Case Summary (G.R. No. 147036-37)
Procedural Posture
Two consolidated Rule 65 petitions seek to declare unconstitutional: Section 2 of PD 755; Article III, § 5 of PDs 961 & 1468; EOs 312 & 313. Procedural questions: proper remedy and petitioners’ standing. Substantive questions: public or private character of coco-levy funds; constitutionality of the challenged provisions.
Proper Remedy and Standing
The Court exercised its original jurisdiction under Art. VIII § 5 to address serious constitutional challenges, dispensing with procedural technicalities. Farmers’ organizations, as direct levy payors, and individual taxpayers have standing to prevent misapplication of public funds.
Public Character of Coco-Levy Funds
Citing Republic v. COCOFED (2001) and subsequent rulings, coco-levy funds are prima facie public funds (a form of taxation) raised under the State’s police and taxing powers for the coconut industry’s development. Managed by PCA and government banks; the term “levy” denotes taxation. Unlike SSS premiums, these levies fund a public purpose and vest ownership in government.
Special Fund Status
As special funds under Art. VI § 29(3), coco-levy collections must be segregated and used solely for their statutorily defined purposes. Precedents (Gaston, Osmeña) confirm that stabilization or development levies constitute special trust funds subject to COA audit.
Unconstitutionality of Decrees Declaring Funds Private
PD 755 § 2 and Article III, § 5 of PDs 961 & 1468 purport to remove coco-levy funds from public treasury and vest them as private property of farmers. Such declarations are void: taxes cannot finance private interests; farmers never acquired true ownership attributes (possession, management, disposal). These provisions violate substantive due process by appropriating public funds for private purposes.
Removal of COA Jurisdiction
Provisions in PDs 961, 1468 and EOs 312, 313 exempt the funds and acquired assets from COA scrutiny, contravening Art. IX-D § 2(1) of the Constitution and PD 898. There is no valid basis to shield tax-derived funds from audit.
Unconstitutionality of EO 312 and EO 313
EO 312 and EO 313 extend uses beyond the coconut industry’s development (e.g., other agriculture programs), breaching the special-purpose
Case Syllabus (G.R. No. 147036-37)
Facts of the Case
- June 19, 1971: Republic Act No. 6260 created the Coconut Investment Fund (CI Fund) and Coconut Investment Company (CIC); imposed a levy of ₱0.55 per 100 kg of copra, convertible into CIC shares, to benefit coconut farmers.
- August 20, 1973: P.D. 276 established the Coconut Consumers Stabilization Fund (CCS Fund) via a ₱15 levy per 100 kg of copra resecada; any balance to revert to the CI Fund.
- November 14, 1974: P.D. 582 created the Coconut Industry Development Fund (CID Fund); initial capital of ₱100 million from the Philippine Coconut Authority (PCA) and a permanent ₱0.20 per kg levy thereafter; Philippine National Bank (PNB) to administer and invest unexpended balances.
- 1975: P.D. 755 approved acquisition of First United Bank (later United Coconut Planters Bank, UCPB) to implement coconut industry credit policy; PCA acquired 72.2% of its shares.
- July 14, 1976: P.D. 961 (Coconut Industry Code) consolidated all coconut-industry laws; surpluses to be invested in coconut-related corporations and distributed free to farmers; declared coco-levy funds privately owned by farmers.
- June 11, 1978: P.D. 1468 reiterated that CCS and CID Funds and their disbursements are private properties of coconut farmers.
- 1980–1981: P.D. 1699 suspended coco-levy collections; P.D. 1841 revived them, renamed CCS Fund to Coconut Industry Stabilization Fund (CIS Fund), and earmarked proceeds for hybrid replanting, insurance, scholarships.
- November 2000: E.O. 312 launched the Sagip Niyugan Program to generate a ₱1-billion fund from coco-levy-acquired assets; created a managing committee with audit requirements.
- November 2000: E.O. 313 constituted the Coconut Trust Fund (CTF) as an irrevocable trust capitalized with San Miguel Corporation (SMC) shares (27% of its stock) acquired via coco-levy funds; designated UCPB as trustee; formed a Trust Fund Committee with audit provisions.
- January 26, 2001: Suspension of E.O.s 312 and 313 by President Gloria Macapagal-Arroyo.
- March 1 & April 24, 2001: Petitioners filed G.R. Nos. 147036-37 and 147811 to challenge the constitutionality of P.D.s 755, 961, 1468 and E.O.s 312, 313 under Rule 65 certiorari.
Issues Presented
- Procedural
- Whether certiorari under Rule 65 was the proper remedy.
- Whether petitioners have legal standing (organizations representing farmers; individuals as taxpayers).
- Substan