G.R. Nos. 104637-38 and 109797; September 14, 2000
SAN MIGUEL CORPORATION, ET AL., petitioners, vs. SANDIGANBAYAN (FIRST DIVISION), ET AL., respondents.

FACTS

In 1986, the Coconut Industry Investment Fund (CIIF) Holding Companies sold 33 million San Miguel Corporation (SMC) shares to the SMC Group led by Andres Soriano III. The Presidential Commission on Good Government (PCGG) sequestered these shares shortly after the initial payment. The United Coconut Planters Bank (UCPB) Group, representing the sellers, rescinded the sale due to the SMC Group’s suspension of further payments, leading to litigation. The Supreme Court ultimately held that the Sandiganbayan had primary jurisdiction over disputes involving sequestered assets. Subsequently, in 1990, the SMC Group and the UCPB Group entered into a Compromise Agreement, recognizing the validity of the sale for 5 million shares (First Installment) and rescinding the sale for the remaining shares. They jointly petitioned the Sandiganbayan for its approval in Civil Case No. 0102.
The Republic of the Philippines, through the Office of the Solicitor General (OSG), opposed the agreement. It argued that the coco-levy funds used to purchase the SMC shares were public funds, placing the shares beyond the commerce of man and outside the private parties’ authority to compromise. The OSG contended the petition was an improper attempt to preempt the main ill-gotten wealth case, Civil Case No. 0033, where the same shares were implicated. The Sandiganbayan denied approval of the compromise and later dismissed Civil Case No. 0102, prompting the petitioners to elevate the case to the Supreme Court.

ISSUE

Whether the Sandiganbayan committed grave abuse of discretion in denying the approval of the Compromise Agreement and dismissing Civil Case No. 0102.

RULING

No, the Sandiganbayan did not commit grave abuse of discretion. The Supreme Court upheld the Sandiganbayan’s denial of the compromise agreement. The legal logic rests on the nature of the subject matter—the sequestered SMC shares purchased with coco-levy funds. The Court affirmed the OSG’s position that these funds are prima facie public funds. Consequently, assets acquired using these funds are presumed to be public in character and are beyond the commerce of man. This means they cannot be freely alienated or made the subject of a private compromise agreement between the petitioners and the UCPB Group without the consent and participation of the Republic, the real party-in-interest.
The Sandiganbayan correctly recognized that the compromise would effectively adjudicate rights over assets that were simultaneously the subject of Civil Case No. 0033, the main recovery case filed by the Republic. Approving the private compromise would have preempted the resolution of the fundamental issue in Civil Case No. 0033: whether the shares constituted ill-gotten wealth. The dismissal of Civil Case No. 0102 was also proper as it was merely a derivative action concerning the sequestered assets, and its continuation would have been superfluous and potentially prejudicial to the main case. The Sandiganbayan’s actions were a valid exercise of its jurisdiction to prevent a private settlement from disposing of assets claimed by the state in pending litigation.