Supreme Court affirms ruling for conversion of SMC shares held by Cocofed

MANILA, Philippines - The Supreme Court (SC) has affirmed its ruling last year approving the conversion of a 24-percent stake of Philippine Coconut Producers Federation Inc. (Cocofed) in San Miguel Corp. from common to preferred shares.

In a 16-page resolution issued by Associate Justice Presbitero Velasco Jr., the Court dismissed the appeal of groups led by former senators Jovito Salonga, Wigberto Tañada, Oscar Santos, Ana Theresa Hontiveros (Akbayan Party list), and former Vice President Teofisto Guingona III seeking the reversal of the Court’s ruling issued on Sept. 17 last year.

The Court reiterated its ruling that the conversion “is advantageous to the public interest or will result in clear and material benefit to the eventually declared stock owners, be they the coconut farmers or the government itself.”

The SC, in dismissing the motions for reconsideration, stressed that the arguments raised by the petitioners were “clearly replications” of their previous positions presented in opposition to the motion filed by the Philippine Coconut Producers Federation, Inc. (Cocofed) seeking the approval of the conversion in question.

 “It was proved that the PCGG had exercised proper diligence in reviewing the pros and cons of the conversion. The efforts PCGG have taken with respect to the desired stock conversion argue against the notion of grave abuse of discretion,” the SC ruled.

Under the Constitution, the Court noted, it is the executive branch that has control over all matters related to the disposition of government property, including sequestered assets under the administration of the PCGG.

The Court, likewise, branded as “is misplaced” the contention of Tanada’s group that the Sept. 17 resolution violates its holding in San Miguel Corp. vs. Sandiganbayan, as the conversion of the sequestered common shares into treasury shares would destroy the character of the shares of stock.

It noted that its ruling in the said case did not per se prohibit the conversion of sequestered common shares into preferred shares.

 “As we held thereat, the changes that are unacceptable are those ‘of any peremanent character that will alter their being sequestered shares and therefore, in custodia legis, that is to say, under the control and disposition of this Court,” the SC added.

The SC noted that in the present case, the SMC Series 1 preferred shares will also be sequestered in exchange for the common shares originally sequestered.

Likewise, the SC also dismissed the argument of the petitioners that the conversion would violate Commission on Audit (COA) Circular No. 89-296 which provides that the divestment or disposal of government property shall be undertaken through public auction.

It explained that conversion would not result in divestment or bdisposal of the SMC shares as the CIIF companies shall remain the registered owners of the preferred shares after the conversion.

The Court stressed that the SMC shares are not yet owned by government as the ownership issue has yet to be resolved by Court.

“Hence, COA Circular No. 89-296, which covers only the disposition of government property, cannot plausibly be made to govern the conversion of the SMC shares in question, assuming for the nonce that the challenged conversion is equivalent to disposition,” the SC held.