1 INSURANCE Case Digest 5th Batch
1 HELD:
Gregorio Tongko vs. The manufacturers Life Insurance
Gr no. 167622
June 29, 2010
FACTS:
Taking from the November 2008 decision, the facts are as follows:
Manufacturers Life Insurance, Co. is a domestic corporation engaged
in life insurance business. De Dios was its President and Chief
Executive Officer. Petitioner Tongko started his relationship with
Manulife in 1977 by virtue of a Career Agent's Agreement.
Sometime in 2001, De Dios addressed a letter to Tongko, then one
of the Metro North Managers, regarding meetings wherein De Dios
found Tongko's views and comments to be unaligned with the
directions the company was taking.
De Dios subsequently sent Tongko a letter of termination in
accordance with Tongko's Agents Contract. Tongko filed a complaint
with the NLRC against Manulife for illegal dismissal, alleging that he
had an employer-employee relationship with De Dios instead of a
revocable agency by pointing out that the latter exercised control
over him through directives regarding how to manage his area of
responsibility and setting objectives for him relating to the business.
Tongko also claimed that his dismissal was without basis and he was
not afforded due process.
The NLRC ruled that there was an employer-employee relationship
as evidenced by De Dios's letter which contained the manner and
means by which Tongko should do his work.
The NLRC ruled in favor of Tongko, affirming the existence of the
employer-employee relationship.
The Court of Appeals, however, set aside the NLRC's ruling. It
applied the four-fold test for determining control and found the
elements in this case to be lacking, basing its decision on the same
facts used by the NLRC. It found that Manulife did not exert control
over Tongko, there was no employer-employee relationship and
thus the NLRC did not have jurisdiction over the case.
The Supreme Court reversed the ruling of the Court of Appeals and
ruled in favor of Tongko. However, the Supreme Court issued
another Resolution dated June 29, 2010, reversing its decision.
Tongko filed a motion for reconsideration, which is now the subject
of the instant case.
ISSUE:
Did the Supreme Court err in issuing the June 29, 2010 resolution,
reversing its earlier decision that an employer-employee
relationship existed?
The Supreme Court finds no reason to reverse the June 29, 2010
decision. Control over the performance of the task of one providing
service both with respect to the means and manner, and the results
of the service is the primary element in determining whether an
employment relationship exists.
The Supreme Court ruled petitioners Motion against his favor since
he failed to show that the control Manulife exercised over him was
the control required to exist in an employer-employee relationship;
Manulifes control fell short of this norm and carried only the
characteristic of the relationship between an insurance company
and its agents, as defined by the Insurance Code and by the law of
agency under the Civil Code.
In the Supreme Courts June 29, 2010 Resolution, they noted that
there are built-in elements of control specific to an insurance
agency, which do not amount to the elements of control that
characterize an employment relationship governed by the Labor
Code.The Insurance Code provides definite parameters in the way
an agent negotiates for the sale of the companys insurance
products, his collection activities and his delivery of the insurance
contract or policy. They do not reach the level of control into the
means and manner of doing an assigned task that invariably
characterizes an employment relationship as defined by labor law.
To reiterate, guidelines indicative of labor law "control" do not
merely relate to the mutually desirable result intended by the
contractual relationship; they must have the nature of dictating the
means and methods to be employed in attaining the result.
Tested by this norm, Manulifes instructions regarding the objectives
and sales targets, in connection with the training and engagement of
other agents, are among the directives that the principal may
impose on the agent to achieve the assigned tasks.They are targeted
results that Manulife wishes to attain through its agents. Manulifes
codes of conduct, likewise, do not necessarily intrude into the
insurance agents means and manner of conducting their sales.
Codes of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be done.
In sum, the Supreme Court found absolutely no evidence of labor
law control.
2 INSURANCE Case Digest 5th Batch
2.
WHITE GOLD MARINE SERVICES, INC., vs. PIONEER INSURANCE
AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA) LTD.,
G.R. No. 154514.
July 28, 2005
Petitioner White Gold procured a protection and indemnity
coverage for its vessels from Respondent Steamship Mutual through
Respondent Pioneer. White Gold was then issued a Certificate of
Entry and Acceptance.
When White Gold failed to fully pay its accounts, Steamship Mutual
filed a case against White Gold for collection of sum of money to
recover the latters unpaid balance.
White Gold on the other hand, filed a complaint before the
Insurance Commission claiming that Steamship Mutual violated
Sections 186 and 187 of the Insurance Code, while Pioneer violated
Sections 299, 300 and 301 in relation to Sections 302 and 303,
thereof.
Insurance Commission dismissed the complaint saying that
- there was no need for Steamship Mutual to secure a
license because it was not engaged in the insurance
business, rather it was a Protection and Indemnity Club,
and
- Pioneer need not obtain another license as insurance
agent and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the insurance
business. Moreover, Pioneer was already licensed, hence,
a separate license solely as agent/broker of Steamship
Mutual was already superfluous.
ISSUES
1) Is Steamship Mutual, being a Protection and Indemnity Club (P
& I Club) engaged in the insurance business in the Philippines?
YES
2) Does Pioneer need a license as an insurance agent/broker for
Steamship Mutual? YES
HELD
1) Section 2(2) of the Insurance Code enumerates what constitutes
"doing an insurance business" or "transacting an insurance
business". These are:
a. making or proposing to make, as insurer, any insurance
contract;
b. making, or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to any
other legitimate business or activity of the surety;
c. doing any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an
insurance business within the meaning of this Code;
d. doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code.
The fact that no profit is derived from the making of insurance
contracts, agreements or transactions, or that no separate or direct
consideration is received therefor, shall not preclude the existence
of an insurance business.
The TEST TO DETERMINE if a contract is an insurance contract or
not, depends on the nature of the promise, the act required to be
performed, and the exact nature of the agreement in the light of the
occurrence, contingency, or circumstances under which the
performance becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.
In particular, a MARINE INSURANCE undertakes to indemnify the
assured against marine losses, such as the losses incident to a
marine adventure.15 Section 99 of the Insurance Code enumerates
the coverage of marine insurance.
Relatedly, a MUTUAL INSURANCE COMPANY is a cooperative
enterprise where the members are both the insurer and insured. In
it, the members all contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses and
liabilities are paid, and where the profits are divided among
themselves, in proportion to their interest. Additionally, mutual
insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs.
A P & I Club is "a form of insurance against third party liability,
where the third party is anyone other than the P & I Club and the
members." By definition then, Steamship Mutual as a P & I Club is a
mutual insurance association engaged in the marine insurance
business.
The records reveal Steamship Mutual is doing business in the
country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a
resident agent in the Philippines to solicit insurance and to collect
payments in its behalf. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by
the State is necessary. Thus, no insurer or insurance company is
allowed to engage in the insurance business without a license or a
certificate of authority from the Insurance Commission.
2) Pioneer is the resident agent of Steamship Mutual. It has been
licensed to do or transact insurance business by virtue of the
certificate of authority issued by the same agency. However, a
Certification from the Commission states that Pioneer does not
have a separate license to be an agent/broker of Steamship
Mutual.
Although Pioneer is already licensed as an insurance company, it
needs a separate license to act as insurance agent for Steamship
Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker
in the solicitation or procurement of applications for insurance, or
receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
3 INSURANCE Case Digest 5th Batch
Philippines or any agent thereof, without first procuring a license so
to act from the Commissioner, which must be renewed annually on
the first day of January, or within six months thereafter
3.
Almendras Mining Corporation vs. Offices of the Insurance
Commission
GR 72378
April 15, 1988
Facts:
Almendras Mining Corporation (Almendras)) is the owner of the
vessel Don Paulo which was forced aground in Mindoro after
having hit by strong winds and tidal waves. Almendaras executed
and filed a Marine Protest, it formally notified the insurer Country
Bankers Insurance Corporation of its intention to file a provisional
claim for indemnity for damages sustained by the vessel.
Bankers commissioned the services of Audemus Adjustment
Corporation to estimate its liability, it accepted its liability equivalent
of 70% of all expenses necessary for the repair of the vessel.
Salvage operation was done, the vessel had been towed to and
docked at the Phil. National Oil Corporation (PNOC) where repair
work was performed.
Delay however overtook the repair work, Bankers explained that it
was due to unavailability of the spare parts needed in the repair.
Notwithstanding, Almendras filed with the Insurance Commission an
administrative complaint for the revocation or suspension of
Bankers Certificate of Authority to engage in the insurance
business; for directive ordering immediate completion of all repair
and for damages.
During the hearing, Bankers agreed to replace the engines with
brand new engines, Almendras also agreed to pay the 30% share in
the cost. However, after inspection, Almedras claimed that the
engine was not at par with the vessels original main engine, it then
demanded cash and settlement of insurance claim.
Almendras filed a separate civil action for damages with RTC of
Pasay City. In the Commission hearing, the Commission ordered the
dismissal of Almendras complaint on the ground that the delay of
repair was not unreasonable or was the result of unfair claim
settlement practice. . It filed an MR but was denied. Almendras then
filed a Petition for Certiorari with SC with the question whether or
not there is a valid and substantial ground to revoke or suspend
Bankers Certificate of Authority to engage in the insurance
business.
Issue:
WON the Court has jurisdiction to try and decide on the revocation
or suspension of an insurers Certificate of Authority to engage in
insurance business.
Held:
No.
The Insurance Code clearly indicates that the Office of the Insurance
Commission is an administrative agency vested with regulatory
power as well as with adjudicatory authority.
Among the regulatory or non-quasi-judicial duties is the authority to
issue or refuse issuance of a Certificate of Authority and to revoke or
suspend such Certificate upon a finding of the existence of statutory
grounds of such revocation or suspension.
The adjudicatory authority of the Commission is described in Section
416 of the Code which are to adjudicate claims and complaints
involving any loss, damage or liability which an insurer may be liable.
The authority of the Commission to adjudicate is concurrent with
that of civil courts but the filing of a complaint with the
Commissioner shall preclude other courts from taking cognizance of
the suit involving the same matter.
The appeal of decision or final order of the Commissioner shall be
filed with the Court of Appeals in the manner provided for in the
Rules of Court (BP Blg. 129). The CA now has the exclusive appellate
jurisdiction.
The issue in this case, as to the revocation or suspension of the
insurers Certificate of Authority is within the administrative and
regulatory duties and function of the Commission, the denial of
Almendras petition by the Commissioner should be appealed to the
Office of the Secretary of Finance.
As to the separate civil action for damages before the RTC after the
amicable settlement a had failed, the claim of Almendras was in
excess of 100K, therefore it is outside the quasi-judicial jurisdiction
of the Insurance Commissioner under Section 416 of Insurance
Code.
Sec. 416. The Commissioner shall have the power
to adjudicate claims and complaints involving
any loss, damage or liability for which an insurer
may be answerable under any kind of policy or
contract of insurance, or for which such insurer
may be liable under a contract of membership, or
for which a reinsurer may be sued under any
contract or reinsurance it may have entered into,
or for which a mutual benefit association may be
held liable under the membership certificates it
has issued to its members, where the amount of
any such loss, damage or liability, excluding
interests, cost and attorney's fees, being claimed
or sued upon any kind of insurance, bond,
reinsurance contract, or membership certificate
does not exceed in any single claim one hundred
thousand pesos.
xxx xxx xxx
The authority to adjudicate granted to the
Commissioner under this section shall be
concurrent with that of the civil courts, but the
filing of a complaint with the Commissioner shall
preclude the civil courts from taking cognizance
of a suit involving the same subject matter.
(Emphasis supplied)
4 INSURANCE Case Digest 5th Batch
4.
THE MANUFACTURERS LIFE INSURANCE CO. vs. BIBIANO L. MEER,
in the capacity as Collector of Internal Revenue.
Note: tax related ni na case guys. Kadtong taxes on insurance
premiums. So ayaw mog wonder nganu puro tax ang issues. Hehe
Facts:
Manufacturer Life Insurance Company was engaged in such business
in the Philippines for more than five years before and including the
year 1941. But due to war it closed the branch office at Manila
during 1942 up to 1945.
Plaintiff issued a number of life insurance policies in the
Philippines containing stipulations known as non-forfeiture clauses.
Since the insured failed to pay from 1942 to 1946, the
company applied the provision of the automatic premium
loan clauses; and the net amount of premiums so advanced or
loaned totaled P1,069,254.98. On this sum the
defendant Collector of Internal Revenue assessed P17,917.12. The
assessment was made pursuant to section 255 of the NIRC which
put taxes on insurance premiums paid by money, notes, credits or
any substitutes for money.
Manufacturer contended that when it made premium
loans or premium advances by virtue of the non-forfeiture clauses, it
did not collect premiums within the meaning of the above sections
of the law, and therefore it is not amendable to the tax provided.
Issues:
1. Whether or not premium advances made by plaintiff-
appellant under the automatic premium loan clause of its policies
are "premium collected" by the Company are subject to tax. YES.
2. Whether or not, in the application of the automatic
premium loan clause of plaintiff-appellant's policies, there is
"payment in money, notes, credit, or any substitutes for money."
YES.
3. Whether or not the collection of the alleged deficiency
premium taxes constitutes double taxation. NO.
4. Whether the making of premium advances, granting for
the sake of argument that it amounted to collection of premiums,
were done in Toronto, Canada, or in the Philippines. NO.
5. Whether or not the fact that plaintiff-appellant was not
doing business in the Philippines during the period from January 1,
1942 to September 30, 1945, inclusive, exempts it from payment of
premium taxes corresponding to said period. No.
Ruling:
1. A person secures a 20-years endowment policy for P5,000 from
Manufacturers and pays an annual premium of P250. He pays the
first ten yearly premiums amounting to P2,500 and on this amount
plaintiff-appellant pays the taxes. Also, the cash value of said policy
after the payment of the 10th annual premium amounts to P1,000."
When on the eleventh year the annual premium fell due and the
insured remitted no money within the grace period, the insurer
treated the premium then overdue as paid from the cash value, the
amount being loan to the policyholder who could discharge it at
anytime with interest at 6 per cent. The insurance contract,
therefore, continued in force for the eleventh year. (example given
by petitioner.)
Under the circumstances described, did the insurer collect
the amount of P250 as the annual premium for the eleventh year on
the said policy? In effect the Manufacturers Life Insurance Co.
loaned to the person P250 and the latter in turn paid with that sum
the annual premium on his policy. The Company therefore collected
the premium for the eleventh year.
"How could there be such a collection when insurer
becomes a creditor, acquires a lien on the policy and is entitled to
collect interest on the amount of the unpaid premiums?"
Wittingly, the "premium" and the "loan" have been
interchanged in the argument. The insurer "became a creditor" of
the loan, but not of the premium that had already been paid. And it
is entitled to collect interest on the loan, not on the premium.
The insured paid the premium for the eleventh; but in turn
he became a debtor of the company for the sum of P250. This debt
he could repay either by later remitting the money to the insurer or
by letting the cash value compensate for it. The debt may also be
deducted from the amount of the policy should he die thereafter
during the continuance of the policy.
There was new credit for the advances made. True, the
company could not sue the insured to enforce that credit. But it has
means of satisfaction out of the cash surrender value.
Here again it may be urged that if the credit is paid out of
the cash surrender value, there were no new funds added to the
company's assets. Cash surrender value "as applied to life insurance
policy, is the amount of money the company agrees to pay to the
holder of the policy if he surrenders it and releases his claims upon
it. The more premiums the insured has paid the greater will be the
surrender value; but the surrender value is always a lesser sum than
the total amount of premiums paid."
The cash value or cash surrender value is therefore an
amount which the insurance company holds in trust for the insured
to be delivered to him upon demand. It is therefore a liability of the
company to the insured. Now then, when the company's credit for
advances is paid out of the cash value or cash surrender value, that
value and the company's liability is thereby
dismissed. Consequently, the net assets of the insurance company
increase.
2. The insurer agreed to consider the premium paid on the
strength of the automatic loan. The premium was paid by means of
a "note" or "credit" or "other substitute for money" and the taxes
due because section 255 above quoted levies taxes according to the
total premiums collected by the insurer "whether such premiums
are paid in money, notes, credits or any substitutes for money.
3. There is no constitutional prohibition against double
taxation. The total amount advanced worth 1 million pesos had
P158,666.63 which was repaid at the time of assessment notice.
Besides, the premiums paid and on which taxes had already been
collected were those for the ten years. The tax demanded is on the
premium for the eleventh year.
4. Since the advances were done internationally, the
petitioner contended that those payments were not subject to local
taxation. This cant be sustained because the loans were made to
5 INSURANCE Case Digest 5th Batch
policyholders in the Philippines, who pay the premium in the Manila
branch. Approving this point would allow foreign insurers to evade
the tax by requiring that premium payments shall be made at their
head offices. It is enough that the insurer is doing insurance business
in the Philippines, irrespective of the place of its establishment.
5. Even if its office was closed, it was operating by
collecting premiums on its outstanding policies, incurring the risks
and/or enjoying the benefits, without withdrawing in economic
activity. Before the BIR, it never asserted that that it was not
engaged in business in this country during those years.
Petition dismissed.
5
GR NO.164197
SECURITIES AND EXCHANGE COMMISSION
VS. PROSPERITY.COM, INC
Facts:
Respondent Prosperity. Com, sold computer softwares and hosted
websites with providing internet service. To make profit, the PCI
devised a scheme in which, for the price of US$234.00, a buyer could
acquire from it an internet website of a 15 MB capacity and could
earn commissions, interest,in real estate in the Philippines and in
the US, and insurance coverage worth P50,000.00 by referring to
the PCI his own down line buyers.
Apparently, PCI patterned its scheme from that of Golconda
Ventures, Inc. (GVI), which company stopped operations after the
Securities and Exchange Commission (SEC) issued a cease and desist
order (CDO) against it. As it later on turned out, the same persons
who ran the affairs of GVI directed PCIs actual operations.
Disgruntled elements of GVI filed a complaint with the SEC against
PCI, alleging that the latter had taken over GVIs operations. After
hearing,1 the SEC, through its Compliance and Enforcement unit,
issued a CDO against PCI. The SEC ruled that PCIs scheme
constitutes an Investment contract and, following the Securities
Regulations Code,2 it should have first registered such contract or
securities with the SEC.
The CA rendered a decision, granting PCIs petition and setting aside
the SEC-issued CDO.7 The CA ruled that, following the Howey test,
PCIs scheme did not constitute an investment contract that needs
registration pursuant to R.A. 8799,
Issue:
WON the PCIs scheme constitutes an investment contract which
should have been registered first with the SEC.
Held:
The Securities Regulation Code treats investment contracts as
"securities" that have to be registered with the SEC before they can
be distributed and sold. An investment contract is a contract,
transaction, or scheme where a person invests his money in a
common enterprise and is led to expect profits primarily from the
efforts of others.
Apart from the definition, which the Implementing Rules and
Regulations provide, Philippine jurisprudence has so far not done
more to add to the same. Of course, the United States Supreme
Court, grappling with the problem, has on several occasions
discussed the nature of investment contracts. That courts rulings,
while not binding in the Philippines, enjoy some degree of
persuasiveness insofar as they are logical and consistent with the
countrys best interests.
The United States Supreme Court held in Securities and Exchange
Commission v. W.J. Howey Co.10 that, for an investment contract to
exist, the following elements, referred to as the Howey test must
concur: (1) a contract, transaction, or scheme; (2) an investment of
money; (3) investment is made in a common enterprise; (4)
expectation of profits; and (5) profits arising primarily from the
efforts of others.
Thus, to sustain the SEC position in this case, PCIs scheme or
contract with its buyers must have all these elements.
Actually, PCI appears to be engaged in network marketing, a
scheme adopted by companies for getting people to buy their
products outside the usual retail system where products are bought
from the stores shelf. Under this scheme, adopted by most health
product distributors, the buyer can become a down-line seller. The
latter earns commissions from purchases made by new buyers
whom he refers to the person who sold the product to him. The
network goes down the line where the orders to buy come.
The commissions, interest in real estate, and insurance coverage
worth 50,000.00 are incentives to down-line sellers to bring in
other customers. These can hardly be regarded as profits from
investment of money under the Howey test.
The CA is right in ruling that the last requisite in the Howey test is
lacking in the marketing scheme that PCI has adopted. Evidently, it is
PCI that expects profit from the network marketing of its products.
PCI is correct in saying that the US$234 it gets from its clients is
merely a consideration for the sale of the websites that it provides.
6.
AVON INSURANCE et al. vs. CA, YUPANGCO COTTON MILLS.
WORLDWIDE SURETY & INSURANCE CO., INC.
FACTS
Respondent Yupangco Cotton Mills filed a complaint against several
foreign reinsurance companies (among which are PETITIONERS) to
collect their alleged percentage liability under contract treaties
between the foreign insurance companies and the international
insurance broker C.J. Boatright, acting as agent for respondent
Worldwide Surety and Insurance Company.
Petitioners, on special appearance, filed motions to dismiss
disputing the jurisdiction of the RTC and the extra-territorial service
of summons. Yupangco filed its opposition to the motions to dismiss,
petitioners filed their reply, and respondent Yupangco filed its
rejoinder. In an Order dated April 30, 1990, respondent Court denied
the motions to dismiss and directed petitioners to file their answer.
On May 29, 1990, petitioners filed their notice of appeal. In an order
6 INSURANCE Case Digest 5th Batch
dated June 4, 1990, respondent court denied due course to the
appeal.3
To this day, trial on the merits of the collection suit has not
proceeded as in the present petition, petitioners continue vigorously
to dispute the trial court's assumption of jurisdiction over them.
In 1979 and 1980, Yupangco Cotton Mills engaged to secure with
Worldwide Security and Insurance Co. Inc., several of its properties
under two policies. Both contracts were covered by reinsurance
treaties between Worldwide Surety and several foreign reinsurance
companies, including the petitioners. The reinsurance arrangements
had been made through international broker C.J. Boatwright and Co.
Ltd., acting as agent of Worldwide Surety and Insurance.
Within the respective effectivity periods of the Policies the
properties insured were razed by fire, giving rise to the obligation of
the insurer to indemnify the Yupangco. Partial payments were made
by Worldwide Surety and some of the reinsurance companies.
On 1983, Worldwide Surety in a Deed of Assignment, acknowledged
a remaining balance of still due Yupangco, and assigned to the latter
all reinsurance proceeds still collectible from all the foreign
reinsurance companies. Thus, in its interest as assignee and original
insured, Yupangco Cotton Mills instituted this collection suit against
the petitioners (other reinsurance companies).
Inasmuch as petitioners are not engaged in business in the
Philippines with no offices, places of business or agents in the
Philippines, the reinsurance treaties having been entered abroad,
service of summons was made upon petitioners through the Office
of the Insurance Commissioner.
ISSUE
WON petitioners are doing business in the Philippines for the
purpose of acquiring jurisdiction by way of summons. NO
HELD
There is no exact rule or governing principle as to what constitutes
doing or engaging in or transacting business. Indeed, such case must
be judged in the light of its peculiar circumstances, upon its peculiar
facts and upon the language of the statute applicable.
The TRUE TEST, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or
enterprise for which it was organized.
The term ordinarily implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of the functions normally incident to
and in progressive prosecution of the purpose and object of its
organization.
A single act or transaction made in the Philippines, however, could
qualify a foreign corporation to be doing business in the Philippines,
if such singular act is not merely incidental or casual, but indicates
the foreign corporation's intention to do business in the
Philippines.
There is nothing to substantiate the private respondent's submission
that the petitioners had engaged in business activities in this
country. In the absence of showing that petitioners had been doing
business in the country, they cannot be summoned to answer for
the charges leveled against them.
For the purpose of acquiring jurisdiction by way of summons on a
defendant foreign corporation, there is no need to prove first the
fact that defendant is doing business in the Philippines. The
plaintiff only has to allege in the complaint that the defendant has
an agent in the Philippines for summons to be validly served thereto,
even without prior evidence advancing such factual allegation.
As it is, Yupangco has made no allegation or demonstration of the
existence of petitioners' domestic agent, but avers simply that they
are doing business not only abroad but in the Philippines as well. It
does not appear at all that the petitioners had performed any act
which would give the general public the impression that it had been
engaging, or intends to engage in its ordinary and usual business
undertakings in the country.
The reinsurance treaties between the petitioners and Worldwide
Surety and Insurance were made through an international insurance
broker, and not through any entity or means remotely connected
with the Philippines.
A reinsurance company is not doing business in a certain state
merely because the property or lives which are insured by the
original insurer company are located in that state. The REASON for
this is that a contract of reinsurance is generally a separate and
distinct arrangement from the original contract of insurance,
whose contracted risk is insured in the reinsurance agreement.
Hence, the original insured has generally no interest in the contract
of reinsurance.
A foreign corporation, is one which owes its existence to the laws of
another state, and generally, has no legal existence within the state
in which it is foreign. Corporations have no legal status beyond the
bounds of the sovereignty by which they are created. Nevertheless,
it is widely accepted that foreign corporations are, by reason of state
comity, allowed to transact business in other states and to sue in the
courts of such fora. In the Philippines foreign corporations are
allowed such privileges, subject to certain restrictions, arising from
the state's sovereign right of regulation.
Before a foreign corporation can transact business in the country, it
must first obtain a license to transact business here and secure the
proper authorizations under existing law.
If a foreign corporation engages in business activities without the
necessary requirements, it opens itself to court actions against it,
but it shall not be allowed to maintain or intervene in an action, suit
or proceeding for its own account in any court or tribunal or agency
in the Philippines.
The purpose of the law in requiring that foreign corporations doing
business in the country be licensed to do so, is to subject the foreign
corporations doing business in the Philippines to the jurisdiction of
the courts,19 otherwise, a foreign corporation illegally doing
business here because of its refusal or neglect to obtain the required
license and authority to do business may successfully though
unfairly plead such neglect or illegal act so as to avoid service and
thereby impugn the jurisdiction of the local courts.
7 INSURANCE Case Digest 5th Batch
The same danger does not exist among foreign corporations that are
indubitably not doing business in the Philippines. Indeed, if a foreign
corporation does not do business here, there would be no reason
for it to be subject to the State's regulation.
7.
Smith, Bell & Co. Inc. vs. CA
GR 110668
February 6, 1987
Facts:
Plaintiff Tic Him Chiong is an importer of goods, Dicalcium
Phosphate etc. from Taiwan. The shipment was insured by First
Insurance Co for US$19,500.00 against all risk at port of departure
under a Marine Policy with note Claim if any, payable in US
currency at Manila and with Smith, Bell and Co. (Smith) stamped at
the lower left side of the policy as Claim Agent
The cargo arrived at the Port of Manila and discharged to the local
arrastre contractor, it was found out that a number of the cargo
were in apparent bad order condition. The plaintiff filed with Smith,
Bell and Co. a formal statement of with proof of loss and a demand
for settlement.
After conveying the claim to its principal, Smith informed the
plaintiff that its principal offered only 50% of the claim on the
alleged ground of discrepancy between the amounts contained in
the shipping agents reply to the claimant with that of Metroport.
Plaintiff refused the offer contending that the discrepancy was a
result of loss from vessel to arrastre to consignees warehouse
which losses were still within the all risk insurance cover. Plaintiff
then filed a claim in RTC against the Insurer First Insurance Co and
Smith, Bell, and Co.
The First Insurance Co. Ltd. did not file an Answer. Smith, Bell in its
answer argued that it is merely a settling or claim agent of
defendant insurance company and such agent, it is not personally
liable under the policy in which it has not even taken part of.
RTC ruled that the insurance company and Smith, Bell are jointly and
severally liable to pay the plaintiff.
Issue:
WON a local settling or claim agent of a disclosed principal (a foreign
insurance company) can be held jointly and severally liable with said
principal under a marine cargo insurance policy.
Held:
No.
First reason: Existing Jurisprudence; Salonga vs. Warner Barnes
- An adjustment and settlement agent is no different from
any other agent from the point of view of his
responsibility, for he also acts in a representative capacity.
Whenever he adjust or settles a claim, he does it in behalf
of his principal and his action is binding not upon himself
but upon his principal.
- An insurance adjuster is ordinarily a special agent for the
person or company for whom he acts, and his authority is
prima facie coextensive with the business intrusted to him.
- An adjuster does not discharge functions of a quasi-judicial
nature, but represents his employer, to whom he owes
faithful service, and for his acts, in the employers interest,
the employer is responsible so long as the acts are done
while the agent is acting within the scope of his
employment.
- An adjustment and settlement agent do not include
personal liability. His functions are merely to settle and
adjust claims in behalf of his principal if those claims are
proven and undisputed, and if the claim is disputed or is
disapproved by the principal, like in the instant case, the
agent does not assume any personal liability.
Second reason: Absence of Solidarity Liability
- Article 1207 of NCC clearly provides that there is a solidary
liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires
solidarity.
- The role of the resident agent as a representative of the
foreign insurance company is tasked only to receive legal
processes on behalf of its principal and not to answer
personally for any insurance claims.
Third reason: Not Real Party-in-interest
- Being a mere agent and representative, Smith is also not
the real party-in-interest in the claim. An action is brought
for the principal purpose that is to obtain actual and
positive relief. It the party sued is not the proper party,
any decision that may be rendered against him would be
futile for the decision cannot be enforced and executed.
- The cause of action is based on a contract of insurance
which was not participated by Smith, Bell and Co.
8
ANGELITA AMPARO GO, petitioner,
vs. OFFICE OF THE OMBUDSMAN, INSURANCE COMMISSIONER
EDUARDO T. MALINIS and NORBERTO F. CASTRO, respondents.
Note: power of the insurance commissioner ang topic ani.
Facts:
Petitioner is the Treasurer and Vice-President of Wear Me Garment
Manufacturing Inc. Due to a fire on July 12, 1993that gutted down
Wear Me Garments factory as well as its machineries and stocks,
petitioner filed separate insurance claims against 14 insurance
companies which total P29,778,000.00.
The insurers manifested their official stance to deny the claims of
petitioner. Petitioner then sought the intercession of several
members and committees of the Legislature.
The Commission vehemently denies petitioners accusations.
Petitioner filed with the Commission a complaint for Revocation
and/or Suspension of Licenses against the fourteen insurance
companies.
The Commission was of the opinion that the administrative
case for revocation/suspension of license of respondents and the
civil case for specific performance with the Regional Trial Court
involve the same set of parties, facts and circumstances; and
8 INSURANCE Case Digest 5th Batch
that the determination by the Commission of the validity of the
claims might conflict with that of the court, or vice-versa.
Aggrieved, petitioner filed with the Office of the Ombudsman.
Graft Investigation recommended the dismissal of the
charges against respondents.
However, Ombudsman Desierto ordered further clarificatory
hearings. Thereafter, the Ombudsman approved the
recommendation of the Graft Investigation Officer to dismiss the
charges against respondents.
Upon denial by the Ombudsman of her motion for reconsideration,
petitioner filed the present petition for review on certiorari.
Issue:
1. Can an Administrative case pending before an administrative
tribunal be pursued unabated and independently despite
subsequent filing of a civil case in a regular court of justice wherein
in both cases, it involve the same incident? YES.
2. WON the conduct of separate hearings for each respondent
violates the mandate of the speedy disposition cases? NO.
Ruling:
The conduct of separate hearings and issuance of the Order were all
done in the regular performance of duties by the respondents
Insurance Commissioner and Hearing Officer respectively.
Moreover, they were done within the purview of the rules of
procedure governing the functions of the Insurance Commission.
The Code provides that the Insurance Commissioner shall have the
power to adjudicate claims and complaints involving any loss,
damage or liability for which an insurer may be answerable under
any kind of policy or contract of insurance where the amount of any
such loss, damage or liability does not exceed in any single claim one
hundred thousand pesos. The Office of the Insurance Commission is
an administrative agency vested with regulatory power as well as
with adjudicatory authority.
Under its adjudicatory authority, the Insurance Commission has the
original jurisdiction to adjudicate and settle insurance claims and
complaints where the amount being claimed does not exceed in any
single claim one hundred thousand pesos, as provided in Section 416
of the Code.
Such original jurisdiction is concurrent with that of the Metropolitan
Trial Courts, the Municipal Trial Courts and the Municipal Circuit
Trial Courts.
In addition to such adjudicatory power, the Commissioner has the
regulatory authority to revoke or suspend the certificate or authority
of an insurance company upon finding the legal grounds for such
revocation or suspension under Sections 241 and 247 of the
Insurance Code.
Petition dismissed.
9
GR NO. 184778 OCTOBER 2, 2009
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI
FONACIER, Petitioners,
vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional
Trial Court Judge of Manila,
FACTS:
The Supervision and Examination Department (SED) of the (BSP)
conducted examinations of the books of the following banks, the
respondent herein.
After the examinations, exit conferences were held with the officers
or representatives of the banks wherein the SED examiners provided
them with copies of Lists of Findings/Exceptions containing the
deficiencies discovered during the examinations.
Petitioner ChuchiFonacier, officer-in-charge of the SED, sent
separate letters to the Board of Directors of each bank, informing
them that the SED found that the banks failed to carry out the
required remedial measures. In response, the banks requested that
they be given time to obtain BSP approval to amend their Articles of
Incorporation, that they have an opportunity to seek investors. They
requested as well that the basis for the capital infusion figures be
disclosed, and noted that none of them had re
ceived the Report of Examination (ROE) which finalizes the audit
findings. They also requested meetings with the BSP audit teams to
reconcile audit figures.
On May 12, 2008, the RBPI filed a complaint for nullification of the
BSP ROE with application for a TRO and writ of preliminary
injunction before the RTC.
RBPI prayed that Fonacier, her subordinates, agents, or any other
person acting in her behalf be enjoined from submitting the ROE or
any similar report to the Monetary Board (MB), or if the ROE had
already been submitted, the MB be enjoined from acting on the
basis of said ROE, on the allegation that the failure to furnish the
bank with a copy of the ROE violated its right to due process.
On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino
Rural Bank, Inc. The bank filed a motion for reconsideration the next
day.
Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted
RBPIs prayer for the issuance of a TRO.
On May 19, 2008, Judge Valenzuela issued an Order granting the
prayer for the issuance of TROs for the other seven cases
Petitioners then brought the matter to the CA via a petition for
certiorari under Rule 65 claiming grave abuse of discretion on the
part of Judge Valenzuela when she issued the orders dated May 21,
2008 and June 4, 2008.
Issue:
WON the respondent banks are entitled to a copy of reports.
9 INSURANCE Case Digest 5th Batch
WON the the injuction issued by the RTC violated section 25 of the
NEW CENTRAL BANK ACT and effectively handcuffed the BSP from
discharging its functions to the great and irreparable damage of the
countrys banking system
Held:
The petition is meritorious.
The respondent banks have failed to show that they are entitled to
copies of the ROEs. They can point to no provision of law, no section
in the procedures of the BSP that shows that the BSP is required to
give them copies of the ROEs. Sec. 28 of RA 7653, or the New
Central Bank Act, which governs examinations of banking
institutions, provides that the ROE shall be submitted to the MB; the
bank examined is not mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due
process if they are not provided with copies of the ROEs. The same
ROEs are based on the lists of findings/exceptions containing the
deficiencies found by the SED examiners when they examined the
books of the respondent banks. As found by the RTC, these lists of
findings/exceptions were furnished to the officers or representatives
of the respondent banks, and the respondent banks were required
to comment and to undertake remedial measures stated in said lists.
Despite these instructions, respondent banks failed to comply with
the SEDs directive. Also, the reliance of the RTC on Banco Filipino v.
Monetary Board9 is misplaced. The petitioner in that case was held
to be entitled to annexes of the Supervision and Examination
Sectors reports, as it already had a copy of the reports themselves.
It was not the subject of the case whether or not the petitioner was
entitled to a copy of the reports. And the ruling was made after the
petitioner bank was ordered closed, and it was allowed to be
supplied with annexes of the reports in order to better prepare its
defense. In this instance, at the time the respondent banks
requested copies of the ROEs, no action had yet been taken by the
MB with regard to imposing sanctions upon said banks.
The issuance by the RTC of writs of preliminary injunction is an
unwarranted interference with the powers of the MB. Secs. 29 and
30 of RA 7653 refer to the appointment of a conservator or a
receiver for a bank, which is a power of the MB for which they need
the ROEs done by the supervising or examining department. The
writs of preliminary injunction issued by the trial court hinder the
MB from fulfilling its function under the law.
The respondent banksthrough seeking a writ of preliminary
injunction by appealing to lack of due process, in a roundabout
manner prevent their closure by the MB. Their remedy, as stated,
is a subsequent one, which will determine whether the closure of
the bank was attended by grave abuse of discretion. Judicial review
enters the picture only after the MB has taken action; it cannot
prevent such action by the MB. The threat of the imposition of
sanctions, even that of closure, does not violate their right to due
process, and cannot be the basis for a writ of preliminary injunction.
The "close now, hear later" doctrine has already been justified as a
measure for the protection of the public interest. Swift action is
called for on the part of the BSP when it finds that a bank is in dire
straits. Unless adequate and determined efforts are taken by the
government against distressed and mismanaged banks, public faith
in the
10.
SPOUSES MALOLOS vs. AIDA S. DY, in her capacity as Assignee of
MARIETTA M. VALENZUELA,
G.R. No. 132555
February 17, 2000
On January 9, 1995, Petitioner Spouses Malolos instituted a civil case
for collection of sum of money against Marieta Valenzuela. After the
service of summons by publication, Valenzuela was declared in
default. Subsequently, on June 23, 1995 judgment was rendered in
favor of Sps Malolos ordering Sps Valenzuela to pay the former
P3,000,000.00
On February 28, 1995, the RTC issued an order in a case filed for
involuntary insolvency which declared Marieta Valenzuela insolvent
and directed that all civil proceedings pending against the insolvent
be stayed.
On November 29, 1995, respondent Dy was appointed as assignee of
Marieta Valenzuela.
On October 16, 1995, a writ of execution was issued in favor of Sps
Malolos. A Notice of Sheriffs Sale was subsequently issued, setting
the sale at public auction of certain real properties of Valenzuela on
December 5, 1995.
Dy, filed a motion to suspend proceedings as against defendant
Marieta Valenzuela. The assignee posits that as early as 28 February
1995, Marieta M. Valenzuela was judicially declared insolvent that
the petition for involuntary insolvency of Marieta Valenzuela was
filed on November 28, 1994, long before the filing of the instant case
on January 9, 1995. Hence the proceedings in the for collection of
sum of money should be vacated, stayed and/or suspended.
The CA held that the claim of Sps Malolos against the Valenzuela
spouses should not have been allowed to proceed in view of the
order of the insolvency court directing the stay of all civil
proceedings against Marietta Valenzuela. Such order, had the effect
of putting such properties in custodia legis.
Petitioners question the adequacy of the manifestation and motion
filed by Dy in the RTC to assail the judgment rendered hereby, which
was not only final and executory, but in fact already executed.
ISSUE
WON the decision of the RTC in the collection for sum of money case
directing Valenzuela to pay, may be set aside by motion of the
insolvents assignee. NO
HELD
Respondent's motion was inadequate to set aside the decision of
the RTC, and the execution proceedings conducted pursuant
thereto, when the judgment had already been satisfied. It is
axiomatic that after a judgment has been fully satisfied the case is
deemed terminated once and for all. Even in a case involving a
judgment that was only partially satisfied, this Court held that the
trial court had lost its jurisdiction over the part of the proceedings
involving the auction of the properties representing the amount
already satisfied.
10 INSURANCE Case Digest 5th Batch
The general rule is "A case in which an execution has been issued is
regarded as still pending so that all proceedings on the execution are
proceedings in the suit. There is no question that the court which
rendered the judgment has a general supervisory control over its
process of execution, and this power carries with it the right to
determine every question of fact and law which may be involved in
the execution."
Moreover, it has been stated that it is when the judgment has been
satisfied that the same passes beyond review, for satisfaction
thereof is the last act and end of the proceedings. Payment
produces permanent and irrevocable discharge.
In this case, it appears that the decision of the RTC had already been
fully executed and satisfied when respondent filed her
Manifestation and Motion to Set Aside Judgment and/or To Suspend
Proceedings Indeed, there are no more proceedings to speak of
inasmuch as these were terminated by the satisfaction of the
judgment. Respondent's motion is simply not the proper remedy
either to question the judgment of the RTC, or the execution
thereof.
The remedy of respondent is to file an action to annul the judgment
on the ground of either extrinsic fraud or lack of jurisdiction.
11.
Mindanao Savings and Loan Association Inc. vs. Edward Willkom
et.al.
GR 179618
October 11, 2010
Facts:
The First Iligan Savings and Loan Association Inc. (FISLAI) and Davao
Savings and Loan Association Inc. (DSLAI) are entities duly registered
with the SEC. They were primarily engaged in the business of
granting loans and receiving deposits.
In 1985, FISLA and DSLAI entered into a merger but the articles of
merger were not registered with the SEC due to incomplete
documentation. DSLAI is the surviving corporation, it changed its
corporate name to MSLAI. FISLAI assigned its assets to DSLAI, in turn
the latter assumed the formers liabilities. Subsequently, MSLAI was
closed by the Monetary Board of Central Bank due to insolvency and
it was placed under receivership in 1990.
But prior to the closure of MSLAI, Uy filed with RTC an action for
collection with FSLAI. In 1989, the court issued a decision in favor of
Uy. In 1993, parcels of land owned by FISLAI was levied by the
sheriff. Willkom was the buyer thereof in the public auction and a
new Certificate of Title was issued in its name. Willkom in turn sold
one of the parcels of land to Go.
In 1995, MSLAI filed for the cancellation of title and reconveyance of
properties against Willkom and Go. It alleged that the sale was void
due to lack of notice to Philippine Deposit Insurance Corp. (PDIC);
that the sale was illegal because the assets of an institution placed
under receivership of liquidation such as MSLAI should be deemed in
custodial egis and should be exempt from any order of garnishment,
levy, attachment or execution.
RTC denied the petition on the ground of lack of jurisdiction, that it
could not annul the decision in a civil case rendered by a court of
coordinate jurisdiction.
CA ruled that there was no merger between FISLAI and DSLAI for
their failure to follow the procedure lain down in the Corporation
Code for a valid merger or consolidation.
Issues:
1. WON there was merger between FISLAI and DSLAI.
2. WON there was novation of the obligation by substituting
the person of the debtor.
Held:
1. No. There was no valid merger
A merger does not become effective upon the mere agreement of
the constituent corporations. Since it involves fundamental changes
in the corporation as well as in the rights of stockholders and
creditors, there must be an express provision of law authorizing
them.
It is undisputed that the articles of merger were not registered with
the SEC due to incomplete documentation. Consequently, the SEC
did not issue the required certificate of merger. Even if is true that
the Monetary Board of CBP recognized such merger, the fact
remains that no certificate was issued by the SEC. Such merger is still
incomplete without certification (Corporation Code Sections 76, 77,
78, and 79)
The issuance of Certificate of merger is crucial because not only does
it bear out SECs approval but it also marks the moment when the
consequences of a merger take place. By operation of law, upon the
effectivity of the merger, the absorbed corporation ceases to exist
but its rights and properties as well as liabilities shall be taken and
deemed transferred to and vested in the surviving corporation.
There being no merger, for 3rd parties, the corporations shall not be
considered as one but two separate corporations. As far as 3rd
parties are concerned, the assets of FISLAI remain as its assets and
cannot be considered as belonging to MSLAI notwithstanding the
deed of assignment issued by FISLAI in favor of DSLAI/MSLAI.
2. No. There was no novation.
While it is true that DSLAI assumed all the liabilities of FISLAI, such
assumption did not result in novation as would release the latter
from liability. Novation is the extinguishment of an obligation by the
substitution or changes of the obligation by a subsequent one which
extinguishes or modifies the first, either by changing the object or
principal conditions, by substituting another in place of the debtor,
or by subrogating a third person in the rights of the creditors
It is a rule that substitution of debtor must always be made with the
consent of creditor. (Article 1293 NCC) There was no showing that
Uy, the creditor gave her consent to the agreement that DSLAI
would assume the liabilities of FISLAI. Thus, the assets of FISLAI
transferred to DSLAI remained subject to execution to satisfy the
judgment claim of Uy against FISLAI.
11 INSURANCE Case Digest 5th Batch
12.
REPUBLIC OF THE PHILIPPINES, Represented by the
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs. SUNLIFE ASSURANCE COMPANY OF CANADA, Respondent.
Note: irelate sa corpo ni na case.
Facts:
Sun Life Assurance Company of Canada (Sun Life) is a mutual life
insurance company organized and existing under the laws of
Canada. Sun Life is registered and authorized by the Securities and
Exchange Commission (SEC) and the Insurance Commission (IC) to
engage in business in the Philippines as a mutual life insurance
company.
Sun Life filed with the Commissioner of Internal Revenue
(CIR) its insurance premium tax return for the third quarter of 1997,
and paid the necessary premium. It also filed with the CIR its
documentary stamp tax (DST) declaration returns and paid the total
amount therefor.
The Court of Tax Appeals (CTA) held in one case (Insular
life Assurance Co. ltd v. CIR) that mutual life insurance companies
are purely cooperative companies and are exempt from payment of
premium tax and DST.
Sun Lie then, filed with the CIR an administrative claim for
tax credit of its alleged erroneously paid premium tax and DST.
The CIR failed to act upon the claim for tax credit. Hence,
Sun Life filed with the CTA a petition for review, praying for the
issuance of a tax credit certificate, contending that it is a mutual life
insurance company vested with all the characteristic features and
elements of a cooperative company/association (see Sec. 121,NIRC):
(1) management and affairs, conducted by members; (2) operated
with money collected from members; (3) purpose is for mutual
protection of members, and not profit or gain.
CTA ruled in Sun Life's favor
CIR filed a motion for reconsideration, arguing that Sun
Life (1) should have registered with the Cooperative Development
Authority before it could enjoy the exemptions from premium tax
and DST extended to purely cooperative companies or associations
under the NIRC; and (2) failed to prove that ownership of the
company was vested in its members who are entitled to vote and
elect the Board of Trustees among them.
CTA denied the motion for reconsideration.
CIR appealed to the CA w/c affirmed the CTA's ruling.
hence this petition
Issue:
1. WON respondent is purely cooperative company or association?
YES.
2. WON registration with the cooperative development authority is a
sine qua non requirement to be entitled to tax exemption? NO.
3. WON respondent is exempted from payment of taxes on life
insurance premiums and DST? YES.
Ruling:
1. The Tax Code defines a cooperative as an association "conducted
by the members thereof with the money collected from among
themselves and solely for their own protection and not for
profit." Without a doubt, respondent is a cooperative engaged in a
mutual life insurance business.
First, it is managed by its members. Both the CA and the
CTA found that the management and affairs of respondent were
conducted by its member-policyholders.
A stock insurance company doing business in the
Philippines may "alter its organization and transform itself into a
mutual insurance company." Respondent has been mutualized or
converted from a stock life insurance company to a nonstock mutual
life insurance corporation pursuant to Section 266 of the Insurance
Code of 1978. On the basis of its bylaws, its ownership has been
vested in its member-policyholders who are each entitled to one
vote, and who, in turn, elect from among themselves the members
of its board of trustees.14 Being the governing body of a nonstock
corporation, the board exercises corporate powers, lays down all
corporate business policies, and assumes responsibility for the
efficiency of management.
Second, it is operated with money collected from its
members. Since respondent is composed entirely of members who
are also its policyholders, all premiums collected obviously come
only from them.
The member-policyholders constitute "both insurer and
insured" who "contribute, by a system of premiums or assessments,
to the creation of a fund from which all losses and liabilities are
paid."18 The premiums pooled into this fund are earmarked for the
payment of their indemnity and benefit claims.
Third, it is licensed for the mutual protection of its
members, not for the profit of anyone.
As early as October 30, 1947, the director of commerce
had already issued a license to respondent -- a corporation
organized and existing under the laws of Canada -- to engage in
business in the Philippines. Pursuant to Section 225 of Canadas
Insurance Companies Act, the Canadian minister of state (for finance
and privatization) also declared in its Amending Letters Patent that
respondent would be a mutual company effective June 1, 1992. In
the Philippines, the insurance commissioner also granted it annual
Certificates of Authority to transact life insurance business, the most
relevant of which were dated July 1, 1997 and July 1, 1998.
2. Under the Tax Code although respondent is a
cooperative, registration with the Cooperative Development
Authority (CDA) is not necessary in order for it to be exempt from
the payment of both percentage taxes on insurance premiums,
under Section 121; and documentary stamp taxes on policies of
insurance or annuities it grants, under Section 199.
First, the Tax Code does not require registration with the
CDA. No tax provision requires a mutual life insurance company to
register with that agency in order to enjoy exemption from both
percentage and documentary stamp taxes.
A provision of Section 8 of Revenue Memorandum Circular
(RMC) No. 48-91 requires the submission of the Certificate of
Registration with the CDA, before the issuance of a tax exemption
certificate. That provision cannot prevail over the clear absence of
an equivalent requirement under the Tax Code. One, the Circular
does not apply to respondent, but only to cooperatives that need to
12 INSURANCE Case Digest 5th Batch
be registered under the Cooperative Code. Two, it is a mere issuance
directing all internal revenue officers to publicize a new tax
legislation. Although the Circular does not derogate from their
authority to implement the law, it cannot add a registration
requirement, when there is none under the law to begin with.
Second, the provisions of the Cooperative Code of the
Philippines do not apply.
The cooperative under PD 175 referred only to an
organization composed primarily of small producers and consumers
who voluntarily joined to form a business enterprise that they
themselves owned, controlled, and patronized. The Bureau of
Cooperatives Development -- under the Department of Local
Government and Community Development (later Ministry of
Agriculture) -- had the authority to register, regulate and supervise
only the following cooperatives: (1) barrio associations involved in
the issuance of certificates of land transfer; (2) local or primary
cooperatives composed of natural persons and/or barrio
associations; (3) federations composed of cooperatives that may or
may not perform business activities; and (4) unions of cooperatives
that did not perform any business activities. Respondent does not
fall under any of the above-mentioned types of cooperatives
required to be registered under PD 175.
When the Cooperative Code was enacted years later, all
cooperatives that were registered under PD 175 and previous laws
were also deemed registered with the CDA. Since respondent was
not required to be registered under the old law on cooperatives, it
followed that it was not required to be registered even under the
new law.
We have already determined that respondent is a
cooperative. The distinguishing feature of a cooperative enterprise is
the mutuality of cooperation among its member-policyholders
united for that purpose. So long as respondent meets this essential
feature, it does not even have to use and carry the name of a
cooperative to operate its mutual life insurance business. Gratia
argumenti that registration is mandatory, it cannot deprive
respondent of its tax exemption privilege merely because it failed to
register. The nature of its operations is clear; its purpose well-
defined. Exemption when granted cannot prevail over
administrative convenience.
Third, not even the Insurance Code requires registration
with the CDA. The provisions of this Code primarily govern insurance
contracts; only if a particular matter in question is not specifically
provided for shall the provisions of the Civil Code on contracts and
special laws govern.
True, the provisions of the Insurance Code relative to the
organization and operation of an insurance company also apply to
cooperative insurance entities organized under the Cooperative
Code. The latter law, however, does not apply to respondent, which
already existed as a cooperative company engaged in mutual life
insurance prior to the laws passage of that law. The statutes
prevailing at the time of its organization and mutualization were the
Insurance Code and the Corporation Code, which imposed no
registration requirement with the CDA
3. Having determined that respondent is a cooperative that does not
have to be registered with the CDA, we hold that it is entitled to
exemption from both premium taxes and documentary stamp taxes
(DST).
The Tax Code is clear. On the one hand, Section 121 of the
Code exempts cooperative companies from the 5 percent
percentage tax on insurance premiums. On the other hand, Section
199 also exempts from the DST, policies of insurance or annuities
made or granted by cooperative companies. Being a cooperative,
respondent is thus exempt from both types of taxes.
Petition dismissed.
13.
SCOTTISH UNION and NATIONAL INSURANCE COMPANY; LONDON
AND SCOTTISH ASSURANCE CORPORATION, LTD.; and ST. PAUL
FIRE and MARINE INSURANCE COMPANY, petitioners,
vs.
Court of First Instance of Manila and YU HUN and
COMPANY,respondents.
G.R. Nos. L-5717 and L-5751 to L-5756
August 30, 1952
Facts:
The petitioners are three of seven defendants in as many civil cases
of the Manila court of first instance, now on appeal, and the
respondent Yu Hun & Co., is the plaintiff therein.
As a result of the fire that destroyed its warehouse and goods in
May 1949, Yu Hun & Co., filed in 1949 and 1950 the above suits
seeking to recover the total sum of P240,00 from the defendants,
foreign insurance corporations who had issued insurance policies
covering the said properties.
The Court renders judgment in favor of the plaintiff and against
each and everyone of the defendants.
On January 30, 1952, all defendants filed a motion for
reconsideration and/or new trial, which was denied on February 18,
1952.
But on January 28, 1952, Yu Hun & Co. submitted an urgent petition
for execution pending appeal, under the provisions of section 2, Rule
39 of the Rules of Court. And notwithstanding vigorous opposition,
the respondent judge directed the issuance of writs of execution
against the petitioners, the London & Scottish Assurance
Corporation, the Scottish Union and Insurance Co. and the St. Paul's
Fire and Marine Insurance Co.
Issue:
WON petitioners withdrawal from business in this country during
the pendency of the case constitutes a sufficiently good reason for
decreeing execution notwithstanding the appeal.
Held:
Section 2, Rule 39, of the Rules of Court, allows the issuance of an
advanced writ of execution for "good cause." This so-called "good
cause" does not have a definite meaning. It must be interpreted in
accordance with the circumstance of a particular case. It is the
13 INSURANCE Case Digest 5th Batch
opinion of this Court that when there is danger for the judgment to
be ineffective if and when it becomes first, there is good cause to
issue an advanced writ of execution.
Under the circumstances of the instant case, justice and equity
demand that the right of the plaintiff be protected and secured. The
only way to secure and protect such right in the issuance of a writ of
execution or for the defendants to file their respective bonds to stay
execution. This holds true, however, in so far as defendants Scottish
Union and National Insurance Co., London and Scottish Assurance
Corporation, Ltd., and St. Paul's Fire and Marine Insurance Co., are
concerned.
The respondent judge in the contested directive explains that
"when there is danger for the judgment to be ineffective if and
when it becomes final, there is good cause to issue an advanced writ
of execution." That appears to be good law. In fact, petitioners,
merely deny that the circumstances show the existence of the
danger apprehended by His Honor.
Under the Insurance Law, when a foreign insurance corporation
applies for permission to engage in business in the Philippines it
must deposit with the Insurance Commissioner "for the benefit and
security of its policy holders and creditors in the Philippines
securities and bonds for the total amount of P250,000 (Sec. 178 as
amended), valuables which said offer is required to retain until the
day when such corporation ceases to do business in this jurisdiction
and applies, and is permitted by said Commissioner, to get them
back. (Sec. 179)
Republic Act No. 447 prescribes the procedure to be followed upon
cessation of business: The foreign insurer must apply. Its application
must be published in two newspapers. It must discharge its liabilities
to policyholders and creditors in this country, and cause its policies
insuring Philippine resident to be taken up by other qualified
insurers.
Under Rep. Act No. 447 with the permission of the Insurance
Commissioner, the petitioners should not be prejudiced by such
withdrawal. In reply they must be reminded that one of the
conditions precedent for such withdrawal is that they shall
"discharge their liabilities to policyholders and creditors in this
country." (Sec. 202-C) They have failed to discharge their liabilities to
Hu Yun & Co. Granting that upon issuing the permit, the Insurance
Commissioner must have been convinced that the petitioners "had
no outstanding liabilities to residents of the Philippines," yet there is
nothing in the law to make his findings conclusive upon the courts.
They could not be, because they are based only upon the
"examination of the books and records of the withdrawing
company."
The procedure outlined in Rep. Act 447 is intended to govern the
conduct of the Insurance Commissioner where petitioner are made
for return of the deposit upon withdrawal of foreign insurers. It does
not attempt to regulate the liquidation of liabilities of such foreign
insurers, nor the rights of claimants against them. Of course there is
no doubt that if the Insurance Commissioner is advised that there
are unpaid claimants against the foreign insurers he will refuse to
allow withdrawal or the return of the securities deposited within or
such portion thereof as may be necessary to satisfy the local
claimants. Yet it would be incorrect to assert that whenever he
allows the return of such securities, there are factually and legally no
unpaid claimants.
The petitioners contend that when the Insurance and Commissioner,
pursuant to law, approves the withdrawal of a foreign insurance
company from business in the Philippines the courts may not
contest the discretion exercised by him and substitute their own
judgment therefore "declaring that the outstanding risks of the
withdrawing company are not sufficiently protected by the
measures taken" by said officer. The contention must be overruled,
because the matter now at issue does not concern "outstanding
risks" but accrued "liabilities", which the law requires to be
discharged before withdrawal. (Sec. 202-C Insurance Law as
amended by Rep. Act No. 447). The statute does not authorize a
foreign insurer to another insurer its accrued liabilities to a policy
holder, foisting a new debtor upon the latter. And even supposing it
does permit such assignment, there is no deny that once the
substitution is accomplished, the judgment which Yu Hun & Co.
would get in the above cases would practically become useless,
since it would be unenforceable by execution against the new
debtor, who is not a party to the case. Thus the frustration or
circumvention of the action would entirely be owing to the
voluntary set of the petitioners, who neither be advised the court
nor secured the consent of Yu Hun & Co. to the substitution.
Consequently it was meet and proper to adopt measure calculated
forestall such frustration, especially after the Court had found the
petitioner's unreasonably delayed settlement of Yu Hun's claim for
losses.
Premises considered, the petition is denied, and the preliminary
injunction heretofore issued is hereby dissolved. Costs in favor of
respondents.So ordered.
14.
REPUBLIC OF THE PHILIPPINES, by EDUARDO T. MALINIS, in His
Capacity as Insurance Commissioner,
vs. DEL MONTE MOTORS, INC.,
G.R. No. 156956
October 9, 2006
FACTS
In a Civil Case, RTC rendered a Decision finding (Vilfran Liner, Inc.,
Hilaria Villegas and Maura Villegas) jointly and severally liable to pay
Del Monte Motors, Inc., the balance of Vilfran Liner's service
contracts with Del Monte. The trial court further ordered the
execution of the Decision against the counterbond posted by Vilfran
Liner and issued by Capital Insurance and Surety Co., Inc. (CISCO).
Sheriff Manuel S. Paguyo proceeded to levy on the properties of
CISCO, issuing a Notice of Garnishment on the Insurance
Commission, so as to enforce the Writ on the security deposit filed
by CISCO with the Commission in accordance with Section 203 of the
Insurance Code.
The RTC ruled that the Notice of Garnishment served by Sheriff
Paguyo on the insurance commission was valid. The trial court
added that the letter and spirit of the law made the security deposit
answerable for contractual obligations incurred by CISCO under the
insurance contracts the latter had entered into
ISSUE:
14 INSURANCE Case Digest 5th Batch
WON the security deposit held by the Insurance Commissioner
pursuant to Section 203 of the Insurance Code may be levied or
garnished in favor of only one insured. NO
RULING:
Section 203 of the Insurance Code provides that Every domestic
insurance company shall, to the extent of an amount equal in value
to twenty-five per centum of the minimum paid-up capital required
under section one hundred eighty-eight, invest its funds only in
securities, satisfactory to the Commissioner, consisting of bonds or
other evidences of debt of the Government of the Philippines or its
political subdivisions or instrumentalities, or of government-owned
or controlled corporations and entities, including the Central Bank of
the Philippines: Provided, That such investments shall at all times be
maintained free from any lien or encumbrance; and Provided,
further, That such securities shall be deposited with and held by the
Commissioner for the faithful performance by the depositing insurer
of all its obligations under its insurance contracts. The provisions of
section one hundred ninety-two shall, so far as practicable, apply to
the securities deposited under this section.
"Except as otherwise provided in this Code, no judgment creditor or
other claimant shall have the right to levy upon any of the securities
of the insurer held on deposit pursuant to the requirement of the
Commissioner."
The law expressly and clearly states that the security deposit shall be
(1) answerable for all the obligations of the depositing insurer under
its insurance contracts; (2) at all times free from any liens or
encumbrance; and (3) exempt from levy by any claimant.
To be sure, CISCO, though presently under conservatorship, has valid
outstanding policies. Its policy holders have a right under the law to
be equally protected by its security deposit. To allow the
garnishment of that deposit would impair the fund by decreasing it
to less than the percentage of paid-up capital that the law requires
to be maintained. Further, this move would create, in favor of
respondent, a preference of credit over the other policy holders and
beneficiaries.
Money required to be deposited by a mutual assessment insurance
company with the state treasurer was "a trust fund to be ratably
distributed amongst all the claimants entitled to share in it. Such a
distribution cannot be had except in an action in the nature of a
creditors' bill, upon the hearing of which, and with all the parties
interested in the fund before it, the court may make equitable
distribution of the fund, and appoint a receiver to carry that
distribution into effect."
Basic is the statutory construction rule that provisions of a statute
should be construed in accordance with the purpose for which it was
enacted. That is, the securities are held as a contingency fund to
answer for the claims against the insurance company by all its policy
holders and their beneficiaries. This step is taken in the event that
the company becomes insolvent or otherwise unable to satisfy the
claims against it. Thus, a single claimant may not lay stake on the
securities to the exclusion of all others. The other parties may have
their own claims against the insurance company under other
insurance contracts it has entered into.
15.
Gaudioso Erezo vs. Aguedo Jepte
GR L-9605
September 30, 1957
Facts:
Jepte is the registered owner of six by six truck. While the same was
being driven by Garcia, it collided with a taxicab, it hit Erezo and
another, as a result of which he died.
The driver was prosecuted for homicide and was sentenced to suffer
imprisonment and to pay the heirs of Erezo an amount for damages.
As the amount could not be enforced on the driver, the heirs
brought an action against the registered owner of the truck Jepte.
Jepte argued that at the time of the accident he is no longer the
owner of the truck, it was proved during the trial that the owner of
the truck was the Port of Brokerage.
Issue:
WON Jepte is liable for the civil aspect of the case as he is the
registered owner of the truck but at the time of the accient it was
already sold to another person.
Held:
Yes. He is still liable.
The registered owner of a certificate of public convenience is liable
to the public for the injuries or damages suffered by passengers or
3rd persons caused by the operation of said vehicle, even though the
same has been transferred to third person.
The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is
caused by the vehicles on the public highways, responsibility
therefore can be fixed on a definite individual, the registered owner.
The law does not allow the registered owner to prove during the
trial the actual owner of the vehicle. The law, with its aim and policy
in mind, does not relieve him directly of the responsibility that the
law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade
responsibility by proving the transfer of ownership of such vehicle, it
would be easy for him, by collusion with others to escape said
responsibility and transfer the same to an indefinite person or to
person who possesses to property with which to respond financially
for the damages or injury done.
A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury
or damage. He has no means other than by recourse to the
registration in the Motor Vehicles Office to determine the owner.
The protection that the law aims to extend to him would become
illusory were the registered owner is given the opportunity to
escape liability by disproving his ownership.
A registered owner who has already sold or transferred a vehicle has
the recourse to a third party complaint, in the same action brought
against him to recover for the damage or injury done against the
vendee or transferee of the vehicle. The inconvenience of the suit is
no justification for relieving him of liability, said inconvenience is the
price he pays for failure to comply with the registration that the law
demands and requires.