Republic v Sandiganbayan
16,276,879 SMC shares purchased by
Facts:
A complaint was filed against the defendants
Eduardo Cojuangco Jr., the ACCRA lawyers,
Danilo Ursua and 71 corporations by the
Presidential Commission on Good
Government (PCGG) referred here as
―Republic of the Philippines‖ with regard to a
block of San Miguel Corporation (SMC) stock
which were allegedly bought through the
CIIF Holding Companies and funded by the
coconut levy fund passing through the
Unicom Oil Mills and directly from
UCPB. The coconut levy funds were
considered as government funds since this
came from contributions from the coconut
farmers with the purpose of improving and
stabilizing the coconut farming industry,
however these were said to be privatized
under presidential directives of then Pres.
Marcos. Defendant Cojuangco Jr., being
close with the Marcoses is said to have taken
undue advantage of his association,
influence and connection, embarked upon
different devices and schemes including the
use of the ACCRA Lawyers as ―nominee
shareholders‖ and the defendant
corporations as fronts to unjustly enrich
themselves at the expense of the Filipino
people when he misused the coconut levy
fund, amounting to $150 million, to purchase
33 million shares of the SMC through the
holding companies. Hence with the
allegations mentioned and with different
cases and issues which remain unresolved,
the block of shares representing 20% of the
outstanding capital stock of SMC remained
sequestered by the government.
There are two sets of SMC shares involved.
The first set refers to a block of 33,000,000
SMC shares allegedly purchased by Cojuanco
through 14 holding companies owned by the
CIFF Oil Mills.
The second set refers to a block of
companies under Cojuangco’s control (as
distinguished from the companies owned by
CIFF Oil Mills). At the time of acquisition
these shares represented approximately
20% of the capital stock of SMC.
Both sets or blocks of shares were being
claimed by the Government through PCGG.
SANDIGANBAYAN:
As to the first sets or blocks of shares –
The SANDIGANBAYAN ruled that these
33,000,000 SMC shares belong to the
Government. The SANDIGANBAYAN Decision
reads:
WHEREFORE, in view of the foregoing,
we hold that:
The Motion for Partial Summary
Judgment (Re: Defendants CIIF Companies,
14 Holding Companies and Cocofed, et al.)
filed by Plaintiff is hereby GRANTED.
ACCORDINGLY, THE CIIF COMPANIES AS
WELL AS THE 14 HOLDING COMPANIES,
AND THE CIIF BLOCK OF SAN MIGUEL
CORPORATION (SMC) SHARES OF STOCK
TOTALING 33,133,266 SHARES AS OF 1983
TOGETHER WITH ALL DIVIDENDS
DECLARED, PAID AND ISSUED THEREON AS
WELL AS ANY INCREMENTS THERETO
ARISING FROM, BUT NOT LIMITED TO,
EXERCISE OF PRE-EMPTIVE RIGHTS ARE
DECLARED OWNED BY THE GOVERNMENT
IN-TRUST FOR ALL THE COCONUT FARMERS
AND ORDERED RECONVEYED TO THE
GOVERNMENT.
As to the second sets or blocks of shares –
The SANDIGANBAYAN ruled that these
shares belong to Cojuangco. The
SANDIGANBAYAN Decision reads:
WHEREFORE, in view of all the foregoing, the
Court is constrained to DISMISS, as it
hereby DISMISSES, the Third Amended
Complaint in subdivided Civil Case No. 0033-
F for failure of plaintiff to prove by
preponderance of evidence its causes of
action against defendants with respect to the
twenty percent (20%) outstanding shares of
stock of San Miguel Corporation registered in
defendants’ names, denominated herein as
the ―Cojuangco, et al. block‖ of SMC shares.
For lack of satisfactory warrant, the
counterclaims in defendants’ Answers are
likewise ordered dismissed.
SO ORDERED.
This Decision of the Sandiganbayan is the
main subject of the present case.
ISSUE:
Whether Cojuangco breach his ―fiduciary
duties‖ as an officer and member of the
Board of Directors of the UCPB; and did his
acquisition and holding of the contested SMC
shares come under a constructive trust in
favor of the Republic.
PROVISIONS OF LAW:
Article 1455. When any trustee, guardian or
other person holding a fiduciary relationship
uses trust funds for the purchase of property
and causes the conveyance to be made to
him or to a third person, a trust is
established by operation of law in favor of
the person to whom the funds belong.
Article 1456. If property is acquired through
mistake or fraud, the person obtaining it s by
force of law, considered a trustee of an
implied trust for the benefit of the person
from whom the property comes.
and the Corporation Code, as follows:
Section 31. Liability of directors,
trustees or officers.—Directors or trustees
who willfully and knowingly vote for or
assent to patently unlawful acts of the
corporation or who are guilty of gross
negligence or bad faith in directing the
affairs of the corporation or acquire any
personal or pecuniary interest in conflict with
their duty as such directors, or trustees shall
be liable jointly and severally for all damages
resulting therefrom suffered by the
corporation, its stockholders or members
and other persons.
When a director, trustee or officer
attempts to acquire or acquires, in violation
of his duty, any interest adverse to the
corporation in respect of any matter which
has been reposed in him in confidence, as to
which equity imposes a disability upon him
to deal in his own behalf, he shall be liable
as a trustee for the corporation and must
account for the profits which otherwise
would have accrued to the corporation.
HELD:
No.
The conditions for the application of Articles
1455 and 1456 of the Civil Code (like the
trustee using trust funds to purchase, or a
person acquiring property through mistake
or fraud), and Section 31 of the Corporation
Code (like a director or trustee willfully and
knowingly voting for or assenting to patently
unlawful acts of the corporation, among
others) require factual foundations to be first
laid out in appropriate judicial proceedings.
Hence, concluding that Cojuangco breached
fiduciary duties as an officer and member of
the Board of Directors of the UCPB without
competent evidence thereon would be
unwarranted and unreasonable.
Thus, the Sandiganbayan could not fairly
find that Cojuangco had committed breach of
any fiduciary duties as an officer and
member of the Board of Directors of the
UCPB. For one, the Amended Complaint
contained no clear factual allegation on
which to predicate the application of Articles
1455 and 1456 of the Civil Code, and Section
31 of the Corporation Code. Although the
trust relationship supposedly arose from
Cojuangco’s being an officer and member of
the Board of Directors of the UCPB, the link
between this alleged fact and the borrowings
or advances was not established. Nor was
there evidence on the loans or borrowings,
their amounts, the approving authority, etc.
As trial court, the Sandiganbayan could not
presume his breach of fiduciary duties
without evidence showing so, for fraud or
breach of trust is never presumed, but must
be alleged and proved.
The thrust of the Republic that the funds
were borrowed or lent might even preclude
any consequent trust implication. In a
contract of loan, one of the parties (creditor)
delivers money or other consumable thing to
another (debtor) on the condition that the
same amount of the same kind and quality
shall be paid.[129][129] Owing to the
consumable nature of the thing loaned, the
resulting duty of the borrower in a contract
of loan is to pay, not to return, to the
creditor or lender the very thing loaned. This
explains why the ownership of the thing
loaned is transferred to the debtor upon
perfection of the contract. Ownership of the
thing loaned having transferred, the debtor
enjoys all the rights conferred to an owner of
property, including the right to use and
enjoy (jus utendi), to consume the thing by
its use (jus abutendi), and to dispose (jus
disponendi), subject to such limitations as
may be provided by law. Evidently, the
resulting relationship between a creditor and
debtor in a contract of loan cannot be
characterized as fiduciary.
To say that a relationship is fiduciary when
existing laws do not provide for such
requires evidence that confidence is reposed
by one party in another who exercises
dominion and influence. Absent any special
facts and circumstances proving a higher
degree of responsibility, any dealings
between a lender and borrower are not
fiduciary in nature. This explains why, for
example, a trust receipt transaction is not
classified as a simple loan and is
characterized as fiduciary, because the Trust
Receipts Law (P.D. No. 115) punishes the
dishonesty and abuse of confidence in the
handling of money or goods to the prejudice
of another regardless of whether the latter is
the owner.
Based on the foregoing, a debtor can
appropriate the thing loaned without any
responsibility or duty to his creditor to return
the very thing that was loaned or to report
how the proceeds were used. Nor can he be
compelled to return the proceeds and fruits
of the loan, for there is nothing under our
laws that compel a debtor in a contract of
loan to do so. As owner, the debtor can
dispose of the thing borrowed and his act will
not be considered misappropriation of the
thing. The only liability on his part is to pay
the loan together with the interest that is
either stipulated or provided under existing
laws.
WHEREFORE, the Court dismisses the
petitions for certiorari in G.R. Nos. 166859
and 169023; denies the petition for review
on certiorari in G.R. No. 180702; and,
accordingly, affirms the decision
promulgated by the Sandiganbayan on
November 28, 2007 in Civil Case No. 0033-F.
The Court declares that the block of shares
in San Miguel Corporation in the names of
respondents Cojuangco, et al. subject of Civil
Case No. 0033-F is the exclusive property of
Cojuangco, et al. as registered owners.
Marcos-Araneta v CA
FACTS:
 Sometime in 1968 and 1972, Ambassador
Roberto S. Benedicto, now deceased, and his
business associates (Benedicto Group)
organized Far East Managers and Investors, Inc.
(FEMII) and Universal Equity Corporation (UEC),
respectively.
 Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a
contract whereby Benedicto, as trustor, placed
in his name and in the name of his associates,
as trustees, the shares of stocks of FEMII and
UEC with the obligation to hold those shares
and their fruits in trust and for the benefit of
Irene to the extent of 65% of such shares.
Several years after, Irene demanded the
reconveyance of said 65% stockholdings, but
the Benedicto Group refused to oblige.
 In March 2000, Irene filed before the RTC two
similar complaints for conveyance of shares of
stock, accounting and receivership against the
Benedicto Group with prayer for the issuance
of a temporary restraining order (TRO).
 In a consolidated opposition, Benedicto,
moved to dismiss on 5 grounds, among which
were: (2) venue was improperly laid
 During the preliminary proceedings on their
motions to dismiss, Benedicto presented the
Joint Affidavit of Gilmia B. Valdez, Catalino A.
Bactat, and Conchita R. Rasco who all attested
being employed as household staff at the
Marcos’ Mansion in Brgy. Lacub, Batac, Ilocos
Norte and that Irene did not maintain residence
in said place as she in fact only visited the
mansion twice in 1999; that she did not vote in
Batac in the 1998 national elections; and that
she was staying at her husband’s house
in Makati City.
 Irene presented her community tax
certificateissued on “11/07/99” in Curimao,
Ilocos Norte to support her claimed residency
in Batac, Ilocos Norte.
RTC:
RTC dismissed both complaints, stating that these
partly constituted “real action,” and that Irene did
not actually reside in Ilocos Norte, and, therefore,
venue was improperly laid.
 The RTC eventually entertained an amended
complaint filed by Irene, dispositively stating:
(1) Irene may opt to file, as a matter of right, an
amended complaint. (2) The inclusion of
additional plaintiffs, one of whom was a Batac,
an Ilocos Norte resident, in the amended
complaint setting out the same cause of action
cured the defect of improper venue. (3) Secs. 2
and 3 of Rule 3 in relation to Sec. 2 of Rule 4
allow the filing of the amended complaint in
question in the place of residence of any of
Irene’s co-plaintiffs.
CA:
The Benedictos filed on April 10, 2001 their Answer to
the amended complaint but also went the CA via a
petition for certiorari, seeking to nullify the following
RTC orders. The CA rendered a Decision, setting aside
the assailed RTC orders and dismissing the amended
complaints in Civil Case Nos. 3341-17 and 3342-17.
ISSUE:
Are the residences of the new trustees of Irene be made
the basis in determining the venue of the suit.
HELD:
When there is more than one plaintiff in a personal
action case, the residences of the principal parties
should be the basis for determining proper venue;
Trustees can only serve as mere representatives of the
beneficiary.
There can be no serious dispute that the real
party-in-interest plaintiff is Irene. As self-
styled beneficiary of the disputed trust, she
stands to be benefited or entitled to the
avails of the present suit. It is undisputed
too that petitioners Daniel Rubio, Orlando G.
Reslin, and Jose G. Reslin, all from Ilocos
Norte, were included as co-plaintiffs in the
amended complaint as Irene's new
designated trustees. As trustees, they can
only serve as mere representatives of Irene.
Upon the foregoing consideration, the
resolution of the crucial issue of whether or
not venue had properly been laid should not
be difficult.
Sec. 2 of Rule 4 indicates quite clearly that
when there is more than one plaintiff in a
personal action case, the residences of the
principal parties should be the basis for
determining proper venue. According to the
late Justice Jose Y. Feria, "the word
'principal' has been added [in the uniform
procedure rule] in order to prevent the
plaintiff from choosing the residence of a
minor plaintiff or defendant as the venue."42
Eliminate the qualifying term "principal" and
the purpose of the Rule would, to borrow
from Justice Regalado, "be defeated where a
nominal or formal party is impleaded in the
action since the latter would not have the
degree of interest in the subject of the action
which would warrant and entail the desirably
active participation expected of litigants in a
case."
prosecute a suit, but only on behalf of the
beneficiary who must be included in the title
of the case and shall be deemed to be the
real party-in-interest. In the final analysis,
the residences of Irene's co-plaintiffs cannot
be made the basis in determining the venue
of the subject suit. This conclusion becomes
all the more forceful considering that Irene
herself initiated and was actively prosecuting
her claim against Benedicto, his heirs,
assigns, or associates, virtually rendering the
impleading of the trustees unnecessary.
WHEREFORE, the instant petition is hereby
DISMISSED. The Decision and Resolution
dated October 17, 2001 and June 20, 2002,
respectively, of the CA in CA-G.R. SP No.
64246, insofar as they nullified the assailed
orders of the RTC, Branch 17 in Batac, Ilocos
Norte in Civil Case Nos. 3341-17 and 3342-
17 on the ground of lack of jurisdiction due
to improper venue, are hereby AFFIRMED.
The Orders dated October 9, 2000,
December 18, 2000, and March 15, 2001 of
the RTC in Civil Case Nos. 3341-17 and
3342-17 are accordingly ANNULLED and SET
ASIDE and said civil cases are DISMISSED.

The trustees may be accorded the right to

prosecute a suit, but only on behalf of the
beneficiary who must be included in the title
of the case and shall be deemed to be the
real party-in-interest – their residences
cannot be made the basis in determining the
venue of the suit.

The Court can concede that Irene's three co-

plaintiffs are all residents of Batac, Ilocos
Norte. But it ought to be stressed in this
regard that not one of the three can be
considered as principal party-plaintiffs in
Civil Case Nos. 3341-17 and 3342-17,
included as they were in the amended
complaint as trustees of the principal
plaintiff. As trustees, they may be accorded,
by virtue of Sec. 3 of Rule 3, the right to
Pasiño v Monterroyo
FACTS
- The Director of Land granted Laureano
Pasino’s application for homestead patent.
- The said land was divided by a creek,
hence, two portions — Lot A and Lot B.
- OCTs were issued by LMB covering the
lands, respectively.
- Here comes the respondent alleging
exclusive and notorious possession of Lot B.
He contended that the OCT issued in favor of
petitioners over the subject lot was null and
void.
RTC:
The trial court ruled that as of January 1994,
Lot No. 2139 had already acquired the
character of a private land by operation of
law. Since Lot No. 2139 had already ceased
to be a public land, the Land Management
Bureau had no power or authority to dispose
of it by issuing free patent titles.
The trial court ruled that respondents’
counterclaim stands on the same footing as
an independent action. Thus, it could not be
considered a collateral attack on petitioners’
titles. The trial court further ruled that
respondents filed their counterclaim within
one year from the grant of petitioners’ titles,
which was the reglementary period for
impugning a title.
The trial court ruled that the order for the
issuance of a patent in favor of Laureano
lapsed and became functus officio when it
was not registered with the Director of
Deeds. The trial court ruled that while
Laureano was the original claimant of the
entire 24 hectares, he ceded the right to
possession over half of the property,
denominated as Lot No. 2139, to Larumbe
sometime in 1947. The trial court found that
Laureano offered to sell half of the land to
his tenant Gavino Quinaquin (Gavino) but he
did not have money. Later, Gavino learned
from Larumbe that he (Larumbe) acquired
half of the land from Laureano. Gavino then
started delivering the owner’s share of the
harvest to Larumbe. Laureano never
contested Gavino’s action nor did he demand
that Gavino deliver to him the owner’s share
of the harvest and not to Larumbe. When Lot
No. 2139 was sold, Gavino and his
successors delivered the owner’s share of
the harvest to Petra, Vicente, Arturo, Dr.
Monterroyo, and Dindo Monterroyo,
successively. The trial court also found that
the other tenants had never given any share
of the harvest to Jose. The trial court ruled
that petitioners had failed to present
convincing evidence that they and their
predecessors-in-interest were in possession
of Lot No. 2139 from 1947 to 1994 when
they filed their application for free patent.
The trial court ruled that petitioners
committed actual fraud when they
misrepresented in their free patent
applications that they were in possession of
the property continuously and publicly.
Petitioners appealed from the trial court’s
Decision.
CA:
In its 31 January 2003 Decision, the Court of
Appeals affirmed the trial court’s Decision.
The Court of Appeals sustained the trial
court’s ruling that the Land Management
Bureau had been divested of jurisdiction to
grant the patent because the land already
acquired the character of a private land.
While the homestead patent was issued in
favor of Laureano, the issuance of patent
order became functus officio when it was not
registered. The Court of Appeals further
sustained the trial court’s finding that
respondents were in physical, open, public,
adverse and continuous possession of Lot
No. 2139 in the concept of owner for at least
30 years prior to petitioners’ application for
free patent titles over the land.
Petitioners filed a motion for reconsideration.
In its 5 August 2003 Resolution, the Court of
Appeals denied petitioners’ motion for
reconsideration.
Hence, the petition before this Court.
ISSUE
Who is the rightful owner of the subject
land?
HELD
Monterroyo.
constructive trust for the real owner, which
would justify an action for reconveyance.
Under the principle of constructive trust,
registration of property by one person in his
name, whether by mistake or fraud, the real
owner being another person, impresses upon
the title so acquired the character of a
constructive trust for the real owner, which
would justify an action for reconveyance. In
the action for reconveyance, the decree of
registration is respected as incontrovertible
but what is sought instead is the transfer of
the property wrongfully or erroneously
registered in another’s name to its rightful
owner or to one with a better right. If the
registration of the land is fraudulent, the
person in whose name the land is registered
holds it as a mere trustee, and the real
owner is entitled to file an action for
reconveyance of the property

First, LMB has no jurisdiction to issue free
patent titles.
Secondly, the subject land has been
converted into private land thru operation of
the law by virtue of prescription, thus
WHEREFORE, we DENY the petition. We
AFFIRM the 31 January 2003 Decision and
the 5 August 2003 Resolution of the Court of
Appeals in CA-G.R. CV No. 63199. Costs
against petitioners.

In Director of Lands v. IAC, the Court ruled:

―Alienable public land held by a possessor,

continuously or through his predecessors

-in-interest, openly, continuously and

exclusively for the prescribed statutory
period (30 years under The Public Land Act,
as amended) is converted to private property
by the mere lapse or completion of the
period, ipso jure.‖

The respondent to that effect has presented

proof.

Under the principle of constructive trust,

registration of property by one person in his
name, whether by mistake or fraud, the real
owner being another person, impresses upon
the title so acquired the character of a