G.R. Nos. 147036-37 and 147811. April 10, 2012.
PKSMMN, COIR, REP. LORETA ANN ROSALES, ET AL., and TEODORO J. AMOR, ET AL., Petitioners, vs. EXECUTIVE SECRETARY, ET AL., Respondents.

FACTS

These consolidated petitions assail the constitutionality of various presidential decrees and executive orders concerning coco-levy funds. The funds originated from levies imposed on coconut farmers under laws like R.A. 6260 and subsequent Presidential Decrees (e.g., P.D. 276, 582, 755, 961). These laws declared the funds to be private, owned by the farmers, and were used to acquire assets, notably shares in the United Coconut Planters Bank (UCPB) and San Miguel Corporation (SMC). In 2000, President Joseph Estrada issued E.O. 312 and E.O. 313. E.O. 313 created an irrevocable “Coconut Trust Fund,” using the SMC shares acquired with levy funds as initial capital, to provide financial assistance to farmers. The petitioners, representing farmer groups and individuals, argue these issuances, particularly E.O. 313, illegally divert the purportedly private coco-levy funds into a public trust fund, violating due process and the farmers’ right to property.

ISSUE

Whether Executive Order No. 313 is unconstitutional for converting what are alleged to be private coco-levy funds into a public trust fund.

RULING

The Supreme Court declared E.O. 313 UNCONSTITUTIONAL. The Court held that the coco-levy funds are prima facie public funds. They were raised pursuant to law, imposed by the state, and administered by government agencies for a public purpose—the development of the coconut industry. The fact that the laws declared them as owned by the farmers in their private capacity does not automatically make them private property; such declarations are mere conclusions of law that cannot override the essential nature of the funds as having been collected under the state’s taxing power. Since the funds are public, the SMC shares purchased with them are also public. E.O. 313’s creation of a trust fund using these public assets is not inherently invalid. However, the Order failed to comply with the constitutional mandate under Article VI, Section 29(3) that “All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only.” By establishing a new “Coconut Trust Fund” with a broader purpose, E.O. 313 effectively redirected the special fund to a purpose not specified by the levying law, absent any showing that the original special purpose had been fulfilled or abandoned. This unilateral executive act violated the constitutional rule on the disposition of special funds.