, 14 May 2001, Erly D. Hao
informed the MBEC that Atty. Edwin L. Rana has been authorized by
REFORMA LM-PPC as the legal counsel of the party and the candidate of the
said party. Respondent himself wrote the MBEC on 14 May 2001 that he was
entering his appearance as counsel for Mayoralty Candidate Emily
Estipona-Hao and for the REFORMA LM-PPC. On 19 May 2001, respondent
signed as counsel for Estipona-Hao in the petition filed before the MBEC
praying for the proclamation of Estipona-Hao as the winning candidate for
mayor of Mandaon, Masbate.
All these happened even before respondent took the lawyers oath. Clearly,
respondent engaged in the practice of law without being a member of the
Philippine Bar.
In Philippine Lawyers Association v. Agrava, the Court elucidated that:
[1]

The practice of law is not limited to the conduct of cases or litigation in court; it
embraces the preparation of pleadings and other papers incident to actions and special
proceedings, the management of such actions and proceedings on behalf of clients
before judges and courts, and in addition, conveyancing. In general, alladvice to
clients, and all action taken for them in matters connected with the law, incorporation
services, assessment and condemnation services contemplating an appearance before a
judicial body, the foreclosure of a mortgage, enforcement of a creditor's claim in
bankruptcy and insolvency proceedings, and conducting proceedings in attachment,
and in matters of estate and guardianship have been held to constitute law practice, as
do the preparation and drafting of legal instruments,where the work done involves the
determination by the trained legal mind of the legal effect of facts and conditions. (5
Am. Jur. p. 262, 263). (Italics supplied) x x x

In Cayetano v. Monsod, the Court held that practice of law means any
[2]

activity, in or out of court, which requires the application of law, legal procedure,
knowledge, training and experience. To engage in the practice of law is to
perform acts which are usually performed by members of the legal profession.
Generally, to practice law is to render any kind of service which requires the
use of legal knowledge or skill.
Verily, respondent was engaged in the practice of law when he appeared in
the proceedings before the MBEC and filed various pleadings, without license
to do so. Evidence clearly supports the charge of unauthorized practice of law.
Respondent called himself counsel knowing fully well that he was not a member
of the Bar. Having held himself out as counsel knowing that he had no authority
to practice law, respondent has shown moral unfitness to be a member of the
Philippine Bar.[3]

The right to practice law is not a natural or constitutional right but is a

privilege. It is limited to persons of good moral character with special
qualifications duly ascertained and certified. The exercise of this privilege
presupposes possession of integrity, legal knowledge, educational attainment,
and even public trust since a lawyer is an officer of the court. A bar candidate
[4]

does not acquire the right to practice law simply by passing the bar
examinations. The practice of law is a privilege that can be withheld even from
one who has passed the bar examinations, if the person seeking admission had
practiced law without a license. [5]

The regulation of the practice of law is unquestionably strict. In Beltran, Jr.

v. Abad, a candidate passed the bar examinations but had not taken his oath
[6]

and signed the Roll of Attorneys. He was held in contempt of court for practicing
law even before his admission to the Bar. Under Section 3 (e) of Rule 71 of the
Rules of Court, a person who engages in the unauthorized practice of law is
liable for indirect contempt of court. [7]

True, respondent here passed the 2000 Bar Examinations and took the
lawyers oath. However, it is the signing in the Roll of Attorneys that finally
makes one a full-fledged lawyer. The fact that respondent passed the bar
examinations is immaterial. Passing the bar is not the only qualification to
become an attorney-at-law. Respondent should know that two essential
[8]

requisites for becoming a lawyer still had to be performed, namely: his lawyers
oath to be administered by this Court and his signature in the Roll of Attorneys. [9]

On the charge of violation of law, complainant contends that the law does
not allow respondent to act as counsel for a private client in any court or
administrative body since respondent is the secretary of the Sangguniang
Bayan.
Respondent tendered his resignation as secretary of the Sangguniang
Bayan prior to the acts complained of as constituting unauthorized practice of
law. In his letter dated 11 May 2001 addressed to Napoleon Relox, vice- mayor
and presiding officer of the Sangguniang Bayan, respondent stated that he was
resigning effective upon your acceptance. Vice-Mayor Relox accepted
[10]

respondents resignation effective 11 May 2001. Thus, the evidence does not
[11]

support the charge that respondent acted as counsel for a client while serving
as secretary of the Sangguniang Bayan.
 On the charge of grave misconduct and misrepresentation, evidence shows
that Bunan indeed authorized respondent to represent him as his counsel
before the MBEC and similar bodies. While there was no misrepresentation,
respondent nonetheless had no authority to practice law.
WHEREFORE, respondent Edwin L. Rana is DENIED admission to the
Philippine Bar.
SO ORDERED.
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and GILBERTO
SABSALON,respondents.

Edgardo G. Fernandez for petitioners.

R E SO L U T I O N

REGALADO, J.:

Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action for certiorari to annul
the decision 1of respondent National Labor Relations Commission (NLRC) ordering petitioners to pay
private respondents Domingo Maldigan and Gilberto Sabsalon their accumulated deposits and car wash
payments, plus interest thereon at the legal rate from the date of promulgation of judgment to the date of
actual payment, and 10% of the total amount as and for attorney's fees.

We have given due course to this petition for, while to the cynical the de minimis amounts involved
should not impose upon the valuable time of this Court, we find therein a need to clarify some issues
the resolution of which are important to small wage earners such as taxicab drivers. As we have
heretofore repeatedly demonstrated, this Court does not exist only for the rich or the powerful, with
their reputed monumental cases of national impact. It is also the Court of the poor or the
underprivileged, with the actual quotidian problems that beset their individual lives.

Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as taxi
drivers 2 and, as such, they worked for 4 days weekly on a 24-hour shifting schedule. Aside from the daily
"boundary" of P700.00 for air-conditioned taxi or P450.00 for non-air-conditioned taxi, they were also
required to pay P20.00 for car washing, and to further make a P15.00 deposit to answer for any
deficiency in their "boundary," for every actual working day.

In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he already failed
to report for work for unknown reasons. Later, petitioners learned that he was working for "Mine of
Gold" Taxi Company. With respect to Sabsalon, while driving a taxicab of petitioners on September
6, 1983, he was held up by his armed passenger who took all his money and thereafter stabbed him.
He was hospitalized and after his discharge, he went to his home province to recuperate.

In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the same terms and
conditions as when he was first employed, but his working schedule was made on an "alternative
basis," that is, he drove only every other day. However, on several occasions, he failed to report for
work during his schedule.

On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for the previous day.
Also, he abandoned his taxicab in Makati without fuel refill worth P300.00. Despite repeated
requests of petitioners for him to report for work, he adamantly refused. Afterwards it was revealed
that he was driving a taxi for "Bulaklak Company."

Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily cash deposits
for 2 years, but herein petitioners told him that not a single centavo was left of his deposits as these
were not even enough to cover the amount spent for the repairs of the taxi he was driving. This was
allegedly the practice adopted by petitioners to recoup the expenses incurred in the repair of their
taxicab units. When Maldigan insisted on the refund of his deposit, petitioners terminated his
services. Sabsalon, on his part, claimed that his termination from employment was effected when he
refused to pay for the washing of his taxi seat covers.

On November 27, 1991, private respondents filed a complaint with the Manila Arbitration Office of
the National Labor Relations Commission charging petitioners with illegal dismissal and illegal
deductions. That complaint was dismissed, the labor arbiter holding that it took private respondents
two years to file the same and such unreasonable delay was not consistent with the natural reaction
of a person who claimed to be unjustly treated, hence the filing of the case could be interpreted as a
mere afterthought.

Respondent NLRC concurred in said findings, with the observation that private respondents failed to
controvert the evidence showing that Maldigan was employed by "Mine of Gold" Taxi Company from
February 10, 1987 to December 10, 1990; that Sabsalon abandoned his taxicab on September 1,
1990; and that they voluntarily left their jobs for similar employment with other taxi operators. It,
accordingly, affirmed the ruling of the labor arbiter that private respondents' services were not
illegally terminated. It, however, modified the decision of the labor arbiter by ordering petitioners to
pay private respondents the awards stated at the beginning of this resolution.

Petitioners' motion for reconsideration having been denied by the NLRC, this petition is now before
us imputing grave abuse of discretion on the part of said public respondent.

This Court has repeatedly declared that the factual findings of quasi-judicial agencies like the NLRC,
which have acquired expertise because their jurisdiction is confined to specific matters, are generally
accorded not only respect but, at times, finality if such findings are supported by substantial
evidence. 3 Where, however, such conclusions are not supported by the evidence, they must be struck
4
down for being whimsical and capricious and, therefore, arrived at with grave abuse of discretion.

Respondent NLRC held that the P15.00 daily deposits made by respondents to defray any shortage
in their "boundary" is covered by the general prohibition in Article 114 of the Labor Code against
requiring employees to make deposits, and that there is no showing that the Secretary of Labor has
recognized the same as a "practice" in the taxi industry. Consequently, the deposits made were
illegal and the respondents must be refunded therefor.

Article 114 of the Labor Code provides as follows:

Art. 114. Deposits for loss or damage. No employer shall require his worker to
make deposits from which deductions shall be made for the reimbursement of loss of
or damage to tools, materials, or equipment supplied by the employer, except when
the employer is engaged in such trades, occupations or business where the practice
of making deposits is a recognized one, or is necessary or desirable as determined
by the Secretary of Labor in appropriate rules and regulations.

It can be deduced therefrom that the said article provides the rule on deposits for loss or damage to
tools, materials or equipments supplied by the employer. Clearly, the same does not apply to or
permit deposits to defray any deficiency which the taxi driver may incur in the remittance of his
"boundary." Also, when private respondents stopped working for petitioners, the alleged purpose for
which petitioners required such unauthorized deposits no longer existed. In other case, any balance
due to private respondents after proper accounting must be returned to them with legal interest.

However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:
 YEAR DEPOSITS SHORTAGES VALES

1987 P 1,403.00 P 567.00 P 1,000.00

1988 720.00 760.00 200.00

1989 686.00 130.00 1,500.00

1990 605.00 570.00

1991 165.00 2,300.00

P 3,579.00 P 4,327.00 P 2,700.00

The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw his deposits
through valesor he incurred shortages, such that he is even indebted to petitioners in the amount of
P3,448.00. With respect to Maldigan's deposits, nothing was mentioned questioning the same even
in the present petition. We accordingly agree with the recommendation of the Solicitor General that
since the evidence shows that he had not withdrawn the same, he should be reimbursed the amount
of his accumulated cash deposits. 5

On the matter of the car wash payments, the labor arbiter had this to say in his decision: "Anent the
issue of illegal deductions, there is no dispute that as a matter of practice in the taxi industry, after a
tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean
condition when he took it out, and as claimed by the respondents (petitioners in the present case),
complainant(s) (private respondents herein) were made to shoulder the expenses for washing, the
amount doled out was paid directly to the person who washed the unit, thus we find nothing illegal in
this practice, much more (sic) to consider the amount paid by the driver as illegal deduction in the
context of the law." 6 (Words in parentheses added.)

Consequently, private respondents are not entitled to the refund of the P20.00 car wash payments
they made. It will be noted that there was nothing to prevent private respondents from cleaning the
taxi units themselves, if they wanted to save their P20.00. Also, as the Solicitor General correctly
noted, car washing after a tour of duty is a practice in the taxi industry, and is, in fact, dictated by fair
play.

On the last issue of attorney's fees or service fees for private respondents' authorized
representative, Article 222 of the Labor Code, as amended by Section 3 of Presidential Decree No.
1691, states that non-lawyers may appear before the NLRC or any labor arbiter only (1) if they
represent themselves, or (2) if they represent their organization or the members thereof. While it
may be true that Guillermo H. Pulia was the authorized representative of private respondents, he
was a non-lawyer who did not fall in either of the foregoing categories. Hence, by clear mandate of
the law, he is not entitled to attorney's fees.

Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client a
reasonable compensation for his services 7 necessarily imports the existence of an attorney-client
relationship as a condition for the recovery of attorney's fees, and such relationship cannot exist unless
the client's representative is a lawyer. 8
WHEREFORE, the questioned judgment of respondent National Labor Relations Commission is
hereby MODIFIED by deleting the awards for reimbursement of car wash expenses and attorney's
fees and directing said public respondent to order and effect the computation and payment by
petitioners of the refund for private respondent Domingo Maldigan's deposits, plus legal interest
thereon from the date of finality of this resolution up to the date of actual payment thereof.

SO ORDERED.
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. LEONCIO
SANTOCILDES, JR. y SIGA-AN, accused-appellant.

DECISION
QUISUMBING, J.:

Where an accused was not duly represented by a member of the Philippine Bar
during trial, the judgment should be set aside and the case remanded to the trial court
for a new trial. A person who misrepresents himself as a lawyer shall be held liable for
indirect contempt of court.
Subject of the present appeal is the decision dated October 29, 1992, of the Regional
Trial Court of Iloilo City, Branch 33, convicting accused-appellant of the crime of rape,
sentencing him to suffer the penalty of reclusion perpetua, and ordering him to pay the
offended party the amount of P50,000.00 and to pay the costs.
The antecedent facts of the case are as follows:
On February 17, 1992, appellant was charged with the crime of rape[1] of a girl less
than nine (9) years old, committed on December 28, 1991, in the town of Barangay San
Luis, San Joaquin, Iloilo.
Upon arraignment, appellant entered a plea of not guilty. Trial ensued and the
prosecution presented as its witnesses the victim, her mother, her six (6) year-old
playmate, and the medico-legal officer who examined the victim.
For the defense, appellant presented one German Toriales and himself. Appellant
denied committing the rape and claimed that he merely tried to stop the two girls, the
victim and her playmate, from quarreling.
On October 29, 1992, the trial court rendered a decision [2] finding appellant guilty as
charged. The dispositive portion of the decision states:

WHEREFORE, the Court finds the accused guilty beyond reasonable doubt of the
crime of rape and sentences him to suffer the penalty of reclusion perpetuatogether its
accessory penalty. The accused is ordered to pay the amount of P50,000.00 to the
complainant and another amount for costs, without subsidiary penalty in case of
failure to pay the civil liability and the cost.

If qualified under Art. 29 of the Revised Penal Code, as amended by R.A. 6127, as
amended, and he has agreed in writing to abide by the same rules imposed upon
convicted prisoners, he shall be credited with the full duration of his preventive
imprisonment; otherwise, he shall only be credited with 4/5 of the same.

SO ORDERED.
 Hence, appellant duly filed a Notice of Appeal.[3] In his brief,[4] appellant made the following
assignment of errors:

I. THE HONORABLE TRIAL COURT COMMITTED REVERSIBLE ERROR IN

FINDING THAT THE ACCUSED IS GUILTY OF RAPE INSPITE OF
CONFLICTING TESTIMONIES OF THE PRIVATE COMPLAINANT AND HER
WITNESSES ON MATERIAL POINTS.

II. THAT THE ACCUSED-APPELLANT WAS DEPRIVED THOUGH NO FAULT

OF HIS OWN TO BE DEFENDED BY A PERSON AUTHORIZED TO PRACTICE
LAW AMOUNTING TO DENIAL OF DUE PROCESS.

Considering the importance of the constitutional right to counsel, we shall now first
resolve the issue of proper representation by a member of the bar raised by appellant.
Appellant contends that he was represented during trial by a person named
Gualberto C. Ompong, who for all intents and purposes acted as his counsel and even
conducted the direct examination and cross-examinations of the witnesses. On appeal,
however, appellant secured the services of a new lawyer, Atty. Igmedio S. Prado, Jr.,
who discovered that Gualberto C. Ompong is actually not a member of the bar. Further
verification with the Office of the Bar Confidant confirmed this fact.[5] Appellant therefore
argues that his deprivation of the right to counsel should necessarily result in his
acquittal of the crime charged.
The Office of the Solicitor General, on the other hand, maintains that
notwithstanding the fact that appellants counsel during trial was not a member of the
bar, appellant was afforded due process since he has been given an opportunity to be
heard and the records reveal that said person presented the evidence for the defense with
the ability of a seasoned lawyer and in general handled the case of appellant in a
professional and skillful manner. However, the right of the accused to be heard by
himself and his counsel, in our view, goes much deeper than the question of ability or
skill. It lies at the heart of our adversarial system of justice. Where the interplay of basic
rights of the individual may collide with the awesome forces of the state, we need a
professional learned in the law as well as ethically committed to defend the accused by
all means fair and reasonable.
On the matter of proper representation by a member of the bar, we had occasion to
resolve a similar issue in the case of Delgado v. Court of Appeals.[6] InDelgado,
petitioner and two others were convicted by the trial court of the crime of estafa thru
falsification of public and/or official documents. One accused did not appeal. Petitioner
Delgado and her remaining co-accused appealed to the Court of Appeals, which
affirmed petitioners conviction but acquitted her co-accused. After entry of judgment,
petitioner discovered that her lawyer was not a member of the bar and moved to set
aside the entry of judgment. The Court of Appeals denied petitioners motion, hence,
she filed a petition for certiorari with this Court. The Court set aside the assailed
judgment and remanded the case to the trial court for a new trial, explaining that -

This is so because an accused person is entitled to be represented by a member of the

bar in a criminal case filed against her before the Regional Trial Court. Unless she is
represented by a lawyer, there is great danger that any defense presented in her behalf
will be inadequate considering the legal perquisites and skills needed in the court
proceedings. This would certainly be a denial of due process.[7]

Indeed, the right to counsel is of such primordial importance that even if an accused
was represented by three successive counsels from the Public Attorneys Office, the
Court has ordered the remand of a rape case when it found that accused was given mere
perfunctory representation by aforesaid counsels such that appellant was not properly
and effectively accorded the right to counsel. In the recent en banc case of People v.
Bermas, G.R. No. 120420, April 21, 1999, the Court, speaking through Justice Vitug,
admonished three (3) PAO lawyers for failing to genuinely protect the interests of the
accused and for having fallen much too short of their responsibility as officers of the
court and as members of the Bar. Verily, we can do no less where the accused was not
even duly represented by a certified member of the Philippine Bar, no matter how
zealous his representation might have been.
The presence and participation of counsel in criminal proceedings should never be
taken lightly.[8] Even the most intelligent or educated man may have no skill in the science of the law, particularly
in the rules of procedure, and, without counsel, he may be convicted not because he is guilty but because he does not
know how to establish his innocence.[9] The right of an accused to counsel is guaranteed to minimize the imbalance in
the adversarial system where the accused is pitted against the awesome prosecutory machinery of the State. [10] Such a
right proceeds from the fundamental principle of due process which basically means that a person must be heard before
being condemned. The due process requirement is a part of a persons basic rights; it is not a mere formality that may
be dispensed with or performed perfunctorily.[11]

The right to counsel of an accused is enshrined in no less than Article III, Sections
12 and 14 (2) of the 1987 Constitution. This constitutional mandate is reflected in
Section 1 of Rule 115 of the 1985 Rules of Criminal Procedure which declares the right
of the accused at the trial to be present in person and by counsel at every stage of the
proceedings from the arraignment to the promulgation of judgment. In turn, Section 5
of Article VIII of the 1987 Constitution vests the power to promulgate rules concerning
the admission to the practice of law to the Supreme Court. Section 1 of Rule 138 of the
Rules of Court explicitly states who are entitled to practice law in the Philippines, and
Section 2 thereof clearly provides for the requirements for all applicants for admission
to the bar. Jurisprudence has also held that the right to practice law is not a natural or
constitutional right but is in the nature of a privilege or franchise. It is limited to persons
of good moral character with special qualifications duly ascertained and certified. The
right does not only presuppose in its possessor integrity, legal standing and attainment,
but also the exercise of a special privilege, highly personal and partaking of the nature
of a public trust.[12] Indeed, so strict is the regulation of the practice of law that
in Beltran, Jr. v. Abad,[13] a Bar candidate who has already successfully hurdled the Bar
examinations but has not yet taken his oath and signed the roll of attorneys, and who
was caught in the unauthorized practice of law was held in contempt of court. Under
Section 3 (e) of Rule 71 of the Rules of Court, a person who undertakes the unauthorized
practice of law is liable for indirect contempt of court for assuming to be an attorney
and acting as such without authority.
WHEREFORE, the assailed judgment is SET ASIDE, and the case is hereby
REMANDED to the trial court for new trial.
With respect to the unauthorized practice of law by the person named Gualberto C.
Ompong in connection with this case, the local Chapter of the Integrated Bar of the
Philippines of Iloilo City is DIRECTED to conduct a prompt and thorough investigation
regarding this matter and to report its recommendations to the Court within ninety (90)
days from notice of this order. Let all concerned parties, including the Office of the Bar
Confidant, be each furnished a copy of this Decision for their appropriate action.
No pronouncement as to costs.
SO ORDERED.
PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS (PAFLU), ENRIQUE ENTILA &
VICTORIANO TENAZASpetitioners,
vs.
BINALBAGAN ISABELA SUGAR COMPANY, COURT OF INDUSTRIAL RELATIONS, & QUINTIN
MUNINGrespondents.

Cipriano Cid & Associates for petitioners.

Ceferino Magat and Manuel C. Gonzales for respondent Quintin Muning.

REYES, J.B.L., J.:

May a non-lawyer recover attorney's fees for legal services rendered? This is the issue presented in
this petition for review of an order, dated 12 May 1964, and the en banc resolution, dated 8
December 1964, of the Court of Industrial Relations, in its Case No. 72-ULP-Iloilo, granting
respondent Quintin Muning a non-lawyer, attorney's fees for professional services in the said case.

The above-named petitioners were complainants in Case No. 72-ULP-Iloilo entitled, "PAFLU et al.
vs. Binalbagan Isabela Sugar Co., et al." After trial, the Court of Industrial Relations rendered a
decision, on 29 March 1961, ordering the reinstatement with backwages of complainants Enrique
Entila and Victorino Tenazas. Said decision became final. On 18 October 1963, Cipriano Cid &
Associates, counsel of record for the winning complainants, filed a notice of attorney's lien equivalent
to 30% of the total backwages. On 22 November 1963, Atty. Atanacio Pacis also filed a similar
notice for a reasonable amount. Complainants Entila and Tenazas on 3 December 1963, filed a
manifestation indicating their non-objection to an award of attorney's fees for 25% of their
backwages, and, on the same day, Quentin Muning filed a "Petition for the Award of Services
Rendered" equivalent to 20% of the backwages. Munings petition was opposed by Cipriano Cid &
Associates the ground that he is not a lawyer.

The records of Case No. 72-ULP-Iloilo show that the charge was filed by Cipriano Cid & Associates
through Atty. Atanacio Pacis. All the hearings were held in Bacolod City and appearances made in
behalf of the complainants were at first by Attorney Pacis and subsequently by respondent Quintin
Muning.

On 12 May 1964, the Court of Industrial Relations awarded 25% of the backwages as compensation
for professional services rendered in the case, apportioned as follows:

Attys. Cipriano Cid & Associates ............................................. 10%

Quintin Muning ......................................................................... 10%

Atty. Atanacio Pacis ................................................................. 5%

The award of 10% to Quintin Muning who is not a lawyer according to the order, is sought to be
voided in the present petition.

Respondent Muning moved in this Court to dismiss the present petition on the ground of late filing
but his motion was overruled on 20 January 1965. 1 He asked for reconsideration, but, considering that
the motion contained averments that go into the merits of the case, this Court admitted and considered
the motion for reconsideration for all purposes as respondent's answer to the petitioner for review. 2 The
case was considered submitted for decision without respondent's brief. 3

Applicable to the issue at hand is the principle enunciated in Amalgamated Laborers' Association, et
al. vs. Court of Industrial Relations, et al., L-23467, 27 March 1968, 4 that an agreement providing for
the division of attorney's fees, whereby a non-lawyer union president is allowed to share in said fees with
lawyers, is condemned by Canon 34 of Legal Ethics and is immoral and cannot be justified. An award by
a court of attorney's fees is no less immoral in the absence of a contract, as in the present case.

The provision in Section 5(b) of Republic Act No. 875 that

In the proceeding before the Court or Hearing Examiner thereof, the parties shall not
be required to be represented by legal counsel ...

is no justification for a ruling, that the person representing the party-litigant in the Court of Industrial
Relations, even if he is not a lawyer, is entitled to attorney's fees: for the same section adds that

it shall be the duty and obligation of the Court or Hearing Officer to examine and
cross examine witnesses on behalf of the parties and to assist in the orderly
presentation of evidence.

thus making it clear that the representation should be exclusively entrusted to duly qualified
members of the bar.

The permission for a non-member of the bar to represent or appear or defend in the said court on
behalf of a party-litigant does not by itself entitle the representative to compensation for such
representation. For Section 24, Rule 138, of the Rules of Court, providing

Sec. 24. Compensation of attorney's agreement as to fees. An attorney shall be

entitled to have and recover from his client no more than a reasonable compensation
for his services, ...

imports the existence of an attorney-client relationship as a condition to the recovery of attorney's

fees. Such a relationship cannot exist unless the client's representative in court be a lawyer. Since
respondent Muning is not one, he cannot establish an attorney-client relationship with Enrique Entila
and Victorino Tenezas or with PAFLU, and he cannot, therefore, recover attorney's fees. Certainly
public policy demands that legal work in representation of parties litigant should be entrusted only to
those possessing tested qualifications and who are sworn, to observe the rules and the ethics of the
profession, as well as being subject to judicial disciplinary control for the protection of courts, clients
and the public.

On the present issue, the rule in American jurisdictions is persuasive. There, it is stated:

But in practically all jurisdictions statutes have now been enacted prohibiting persons
not licensed or admitted to the bar from practising law, and under statutes of this
kind, the great weight of authority is to the effect that compensation for legal services
cannot be recovered by one who has not been admitted to practice before the court
or in the jurisdiction the services were rendered. 5

No one is entitled to recover compensation for services as an attorney at law unless he

has been duly admitted to practice ... and is an attorney in good standing at the time. 6
The reasons are that the ethics of the legal profession should not be violated; 7 that acting as an
attorney with authority constitutes contempt of court, which is punishable by fine or imprisonment or
both, 8 and the law will not assist a person to reap the fruits or benefit of an act or an act done in violation
of law; 9 and that if were to be allowed to non-lawyers, it would leave the public in hopeless confusion as
to whom to consult in case of necessity and also leave the bar in a chaotic condition, aside from the fact
that non-lawyers are not amenable to disciplinary measures. 10

And the general rule above-stated (referring to non-recovery of attorney's fees by

non-lawyers) cannot be circumvented when the services were purely legal, by
seeking to recover as an "agent" and not as an attorney. 11

The weight of the reasons heretofore stated why a non-lawyer may not be awarded attorney's fees
should suffice to refute the possible argument that appearances by non-lawyers before the Court of
Industrial Relations should be excepted on the ground that said court is a court of special
jurisdiction; such special jurisdiction does not weigh the aforesaid reasons and cannot justify an
exception.

The other issue in this case is whether or not a union may appeal an award of attorney's fees which
are deductible from the backpay of some of its members. This issue arose because it was the union
PAFLU, alone, that moved for an extension of time to file the present petition for review; union
members Entila and Tenazas did not ask for extension but they were included as petitioners in the
present petition that was subsequently filed, it being contended that, as to them (Entila and
Tenazas), their inclusion in the petition as co-petitioners was belated.

We hold that a union or legitimate labor organization may appeal an award of attorney's fees which
are deductible from the backpay of its members because such union or labor organization is
permitted to institute an action in the industrial court, 12 on behalf of its members; and the union was
organized "for the promotion of the emloyees' moral, social and economic well-being"; 13 hence, if an
award is disadvantageous to its members, the union may prosecute an appeal as an aggrieved party,
under Section 6, Republic Act 875, which provides:

Sec. 6. Unfair Labor Practice cases Appeals. Any person aggrieved by any
order of the Court may appeal to the Supreme Court of the Philippines ...,

since more often than not the individual unionist is not in a position to bear the financial burden of
litigations.

Petitioners allege that respondent Muning is engaged in the habitual practice of law before the Court
of Industrial Relations, and many of them like him who are not licensed to practice, registering their
appearances as "representatives" and appearing daily before the said court. If true, this is a serious
situation demanding corrective action that respondent court should actively pursue and enforce by
positive action to that purpose. But since this matter was not brought in issue before the court a quo,
it may not be taken up in the present case. Petitioners, however, may file proper action against the
persons alleged to be illegally engaged in the practice of law.

WHEREFORE, the orders under review are hereby set aside insofar as they awarded 10% of the
backwages as attorney's fees for respondent Quintin Muning. Said orders are affirmed in all other
respects. Costs against respondent Muning.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and
Makasiar, JJ. concur.
Cherylette P. Lingao January 6, 2012

PALE 3-S

Presidential Commission on Good Government vs. Sandiganbayan

April 12, 2005

455 SCRA 526

Facts:

General Bank and Trust Company was declared insolvent by the Central Bank and subjected it to

liquidation. A public bidding followed, which was bought by the highest bidder, Lucio Tan. Thereafter, the

government, represented by then Solicitor General, Estelito Mendoza, filed a petition with the trial court

praying for the assistance and supervision of the court in GENBANKs liquidation docketed as Special

Proceeding No. 107812.

After the end of the Marcos administration, and the election of Corazon Aquino as president,

Presidential Commision on Good Governance (PCGG) was formed to recover the alleged ill-gotten wealth

of the Marcos family and his cronies.

One of the first civil cases filed by the PCGG in the Sandiganbayan was a complaint for reversion,

reconveyance, restitution, accounting and damages against respondents Tan et al. and the then First

Couple, Ferdinand and Imelda Marcos together with several others.

By the time Civil Cases Nos. 0005 and 0096-0099 were filed, Estelito Mendoza has returned to his

private life together into the private practice of law. He was engaged as counsel for respondents Tan, et
al. and thereafter filed petitions for certiorari, prohibition and injunction to annul the writs of

sequestration issued by the PCGG.

This led to the filing of several motions by the PCGG to disqualify Mendoza from the cases he was

representing for the respondents, alleging that as former Solicitor General, he actively intervened in the

liquidation proceedings of GENBANK (currently Allied Bank) that was acquired by the same group of Tan

et al.

The allegation of the government in its motions stresses that as former Solicitor General, and

acting as counsel for Central Bank, he advised the Central Banks officials on how to go about with the

procedure of the liquidation. In doing so, PCGG says that he violated Rule 6.03 of the Code of Professional

Responsibility, prohibiting former government lawyers from accepting engagement or employment in

connection with any matter in which he had intervened while in said service.

The Sandinbayan, through a resolution, denied the motion to disqualify which led to the filing of

a petition for certiorari and prohibition before the Supreme Court.

Issues:

Whether or not the definitions of matter and intervene as interpreted by the PCGG are the same as

the definitions contemplated by the Code of Professional Responsibility

And,

Whether or not Estelito Mendoza violated Rule 6.03 of the Code of Professional Responsibility in his

engagement with the civil cases involving Tan, et al.

Held:
 The issues were resolved both in the negative.

The Court resolved the case by going through the history of the adoption of the Code of the

Professional Conduct from the American System and stating the rationale behind Rule 6.03. The evil

sought to be prevented is that a government lawyers actions be influenced by the temptation to take

action on behalf of the government client that latter could be to the advantage of parties who might later

become private practice clients.

In the adoption of the said rule from Canon 36 paragraph 2 of the American Bar Associations

Canons of Professional Ethics, the Integrated Bar of the Philippines replaced the phrase investigated and

passed upon with the word intervened.

This led to the explanation behind the phrasing of the canon in the American Legal System where

members of the ABA addressed the issues of revolving door, adverse-interest conflicts, and

congruent-interest conflicts.

ABA further defined the following terms:

Revolving Door: the process by which lawyers and others temporarily enter the government

service from private life then leave it for large fees in private practice, where they can exploit

information, contacts and influence gathered while in government service.

Adverse-interest conflicts: exists when a former government lawyer represents a client in private

practice in which the matter is substantially related to a matter that the lawyer dealt with while

employed by the government and the interests of the current and former are adverse

Congruent-interest conflicts: where former government lawyers are prohibited from representing

a client in private practice even if the interests of the former government client and new client

are entirely parallel.

 It was through the definitions that the Court ruled that Mendozas case does not involve an

adverse-interest conflict because he has not shown any adverse interest when he acted as Solicitor

General in the Special Proceeding case and as counsel for the Civil cases pending before the

Sandiganbayan.

As to the violation of Rule 6.03 of the Code of Professional Responsibility, the Court shed light

through the definitions of matter and intervention based on the Formal Opinion 342 of the American

Bar Association.

Matter is any discrete, isolatable act as well as identifiable transaction or conduct involving a

particular situation and specific party and not merely an act of drafting, enforcing, or interpreting

government or agency procedures, regulations or laws, or briefing abstract principles of law.

Intervention was classified in two definitions.

The first includes the participation in a proceeding even if the intervention is irrelevant or has no

effect or little influence as implied from the definition of intervene which is to occur, fall, or come

in between points of time or events.

While the second includes an act of a person who has the power to influence the subject

proceeding which is rooted from the definition of intervene to come in or between by way of

hindrance or modification and that interference which may affect the interests of others.

The Court said that it is beyond doubt that matter or the act of Mendoza as Solicitor General in

the liquidation case, advising the Central Bank on how to proceed with it, is not the matter

contemplated by Rule 6.03 of the Code of Professional Responsibility.

 The ABA Formal Opinion No. 342 stressed that the matter which will not disqualify a lawyer would

be the mere drafting, enforcing, or interpreting government or agency procedures, regulations or laws,

or briefing abstract principles of law.

The matter where Mendoza got himself involved with was in acting as counsel for the Central

Bank; he informed them of the proper procedure provided by law to liquidate GENBANK through the filing

of the necessary petition in the RTC of Manila.

Mendoza is not privy to the decision of the Central Bank to liquidate GENBANK nor was he

involved in the sale of GENBANK to presently Allied Bank. Furthermore, the matter of liquidation involved

in the Special Proceeding case is entirely different from the matter of sequestration involved in the Civil

Cases.

Moreover, Rule 6.03 of the Code of Professional Responsibility cannot apply to Mendoza because

his alleged intervention as Solicitor General is an intervention on a matter different from the sequestration

of stocks as ill-gotten wealth in the Civil Case. The Court opines that the second interpretation of

intervention is more fitting to the intention of the law based on its historical background.

There can be no intervention when a government lawyer acts only in drafting, enforcing, or

interpreting government or agency procedures, regulations or laws. It has to be that the lawyer

participated personally and substantially in a matter related to his office. To this, the PCGG failed to

substantiate that Mendoza played a significant and substantial intervention in the Special Proceeding

case.

Acting as Solicitor General, he had to sign the petition as an initiatory pleading for the Central

Bank. The assistance extended to the Central Bank by Mendoza was only that of an agent of the

government more than a court litigator acting in behalf of the government. It is still the Central Bank that
has the sole authority and jurisdiction to promulgate the rules and regulations in the liquidation of

insolvent banks.

For these reasons, the Court denied the petitions of the PCGG in disqualifying Estelito Mendoza

as counsel for respondents Tan, et al.

REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT (PCGG), petitioner,
vs.
COCOFED, ET AL. and BALLARES, ET AL.,1 EDUARDO M. COJUANGCO JR. and the
SANDIGANBAYAN (First Division) respondents.

PANGANIBAN, J.:

The right to vote sequestered shares of stock registered in the names of private individuals or
entitles and alleged to have been acquired with ill-gotten wealth shall, as a rule, be exercised by the
registered owner. The PCGG may, however, be granted such voting right provided in can (1)
show prima facie evidence that the wealth and/or the shares are indeed ill-gotten; and (2)
demonstrate imminent danger of dissipation of the assets, thus necessitating their continued
sequestration and voting by the government until a decision, ruling with finality on their ownership, is
promulgated by the proper court. 1wphi1.nt

However, the foregoing "two-tiered" test does not apply when the sequestered stocks are acquired
with funds that are prima facie public in character or, at least, are affected with public interest.
Inasmuch as the subject UCPB shares in the present case were undisputably acquired with coco
levy funds which are public in character, then the right to vote them shall be exercised by the PCGG.
In sum, the "public character" test, not the "two-tiered" one, applies in the instant controversy.

The Case

Before us is a Petition for Certiorari with a prayer for the issuance of a temporary restraining order
and/or a writ of preliminary injunction under Rule 65 of the Rules of Court, seeking to set aside the
February 28, 2001 Order2 of the First Division of the Sandiganbayan3 in Civil Case Nos. 0033-A,
0033-B and 0033-F. The pertinent portions of the assailed Order read as follows:

"In view hereof, the movants COCOFED, et al. and Ballares, et al. as well as Eduardo
Cojuangco, et al., who were acknowledged to be registered stockholders of the UCPB are
authorized, as are all other registered stockholders of the United Coconut Planters Bank,
until further orders from this Court, to exercise their rights to vote their shares of stock and
themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled
Stockholders' Meeting on March 6, 2001 or on any subsequent continuation or resetting
thereof, and to perform such acts as will normally follow in the exercise of these rights as
registered stockholders.

"Since by way of form, the pleadings herein had been labeled as praying for an injunction,
the right of the movants to exercise their right as abovementioned will be subject to the
posting of a nominal bond in the amount of FIFTY THOUSAND PESOS (P50,000.00) jointly
for the defendants COCOFED, et al. and Ballares, et al., as well as all other registered
stockholders of sequestered shares in that bank, and FIFTY THOUSAND PESOS
(P50,000.00) for Eduardo Cojuangco, Jr., et al., to answer for any undue damage or injury to
the United Coconut Planters Bank as may be attributed to their exercise of their rights as
registered stockholders."4

The Antecedents
The very roots of this case are anchored on the historic events that transpired during the change of
government in 1986. Immediately after the 1986 EDSA Revolution, then President Corazon C.
Aquino issued Executive Order (EO) Nos. 1,5 26 and 14.7

"On the explicit premise that 'vast resources of the government have been amassed by former
President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and
abroad,' the Presidential Commission on Good Government (PCGG) was created by Executive
Order No. 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether
located in the Philippines or abroad."8

Executive Order No. 2 states that the ill-gotten assets and properties are in the form of bank
accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominiums,
mansions, residences, estates, and other kinds of real and personal properties in the Philippines and
in various countries of the world.9

Executive Order No. 14, on the other hand, empowered the PCGG, with the assistance of the Office
of the Solicitor General and other government agencies, inter alia, to file and prosecute all cases
investigated by it under EO Nos. 1 and 2.

Pursuant to these laws, the PCGG issued and implemented numerous sequestrations, freeze orders
and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal.10

Among the properties sequestered by the Commission were shares of stock in the United Coconut
Planters Bank (UCPB) registered in the names of the alleged "one million coconut farmers," the so-
called Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent
Eduardo Cojuangco Jr. (hereinafter "Cojuangco").

In connection with the sequestration of the said UCPB shares, the PCGG, on July 31, 1987,
instituted an action for reconveyance, reversion, accounting, restitution and damages docketed as
Case No. 0033 in the Sandiganbayan.

On November 15, 1990, upon Motion11 of Private Respondent COCOFED, the Sandiganbayan
issued a Resolution12 lifting the sequestration of the subject UCPB shares on the ground that herein
private respondents in particular, COCOFED and the so-called CIIF companies had not been
impleaded by the PCGG as parties-defendants in its July 31, 1987 Complaint for reconveyance,
reversion, accounting, restitution and damages. The Sandiganbayan ruled that the Writ of
Sequestration issued by the Commission was automatically lifted for PCGG's failure to commence
the corresponding judicial action within the six-month period ending on August 2, 1987 provided
under Section 26, Article XVIII of the 1987 Constitution. The anti-graft court noted that though these
entities were listed in an annex appended to the Complaint, they had not been named as parties-
respondents.

This Sandiganbayan Resolution was challenged by the PCGG in a Petition for Certiorari docketed as
GR No. 96073 in this Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the
holding of elections for the Board of Directors of UCPB. However, the PCGG applied for and was
granted by this Court a Restraining Order enjoining the holding of the election. Subsequently, the
Court lifted the Restraining Order and ordered the UCPB to proceed with the election of its board of
directors. Furthermore, it allowed the sequestered shares to be voted by their registered owners.

The victory of the registered shareholders was fleeting because the Court, acting on the solicitor
general's Motion for Clarification/Manifestation, issued a Resolution on February 16, 1993, declaring
that "the right of petitioners [herein private respondents] to vote stock in their names at the meetings
of the UCPB cannot be conceded at this time. That right still has to be established by them before
the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and
cannot be accorded the right to vote them."13 The dispositive portion of the said Resolution reads as
follows:

"IN VIEW OF THE FOREGOING, the Court recalls and sets aside the Resolution dated
March 3, 1992 and, pending resolution on the merits of the action at bar, and until further
orders, suspends the effectivity of the lifting of the sequestration decreed by the
Sandiganbayan on November 15, 1990, and directs the restoration of the status quo ante, so
as to allow the PCGG to continue voting the shares of stock under sequestration at the
meetings of the United Coconut Planters Bank."14

On January 23, 1995, the Court rendered its final Decision in GR No. 96073, nullifying and setting
aside the November 15, 1990 Resolution of the Sandiganbayan which, as earlier stated, lifted the
sequestration of the subject UCPB shares. The express impleading of herein Respondents
COCOFED et al. was deemed unnecessary because "the judgment may simply be directed against
the shares of stock shown to have been issued in consideration of ill-gotten wealth."15 Furthermore,
the companies "are simply the res in the actions for the recovery of illegally acquires wealth, and
there is, in principle, no cause of action against them and no ground to implead them as defendants
in said case."16

A month thereafter, the PCGG pursuant to an Order of the Sandiganbayan subdivided Case No.
0033 into eight Complaints and docketed them as Case Nos. 0033-A to 0033-H.

Six years later, on February 13, 2001, the Board of Directors of UCPB received from the ACCRA
Law Office a letter written on behalf of the COCOFED and the alleged nameless one million coconut
farmers, demanding the holding of a stockholders' meeting for the purpose of, among others,
electing the board of directors. In response, the board approved a Resolution calling for a
stockholders' meeting on March 6, 2001 at three o'clock in the afternoon.

On February 23, 2001, "COCOFED, et al. and Ballares, et al." filed the "Class Action Omnibus
Motion"17 referred to earlier in Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F, asking
the court a quo:

"1. To enjoin the PCGG from voting the UCPB shares of stock registered in the respective
names of the more than one million coconut farmers; and

"2. To enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIIF
holding companies including those registered in the name of the PCGG."18

On February 28, 2001, respondent court, after hearing the parties on oral argument, issued the
assailed Order.

Hence, this Petition by the Republic of the Philippines represented by the PCGG.19

The case had initially been raffled to this Court's Third Division which, by a vote of 3-2,20 issued a
Resolution21requiring the parties to maintain the status quo existing before the issuance of the
questioned Sandiganbayan Order dated February 28, 2001. On March 7, 2001, Respondent
COCOFED et al. moved that the instant Petition be heard by the Court en banc.22 The Motion was
unanimously granted by the Third Division.
On March 13, 2001, the Court en banc resolved to accept the Third Division's referral.23 It heard the
case on Oral Argument in Baguio City on April 17, 2001. During the hearing, it admitted the
intervention of a group of coconut farmers and farm worker organizations, the Pambansang
Koalisyon ng mga Samahang Magsasaka at Manggagawa ng Niyugan (PKSMMN). The coalition
claims that its members have been excluded from the benefits of the coconut levy fund. Inter alia, it
joined petitioner in praying for the exclusion of private respondents in voting the sequestered shares.

Issues

Petitioner submits the following issues for our consideration:24

"A.

Despite the fact that the subject sequestered shares were purchased with coconut levy funds
(which were declared public in character) and the continuing effectivity of Resolution dated
February 16, 1993 in G.R. No. 96073 which allows the PCGG to vote said sequestered
shares, Respondent Sandiganbayan, with grave abuse of discretion, issued its Order dated
February 20, 2001 enjoining PCGG from voting the sequestered shares of stock in UCPB.

"B.

The Respondent Sandiganbayan violated petitioner's right to due process by taking

cognizance of the Class Action Omnibus Motion dated 23 February 2001 despite gross lack
of sufficient notice and by issuing the writ of preliminary injunction despite the obvious fact
that there was no actual pressing necessity or urgency to do so."

In its Resolution dated April 17, 2001, the Court defined the issue to be resolved in the instant case
simply as follows:

This Court's Ruling

The Petition is impressed with merit.

Main Issue:

Who May Vote the Sequestered Shares of Stock?

Simply stated, the gut substantive issue to be resolved in the present Petition is: "Who may vote the
sequestered UCPB shares while the main case for their reversion to the State is pending in the
Sandiganbayan?"

This Court holds that the government should be allowed to continue voting those shares inasmuch
as they were purchased with coconut levy funds that are prima facie public in character or, at the
very least, are "clearly affected with public interest."

General Rule: Sequestered Shares

Are Voted by the Registered Holder

At the outset, it is necessary to restate the general rule that the registered owner of the shares of a
corporation exercises the right and the privilege of voting.25 This principle applies even to shares that
are sequestered by the government, over which the PCGG as a mere conservator cannot, as a
general rule, exercise acts of dominion.26On the other hand, it is authorized to vote these
sequestered shares registered in the names of private persons and acquired with allegedly ill-gotten
wealth, if it is able to satisfy the two-tiered test devised by the Court inCojuangco v.
Calpo27 and PCGG v. Cojuangco Jr.,28 as follows:

(1) Is there prima facie evidence showing that the said shares are ill-gotten and thus belong
to the State?

(2) Is there an imminent danger of dissipation, thus necessitating their continued

sequestration and voting by the PCGG, while the main issue is pending with the
Sandiganbayan?

Sequestered Shares Acquired with Public Funds are an Exception

From the foregoing general principle, the Court in Baseco v. PCGG29 (hereinafter "Baseco")
and Cojuangco Jr. v. Roxas30 ("Cojuangco-Roxas") has provided two clear "public character"
exceptions under which the government is granted the authority to vote the shares:

(1) Where government shares are taken over by private persons or entities who/which
registered them in their own names, and

(2) Where the capitalization or shares that were acquired with public funds somehow landed
in private hands.

The exceptions are based on the common-sense principle that legal fiction must yield to truth; that
public property registered in the names of non-owners is affected with trust relations; and that
the prima facie beneficial owner should be given the privilege of enjoying the rights flowing from
the prima facie fact of ownership.

In Baseco, a private corporation known as the Bataan Shipyard and Engineering Co. was placed
under sequestration by the PCGG. Explained the Court:

"The facts show that the corporation known as BASECO was owned and controlled by
President Marcos 'during his administration, through nominees, by taking undue advantage
of his public office and/or using his powers, authority, or influence,' and that it was by and
through the same means, that BASECO had taken over the business and/or assets of the
National Shipyard and Engineering Co., Inc., and other government-owned or controlled
entities."31

Given this factual background, the Court discussed PCGG's right over BASECO in the following
manner:

"Now, in the special instance of a business enterprise shown by evidence to have been
'taken over by the government of the Marcos Administration or by entities or persons close to
former President Marcos,' the PCGG is given power and authority, as already adverted to, to
'provisionally take (it) over in the public interest or to prevent * * (its) disposal or dissipation;'
and since the term is obviously employed in reference to going concerns, or business
enterprises in operation, something more than mere physical custody is connoted; the PCGG
may in this case exercise some measure of control in the operation, running, or management
of the business itself."32
Citing an earlier Resolution, it ruled further:

"Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in
respondents' calling and holding of a stockholders' meeting for the election of directors as
authorized by the Memorandum of the President * * (to the PCGG) dated June 26, 1986,
particularly, where as in this case, the government can, through its designated directors,
properly exercise control and management over what appear to be properties and assets
owned and belonging to the government itself and over which the persons who appear in this
case on behalf of BASECO have failed to show any right or even any shareholding in said
corporation."33 (Italics supplied)

The Court granted PCGG the right to vote the sequestered shares because they appeared to be
"assets belonging to the government itself." The Concurring Opinion of Justice Ameurfina A.
Melencio-Herrera, in which she was joined by Justice Florentino P. Feliciano, explained this principle
as follows:

"I have no objection to according the right to vote sequestered stock in case of a take-over of
business actually belonging to the government or whose capitalization comes from public
funds but which, somehow, landed in the hands of private persons, as in the case of
BASECO. To my mind, however, caution and prudence should be exercised in the case of
sequestered shares of an on-going private business enterprise, specially the sensitive ones,
since the true and real ownership of said shares is yet to be determined and proven more
conclusively by the Courts."34 (Italics supplied)

The exception was cited again by the Court in Cojuangco-Roxas35 in this wise:

"The rule in this jurisdiction is, therefore, clear. The PCGG cannot perform acts of strict
ownership of sequestered property. It is a mere conservator. It may not vote the shares in a
corporation and elect the members of the board of directors. The only conceivable exception
is in a case of a takeover of a business belonging to the government or whose capitalization
comes from public funds, but which landed in private hands as in BASECO."36 (Italics
supplied)

The "public character" test was reiterated in many subsequent cases; most recently, in Antiporda v.
Sandiganbayan.37 Expressly citing Conjuangco-Roxas,38 this Court said that in determining the issue
of whether the PCGG should be allowed to vote sequestered shares, it was crucial to find out first
whether these were purchased with public funds, as follows:

"It is thus important to determine first if the sequestered corporate shares came from public
funds that landed in private hands."39

In short, when sequestered shares registered in the names of private individuals or entities are
alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied. However,
when the sequestered shares in the name of private individuals or entities are shown, prima facie, to
have been (1) originally government shares, or (2) purchased with public funds or those affected
with public interest, then the two-tiered test does not apply. Rather, the public character exceptions
in Baseco v. PCGG and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the
shares.

UCPB Shares Were Acquired With Coconut Levy Funds

In the present case before the Court, it is not disputed that the money used to purchase the
sequestered UCPB shares came from the Coconut Consumer Stabilization Fund (CCSF), otherwise
known as the coconut levy funds.

This fact was plainly admitted by private respondent's counsel, Atty. Teresita J. Herbosa, during
the Oral Arguments held on April 17, 2001 in Baguio City, as follows:

"Justice Panganiban:

"In regard to the theory of the Solicitor General that the funds used to purchase [both] the
original 28 million and the subsequent 80 million came from the CCSF, Coconut Consumers
Stabilization Fund, do you agree with that?

"Atty. Herbosa:

"Yes, Your Honor.

xxx xxx xxx

"Justice Panganiban:

"So it seems that the parties [have] agreed up to that point that the funds used to purchase
72% of the former First United Bank came from the Coconut Consumer Stabilization Fund?

"Atty. Herbosa:

"Yes, Your Honor."40

Indeed in Cocofed v. PCGG,41 this Court categorically declared that the UCPB was acquired
"with the use of the Coconut Consumers Stabilization Fund in virtue of Presidential Decree
No. 755, promulgated on July 29, 1975."

Coconut Levy Funds Are Affected With Public Interest

Having conclusively shown that the sequestered UCPB shares were purchased with coconut levies,
we hold that these funds and shares are, at the very least, "affected with public interest."

The Resolution issued by the Court on February 16, 1993 in Republic v. Sandiganbayan42 stated that
coconut levy funds were "clearly affected with public interest"; thus, herein private respondents
even if they are the registered shareholders cannot be accorded the right to vote them. We quote
the said Resolution in part, as follows:

"The coconut levy funds being 'clearly affected with public interest, it follows that the
corporations formed and organized from those funds, and all assets acquired therefrom
should also be regarded as 'clearly affected with public interest.'"43

xxx xxx xxx

"Assuming, however, for purposes of argument merely, the lifting of sequestration to be

correct, may it also be assumed that the lifting of sequestration removed the character of the
 coconut levy companies of being affected with public interest, so that they and their stock
and assets may now be considered to be of private ownership? May it be assumed that the
lifting of sequestration operated to relieve the holders of stock in the coconut levy companies
affected with public interest of the obligation of proving how that stock had been
legitimately transferred to private ownership, or that those stockholders who had had some
part in the collection, administration, or disposition of the coconut levy funds are now
deemed qualified to acquire said stock, and freed from any doubt or suspicion that they had
taken advantage of their special or fiduciary relation with the agencies in charge of the
coconut levies and the funds thereby accumulated? The obvious answer to each of the
questions is a negative one. It seems plain that the lifting of sequestration has no relevance
to the nature of the coconut levy companies or their stock or property, or to the legality of the
acquisition by private persons of their interest therein, or to the latter's capacity or
disqualification to acquire stock in the companies or any property acquired from coconut levy
funds.

"This being so, the right of the [petitioners] to vote stock in their names at the meetings of the
UCPB cannot be conceded at this time. That right still has to be established by them before
the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB
stock and cannot be accorded the right to vote them."44 (Italics supplied)

It is however contended by respondents that this Resolution was in the nature of a temporary
restraining order. As such, it was supposedly interlocutory in character and became functus
oficio when this Court decided GR No. 96073 on January 23, 1995.

This argument is aptly answered by petitioner in its Memorandum, which we quote:

"The ruling made in the Resolution dated 16 February 1993 confirming the public nature of
the coconut levy funds and denying claimants their purported right to vote is an affirmation of
doctrines laid down in the cases of COCOFED v. PCGG supra, Baseco v. PCGG, supra,
and Cojuangco v. Roxas, supra. Therefore it is of no moment that the Resolution dated 16
February 1993 has not been ratified. Its jurisprudential based remain."45 (Italics supplied)

To repeat, the foregoing juridical situation has not changed. It is still the truth today: "the coconut
levy funds are clearly affected with public interest." Private respondents have not "demonstrated
satisfactorily that they have legitimately become private funds."

If private respondents really and sincerely believed that the final Decision of the Court in Republic v.
Sandiganbayan (GR No. 96073, promulgated on January 23, 1995) granted them the right to vote,
why did they wait for the lapse of six long years before definitively asserting it (1) through their letter
dated February 13, 2001, addressed to the UCPB Board of Directors, demanding the holding of a
shareholders' meeting on March 6, 2001; and (2) through their Omnibus Motion dated February 23,
2001 filed in the court a quo, seeking to enjoin PCGG from voting the subject sequestered shares
during the said stockholders' meeting? Certainly, if they even half believed their submission now
that they already had such right in 1995 why are they suddenly and imperiously claiming it only
now?

It should be stressed at this point that the assailed Sandiganbayan Order dated February 28, 2001
allowing private respondents to vote the sequestered shares is not based on any finding that the
coconut levies and the shares have "legitimately become private funds." Neither is it based on the
alleged lifting of the TRO issued by this Court on February 16, 1993. Rather, it is anchored on the
grossly mistaken application of the two-tiered test mentioned earlier in this Decision.
To stress, the two-tiered test is applied only when the sequestered asset in the hands of a private
person is alleged to have been acquired with ill-gotten wealth. Hence, in PCGG v. Cojuangco,47 we
allowed Eduardo Cojuangco Jr. to vote the sequestered shares of the San Miguel Corporation
(SMC) registered in his name but alleged to have been acquired with ill-gotten wealth. We did so on
his representation that he had acquired them with borrowed funds and upon failure of the PCGG to
satisfy the "two-tiered" test. This test was, however, not applied to sequestered SMC shares that
were purchased with coco levy funds.

In the present case, the sequestered UCPB shares are confirmed to have been acquired with coco
levies, not with alleged ill-gotten wealth. Hence, by parity of reasoning, the right to vote them is not
subject to the "two-tiered test" but to the public character of their acquisition, which per Antiporda v.
Sandiganbayan cited earlier, must first be determined.

Coconut Levy Funds Are Prima Facie Public Funds

To avoid misunderstanding and confusion, this Court will even be more categorical and positive than
its earlier pronouncements: the coconut levy funds are not only affected with public interest;
they are, in fact, prima facie public funds.

Public funds are those moneys belonging to the State or to any political subdivision of the State;
more specifically, taxes, customs duties and moneys raised by operation of law for the support of the
government or for the discharge of its obligations.48 Undeniably, coconut levy funds satisfy this
general definition of public funds, because of the following reasons:

1. Coconut levy funds are raised with the use of the police and taxing powers of the State.

2. They are levies imposed by the State for the benefit of the coconut industry and its
farmers.

3. Respondents have judicially admitted that the sequestered shares were purchased with
public funds.

4. The Commission on Audit (COA) reviews the use of coconut levy funds.

5. The Bureau of Internal Revenue (BIR), with the acquiescence of private respondents, has
treated them as public funds.

6. The very laws governing coconut levies recognize their public character.

We shall now discuss each of the foregoing reasons, any one of which is enough to show their
public character.

1. Coconut Levy Funds Are Raised Through the State's Police and Taxing Powers.

Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced
proportional contributions from persons and properties, exacted by the State by virtue of its
sovereignty for the support of government and for all public needs.49

Based on this definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty;
and c) it is levied for the support of the government. The coconut levy funds fall squarely into these
elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on the coconut farmers
requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut
Consumer Stabilization Fund (CCSF), mandated the following:

"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other
coconut products, shall be imposed on every first sale, in accordance with the mechanics
established under RA 6260, effective at the start of business hours on August 10, 1973.

"The proceeds from the levy shall be deposited with the Philippine National Bank or any
other government bank to the account of the Coconut Consumers Stabilization Fund, as a
separate trust fund which shall not form part of the general fund of the government."50

The coco levies were further clarified in amendatory laws, specifically PD No. 96151 and PD
No. 146852 in this wise:

"The Authority (Philippine Coconut Authority) is hereby empowered to impose and collect a
levy, to be known as the Coconut Consumers Stabilization Fund Levy, on every one hundred
kilos of copra resecada, or its equivalent in other coconut products delivered to, and/or
purchased by, copra exporters, oil millers, desiccators and other end-users of copra or its
equivalent in other coconut products. The levy shall be paid by such copra exporters, oil
millers, desiccators and other end-users of copra or its equivalent in other coconut products
under such rules and regulations as the Authority may prescribe. Until otherwise prescribed
by the Authority, the current levy being collected shall be continued."53

Like other tax measures, they were not voluntary payments or donations by the people. They
were enforced contributions exacted on pain of penal sanctions, as provided under PD No.
276:

"3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing
administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or
suffer cancellation of licenses to operate, or both, at the discretion of the Court."54

Such penalties were later amended thus:

"Whenever any person or entity willfully and deliberately violates any of the provisions of this
Act, or any rule or regulation legally promulgated hereunder by the Authority, the person or
persons responsible for such violation shall be punished by a fine of not more than
P20,000.00 and by imprisonment of not more than five years. If the offender be a
corporation, partnership or a juridical person, the penalty shall be imposed on the officer or
officers authorizing, permitting or tolerating the violation. Aliens found guilty of any offenses
shall, after having served his sentence, be immediately deported and, in the case of a
naturalized citizen, his certificate of naturalization shall be cancelled."55

(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative
authorities of the State. Indeed, the CCSF was collected under PD No. 276, issued by former
President Ferdinand E. Marcos who was then exercising legislative powers.56
 (c) They were clearly imposed for a public purpose. There is absolutely no question that they
were collected to advance the government's avowed policy of protecting the coconut
industry. This Court takes judicial notice of the fact that the coconut industry is one of the
great economic pillars of our nation, and coconuts and their byproducts occupy a leading
position among the country's export products; that it gives employment to thousands of
Filipinos; that it is a great source of the state's wealth; and that it is one of the important
sources of foreign exchange needed by our country and, thus, pivotal in the plans of a
government committed to a policy of currency stability.

Taxation is done not merely to raise revenues to support the government, but also to provide means
for the rehabilitation and the stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State, as held in Caltex Philippines v.
COA57 and Osmea v. Orbos.58

Even if the money is allocated for a special purpose and raised by special means, it is still public in
character. In the case before us, the funds were even used to organize and finance State offices.
In Cocofed v. PCGG,59 the Court observed that certain agencies or enterprises "were organized and
financed with revenues derived from coconut levies imposed under a succession of laws of the late
dictatorship x x x with deposed Ferdinand Marcos and his cronies as the suspected authors and
chief beneficiaries of the resulting coconut industry monopoly."60The Court continued: "x x x. It
cannot be denied that the coconut industry is one of the major industries supporting the national
economy. It is, therefore, the State's concern to make it a strong and secure source not only of the
livelihood of a significant segment of the population, but also of export earnings the sustained growth
of which is one of the imperatives of economic stability. x x x."61

2. Coconut Funds Are Levied for the Benefit of the Coconut Industry and Its Farmers.

Just like the sugar levy funds, the coconut levy funds constitute state funds even though they may
be held for a special public purpose.

In fact, Executive Order No. 481 dated May 1, 1998 specifically likens the coconut levy funds to the
sugar levy funds, both being special public funds acquired through the taxing and police
powers of the State. The sugar levy funds, which are strikingly similar to the coconut levies in their
imposition and purpose, were declared public funds by this Court in Gaston v. Republic Planters
Bank,62 from which we quote:

"The stabilization fees collected are in the nature of a tax which is within the power of the
state to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They
constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a 'Special
Fund,' a 'Development and Stabilization Fund,' almost identical to the 'Sugar Adjustment and
Stabilization Fund' created under Section 6 of Commonwealth Act 567. The tax collected is
not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide
means for the stabilization of the sugar industry. The levy is primarily in the exercise of the
police power of the State. (Lutz vs. Araneta, supra.)."63

The Court further explained:64

"The stabilization fees in question are levied by the State upon sugar millers, planters and
producers for a special purpose that of 'financing the growth and development of the sugar
industry and all its components, stabilization of the domestic market including the foreign
market.' The fact that the State has taken possession of moneys pursuant to law is sufficient
to constitute them as state funds, even though they are held for a special purpose (Lawrence
 v. American Surety Co., 263 Mich 586. 294 ALR 535, cited in 42 Am. Jur., Sec. 2., p. 718).
Having been levied for a special purpose, the revenues collected are to be treated as a
special fund, to be, in the language of the statute, 'administered in trust' for the purpose
intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be
transferred to the general funds of the Government. That is the essence of the trust intended
(see 1987 Constitution, Art. VI, Sec. 29[3], lifted from the 1935 Constitution, Article VI, Sec.
23[1]. (Italics supplied)

"The character of the Stabilization Fund as a special fund is emphasized by the fact that the
funds are deposited in the Philippine National Bank and not in the Philippine Treasury,
moneys from which may be paid out only in pursuance of an appropriation made by law
(1987 Constitution, Article VI, Sec. 29[1], 1973 Constitution, Article VIII, Sec. 18[1]).

"That the fees were collected from sugar producers, planters and millers, and that the funds
were channeled to the purchase of shares of stock in respondent Bank do not convert the
funds into a trust fund for their benefit nor make them the beneficial owners of the shares so
purchased. It is but rational that the fees be collected from them since it is also they who are
to be benefited from the expenditure of the funds derived from it. The investment in shares of
respondent Bank is not alien to the purpose intended because of the Bank's character as a
commodity bank for sugar conceived for the industry's growth and development.
Furthermore, of note is the fact that one-half (1/2) or P0.50 per picul, of the amount levied
under P.D. No. 388 is to be utilized for the 'payment of salaries and wages of personnel,
fringe benefits and allowances of officers and employees of PHILSUCOM' thereby
immediately negating the claim that the entire amount levied is in trust for sugar, producers,
planters and millers.

"To rule in petitioners' favor would contravene the general principle that revenues derived
from taxes cannot be used for purely private purposes or for the exclusive benefit of private
persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry,
'and all its components, stabilization of the domestic market including the foreign market,' the
industry being of vital importance to the country's economy and to national interest."

In the same manner, this Court has also ruled that the oil stabilization funds were public in character
and subject to audit by COA. It ruled in this wise:

"Hence, it seems clear that while the funds collected may be referred to as taxes, they are
exacted in the exercise of the police power of the State. Moreover, that the OPSF is a
special fund is plain from the special treatment given it by E.O. 137. It is segregated from the
general fund; and while it is placed in what the law refers to as a 'trust liability account,' the
fund nonetheless remains subject to the scrutiny and review of the COA. The Court is
satisfied that these measures comply with the constitutional description of a 'special fund.'
Indeed, the practice is not without precedent."65

In his Concurring Opinion in Kilosbayan v. Guingona,66 Justice Florentino P. Feliciano explained that
the funds raised by the On-line Lottery System were also public in nature. In his words:

"x x x. In the case presently before the Court, the funds involved are clearly public in nature.
The funds to be generated by the proposed lottery are to be raised from the population at
large. Should the proposed operation be as successful as its proponents project, those funds
will come from well-nigh every town and barrio of Luzon. The funds here involved are public
in another very real sense: they will belong to the PCSO, a government owned or controlled
corporation and an instrumentality of the government and are destined for utilization in social
 development projects which, at least in principle, are designed to benefit the general public. x
x x. The interest of a private citizen in seeing to it that public funds, from whatever source
they may have been derived, go only to the uses directed and permitted by law is as real and
personal and substantial as the interest of a private taxpayer in seeing to it that tax monies
are not intercepted on their way to the public treasury or otherwise diverted from uses
prescribed or allowed by law. It is also pertinent to note that the more successful the
government is in raising revenues by non-traditional methods such as PAGCOR operations
and privatization measures, the lesser will be the pressure upon the traditional sources of
public revenues, i.e., the pocket books of individual taxpayers and importers."67

Thus, the coconut levy funds like the sugar levy and the oil stabilization funds, as well as the
monies generated by the On-line Lottery System are funds exacted by the State. Being enforced
contributions, the are prima faciepublic funds.

3. Respondents Judicially Admit That the Levies Are Government Funds.

Equally important as the fact that the coconut levy funds were raised through the taxing and police
powers of the State is respondents' effective judicial admission that these levies are government
funds. As shown by the attachments to their pleadings,68 respondents concede that the Coconut
Consumers Stabilization Fund (CCSF) and the Coconut Investment Development Fund "constitute
government funds x x x for the benefit of coconut farmers."

"Collections on both levies constitute government funds. However, unlike other taxes that the
Government levies and collects such as income tax, tariff and customs duties, etc., the
collections on the CCSF and CIDF are, by express provision of the laws imposing them, for a
definite purpose, not just for any governmental purpose. As stated above part of the
collections on the CCSF levy should be spent for the benefit of the coconut farmers. And in
respect of the collections on the CIDF levy, P.D. 582 mandatorily requires that the same
should be spent exclusively for the establishment, operation and maintenance of a hybrid
coconut seed garden and the distribution, for free, to the coconut farmers of the hybrid
coconut seednuts produced from that seed garden.

"On the other hand, the laws which impose special levies on specific industries, for example
on the mining industry, sugar industry, timber industry, etc., do not, by their terms, expressly
require that the collections on those levies be spent exclusively for the benefit of the industry
concerned. And if the enabling law thus so provide, the fact remains that the governmental
agency entrusted with the duty of implementing the purpose for which the levy is imposed is
vested with the discretionary power to determine when and how the collections should be
appropriated."69

4. The COA Audit Shows the Public Nature of the Funds.

Under COA Office Order No. 86-9470 dated April 15, 1986,70 the COA reviewed the expenditure and
use of the coconut levies allocated for the acquisition of the UCPB. The audit was aimed at
ascertaining whether these were utilized for the purpose for which they had been intended.71 Under
the 1987 Constitution, the powers of the COA are as follows:

"The Commission on Audit shall have the power, authority, and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of
funds and property, owned or held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities x x x."72
Because these funds have been subjected to COA audit, there can be no other conclusion than that
are prima facie public in character.

5. The BIR Has Pronounced That the Coconut Levy Funds Are Taxes.

In response to a query posed by the administrator of the Philippine Coconut Authority regarding the
character of the coconut levy funds, the Bureau of Internal Revenue has affirmed that these funds
are public in character. It held as follows: "[T]he coconut levy is not a public trust fund for the benefit
of the coconut farmers, but is in the nature of a tax and, therefore, x x x public funds that are subject
to government administration and disposition."73

Furthermore, the executive branch treats the coconut levies as public funds. Thus, Executive Order
No. 277, issued on September 24, 1995, directed the mode of treatment, utilization, administration
and management of the coconut levy funds. It provided as follows:

'(a) The coconut levy funds, which include all income, interests, proceeds or profits derived
therefrom, as well as all assets, properties and shares of stocks procured or obtained with
the use of such funds, shall be treated, utilized, administered and managed as public
funds consistent with the uses and purposes under the laws which constituted them and the
development priorities of the government, including the government's coconut productivity,
rehabilitation, research extension, farmers organizations, and market promotions programs,
which are designed to advance the development of the coconut industry and the welfare of
the coconut farmers."74 (Italics supplied)

Doctrinally, acts of the executive branch are prima facie valid and binding, unless declared
unconstitutional or contrary to law.

6. Laws Governing Coconut Levies Recognize Their Public Nature.

Finally and tellingly, the very laws governing the coconut levies recognize their public character.
Thus, the thirdWhereas clause of PD No. 276 treats them as special funds for a specific public
purpose. Furthermore, PD No. 711 transferred to the general funds of the State all existing special
and fiduciary funds including the CCSF. On the other hand, PD No. 1234 specifically declared the
CCSF as a special fund for a special purpose, which should be treated as a special account in the
National Treasury.

Moreover, even President Marcos himself, as the sole legislative/executive authority during the
martial law years, struck off the phrase which is a private fund of the coconut farmers from the
original copy of Executive Order No. 504 dated May 31, 1978, and we quote:

"WHEREAS, by means of the Coconut Consumers Stabilization Fund ('CCSF'), which is the
private fund of the coconut farmers (deleted), essential coconut-based products are made
available to household consumers at socialized prices." (Emphasis supplied)

The phrase in bold face -- which is the private fund of the coconut farmers was crossed out
and duly initialed by its author, former, President Marcos. This deletion, clearly visible in "Attachment
C" of petitioner's Memorandum,75 was a categorical legislative intent to regard the CCSF as public,
not private, funds.

Having Been Acquired With Public Funds, UCPB Shares Belong, Prima Facie, to the
Government
Having shown that the coconut levy funds are not only affected with public interest, but are in
fact prima faciepublic funds, this Court believes that the government should be allowed to vote the
questioned shares, because they belong to it as the prima facie beneficial and true owner.

As stated at the beginning, voting is an act of dominion that should be exercised by the share owner.
One of the recognized rights of an owner is the right to vote at meetings of the corporation. The right
to vote is classified as the right to control.76 Voting rights may be for the purpose of, among others,
electing or removing directors, amending a charter, or making or amending by laws.77 Because the
subject UCPB shares were acquired with government funds, the government becomes their prima
facie beneficial and true owner.

Ownership includes the right to enjoy, dispose of, exclude and recover a thing without limitations
other than those established by law or by the owner.78 Ownership has been aptly described as the
most comprehensive of all real rights.79 And the right to vote shares is a mere incident of ownership.
In the present case, the government has been shown to be the prima facie owner of the funds used
to purchase the shares. Hence, it should be allowed the rights and privileges flowing from such fact.

And paraphrasing Cocofed v. PCGG, already cited earlier, the Republic should continue to vote
those shares until and unless private respondents are able to demonstrate, in the main cases
pending before the Sandiganbayan, that "they [the sequestered UCPB shares] have legitimately
become private."

Procedural and Incidental Issues:

Grave Abuse of Discretion, Improper Arguments and Intervenors' Relief

Procedurally, respondents argue that petitioner has failed to demonstrate that the Sandiganbayan
committed grave abuse of discretion, a demonstration required in every petition under Rule 65.80

We disagree. We hold that the Sandiganbayan gravely abused its discretion when it contravened the
rulings of this Court in Baseco and Cojuangco-Roxas thereby unlawfully, capriciously and
arbitrarily depriving the government of its right to vote sequestered shares purchased with coconut
levy funds which are prima faciepublic funds.

Indeed, grave abuse of discretion may arise when a lower court or tribunal violates or contravenes
the Constitution, the law or existing jurisprudence. In one case,81 this Court ruled that the lower
court's resolution was "tantamount to overruling a judicial pronouncement of the highest Court x x x
and unmistakably a very grave abuse of discretion."82

The Public Character of Shares Is a Valid Issue

Private respondents also contend that the public nature of the coconut levy funds was not raised as
an issue before the Sandiganbayan. Hence, it could not be taken up before this Court.

Again we disagree. By ruling that the two-tiered test should be applied in evaluating private
respondents' claim of exercising voting rights over the sequestered shares, the Sandiganbayan
effectively held that the subject assets were private in character. Thus, to meet this issue, the Office
of the Solicitor General countered that the shares were not private in character, and that quite the
contrary, they were and are public in nature because they were acquired with coco levy funds which
are public in character. In short, the main issue of who may vote the shares cannot be determined
without passing upon the question of the public/private character of the shares and the funds used to
acquire them. The latter issue, although not specifically raised in the Court a quo, should still be
resolved in order to fully adjudicate the main issue.

Indeed, this Court has "the authority to waive the lack of proper assignment of errors if the
unassigned errors closely relate to errors properly pinpointed out or if the unassigned errors refer to
matters upon which the determination of the questions raised by the errors properly assigned
depend."83

Therefore, "where the issues already raised also rest on other issues not specifically presented as
long as the latter issues bear relevance and close relation to the former and as long as they arise
from matters on record, the Court has the authority to include them in its discussion of the
controversy as well as to pass upon them."84

No Positive Relief For Intervenors

Intervenors anchor their interest in this case on an alleged right that they are trying to enforce in
another Sandiganbayan case docketed as SB Case No. 0187.85 In that case, they seek the recovery
of the subject UCPB shares from herein private respondents and the corporations controlled by
them. Therefore, the rights sought to be protected and the reliefs prayed for by intervenors are still
being litigated in the said case. The purported rights they are invoking are mere expectancies wholly
dependent on the outcome of that case in the Sandiganbayan.

Clearly, we cannot rule on intervenors' alleged right to vote at this time and in this case. That right is
dependent upon the Sandiganbayan's resolution of their action for the recovery of said sequestered
shares. Given the patent fact that intervenors are not registered stockholders of UCPB as of the
moment, their asserted rights cannot be ruled upon in the present proceedings. Hence, no positive
relief can be given them now, except insofar as they join petitioner in barring private respondents
from voting the subject shares.

Epilogue

In sum, we hold that the Sandiganbayan committed grave abuse of discretion in grossly
contradicting and effectively reversing existing jurisprudence, and in depriving the government of its
right to vote the sequestered UCPB shares which are prima facie public in character.

In making this ruling, we are in no way preempting the proceedings the Sandiganbayan may conduct
or the final judgment it may promulgate in Civil Case Nos. 0033-A, 0033-B and 0033-F. Our
determination here is merelyprima facie, and should not bar the anti-graft court from making a final
ruling, after proper trial and hearing, on the issues and prayers in the said civil cases, particularly in
reference to the ownership of the subject shares.

We also lay down the caveat that, in declaring the coco levy funds to be prima facie public in
character, we are not ruling in any final manner on their classification whether they are general or
trust or special funds since such classification is not at issue here. Suffice it to say that the public
nature of the coco levy funds is decreed by the Court only for the purpose of determining the right to
vote the shares, pending the final outcome of the said civil cases.

Neither are we resolving in the present case the question of whether the shares held by Respondent
Cojuangco are, as he claims, the result of private enterprise. This factual matter should also be
taken up in the final decision in the cited cases that are pending in the court a quo. Again suffice it to
say that the only issue settled here is the right of PCGG to vote the sequestered shares, pending the
final outcome of said cases.
This matter involving the coconut levy funds and the sequestered UCPB shares has been straddling
the courts for about 15 years. What we are discussing in the present Petition, we stress, is just an
incident of the main cases which are pending in the anti-graft court the cases for the
reconveyance, reversion and restitution to the State of these UCPB shares.

The resolution of the main cases has indeed been long overdue. Every effort, both by the parties
and the Sandiganbayan, should be exerted to finally settle this controversy.

WHEREFORE, the Petition is hereby GRANTED and the assailed Order SET ASIDE. The PCGG
shall continue voting the sequestered shares until Sandiganbayan Civil Case Nos. 0033-A, 0033-B
and 0033-F are finally and completely resolved. Furthermore, the Sandiganbayan is ORDERED to
decide with finality the aforesaid civil cases within a period of six (6) months from notice. It shall
report to this Court on the progress of the said cases every three (3) months, on pain of contempt.
The Petition in Intervention is DISMISSED inasmuch as the reliefs prayed for are not covered by the
main issues in this case. No costs.

SO ORDERED.