Beruflich Dokumente
Kultur Dokumente
1 HELD:
Gregorio Tongko vs. The manufacturers Life Insurance
Gr no. 167622 The Supreme Court finds no reason to reverse the June 29, 2010
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
FACTS: of the service is the primary element in determining whether an
employment relationship exists.
Taking from the November 2008 decision, the facts are as follows:
The Supreme Court ruled petitioners Motion against his favor since
he failed to show that the control Manulife exercised over him was
Manufacturers Life Insurance, Co. is a domestic corporation engaged
the control required to exist in an employer-employee relationship;
in life insurance business. De Dios was its President and Chief
Manulifes control fell short of this norm and carried only the
Executive Officer. Petitioner Tongko started his relationship with
characteristic of the relationship between an insurance company
Manulife in 1977 by virtue of a Career Agent's Agreement.
and its agents, as defined by the Insurance Code and by the law of
agency under the Civil Code.
Sometime in 2001, De Dios addressed a letter to Tongko, then one
of the Metro North Managers, regarding meetings wherein De Dios
In the Supreme Courts June 29, 2010 Resolution, they noted that
found Tongko's views and comments to be unaligned with the
there are built-in elements of control specific to an insurance
directions the company was taking.
agency, which do not amount to the elements of control that
De Dios subsequently sent Tongko a letter of termination in characterize an employment relationship governed by the Labor
accordance with Tongko's Agents Contract. Tongko filed a complaint Code.The Insurance Code provides definite parameters in the way
with the NLRC against Manulife for illegal dismissal, alleging that he an agent negotiates for the sale of the companys insurance
had an employer-employee relationship with De Dios instead of a products, his collection activities and his delivery of the insurance
revocable agency by pointing out that the latter exercised control contract or policy. They do not reach the level of control into the
over him through directives regarding how to manage his area of means and manner of doing an assigned task that invariably
responsibility and setting objectives for him relating to the business. characterizes an employment relationship as defined by labor law.
Tongko also claimed that his dismissal was without basis and he was To reiterate, guidelines indicative of labor law "control" do not
not afforded due process. merely relate to the mutually desirable result intended by the
contractual relationship; they must have the nature of dictating the
The NLRC ruled that there was an employer-employee relationship means and methods to be employed in attaining the result.
as evidenced by De Dios's letter which contained the manner and
means by which Tongko should do his work. Tested by this norm, Manulifes instructions regarding the objectives
and sales targets, in connection with the training and engagement of
The NLRC ruled in favor of Tongko, affirming the existence of the other agents, are among the directives that the principal may
employer-employee relationship. impose on the agent to achieve the assigned tasks.They are targeted
results that Manulife wishes to attain through its agents. Manulifes
The Court of Appeals, however, set aside the NLRC's ruling. It codes of conduct, likewise, do not necessarily intrude into the
applied the four-fold test for determining control and found the insurance agents means and manner of conducting their sales.
elements in this case to be lacking, basing its decision on the same Codes of conduct are norms or standards of behavior rather than
facts used by the NLRC. It found that Manulife did not exert control employer directives into how specific tasks are to be done.
over Tongko, there was no employer-employee relationship and
thus the NLRC did not have jurisdiction over the case. In sum, the Supreme Court found absolutely no evidence of labor
law control.
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?
2 INSURANCE Case Digest 5th Batch
Philippines or any agent thereof, without first procuring a license so suspend such Certificate upon a finding of the existence of statutory
to act from the Commissioner, which must be renewed annually on grounds of such revocation or suspension.
the first day of January, or within six months thereafter
The adjudicatory authority of the Commission is described in Section
416 of the Code which are to adjudicate claims and complaints
3. involving any loss, damage or liability which an insurer may be liable.
Almendras Mining Corporation vs. Offices of the Insurance The authority of the Commission to adjudicate is concurrent with
Commission that of civil courts but the filing of a complaint with the
GR 72378 Commissioner shall preclude other courts from taking cognizance of
April 15, 1988 the suit involving the same matter.
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.
Manufacturer Life Insurance Company was engaged in such business "How could there be such a collection when insurer
in the Philippines for more than five years before and including the becomes a creditor, acquires a lien on the policy and is entitled to
year 1941. But due to war it closed the branch office at Manila collect interest on the amount of the unpaid premiums?"
during 1942 up to 1945.
Plaintiff issued a number of life insurance policies in the Wittingly, the "premium" and the "loan" have been
Philippines containing stipulations known as non-forfeiture clauses. interchanged in the argument. The insurer "became a creditor" of
the loan, but not of the premium that had already been paid. And it
Since the insured failed to pay from 1942 to 1946, the is entitled to collect interest on the loan, not on the premium.
company applied the provision of the automatic premium
loan clauses; and the net amount of premiums so advanced or The insured paid the premium for the eleventh; but in turn
loaned totaled P1,069,254.98. On this sum the he became a debtor of the company for the sum of P250. This debt
defendant Collector of Internal Revenue assessed P17,917.12. The he could repay either by later remitting the money to the insurer or
assessment was made pursuant to section 255 of the NIRC which by letting the cash value compensate for it. The debt may also be
put taxes on insurance premiums paid by money, notes, credits or deducted from the amount of the policy should he die thereafter
any substitutes for money. during the continuance of the policy.
Manufacturer contended that when it made premium There was new credit for the advances made. True, the
loans or premium advances by virtue of the non-forfeiture clauses, it company could not sue the insured to enforce that credit. But it has
did not collect premiums within the meaning of the above sections means of satisfaction out of the cash surrender value.
of the law, and therefore it is not amendable to the tax provided.
Here again it may be urged that if the credit is paid out of
Issues: the cash surrender value, there were no new funds added to the
1. Whether or not premium advances made by plaintiff- company's assets. Cash surrender value "as applied to life insurance
appellant under the automatic premium loan clause of its policies policy, is the amount of money the company agrees to pay to the
are "premium collected" by the Company are subject to tax. YES. 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
2. Whether or not, in the application of the automatic surrender value; but the surrender value is always a lesser sum than
premium loan clause of plaintiff-appellant's policies, there is the total amount of premiums paid."
"payment in money, notes, credit, or any substitutes for money."
YES. The cash value or cash surrender value is therefore an
amount which the insurance company holds in trust for the insured
3. Whether or not the collection of the alleged deficiency to be delivered to him upon demand. It is therefore a liability of the
premium taxes constitutes double taxation. NO. company to the insured. Now then, when the company's credit for
4. Whether the making of premium advances, granting for advances is paid out of the cash value or cash surrender value, that
the sake of argument that it amounted to collection of premiums, value and the company's liability is thereby
were done in Toronto, Canada, or in the Philippines. NO. dismissed. Consequently, the net assets of the insurance company
increase.
5. Whether or not the fact that plaintiff-appellant was not
doing business in the Philippines during the period from January 1, 2. The insurer agreed to consider the premium paid on the
1942 to September 30, 1945, inclusive, exempts it from payment of strength of the automatic loan. The premium was paid by means of
premium taxes corresponding to said period. No. a "note" or "credit" or "other substitute for money" and the taxes
due because section 255 above quoted levies taxes according to the
Ruling: total premiums collected by the insurer "whether such premiums
are paid in money, notes, credits or any substitutes for money.
1. A person secures a 20-years endowment policy for P5,000 from
Manufacturers and pays an annual premium of P250. He pays the 3. There is no constitutional prohibition against double
first ten yearly premiums amounting to P2,500 and on this amount taxation. The total amount advanced worth 1 million pesos had
plaintiff-appellant pays the taxes. Also, the cash value of said policy P158,666.63 which was repaid at the time of assessment notice.
after the payment of the 10th annual premium amounts to P1,000." Besides, the premiums paid and on which taxes had already been
When on the eleventh year the annual premium fell due and the collected were those for the ten years. The tax demanded is on the
insured remitted no money within the grace period, the insurer premium for the eleventh year.
treated the premium then overdue as paid from the cash value, the
amount being loan to the policyholder who could discharge it at 4. Since the advances were done internationally, the
anytime with interest at 6 per cent. The insurance contract, 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 Apart from the definition, which the Implementing Rules and
branch. Approving this point would allow foreign insurers to evade Regulations provide, Philippine jurisprudence has so far not done
the tax by requiring that premium payments shall be made at their more to add to the same. Of course, the United States Supreme
head offices. It is enough that the insurer is doing insurance business Court, grappling with the problem, has on several occasions
in the Philippines, irrespective of the place of its establishment. discussed the nature of investment contracts. That courts rulings,
while not binding in the Philippines, enjoy some degree of
5. Even if its office was closed, it was operating by persuasiveness insofar as they are logical and consistent with the
collecting premiums on its outstanding policies, incurring the risks countrys best interests.
and/or enjoying the benefits, without withdrawing in economic
activity. Before the BIR, it never asserted that that it was not The United States Supreme Court held in Securities and Exchange
engaged in business in this country during those years. Commission v. W.J. Howey Co.10 that, for an investment contract to
exist, the following elements, referred to as the Howey test must
Petition dismissed. 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.
5
GR NO.164197
Thus, to sustain the SEC position in this case, PCIs scheme or
SECURITIES AND EXCHANGE COMMISSION
contract with its buyers must have all these elements.
VS. PROSPERITY.COM, INC
6.
The CA rendered a decision, granting PCIs petition and setting aside AVON INSURANCE et al. vs. CA, YUPANGCO COTTON MILLS.
the SEC-issued CDO.7 The CA ruled that, following the Howey test, WORLDWIDE SURETY & INSURANCE CO., INC.
PCIs scheme did not constitute an investment contract that needs
registration pursuant to R.A. 8799, FACTS
dated June 4, 1990, respondent court denied due course to the There is nothing to substantiate the private respondent's submission
appeal.3 that the petitioners had engaged in business activities in this
country. In the absence of showing that petitioners had been doing
To this day, trial on the merits of the collection suit has not business in the country, they cannot be summoned to answer for
proceeded as in the present petition, petitioners continue vigorously the charges leveled against them.
to dispute the trial court's assumption of jurisdiction over them.
For the purpose of acquiring jurisdiction by way of summons on a
In 1979 and 1980, Yupangco Cotton Mills engaged to secure with defendant foreign corporation, there is no need to prove first the
Worldwide Security and Insurance Co. Inc., several of its properties fact that defendant is doing business in the Philippines. The
under two policies. Both contracts were covered by reinsurance plaintiff only has to allege in the complaint that the defendant has
treaties between Worldwide Surety and several foreign reinsurance an agent in the Philippines for summons to be validly served thereto,
companies, including the petitioners. The reinsurance arrangements even without prior evidence advancing such factual allegation.
had been made through international broker C.J. Boatwright and Co.
Ltd., acting as agent of Worldwide Surety and Insurance. As it is, Yupangco has made no allegation or demonstration of the
existence of petitioners' domestic agent, but avers simply that they
Within the respective effectivity periods of the Policies the are doing business not only abroad but in the Philippines as well. It
properties insured were razed by fire, giving rise to the obligation of does not appear at all that the petitioners had performed any act
the insurer to indemnify the Yupangco. Partial payments were made which would give the general public the impression that it had been
by Worldwide Surety and some of the reinsurance companies. engaging, or intends to engage in its ordinary and usual business
undertakings in the country.
On 1983, Worldwide Surety in a Deed of Assignment, acknowledged
a remaining balance of still due Yupangco, and assigned to the latter The reinsurance treaties between the petitioners and Worldwide
all reinsurance proceeds still collectible from all the foreign Surety and Insurance were made through an international insurance
reinsurance companies. Thus, in its interest as assignee and original broker, and not through any entity or means remotely connected
insured, Yupangco Cotton Mills instituted this collection suit against with the Philippines.
the petitioners (other reinsurance companies).
A reinsurance company is not doing business in a certain state
Inasmuch as petitioners are not engaged in business in the merely because the property or lives which are insured by the
Philippines with no offices, places of business or agents in the original insurer company are located in that state. The REASON for
Philippines, the reinsurance treaties having been entered abroad, this is that a contract of reinsurance is generally a separate and
service of summons was made upon petitioners through the Office distinct arrangement from the original contract of insurance,
of the Insurance Commissioner. whose contracted risk is insured in the reinsurance agreement.
Hence, the original insured has generally no interest in the contract
of reinsurance.
ISSUE
The same danger does not exist among foreign corporations that are - An adjuster does not discharge functions of a quasi-judicial
indubitably not doing business in the Philippines. Indeed, if a foreign nature, but represents his employer, to whom he owes
corporation does not do business here, there would be no reason faithful service, and for his acts, in the employers interest,
for it to be subject to the State's regulation. the employer is responsible so long as the acts are done
while the agent is acting within the scope of his
employment.
7. - An adjustment and settlement agent do not include
Smith, Bell & Co. Inc. vs. CA personal liability. His functions are merely to settle and
GR 110668 adjust claims in behalf of his principal if those claims are
February 6, 1987 proven and undisputed, and if the claim is disputed or is
disapproved by the principal, like in the instant case, the
Facts: agent does not assume any personal liability.
Plaintiff Tic Him Chiong is an importer of goods, Dicalcium Second reason: Absence of Solidarity Liability
Phosphate etc. from Taiwan. The shipment was insured by First - Article 1207 of NCC clearly provides that there is a solidary
Insurance Co for US$19,500.00 against all risk at port of departure liability only when the obligation expressly so states, or
under a Marine Policy with note Claim if any, payable in US when the law or the nature of the obligation requires
currency at Manila and with Smith, Bell and Co. (Smith) stamped at solidarity.
the lower left side of the policy as Claim Agent - The role of the resident agent as a representative of the
foreign insurance company is tasked only to receive legal
The cargo arrived at the Port of Manila and discharged to the local processes on behalf of its principal and not to answer
arrastre contractor, it was found out that a number of the cargo personally for any insurance claims.
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 Third reason: Not Real Party-in-interest
for settlement. - Being a mere agent and representative, Smith is also not
the real party-in-interest in the claim. An action is brought
After conveying the claim to its principal, Smith informed the for the principal purpose that is to obtain actual and
plaintiff that its principal offered only 50% of the claim on the positive relief. It the party sued is not the proper party,
alleged ground of discrepancy between the amounts contained in any decision that may be rendered against him would be
the shipping agents reply to the claimant with that of Metroport. futile for the decision cannot be enforced and executed.
Plaintiff refused the offer contending that the discrepancy was a - The cause of action is based on a contract of insurance
result of loss from vessel to arrastre to consignees warehouse which was not participated by Smith, Bell and Co.
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.
8
The First Insurance Co. Ltd. did not file an Answer. Smith, Bell in its ANGELITA AMPARO GO, petitioner,
answer argued that it is merely a settling or claim agent of vs. OFFICE OF THE OMBUDSMAN, INSURANCE COMMISSIONER
defendant insurance company and such agent, it is not personally EDUARDO T. MALINIS and NORBERTO F. CASTRO, respondents.
liable under the policy in which it has not even taken part of.
Note: power of the insurance commissioner ang topic ani.
RTC ruled that the insurance company and Smith, Bell are jointly and
severally liable to pay the plaintiff. Facts:
Held: The insurers manifested their official stance to deny the claims of
petitioner. Petitioner then sought the intercession of several
No. members and committees of the Legislature.
First reason: Existing Jurisprudence; Salonga vs. Warner Barnes The Commission vehemently denies petitioners accusations.
- An adjustment and settlement agent is no different from
any other agent from the point of view of his Petitioner filed with the Commission a complaint for Revocation
responsibility, for he also acts in a representative capacity. and/or Suspension of Licenses against the fourteen insurance
Whenever he adjust or settles a claim, he does it in behalf companies.
of his principal and his action is binding not upon himself
but upon his principal. The Commission was of the opinion that the administrative
- An insurance adjuster is ordinarily a special agent for the case for revocation/suspension of license of respondents and the
person or company for whom he acts, and his authority is civil case for specific performance with the Regional Trial Court
prima facie coextensive with the business intrusted to him. involve the same set of parties, facts and circumstances; and
8 INSURANCE Case Digest 5th Batch
Issue: After the examinations, exit conferences were held with the officers
or representatives of the banks wherein the SED examiners provided
1. Can an Administrative case pending before an administrative them with copies of Lists of Findings/Exceptions containing the
tribunal be pursued unabated and independently despite deficiencies discovered during the examinations.
subsequent filing of a civil case in a regular court of justice wherein
in both cases, it involve the same incident? YES. Petitioner ChuchiFonacier, officer-in-charge of the SED, sent
separate letters to the Board of Directors of each bank, informing
2. WON the conduct of separate hearings for each respondent them that the SED found that the banks failed to carry out the
violates the mandate of the speedy disposition cases? NO. 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
Ruling: requested as well that the basis for the capital infusion figures be
disclosed, and noted that none of them had re
The conduct of separate hearings and issuance of the Order were all
done in the regular performance of duties by the respondents ceived the Report of Examination (ROE) which finalizes the audit
Insurance Commissioner and Hearing Officer respectively. findings. They also requested meetings with the BSP audit teams to
Moreover, they were done within the purview of the rules of reconcile audit figures.
procedure governing the functions of the Insurance Commission.
On May 12, 2008, the RBPI filed a complaint for nullification of the
The Code provides that the Insurance Commissioner shall have the BSP ROE with application for a TRO and writ of preliminary
power to adjudicate claims and complaints involving any loss, injunction before the RTC.
damage or liability for which an insurer may be answerable under
any kind of policy or contract of insurance where the amount of any RBPI prayed that Fonacier, her subordinates, agents, or any other
such loss, damage or liability does not exceed in any single claim one person acting in her behalf be enjoined from submitting the ROE or
hundred thousand pesos. The Office of the Insurance Commission is any similar report to the Monetary Board (MB), or if the ROE had
an administrative agency vested with regulatory power as well as already been submitted, the MB be enjoined from acting on the
with adjudicatory authority. 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.
Under its adjudicatory authority, the Insurance Commission has the
original jurisdiction to adjudicate and settle insurance claims and
On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino
complaints where the amount being claimed does not exceed in any
Rural Bank, Inc. The bank filed a motion for reconsideration the next
single claim one hundred thousand pesos, as provided in Section 416
day.
of the Code.
Such original jurisdiction is concurrent with that of the Metropolitan Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted
Trial Courts, the Municipal Trial Courts and the Municipal Circuit RBPIs prayer for the issuance of a TRO.
Trial Courts.
In addition to such adjudicatory power, the Commissioner has the On May 19, 2008, Judge Valenzuela issued an Order granting the
regulatory authority to revoke or suspend the certificate or authority prayer for the issuance of TROs for the other seven cases
of an insurance company upon finding the legal grounds for such
revocation or suspension under Sections 241 and 247 of the Petitioners then brought the matter to the CA via a petition for
Insurance Code. certiorari under Rule 65 claiming grave abuse of discretion on the
part of Judge Valenzuela when she issued the orders dated May 21,
Petition dismissed. 2008 and June 4, 2008.
Issue:
WON the the injuction issued by the RTC violated section 25 of the
NEW CENTRAL BANK ACT and effectively handcuffed the BSP from 10.
discharging its functions to the great and irreparable damage of the SPOUSES MALOLOS vs. AIDA S. DY, in her capacity as Assignee of
countrys banking system MARIETTA M. VALENZUELA,
G.R. No. 132555
Held: February 17, 2000
The petition is meritorious. 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
The respondent banks have failed to show that they are entitled to
default. Subsequently, on June 23, 1995 judgment was rendered in
copies of the ROEs. They can point to no provision of law, no section
favor of Sps Malolos ordering Sps Valenzuela to pay the former
in the procedures of the BSP that shows that the BSP is required to
P3,000,000.00
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 On February 28, 1995, the RTC issued an order in a case filed for
bank examined is not mentioned as a recipient of the ROE. involuntary insolvency which declared Marieta Valenzuela insolvent
and directed that all civil proceedings pending against the insolvent
be stayed.
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 On November 29, 1995, respondent Dy was appointed as assignee of
deficiencies found by the SED examiners when they examined the Marieta Valenzuela.
books of the respondent banks. As found by the RTC, these lists of
findings/exceptions were furnished to the officers or representatives On October 16, 1995, a writ of execution was issued in favor of Sps
of the respondent banks, and the respondent banks were required Malolos. A Notice of Sheriffs Sale was subsequently issued, setting
to comment and to undertake remedial measures stated in said lists. the sale at public auction of certain real properties of Valenzuela on
Despite these instructions, respondent banks failed to comply with December 5, 1995.
the SEDs directive. Also, the reliance of the RTC on Banco Filipino v.
Monetary Board9 is misplaced. The petitioner in that case was held Dy, filed a motion to suspend proceedings as against defendant
to be entitled to annexes of the Supervision and Examination Marieta Valenzuela. The assignee posits that as early as 28 February
Sectors reports, as it already had a copy of the reports themselves. 1995, Marieta M. Valenzuela was judicially declared insolvent that
It was not the subject of the case whether or not the petitioner was the petition for involuntary insolvency of Marieta Valenzuela was
entitled to a copy of the reports. And the ruling was made after the filed on November 28, 1994, long before the filing of the instant case
petitioner bank was ordered closed, and it was allowed to be on January 9, 1995. Hence the proceedings in the for collection of
supplied with annexes of the reports in order to better prepare its sum of money should be vacated, stayed and/or suspended.
defense. In this instance, at the time the respondent banks
requested copies of the ROEs, no action had yet been taken by the
The CA held that the claim of Sps Malolos against the Valenzuela
MB with regard to imposing sanctions upon said banks.
spouses should not have been allowed to proceed in view of the
order of the insolvency court directing the stay of all civil
The issuance by the RTC of writs of preliminary injunction is an proceedings against Marietta Valenzuela. Such order, had the effect
unwarranted interference with the powers of the MB. Secs. 29 and of putting such properties in custodia legis.
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
Petitioners question the adequacy of the manifestation and motion
the ROEs done by the supervising or examining department. The
filed by Dy in the RTC to assail the judgment rendered hereby, which
writs of preliminary injunction issued by the trial court hinder the
was not only final and executory, but in fact already executed.
MB from fulfilling its function under the law.
ISSUE
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, WON the decision of the RTC in the collection for sum of money case
is a subsequent one, which will determine whether the closure of directing Valenzuela to pay, may be set aside by motion of the
the bank was attended by grave abuse of discretion. Judicial review insolvents assignee. NO
enters the picture only after the MB has taken action; it cannot
prevent such action by the MB. The threat of the imposition of HELD
sanctions, even that of closure, does not violate their right to due
process, and cannot be the basis for a writ of preliminary injunction. Respondent's motion was inadequate to set aside the decision of
the RTC, and the execution proceedings conducted pursuant
The "close now, hear later" doctrine has already been justified as a thereto, when the judgment had already been satisfied. It is
measure for the protection of the public interest. Swift action is axiomatic that after a judgment has been fully satisfied the case is
called for on the part of the BSP when it finds that a bank is in dire deemed terminated once and for all. Even in a case involving a
straits. Unless adequate and determined efforts are taken by the judgment that was only partially satisfied, this Court held that the
government against distressed and mismanaged banks, public faith trial court had lost its jurisdiction over the part of the proceedings
in the 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 RTC denied the petition on the ground of lack of jurisdiction, that it
regarded as still pending so that all proceedings on the execution are could not annul the decision in a civil case rendered by a court of
proceedings in the suit. There is no question that the court which coordinate jurisdiction.
rendered the judgment has a general supervisory control over its
process of execution, and this power carries with it the right to CA ruled that there was no merger between FISLAI and DSLAI for
determine every question of fact and law which may be involved in their failure to follow the procedure lain down in the Corporation
the execution." Code for a valid merger or consolidation.
Moreover, it has been stated that it is when the judgment has been Issues:
satisfied that the same passes beyond review, for satisfaction
thereof is the last act and end of the proceedings. Payment 1. WON there was merger between FISLAI and DSLAI.
produces permanent and irrevocable discharge. 2. WON there was novation of the obligation by substituting
the person of the debtor.
In this case, it appears that the decision of the RTC had already been
Held:
fully executed and satisfied when respondent filed her
Manifestation and Motion to Set Aside Judgment and/or To Suspend
1. No. There was no valid merger
Proceedings Indeed, there are no more proceedings to speak of
inasmuch as these were terminated by the satisfaction of the
A merger does not become effective upon the mere agreement of
judgment. Respondent's motion is simply not the proper remedy
the constituent corporations. Since it involves fundamental changes
either to question the judgment of the RTC, or the execution
in the corporation as well as in the rights of stockholders and
thereof.
creditors, there must be an express provision of law authorizing
them.
The remedy of respondent is to file an action to annul the judgment
on the ground of either extrinsic fraud or lack of jurisdiction. 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
11. the Monetary Board of CBP recognized such merger, the fact
Mindanao Savings and Loan Association Inc. vs. Edward Willkom remains that no certificate was issued by the SEC. Such merger is still
et.al. incomplete without certification (Corporation Code Sections 76, 77,
GR 179618 78, and 79)
October 11, 2010
The issuance of Certificate of merger is crucial because not only does
Facts: 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
The First Iligan Savings and Loan Association Inc. (FISLAI) and Davao effectivity of the merger, the absorbed corporation ceases to exist
Savings and Loan Association Inc. (DSLAI) are entities duly registered but its rights and properties as well as liabilities shall be taken and
with the SEC. They were primarily engaged in the business of deemed transferred to and vested in the surviving corporation.
granting loans and receiving deposits.
There being no merger, for 3rd parties, the corporations shall not be
In 1985, FISLA and DSLAI entered into a merger but the articles of considered as one but two separate corporations. As far as 3rd
merger were not registered with the SEC due to incomplete parties are concerned, the assets of FISLAI remain as its assets and
documentation. DSLAI is the surviving corporation, it changed its cannot be considered as belonging to MSLAI notwithstanding the
corporate name to MSLAI. FISLAI assigned its assets to DSLAI, in turn deed of assignment issued by FISLAI in favor of DSLAI/MSLAI.
the latter assumed the formers liabilities. Subsequently, MSLAI was
closed by the Monetary Board of Central Bank due to insolvency and 2. No. There was no novation.
it was placed under receivership in 1990.
While it is true that DSLAI assumed all the liabilities of FISLAI, such
But prior to the closure of MSLAI, Uy filed with RTC an action for assumption did not result in novation as would release the latter
collection with FSLAI. In 1989, the court issued a decision in favor of from liability. Novation is the extinguishment of an obligation by the
Uy. In 1993, parcels of land owned by FISLAI was levied by the substitution or changes of the obligation by a subsequent one which
sheriff. Willkom was the buyer thereof in the public auction and a extinguishes or modifies the first, either by changing the object or
new Certificate of Title was issued in its name. Willkom in turn sold principal conditions, by substituting another in place of the debtor,
one of the parcels of land to Go. or by subrogating a third person in the rights of the creditors
In 1995, MSLAI filed for the cancellation of title and reconveyance of It is a rule that substitution of debtor must always be made with the
properties against Willkom and Go. It alleged that the sale was void consent of creditor. (Article 1293 NCC) There was no showing that
due to lack of notice to Philippine Deposit Insurance Corp. (PDIC); Uy, the creditor gave her consent to the agreement that DSLAI
that the sale was illegal because the assets of an institution placed would assume the liabilities of FISLAI. Thus, the assets of FISLAI
under receivership of liquidation such as MSLAI should be deemed in transferred to DSLAI remained subject to execution to satisfy the
custodial egis and should be exempt from any order of garnishment, judgment claim of Uy against FISLAI.
levy, attachment or execution.
11 INSURANCE Case Digest 5th Batch
Ruling:
A provision of Section 8 of Revenue Memorandum Circular
(RMC) No. 48-91 requires the submission of the Certificate of
1. The Tax Code defines a cooperative as an association "conducted Registration with the CDA, before the issuance of a tax exemption
by the members thereof with the money collected from among certificate. That provision cannot prevail over the clear absence of
themselves and solely for their own protection and not for 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 exemption from both premium taxes and documentary stamp taxes
directing all internal revenue officers to publicize a new tax (DST).
legislation. Although the Circular does not derogate from their
authority to implement the law, it cannot add a registration The Tax Code is clear. On the one hand, Section 121 of the
requirement, when there is none under the law to begin with. Code exempts cooperative companies from the 5 percent
percentage tax on insurance premiums. On the other hand, Section
Second, the provisions of the Cooperative Code of the 199 also exempts from the DST, policies of insurance or annuities
Philippines do not apply. made or granted by cooperative companies. Being a cooperative,
respondent is thus exempt from both types of taxes.
The cooperative under PD 175 referred only to an
organization composed primarily of small producers and consumers Petition dismissed.
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 13.
Government and Community Development (later Ministry of SCOTTISH UNION and NATIONAL INSURANCE COMPANY; LONDON
Agriculture) -- had the authority to register, regulate and supervise AND SCOTTISH ASSURANCE CORPORATION, LTD.; and ST. PAUL
only the following cooperatives: (1) barrio associations involved in FIRE and MARINE INSURANCE COMPANY, petitioners,
the issuance of certificates of land transfer; (2) local or primary vs.
cooperatives composed of natural persons and/or barrio Court of First Instance of Manila and YU HUN and
associations; (3) federations composed of cooperatives that may or COMPANY,respondents.
may not perform business activities; and (4) unions of cooperatives G.R. Nos. L-5717 and L-5751 to L-5756
that did not perform any business activities. Respondent does not August 30, 1952
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 Facts:
cooperatives that were registered under PD 175 and previous laws
were also deemed registered with the CDA. Since respondent was The petitioners are three of seven defendants in as many civil cases
not required to be registered under the old law on cooperatives, it of the Manila court of first instance, now on appeal, and the
followed that it was not required to be registered even under the respondent Yu Hun & Co., is the plaintiff therein.
new law.
As a result of the fire that destroyed its warehouse and goods in
We have already determined that respondent is a May 1949, Yu Hun & Co., filed in 1949 and 1950 the above suits
cooperative. The distinguishing feature of a cooperative enterprise is seeking to recover the total sum of P240,00 from the defendants,
the mutuality of cooperation among its member-policyholders foreign insurance corporations who had issued insurance policies
united for that purpose. So long as respondent meets this essential covering the said properties.
feature, it does not even have to use and carry the name of a
cooperative to operate its mutual life insurance business. Gratia The Court renders judgment in favor of the plaintiff and against
argumenti that registration is mandatory, it cannot deprive each and everyone of the defendants.
respondent of its tax exemption privilege merely because it failed to
register. The nature of its operations is clear; its purpose well-
On January 30, 1952, all defendants filed a motion for
defined. Exemption when granted cannot prevail over
reconsideration and/or new trial, which was denied on February 18,
administrative convenience.
1952.
opinion of this Court that when there is danger for the judgment to The petitioners contend that when the Insurance and Commissioner,
be ineffective if and when it becomes first, there is good cause to pursuant to law, approves the withdrawal of a foreign insurance
issue an advanced writ of execution. company from business in the Philippines the courts may not
contest the discretion exercised by him and substitute their own
Under the circumstances of the instant case, justice and equity judgment therefore "declaring that the outstanding risks of the
demand that the right of the plaintiff be protected and secured. The withdrawing company are not sufficiently protected by the
only way to secure and protect such right in the issuance of a writ of measures taken" by said officer. The contention must be overruled,
execution or for the defendants to file their respective bonds to stay because the matter now at issue does not concern "outstanding
execution. This holds true, however, in so far as defendants Scottish risks" but accrued "liabilities", which the law requires to be
Union and National Insurance Co., London and Scottish Assurance discharged before withdrawal. (Sec. 202-C Insurance Law as
Corporation, Ltd., and St. Paul's Fire and Marine Insurance Co., are amended by Rep. Act No. 447). The statute does not authorize a
concerned. 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
The respondent judge in the contested directive explains that
substitution is accomplished, the judgment which Yu Hun & Co.
"when there is danger for the judgment to be ineffective if and
would get in the above cases would practically become useless,
when it becomes final, there is good cause to issue an advanced writ
since it would be unenforceable by execution against the new
of execution." That appears to be good law. In fact, petitioners,
debtor, who is not a party to the case. Thus the frustration or
merely deny that the circumstances show the existence of the
circumvention of the action would entirely be owing to the
danger apprehended by His Honor.
voluntary set of the petitioners, who neither be advised the court
nor secured the consent of Yu Hun & Co. to the substitution.
Under the Insurance Law, when a foreign insurance corporation Consequently it was meet and proper to adopt measure calculated
applies for permission to engage in business in the Philippines it forestall such frustration, especially after the Court had found the
must deposit with the Insurance Commissioner "for the benefit and petitioner's unreasonably delayed settlement of Yu Hun's claim for
security of its policy holders and creditors in the Philippines losses.
securities and bonds for the total amount of P250,000 (Sec. 178 as
amended), valuables which said offer is required to retain until the
Premises considered, the petition is denied, and the preliminary
day when such corporation ceases to do business in this jurisdiction
injunction heretofore issued is hereby dissolved. Costs in favor of
and applies, and is permitted by said Commissioner, to get them
respondents.So ordered.
back. (Sec. 179)
Under Rep. Act No. 447 with the permission of the Insurance FACTS
Commissioner, the petitioners should not be prejudiced by such
withdrawal. In reply they must be reminded that one of the
In a Civil Case, RTC rendered a Decision finding (Vilfran Liner, Inc.,
conditions precedent for such withdrawal is that they shall
Hilaria Villegas and Maura Villegas) jointly and severally liable to pay
"discharge their liabilities to policyholders and creditors in this
Del Monte Motors, Inc., the balance of Vilfran Liner's service
country." (Sec. 202-C) They have failed to discharge their liabilities to
contracts with Del Monte. The trial court further ordered the
Hu Yun & Co. Granting that upon issuing the permit, the Insurance
execution of the Decision against the counterbond posted by Vilfran
Commissioner must have been convinced that the petitioners "had
Liner and issued by Capital Insurance and Surety Co., Inc. (CISCO).
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 Sheriff Manuel S. Paguyo proceeded to levy on the properties of
"examination of the books and records of the withdrawing CISCO, issuing a Notice of Garnishment on the Insurance
company." 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 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 The RTC ruled that the Notice of Garnishment served by Sheriff
not attempt to regulate the liquidation of liabilities of such foreign Paguyo on the insurance commission was valid. The trial court
insurers, nor the rights of claimants against them. Of course there is added that the letter and spirit of the law made the security deposit
no doubt that if the Insurance Commissioner is advised that there answerable for contractual obligations incurred by CISCO under the
are unpaid claimants against the foreign insurers he will refuse to insurance contracts the latter had entered into
allow withdrawal or the return of the securities deposited within or
such portion thereof as may be necessary to satisfy the local ISSUE:
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.
14 INSURANCE Case Digest 5th Batch
The law expressly and clearly states that the security deposit shall be Yes. He is still liable.
(1) answerable for all the obligations of the depositing insurer under The registered owner of a certificate of public convenience is liable
its insurance contracts; (2) at all times free from any liens or to the public for the injuries or damages suffered by passengers or
encumbrance; and (3) exempt from levy by any claimant. 3rd persons caused by the operation of said vehicle, even though the
same has been transferred to third person.
To be sure, CISCO, though presently under conservatorship, has valid
outstanding policies. Its policy holders have a right under the law to The main aim of motor vehicle registration is to identify the owner
be equally protected by its security deposit. To allow the so that if any accident happens, or that any damage or injury is
garnishment of that deposit would impair the fund by decreasing it caused by the vehicles on the public highways, responsibility
to less than the percentage of paid-up capital that the law requires therefore can be fixed on a definite individual, the registered owner.
to be maintained. Further, this move would create, in favor of
respondent, a preference of credit over the other policy holders and The law does not allow the registered owner to prove during the
beneficiaries. 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
Money required to be deposited by a mutual assessment insurance registration. Were a registered owner allowed to evade
company with the state treasurer was "a trust fund to be ratably responsibility by proving the transfer of ownership of such vehicle, it
distributed amongst all the claimants entitled to share in it. Such a would be easy for him, by collusion with others to escape said
distribution cannot be had except in an action in the nature of a responsibility and transfer the same to an indefinite person or to
creditors' bill, upon the hearing of which, and with all the parties person who possesses to property with which to respond financially
interested in the fund before it, the court may make equitable for the damages or injury done.
distribution of the fund, and appoint a receiver to carry that
distribution into effect." A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury
Basic is the statutory construction rule that provisions of a statute or damage. He has no means other than by recourse to the
should be construed in accordance with the purpose for which it was registration in the Motor Vehicles Office to determine the owner.
enacted. That is, the securities are held as a contingency fund to The protection that the law aims to extend to him would become
answer for the claims against the insurance company by all its policy illusory were the registered owner is given the opportunity to
holders and their beneficiaries. This step is taken in the event that escape liability by disproving his ownership.
the company becomes insolvent or otherwise unable to satisfy the
claims against it. Thus, a single claimant may not lay stake on the A registered owner who has already sold or transferred a vehicle has
securities to the exclusion of all others. The other parties may have the recourse to a third party complaint, in the same action brought
their own claims against the insurance company under other against him to recover for the damage or injury done against the
insurance contracts it has entered into. 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.