SECOND DIVISION of the Philippines (Pre-Need Code).
It required from the
[G.R. No. 188639. September 2, 2015.]
SECURITIES AND EXCHANGE
COMMISSION, petitioner, vs. HON.
REYNALDO M. LAIGO, in his capacity as
Presiding Judge of the Regional Trial Court,
National Capital Judicial Region, Makati City,
Branch 56, GLICERIA AYAD, SAHLEE DELOS
REYES and ANTONIO P. HUETE,
JR., respondents.
DECISION
MENDOZA, J :
p
In this petition for certiorari 1 under Rule 65 of
the Rules of Court, petitioner Securities and Exchange
Commission (SEC), through the Office of the Solicitor
General (OSG), assails the June 26, 2009 Order 2 (June 26,
2009 Order) issued by respondent Judge Reynaldo M.
Laigo (Judge Laigo) of the Regional Trial Court, Branch 56,
Makati City (RTC), in Sp. Proc. No. M-6758, 3 a petition for
involuntary insolvency of Legacy Consolidated Plans,
Incorporated (Legacy), ordering the inclusion of the trust
fund in its corporate assets to the prejudice of the
planholders.
Factual Antecedents
Republic Act (R.A.) No. 8799, otherwise known as
the Securities Regulation Code (SRC), specifically Section
16 thereof, mandated the Securities and Exchange
Commission (SEC) to prescribe rules and regulations
governing the pre-need industry. Pursuant thereto, the
SEC issued the corresponding New Rules on the
Registration and Sale of Pre-Need Plans (New Rules) 4 to
govern the pre-need industry prior to the enactment
of R.A. No. 9829, otherwise known as the Pre-need Code
pre-need providers the creation of trust funds as a
requirement for registration.
As defined in Rule 1.9 of the New Rules, "'Trust
Fund' means a fund set up from planholders' payments,
separate and distinct from the paid-up capital of a
registered pre-need company, established with a trustee
under a trust agreement approved by the SEC, to pay for
the benefits as provided in the pre-need plan."
Legacy, being a pre-need provider, complied with
the trust fund requirement and entered into a trust
agreement with the Land Bank of the Philippines (LBP).
In mid-2000, the industry collapsed for a range of
reasons. Legacy, like the others, was unable to pay its
obligations to the planholders.EcTCAD
This resulted in Legacy being the subject of a
petition for involuntary insolvency filed on February 18,
2009 by private respondents in their capacity as
planholders. Through its manifestation filed in the RTC,
Legacy did not object to the proceedings. Accordingly, it
was declared insolvent by the RTC in its Order 5 dated
April 27, 2009. The trial court also ordered Legacy to
submit an inventory of its assets and liabilities pursuant
to Sections 15 and 16 of Act No. 1956, 6 otherwise known
as the Insolvency Law, the applicable bankruptcy law at
that time.
On May 15, 2009, the RTC ordered the SEC, being
the pre-need industry's regulator, to submit the
documents pertaining to Legacy's assets and liabilities.
In its Manifestation with Evaluation, dated June 10,
2009, the SEC opposed the inclusion of the trust fund in
the inventory of corporate assets on the ground that to
do so would contravene the New Rules which treated
trust funds as principally established for the exclusive
purpose of guaranteeing the delivery of benefits due to
the planholders. It was of the position that the inclusion
of the trust fund in the insolvent's estate and its being
opened to claims by non-planholders would contravene
the purpose for its establishment.
On June 26, 2009, despite the opposition of the
SEC, Judge Laigo ordered the insolvency Assignee, Gener
T. Mendoza (Assignee) to take possession of the trust
fund. Judge Laigo viewed the trust fund as Legacy's
corporate assets and, for said reason, included it in the
insolvent's estate. Thus:
WHEREFORE, the Court rules as follows:
1. Directing the afore-named banks to
report to Assignee, Gener T. Mendoza, whose
address is at c/o GNCA Holdings, Inc., Unit 322,
3/F, LRI design Center, 210 Nicanor Garcia St.,
Makati City, the total funds as of today deposited
to the insolvent debtor's respective Trust Funds,
within five (5) days from receipt of this Order.
2. Subject funds can be withdrawn by the
Assignee only upon Order of the Court for
distribution among the creditors who have
officially filed their valid claims with this Court,
and for all the expenses to be incurred by the
Assignee in the course of the discharge of his
duties and responsibilities as such Assignee.
3. Stopping the Securities and Exchange
Commission (SEC) from further validating the
claims of planholders (now creditors) pertaining
to their pre-need plans.
xxx xxx xxx
SO ORDERED. 7
The RTC stated that the trust fund could be
withdrawn by the Assignee to be used for the expenses
he would incur in the discharge of his functions and to be
distributed among the creditors who had officially filed
their valid claims with the court.
The Present Petition
Intent on protecting the interest of the investing
public and securing the trust fund exclusively for the
planholders, the SEC filed "this present recourse directly
to this Honorable Court in accordance with Section 5 (1),
Article VIII of the 1987 Constitution for the reason that
the matters involve an issue of transcendental
importance to numerous hard-working Filipinos who had
invested their lifetime savings and hard-earned money in
Legacy, hoping that through this pre-need company they
will be able to fulfill their dreams of providing a bright
future for their children." 8
The SEC's Position
In essence, the SEC contends that Judge Laigo
gravely abused his discretion in treating the trust fund as
part of the insolvency estate of Legacy. It argues that the
trust fund should redound exclusively to the benefit of
the planholders, who are the ultimate beneficial owners;
that the trust fund is held, managed and administered by
the trustee bank to address and answer the claims
against the pre-need company by all its planholders
and/or beneficiaries; that to consider the said fund as
corporate assets is to open the floodgates to creditors of
Legacy other than the planholders; and that, in issuing
the order, Judge Laigo effectively allowed non-
planholders to reach the trust fund in patent violation of
the New Rules established to protect the pre-need
investors.
In its Memorandum, 9 the SEC stressed that the
setting-up of the trust funds effectively created a
demarcation line between the claims of planholders vis-
à-vis those of the other creditors of Legacy; that Legacy's
interest over the trust properties was only by virtue of it
being a trustor and not the owner; and that the SEC was
authorized to validate claims of planholders in the
exercise of its power as regulator of pre-need
corporations.
Further, the SEC is of the position that Section 52
of the Pre-Need Code 10 should be given retroactive
effect for being procedural in character.
Thus, the SEC raises the following
ISSUES
I.
Whether or not the Trust Funds of Legacy form
part of its Corporate Assets.
II.
Whether or not respondent Trial Court Judge
committed grave abuse of discretion amounting
to lack or excess of jurisdiction in issuing the
herein assailed Order dated June 26, 2009.
III.
Whether or not the claims of planholders are to
be treated differently from the claims of other
creditors of Legacy.HSAcaE
IV.
Whether or not Legacy retains ownership over
the trust funds assets despite the execution of
trust agreements.
V.
Whether or not the insolvency court, presided
by respondent Trial Court Judge, has the
authority to enjoin petitioner SEC from further
validating the claims of Legacy's planholders
and treating them as if they are ordinary
creditors of Legacy.
VI.
Whether or not the provision of the Pre-need
Code regarding liquidation is in the nature of a
procedural law that can be retroactively applied
to the case at bar. 11
Private Respondents' position
In their Comment/Opposition, 12 the private
respondents, Glicera Ayad, Sahlee Delos Reyes and
Antonio P. Huerte, Jr. (private respondents), submit that
nothing in the New Rules expressly provided that the
trust fund is excluded from the inventory of corporate
assets which is required to be submitted to the
insolvency court; that the SEC's interference in the
insolvency proceedings is incongruous to the legal
system; and that under the provisions of the Insolvency
Law, all claims, including those against the trust funds
should be filed in the liquidation proceedings. 13 Hence,
private respondents assert that no grave abuse of
discretion was committed by Judge Laigo in issuing the
June 26, 2009 Order.
The Assignee's Position
In his separate Comments on Petition 14 and
Memorandum, 15 the Assignee contends that the trust
fund forms part of Legacy's corporate assets for the
following reasons: first, the insolvency court has
jurisdiction over all the claims against the insolvent and
the trust fund forms part of the company's corporate
assets. It cited Abrera v. College Assurance Plan, 16 where
the Court held that claims arising from pre-need
contracts should not be treated separately from other
claims against a pre-need company. As such, the claims
over the trust fund, being claims against Legacy, are
necessarily lodged with the insolvency court. Second, the
setting up of the trust fund is a mere scheme to attain an
administrative end, that is, the assurance that the
benefits will be delivered under the pre-need contracts.
Considering that Legacy is the debtor as regards such
benefits, it is only through it, or through the insolvency
court, that the assets including the trust fund can be
distributed to satisfy valid claims. Third, though the
trustee banks hold legal title over the funds, the real
parties-in-interest are the pre-need companies as the
terms of the trust agreement between Legacy and LBP
(as trustee) show this intent.
The Assignee also submits that no law authorized
the SEC to interfere in the insolvency proceedings
because its authority under the SRC is only to regulate
the sale of pre-need plans and not to regulate the
management of trust funds.
In sum, the Assignee interprets the June 26, 2009
Order in this wise: that the creditors, planholders or not,
should first line up and file valid claims with the
insolvency court and not get entangled in the validation
process of the SEC; and that once the planholders have
qualified, they will be given preference in the distribution
of the trust assets. Moreover, he proposes that if the
trust fund assets will not be enough to satisfy all claims,
the planholders can still join other claimants and
participate in the distribution of the other assets of the
pre-need company. 17
From the foregoing, the Court is called to
determine whether Judge Laigo gravely abused his
discretion in:
1. Including the trust properties in the insolvent's
estate; and
2. Prohibiting the SEC from validating the claims
filed by the planholders against the trust
fund.
The Court's Ruling
The overarching consideration in the legislative
mandate to establish trust funds is the protection of the
interest of the planholders in the investment plans.
The SRC provides in no uncertain terms the intent to
make such interests paramount above all else. Thus, it
directed the SEC to come up with rules and regulations
to govern not only trust funds but the industry as a
whole. Pursuant to its mandate and delegated authority,
the SEC came out with the New Rules, which the
Congress later on toughened through the enactment of
the Pre-Need Code, carrying similar protection but far
more detailed in scope.
It is in this context that this Court rules to grant
the petition filed by the SEC. The Court finds that Judge
Laigo gravely abused his discretion in treating the trust
fund as assets that form part of Legacy's insolvency
estate and in enjoining the SEC's validation of the
planholders' claims against the trust properties.
The Trust Fund is for the sole
benefit of the planholders and
cannot be used to satisfy the
claims of other creditors of
Legacy
Section 30 of the Pre-Need Code clearly provides
that the proceeds of trust funds shall redound solely to
the planholders. Section 30 reads:
Trust Fund
SECTION 30. Trust Fund. — To ensure the
delivery of the guaranteed benefits and services
provided under a pre-need plan contract, a trust
fund per pre-need plan category shall be
established. A portion of the installment payment
collected shall be deposited by the pre-need
company in the trust fund, the amount of which
 will be as determined by the actuary based on the
viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at
all times remain for the sole benefit of the
planholders. At no time shall any part of the trust
fund be used for or diverted to any purpose other
than for the exclusive benefit of the
planholders. In no case shall the trust fund
assets be used to satisfy claims of other
creditors of the pre-need company. The
provision of any law to the contrary
notwithstanding, in case of insolvency of the pre-
need company, the general creditors shall not be
entitled to the trust fund.
HESIcT
Except for the payment of the cost of
benefits or services, the termination values
payable to the planholders, the insurance
premium payments for insurance-funded
benefits of memorial life plans and other costs
necessary to ensure the delivery of benefits or
services to planholders, no withdrawal shall be
made from the trust fund unless approved by the
Commission. The benefits received by the
planholders shall be exempt from all taxes and
the trust fund shall not be held liable for
attachment, garnishment, levy or seizure by or
under any legal or equitable processes except to
pay for the debt of the planholder to the benefit
plan or that arising from criminal liability
imposed in a criminal action.
[Emphases Supplied]
The Assignee argues that Legacy has retained a
beneficial interest in the trust fund despite the execution
of the trust agreement and that the properties can be the
subject of insolvency proceedings. In this regard, the
Assignee calls the Court's attention to the trust
agreement provisions which supposedly refer to the
interest of Legacy in the trust properties, to wit:
The TRUSTEE hereby undertakes to
perform the functions and duties of a TRUSTEE
provided for in this Agreement with the utmost
good faith, care and prudence required by a
fiduciary relation, being understood, however,
that the COMPANY shall be solely and exclusive
(sic) responsible for (1) fulfilling the services
referred to in the recital clauses, (ii) the
settlement/payment of claims of any person or
firm availing of such services, (iii) compliance
with all laws and governmental regulations on
pre-need plans, and (iv) submission of other data
or information as may be prescribed by the
Commission.
xxx xxx xxx
. . . the Trustee shall from time to time on
the written directions of the Company make
payments out of the Trust Fund to the Company.
To the extent permitted by law, the Trustee shall
be under no liability for any payment made
pursuant to the direction of the Company. Any
written direction of the Company shall constitute
a certification that the distribution of payment so
directed is one which the Company is authorized
to direct. From time to time and when directed in
writing by the Company, the Trustee shall pay
monies from the Trust Fund in amounts equal to
the outstanding amount of the Trust Fund at any
given time to defray the Company's obligations to
the Planholders under its pre-need plan contract
and provided further that the company shall be
reimbursed by the Trustee from the Trust Fund
 for whatever amounts it has advanced to its
beneficiaries. 18 [Italics supplied]
To the Assignee, these "control" mechanisms are
indicative of the interest of Legacy in the enforcement of
the trust fund because the agreement gives it the power
to dictate on LBP the fulfilment of the trust, such as the
delivery of monies to it to facilitate the payment to the
planholders.
The Court, however, sees it differently.
In the course of delving into the complex
relationships created by the agreement and the existing
regulatory framework, this Court finds that Legacy's
claimed interest in the enforcement of the trust and in
the trust properties is mere apparent than real. Legacy is
not a beneficiary.
First, it must be stressed that a person is
considered as a beneficiary of a trust if there is a manifest
intention to give such a person the beneficial interest
over the trust properties. 19 This is the considered
opinion expressed in the Restatement of the Law of
Trust (Restatement) 20 which Justice Vicente Abad Santos
has described in his contribution to the Philippine Law
Journal as containing the more salient principles,
doctrines and rules on the subject. 21 Here, the terms of
the trust agreement plainly confer the status of
beneficiary to the planholders, not to Legacy. In the
recital clauses of the said agreement, Legacy bound itself
to provide for the sound, prudent and efficient
management and administration of such portion of the
collection "for the benefit and account of the
planholders," 22 through LBP (as the trustee).
This categorical declaration doubtless indicates
that the intention of the trustor is to make the
planholders the beneficiaries of the trust properties, and
not Legacy. It is clear that because the beneficial
ownership is vested in the planholders and the legal
ownership in the trustee, LBP, Legacy, as trustor, is left
without any iota of interest in the trust fund. This is
consistent with the nature of a trust arrangement,
whereby there is a separation of interests in the subject
matter of the trust, the beneficiary having an equitable
interest, and the trustee having an interest which is
normally legal interest. 23
Second, considering the fact that a mandated pre-
need trust is one imbued with public interest, the issue
on who the beneficiary is must be determined on the
basis of the entire regulatory framework. Under the New
Rules, it is unmistakable that the beneficial interest over
the trust properties is with the planholders. Rule 16.3 of
the New Rules provides that: [n]o withdrawal shall be
made from the trust fund except for paying the benefits
such as monetary consideration, the cost of services
rendered or property delivered, trust fees, bank charges
and investment expenses in the operation of the trust fund,
termination values payable to the planholders, annuities,
contributions of cancelled plans to the fund and taxes on
trust funds.caITAC
Rule 17.1 also states that to ensure the liquidity of
the trust fund to guarantee the delivery of the benefits
provided for under the plan contract and to obtain
sufficient capital growth to meet the growing actuarial
reserve liabilities, all investments of the trust fund shall
be limited to Fixed Income Instruments, Mutual Funds,
Equities, and Real Estate, subject to certain limitations.
Further, Rule 20.1 directs the trustee to exercise
due diligence for the protection of the planholders
guided by sound investment principles in the exclusive
management and control over the funds and its right, at
any time, to sell, convert, invest, change, transfer, or
otherwise change or dispose of the assets comprising the
funds. All these certainly underscore the importance of
the planholders being recognized as the ultimate
beneficiaries of the SEC-mandated trust.
This consistently runs in accord with the legislative
intent laid down in Chapter IV of R.A. No. 8799, or
the SRC, which provides for the establishment of trust
funds for the payment of benefits under such
plans. Section 16 of the SRC provides:
SEC. 16. Pre-Need Plans. — No person shall
sell or offer for sale to the public any pre-need
plan except in accordance with rules and
regulations which the Commission shall
prescribe. Such rules shall regulate the sale of
pre-need plans by, among other things, requiring
the registration of pre-need plans, licensing
persons involved in the sale of pre-need plans,
requiring disclosures to prospective plan holders,
prescribing advertising guidelines, providing for
uniform accounting system, reports and record
keeping with respect to such plans, imposing
capital, bonding and other financial
responsibility, and establishing trust funds for
the payment of benefits under such plans.
[Emphasis supplied]
It is clear from Section 16 that the underlying
congressional intent is to make the planholders the
exclusive beneficiaries. It has been said that what is
within the spirit is within the law even if it is not within
the letter of the law because the spirit prevails over the
letter. 24
This will by the legislature was fortified with the
enactment of R.A. No. 9829 or the Pre-Need Code in
2009. 25 The Congress, because of the chaos confounding
the industry at the time, considered it necessary to
provide a stronger legal framework so that no entity
could claim that the mandate and delegated authority of
the SEC under the SRC was nebulous. The Pre-Need
Code cemented the regulatory framework governing the
pre-need industry with precise specifics to ensure that
the rights of the pre-need planholders would be
categorically defined and protected. Similar provisions in
the Pre-Need Code are the following:
SECTION 32. Terms and Conditions of a
Trust Fund. — A trust fund must be established
separately for each type of pre-need plan with the
trust department of a trust company, bank or
investment house doing business in the
Philippines. No trust fund shall be established by
a pre-need company with an affiliate trust entity
subject to Section 38 hereof.
The trust agreement shall be submitted to
the Commission for approval before execution
and shall contain the following salient provisions,
among others:
(a) The manner in which the trust fund is to
be operated;
(b) Investment powers of the trustee with
respect to trust deposits, including
the character and kind of investment;
(c) Auditing and settlement of accounts of
the trustee with respect to the trust
fund;
(d) Basis upon which the trust fund may be
terminated;
(e) Provisions for withdrawals from the trust
fund;
 (f) That the trustee shall submit to the power
of the Commission to examine and
verify the trust fund;
(g) An undertaking by the trustee that it shall
abide by the rules and regulations of
the Commission with respect to the
trust fund; and
(h) An undertaking by the trustee that it
shall submit such other data or
information as may be prescribed by
the Commission.
SECTION 33. Responsibilities of the
Trustee. — The trustee shall:
(a) Administer and manage the trust fund
with utmost good faith, care and
prudence required by a fiduciary
relationship;
(b) The trustee shall have the exclusive
management and control over the
funds and the right at any time to sell,
convert, invest, change, transfer or
otherwise change or dispose of the
assets comprising the funds within
the parameters prescribed by the pre-
need company and provided these
parameters are compliant with the
Commission's regulations; and
(c) Not use the trust fund to invest in or
extend any loan or credit
accommodation to the pre-need
company, its directors, officers,
stockholders, and related interests as
well as to persons or enterprises
controlling, owned or controlled by,
or under common control with said
company, its directors, officers,
stockholders and related interests
except for entities which are direct
providers of pre-need companies. ICHDca
SECTION 34. Investment of the Trust
Fund. — To ensure the liquidity of the trust fund
to guarantee the delivery of the benefits provided
for under the plan contract and likewise obtain
sufficient capital growth to meet the growing
actuarial reserve liabilities, all investments of the
trust fund/s of a pre-need company shall be
limited to the following and subject to
limitations, to wit:
(a) Fixed income instruments. — These may
be classified into short-term and long-term
instruments. The instrument is short-term if the
maturity period is three hundred sixty-five (365)
days or less. This category includes:
(1) Government securities which shall not be
less than ten percent (10%) of the
trust fund amount;
(2) Savings/time deposits and unit
investment trust funds maintained
with and managed by a duly
authorized bank with satisfactory
examination rating as of the last
examination by the BSP;
(3) Commercial papers duly registered with
the SEC with a credit rating of "1" for
short-term and "AAA" for long-term
based on the rating scale of an
accredited Philippine Rating Agency
or its equivalent at the time of
investment.
The maximum exposure to long-term
commercial papers shall not exceed
fifteen percent (15%) of the total trust
fund amount while the exposure to
each commercial paper issuer shall
not exceed ten percent (10%) of the
allocated amount; and
(4) Direct loans to corporations which are
financially stable, profitable for the
last three (3) years and have a good
track record of paying their previous
loans.
These loans shall be fully secured by a real
estate mortgage up to the extent of
sixty percent (60%) of the zonal
valuation of the property at the time
the loan was granted.
The property shall be covered by a transfer
certificate of title registered in the
name of the mortgagor and free from
liens and encumbrances.
The maximum amount to be allocated for
direct loans shall not exceed five
percent (5%) of the total trust fund
amount while the amount to be
granted to each corporate borrower
shall not exceed ten percent (10%) of
the amount allocated.
The maximum term of the loan should be no
longer than four (4) years.
Direct loans to planholders are exempt
from the limitations set forth under
this section: Provided, That such loans
to planholders shall not exceed ten
percent (10%) of the total trust fund
amount.
(b) Equities. — Investments in equities shall
be limited to stocks listed on the main board of a
local stock exchange.
Investments in duly registered collective
investment instruments such as mutual funds are
allowed hereunder: Provided, That such funds
are invested only in fixed income instruments
and blue chips securities, subject to the
limitations prescribed by laws, rules and
regulations.
These investments shall include stocks
issued by companies that are financially stable,
actively traded, possess good track record of
growth and have declared dividends for the past
three (3) years. Notwithstanding the prohibition
against transactions with directors, officers,
stockholders and related interests, the trustee
may invest in equities of companies related to the
trustee provided these companies comply with
the foregoing criteria provided in this paragraph
for equity investments.
The amount to be allocated for this
purpose shall not exceed thirty percent (30%) of
the total trust fund while the investment in any
particular issue shall not exceed ten percent
(10%) of the allocated amount. The investment
shall be recorded at the aggregate of the lower of
cost or market.
Existing investments which are not in
accordance herewith shall be disposed of within
three (3) years from the effectivity of this Act.
(c) Real Estate. — These shall include real
estate properties located in strategic areas of
cities and first class municipalities. The transfer
certificate of title (TCT) shall be in the name of
the seller, free from liens and encumbrances and
shall be transferred in the name of the trustee in
trust for the planholders unless the
seller/transferor is the pre-need company
wherein an annotation to the TCT relative to the
sale/transfer may be allowed. It shall be
recorded at acquisition cost.
However, the real estate shall be appraised
every three (3) years by a licensed real estate
appraiser, accredited by the Philippine
Association of Real Estate Appraisers, to reflect
the increase or decrease in the value of the
property. In case the appraisal would result in an
increase in the value, only sixty percent (60%) of
the appraisal increase is allowed to be recorded
in the books of the trust fund but in case of
decline in value, the entire decline shall be
recorded. Appraisal increment should not be
used to cover up the required monthly
contribution to the trust fund.
The total recorded value of the real estate
investment shall not exceed ten percent (10%) of
the total trust fund amount of the pre-need
company. In the event that the existing real
estate investment exceeds the aforesaid limit, the
same shall be leveled off to the prescribed limit
within three (3) years from the effectivity of this
Code.
Investment of the trust fund, which is not
in accordance with the preceding paragraphs,
shall not be allowed unless the prior written
approval of the Commission had been secured:
Provided, further, That no deposit or investment
in any single entity shall exceed fifteen percent
(15%) of the total value of the trust fund:
Provided, finally, That the Commission is
authorized to adjust the percentage allocation
per category set forth herein not in excess of two
percentage (2%) points upward or downward and
no oftener than once every five (5) years. The
first adjustment hereunder may be made no
earlier than five (5) years from the effectivity of
this Act. The pre-need company shall not use the
trust fund to extend any loan to or to invest in its
directors, stockholders, officers or its
affiliates.
TCAScE
xxx xxx xxx
SECTION 36. Trust Fund Deficiencies. —
Upon approval by the Commission of the pre-
need reserve computation submitted in the
preceding section, any deficiency in the trust
fund, when compared to the reserve liabilities as
reported in the pre-need reserve valuation
report, shall be funded by the pre-need company
within sixty (60) days from such approval. Failure
to cover the deficiency in an appropriate manner
within the time required shall subject the pre-
need company to the payment of a penalty, in
addition to other remedies exercisable by the
Commission, as provided for in this Code. Any
excess of the trust fund over the actuarial
reserve liabilities may be credited to future
deposit requirements.
SECTION 37. Liquidity Reserve. — The
trustee shall at all times maintain a liquidity
reserve which shall be sufficient to cover at least
fifteen percent (15%) of the trust fund but in no
case less than one hundred twenty-five percent
(125%) of the amount of the availing plans for the
succeeding year. For this purpose, the pre-need
company shall timely submit to the trustee a
summary of benefits payable for the succeeding
year.
The following shall qualify as investments
for the liquidity reserve:
(a) Loans secured by a hold-out on
assignment or pledge deposits
maintained either with the trustee or
other banks, or of deposit substitute
of the trustee itself or mortgage and
chattel mortgage bonds issued by the
trustee;
(b) Treasury notes or bills, other government
securities or bonds, and such other
evidences or indebtedness or
obligations the servicing and
repayment of which are fully
guaranteed by the Republic of the
Philippines;
(c) Repurchase agreements with any of those
mentioned in Item "b" above, as
underlying instruments thereof; and
(d) Savings or time deposits with
government-owned banks or
commercial banks.
SECTION 38. Trustees. — Upon approval of
the Commission or when the Commission
requires for the protection of planholders, the
pre-need company shall entrust the management
and administration of the trust fund to any
reputable bank's trust department, trust
company or any entity authorized to perform
trust functions in the Philippines: Provided, That
no director and/or officer of the pre-need
company shall at the same time serve as director
and/or officer of the affiliate or related trust
entity: Provided, further, That no trust fund shall
be established by a pre-need company with a
subsidiary, affiliate or related trust entity.
However, such may be allowed: Provided, That
the following conditions are complied with:
(a) A written approval of the Commission has
been previously obtained; and
(b) Public disclosure of the affiliation with
the trust entity be included in all
materials in whatever form.
The Commission shall have the authority
to prescribe appropriate rules that shall ensure
that the yield of the trust fund is maximized,
consistent with the requirements of safety and
liquidity.
[Italics Supplied]
"Under the principle of legislative approval of
administrative interpretation by re-enactment, the re-
enactment of a statute, substantially unchanged (as in
this case), is persuasive indication of the adoption by
Congress of a prior executive
construction." 26 Accordingly, where a statute is
susceptible of the meaning placed upon it by a ruling of
the government agency charged with its enforcement
and the legislature thereafter reenacts the provisions
without substantial change, such action is to some extent
confirmatory that the ruling carries out the legislative
purpose. 27
The Court cannot go against that legislative intent
for it is the duty of this institution to read what the law
intends. It is a cardinal rule that, in seeking the meaning
of the law, the first concern of the judge should be to
discover in its provisions the intent of the lawmaker.
Unquestionably, the law should never be interpreted in
such a way as to cause injustice as this is never within the of the benefits from the trust fund to the intended
legislative intent. An indispensable part of that intent, in beneficiaries, acting as a conduit or an agent of the
fact, for we presume the good motives of the legislature, trustee in the enforcement of the trust agreement.
is to render justice. 28 Under the general principles of trust, a trustee, by the
To rule that Legacy has retained a beneficial terms of the agreement may be permitted to delegate to
interest in the trust fund is to perpetuate the injustices agents or to co-trustees or to other persons the
being committed against the planholders and violate not administration of the trust or the performance of act
only the spirit of the trust agreement but, more
which could not otherwise be properly
importantly, the lawmaker's intent. If indeed Legacy had
delegated. 30 Thus, by the terms of the trust, as in this
an interest that could be reached by its creditors even
case, a trustee may be authorized or permit an agent to
during insolvency, the planholders would be prejudiced
do acts such as the delivery of the benefits out of the
as they would be forced to share in the assets that would
trust fund.
be distributed pro rata to all creditors, whether
The Court cannot subscribe either to the Assignee's
planholders or not. It would contradict the very purpose
position that Legacy is a debtor of the planholders
for which the trust was mandated by the Congress in the
relative to the trust fund. In trust, it is the trustee, and
first place.
not the trustor, who owes fiduciary duty to the
Third, the perceived interest of Legacy, as touted
beneficiary. The Restatement is clear on this point.
by the Assignee, has simply no basis. It may appear that
Section 170 thereof provides that the "trustee is under a
Legacy under the agreement has control over the
duty to the beneficiary to administer the trust solely in
enforcement of the trust because of its provisions stating
the interest of the beneficiary." 31 Section 182 also states
that Legacy shall "solely and exclusive[ly] [be] responsible
that the duty of a trustee is to pay income to the
for fulfilling the services referred to in the recital clauses
beneficiary. 32 Thus, LBP is tasked with the fiduciary duty
and the settlement/payment of claims of any person or
to act for the benefit of the planholders as to matters
firm availing of such services" and that "[a]ny written
within the scope of the relation. 33 Like a debtor, LBP
direction of the Company [to the trustee] shall constitute
owes the planholders the amounts due from the trust
a certification that the distribution of payment so
fund. As to the planholders, as creditors, they can
directed is one which the Company is authorized to
rightfully use equitable remedies against the trustee for
direct." 29 Such provisions, however, cannot be construed
the protection of their interest in the trust fund and, in
as Legacy having retained a beneficial interest in the
particular, their right to demand the payment of what is
trust fund.
due them from the fund. Verily, Legacy is out of the
cTDaEH

To begin with, the aforestated provisions refer

picture and exists only as a representative of the trustee,
solely to the delivery of the proceeds of the trust from
LBP, with the limited role of facilitating the delivery of
LBP to Legacy and then finally to the beneficiaries. In
the benefits of the trust fund to the beneficiaries — the
effect, Legacy merely agreed to facilitate the payment
planholders. The trust fund should not revert to Legacy,
which has no beneficial interest over it. Not being an
asset of Legacy, the trust fund is immune from its reach
and cannot be included by the RTC in the insolvency
estate.
In the end, the failure of Judge Laigo to consider
the provisions of the SRC, the New Rules and the law on
trusts, that should have warranted the exclusion of the
trust fund from the insolvency estate of Legacy,
constituted grave abuse of discretion. In treating the
trust fund as forming part of Legacy's insolvency estate,
Judge Laigo acted against what was contemplated by law.
He turned a blind eye to the will of the Congress as
expressed through the SRC and the Pre-Need Code. In
the process, he endangered the claims of the planholders
by allowing the probability that they would be drastically
reduced or dissipated. He should have acted prudently
bearing in mind that the establishment of the trust was
precisely for the exclusive benefit of the planholders.
Enjoining the SEC from validating
the claims against the trust fund is
grave abuse of discretion for the
insolvency court has no authority
to order the reversion of properties
that do not form part of Legacy's
insolvent estate.
The Assignee cited Abrera v. College Assurance
Plan 34 (Abrera), where the Court held that claims covered
by rehabilitation proceedings before the RTC should
include all claims or demands of whatever nature or
character against a debtor or its property. At the heart of
the Assignee's argument is that because the authority is
with the RTC, the SEC has no right to interfere in the
insolvency proceedings.
It is an error for the Assignee to assume that the
authority of the RTC extends to the claims against the
trust fund. Claims against the trust fund must be
distinguished from claims against Legacy. The claims
against the trust fund are directed not against Legacy,
but against LBP, the trustee, being the debtor relative to
the trust properties.
The Pre-Need Code is clear on this. It recognizes
the distinction between claims against the pre-need
company and those against the trust fund. Section 52 (b)
states that liquidation "proceedings in court shall
proceed independently of proceedings in the Commission
for the liquidation of claims, and creditors of the pre-need
company shall have no personality whatsoever in the
Commission proceedings to litigate their claims against
the trust funds." The reason why claims against the trust
funds can proceed independently of the proceedings in
the courts is the fact that the latter is directed against a
different person or entity.
Moreover, the Assignee must be reminded that the
issue in Abrera is not similar to the question raised here
by the SEC. In the case at bench, the SEC questions the
propriety of including the trust fund in the inventory of
Legacy's corporate assets.
Jurisdiction over claims filed
against the trust fund
From the effectivity of the Pre-Need Code, it is the
Insurance Commission (IC) that "shall have the primary
and exclusive power to adjudicate any and all claims
involving pre-need plans." 35 The transitory provisions of
the Pre-Need Code, however, provide that
"[n]otwithstanding any provision to the contrary, all
pending claims, complaints and cases (referring to pre-
need contract and trust claims) filed with the SEC shall
be continued in its full and final conclusion." 36
The Pre-Need Code recognizes that the jurisdiction
over pending claims against the trust funds prior to its
effectivity is vested with the SEC. Such authority can be
easily discerned even from the provisions of the SRC.
Section 4 thereof provides that despite the transfer of
jurisdiction 37 to the RTC of those matters enumerated
under Section 5 of P.D. No. 902-A, 38 the SEC remains
authorized to "exercise such other powers as may be
provided by law as well as those which may be implied
from, or which are necessary or incidental to the carrying
out of, the express powers granted the Commission 39 to
achieve the objectives and purposes of these
laws." 40 Relevant thereto is Section 36.5 (b) of
the SRC which states that: cSaATC
The Commission may, having due regard
to the public interest or the protection of
investors, regulate, supervise, examine, suspend
or otherwise discontinue such and other similar
funds under such rules and regulations which the
Commission may promulgate, and which may
include taking custody and management of the
fund itself as well as investments in, and
disbursements from, the funds under such forms
of control and supervision by the Commission as
it may from time to time require. The authority
granted to the Commission under this subsection
shall also apply to all funds established for the
protection of investors (which necessarily
includes the trust funds), whether established by
the Commission or otherwise. 41
Concomitantly, under the New Rules, the SEC "may,
at its discretion, demand for the conversion to cash or
other near cash assets of the investments made by the
Trustee to protect the interest of the Planholders." 42
Therefore, even prior to the transfer to the IC of
matters pertaining to pre-need plans and trust funds, the
SEC had authority to regulate, manage, and hear all
claims involving trust fund assets, if in its discretion,
public interest so required. Accordingly, all claims against
the trust funds, which have been pending before it, are
clearly within the SEC's authority to rule upon.
Pre-Need Code is curative and remedial
in character and, therefore, can be
applied retroactively
Finally, it must be stressed that the primary
protection accorded by the Pre-Need Code to the
planholders is curative and remedial and, therefore, can
be applied retroactively. The rule is that where the
provisions of a statute clarify an existing law and do not
contemplate a change in that law, the statute may be
given curative, remedial and retroactive effect. 43 To
review, curative statutes are those enacted to cure
defects, abridge superfluities, and curb certain evils. 44 As
stressed by the Court in Fabian v. Desierto, 45
If the rule takes away a vested right, it is
not procedural. If the rule creates a right such as
the right to appeal, it may be clarified as a
substantive matter; but if it operates as a means
of implementing an existing right then the rule
deals merely with procedure.
[Emphasis Supplied]
A reading of the Pre-Need Code immediately shows
that its provisions operate merely in furtherance of the
remedy or confirmation of the right of the planholders to
exclusively claim against the trust funds as intended by
the legislature. No new substantive right was created or
bestowed upon the planholders. Section 52 of the Pre-
Need Code only echoes and clarifies the SRC's intent to
exclude from the insolvency proceeding trust fund assets
that have been established "exclusively for the benefit of
planholders." It was precisely enacted to foil the tactic of
taking undue advantage of any ambiguities in the New
Rules.
Any doubt or reservation in this regard has been
dispelled by the Pre-Need Code. Section 57 thereof
provides that "[a]ny pre-need company who, at the time
of the effectivity of this Code has been registered and
licensed to sell pre-need plans and similar contracts,
shall be considered registered and licensed under the
provision of this Code and its implementing rules and
regulations and shall be subject to and governed by the
provisions hereof . . . ." Thus, Legacy and all other
existing pre-need companies cannot claim that the
provisions of the Pre-Need Code are not applicable to
them and to the claims which accrued prior to the
enactment of the said law.
"[I]t has been said that a remedial statute must be so
construed as to make it effect the evident purpose for
which it was enacted, so that if the reason of the statute
extends to past transactions, as well as to those in the
future, then it will be so applied although the statute
does not in terms so direct. 46 With the Pre-Need
Code having the attribute of a remedial statute, Legacy
and all pre-need providers or their creditors cannot
argue that it cannot be retroactively applied.
Conclusion
In sum, improvidently ordering the inclusion of the
trust fund in Legacy's insolvency estate without regard to
the avowed state policy of protecting the consumer of
pre-need plans, as laid down in the SRC, the New Rules,
and the Pre-Need Code, constitutes grave abuse of
discretion. The RTC should have known, and ought to
know, the overarching consideration the Congress
intended in requiring the establishment of trust funds —
to uphold first and foremost the interest of the
planholders.
The Court upholds its duty to protect the ordinary
Filipino workers who are seeking a future for their
children through pre-need contracts. Their incredibly
long wait is over as this is the moment when their rightful
and exclusive right to the trust funds, created primarily
for them, is judicially respected and affirmed.
WHEREFORE, the petition is GRANTED. The June
26, 2009 Order of the Regional Trial Court, Branch 56,
Makati City, is declared NULL and VOID.
The Securities and Exchange Commission is
directed to process the claims of legitimate planholders
with dispatch.
SO ORDERED.

FIRST DIVISION
[G.R. No. 193791. August 6, 2014.]
PRIMANILA PLANS, INC., herein
REPRESENTED by EDUARDO S.
MADRID, petitioner, vs. SECURITIES AND
EXCHANGE COMMISSION, respondent.
DECISION
REYES, J :
p
This resolves the Petition for Review on Certiorari 1 under Rule 45 of
the Rules of Court filed by Primanila Plans, Inc. (Primanila) to assail the
Decision 2 dated March 9, 2010 and Resolution 3 dated September 15, 2010
of the Court of Appeals (CA) in CA-G.R. SP No. 104083. The CA affirmed in
CA-G.R. SP No. 104083 the Securities and Exchange Commission's (SEC)
issuance of an Order 4 dated April 9, 2008, which was a cease and desist
order upon Primanila with the following dispositive portion:
WHEREFORE, pursuant to the authority
vested in the Commission, PRIMANILA PLANS,
INC., its respective officers, directors, agents,
representatives, and any and all persons, conduit
entities and subsidiaries claiming and acting under
their authority, are hereby ordered to
immediately CEASE AND DESIST from further
engaging in activities of selling, offering for sale
Primasa plans and to refrain from further
collecting payments and amortizations for Primasa
plans to protect the interest of investors and the
public in general.
In accordance with the provisions of Section
64.3 of Republic Act No. 8799, otherwise known as
the Securities Regulation Code, the parties subject
of this Cease and Desist Order may file a formal
request or motion for the lifting of this Order
within a non-extendible period of five (5) days
from receipt hereof.
SO ORDERED. 5 cSTCDA
The Facts
Primanila was registered with the SEC on October 17, 1988 and was
issued Certificate of Registration No. 156350. Based on its amended
articles of incorporation, the company's primary purpose was "to
organize, establish, develop, conduct, provide, maintain, operate, offer,
issue, market and sell pension plans under which the savings of
professionals, officers, directors and other personnel of corporations,
firms, or entities, and self-employed individuals can be pooled together,
accumulated and invested in profitable placements and productive
enterprises so as to build an Accumulated Fund for each individual
participant or planholder for his retirement, monthly pension or for other
[foreseeable] needs in the future." Primanila then operated as a pre-need
company and maintained a business office in Makati City. 6
On April 9, 2008, the SEC was prompted to issue the subject cease
and desist order after an investigation conducted by the SEC's
Compliance and Enforcement Department (CED) on Primanila yielded the
following factual findings duly explained in the cease and desist order:
1. The office of [Primanila] located at 20th Floor,
Philippine AXA Life Centre, Sen. Gil Puyat
Ave., Makati City was closed. No notices
were posted outside said office to inform
the public of the reason for such closure. . . .
2. [Primanila]'s website (www.primanila.com) was
offering a pension plan product called
Primasa Plan. The website contains detailed
instructions as to how interested persons
can apply for the said plan and where initial
contributions and succeeding installment
payments can be made by applicants and
planholders. According to the website,
applicants and planholders can pay directly
at the head office, any of its field offices or
 may deposit the payments in PRIMANILA's
METROBANK Account No. 066-3-06631031-
1. This was discovered by [CED] when a
member of CED visited [Primanila's] website
on February 12, 2008.
3. [PRIMANILA] failed to renew its Dealer's License
for 2008. In view of the expiration of the
said license, the [SEC's Non-Traditional
Securities and Instruments Department
(NTD)], through its Acting Director Jose P.
Aquino, issued a letter dated January 3, 2008
addressed to [Primanila's] Chairman and
CEO Mr. Eduardo S. Madrid, enjoining
[Primanila] from selling and/or offering for
sale pre-need plans to the public.
4. [Primanila] has not been issued a secondary
license to act as dealer or general agent for
pre-need pension plans for 2008. Also, no
registration statement has been filed by
[Primanila] for the approval of a pension
plan product called Primasa Plan. This is
shown in the certification dated February 15,
2008 issued by NTD upon the request of
Atty. Hubert B. Guevara of CED. CHIEDS
5. [Primanila's] Bank Account is still active. This
was discovered by CED when it deposited
on March 6, 2008 the sum of Php50.00
which was duly received by METROBANK
Robinson's Branch as shown by the deposit
slip.
6. Among the many planholders of [PRIMANILA]
are enlisted personnel of the Philippine
National Police (PNP). Premium collections
for Primaplans via salary deductions were
religiously remitted to [Primanila] on a
monthly basis. . . .
7. PNP remitted the total amount of
Php2,072,149.38 to respondent PRIMANILA
representing the aforementioned premium
collections via salary deductions of the 410
enlisted personnel of PNP who are
planholders. This is shown in the table
prepared by the remittance clerk of the PNP,
Ms. Mercedita A. Almeda.
8. [PRIMANILA] failed to deposit the required
monthly contributions to the trust fund in
violation of Pre-need Rule 19.1. This is shown
in the Trust Fund Reports for the months of
November and December 2007 prepared by
ASIATRUST BANK, the trustee of [Primanila].
9. [PRIMANILA] under-declared the total amount
of its collections as shown in its SEC
Monthly Collection Reports which it
submitted to NTD. Its reports show that it
only collected the total amount of
Php302,081.00 from January to September
2007. However, the remittance report of the
PNP shows that [Primanila] received the
amount of Php1,688,965.22 from the PNP
planholders alone for the said period.
Therefore, it under-declared its report by
Php1,386,884.22. 7
From these findings, the SEC declared that Primanila committed a
flagrant violation of Republic Act No. 8799, otherwise known as
the Securities Regulation Code (SRC), particularly Section 16 thereof
which reads:
Section 16. Pre-Need Plans. — No person
shall sell or offer for sale to the public any pre-
need plan except in accordance with rules and
regulations which the Commission shall prescribe.
Such rules shall regulate the sale of pre-need plans
 by, among other things, requiring the registration the one who crafted it. The Primanila company website that included
of pre-need plans, licensing persons involved in details on the Primasa product was not updated; the advertisement of the
the sale of pre-need plans, requiring disclosures to product on the website was the result of mere inadvertence. 11 Thus, the
prospective plan holders, prescribing advertising cease and desist order against Primanila would allegedly not accomplish
guidelines, providing for uniform accounting anything, but only prejudice the interest and claims of its other
system, reports and record keeping with respect to planholders. 12
such plans, imposing capital, bonding and other On June 5, 2008, the SEC issued its Order 13 denying Primanila's
financial responsibility and establishing trust funds motion for reconsideration for lack of merit. The cease and desist order
for the payment of benefits under such plans.
issued on April 9, 2008 was then made permanent.
It also breached the New Rules on the Registration and Sale of Pre-
Unyielding, Primanila appealed to the CA via a petition for review.
Need Plans, specifically Rule Nos. 3 and 15 thereof, to wit:
On March 9, 2010, the CA rendered its decision dismissing the petition
Rule 3. Registration of Pre-Need Plans. — No
and affirming in toto the issuances of the SEC.
corporation shall issue, offer for sale, or sell Pre-
Need Plans unless such plans shall have been The Present Petition
registered under Rule 4. Following the CA's denial of its motion to reconsider, Primanila filed
Rule 15. Registration of Dealers, General the present petition which cites the following grounds:
Agents and Salesmen of Pre-Need Plans. — THE [CA] GROSSLY ERRED WHEN IT
15.1. Any issuer selling its own Pre-Need SUSTAINED THE ASSAILED ORDERS OF
Plans shall be deemed a dealer in securities and RESPONDENT SEC CONSIDERING THAT THE
shall be required to be registered as such and FACTS AND EVIDENCE ON RECORD [STATE]
comply with all the provisions hereof; provided OTHERWISE;
that the issuer selling different types of Pre-Need THE [CA] GROSSLY ERRED WHEN IT
Plans shall be required to be registered as dealer RULED THAT [PRIMANILA] WAS GIVEN DUE
only once for the different types of plans. PROCESS BY RESPONDENT SEC AS [PRIMANILA]
The SEC then issued the subject cease and desist order "in order to WAS ABLE TO FILE A MOTION FOR
prevent further violations and in order to protect the interest of its plan RECONSIDERATION; AND
holders and the public." 8THAECc
THE [CA] GROSSLY ERRED WHEN IT
RULED THAT THE PUBLIC WILL NOT SUFFER
Feeling aggrieved, Primanila filed a Motion for Reconsideration/Lift
GREATLY AND IRREPARABLY BY THE
Cease and Desist Order, 9 arguing that it was denied due process as the
IMPLEMENTATION OF THE ASSAILED ORDERS OF
order was released without any prior issuance by the SEC of a notice or
RESPONDENT SEC. 14
formal charge that could have allowed the company to defend
The Ruling of the Court
itself. 10 Primanila further argued that it was neither selling nor collecting
The petition lacks merit.
premium payments for the product Primasa plans. The product was
Due Process of Law
previously developed but was never launched and sold to the public
following the resignation from the company in 2006 by Benjamin Munda,
 Contrary to its stance, Primanila was accorded due process
notwithstanding the SEC's immediate issuance of the cease and desist
order on April 9, 2008. The authority of the SEC and the manner by which
it can issue cease and desist orders are provided in Section 64 of the SRC,
and we quote:
Section 64. Cease and Desist Order. —
64.1. The Commission, after proper
investigation or verification, motu proprio, or
upon verified complaint by any aggrieved
party, may issue a cease and desist order without
the necessity of a prior hearing if in its judgment
the act or practice, unless restrained, will operate
as a fraud on investors or is otherwise likely to
cause grave or irreparable injury or prejudice to
the investing public.
64.2. Until the Commission issues a cease
and desist order, the fact that an investigation has
been initiated or that a complaint has been filed,
including the contents of the complaint, shall be
confidential. Upon issuance of a cease and desist
order, the Commission shall make public such
order and a copy thereof shall be immediately
furnished to each person subject to the order.
64.3. Any person against whom a cease and
desist order was issued may, within five (5) days
from receipt of the order, file a formal request for
lifting thereof. Said request shall be set for hearing
by the Commission not later than fifteen (15) days
from its filing and the resolution thereof shall be
made not later than ten (10) days from the
termination of the hearing. If the Commission fails
to resolve the request within the time herein
prescribed, the cease and desist order shall
automatically be lifted. (Emphasis ours)
The law is clear on the point that a cease and desist order may be
issued by the SEC motu proprio, it being unnecessary that it results from a
verified complaint from an aggrieved party. A prior hearing is also not
required whenever the Commission finds it appropriate to issue a cease
and desist order that aims to curtail fraud or grave or irreparable injury to
investors. There is good reason for this provision, as any delay in the
restraint of acts that yield such results can only generate further injury to
the public that the SEC is obliged to protect.
To equally protect individuals and corporations from baseless and
improvident issuances, the authority of the SEC under this rule is
nonetheless with defined limits. A cease and desist order may only be
issued by the Commission after proper investigation or verification, and
upon showing that the acts sought to be restrained could result in injury
or fraud to the investing public. Without doubt, these requisites were duly
satisfied by the SEC prior to its issuance of the subject cease and desist
order.DaTISc
Records indicate the prior conduct of a proper investigation on
Primanila's activities by the Commission's CED. Investigators of the CED
personally conducted an ocular inspection of Primanila's declared office,
only to confirm reports that it had closed even without the prior approval
of the SEC. Members of CED also visited the company website of
Primanila, and discovered the company's offer for sale thereon of the
pension plan product called Primasa Plan, with instructions on how
interested applicants and planholders could pay their premium payments
for the plan. One of the payment options was through bank deposit to
Primanila's given Metrobank account which, following an actual deposit
made by the CED was confirmed to be active.
As part of their investigation, the SEC also looked into records
relevant to Primanila's business. Records with the SEC's Non-Traditional
Securities and Instruments Department (NTD) disclosed Primanila's
failure to renew its dealer's license for 2008, or to apply for a secondary
license as dealer or general agent for pre-need pension plans for the same
year. SEC records also confirmed Primanila's failure to file a registration
statement for Primasa Plan, to fully remit premium collections from
planholders, and to declare truthfully its premium collections from
January to September 2007.
The SEC was not mandated to allow Primanila to participate in the
investigation conducted by the Commission prior to the cease and desist
order's issuance. Given the circumstances, it was sufficient for the
satisfaction of the demands of due process that the company was amply
apprised of the results of the SEC investigation, and then given the
reasonable opportunity to present its defense. Primanila was able to do
this via its motion to reconsider and lift the cease and desist order. After
the CED filed its comment on the motion, Primanila was further given the
chance to explain its side to the SEC through the filing of its reply. "Trite
to state, a formal trial or hearing is not necessary to comply with the
requirements of due process. Its essence is simply the opportunity to
explain one's position." 15 As the Court held in Ledesma v. Court of
Appeals: 16
Due process, as a constitutional precept,
does not always and in all situations require a trial-
type proceeding. Due process is satisfied when a
person is notified of the charge against him and
given an opportunity to explain or defend himself.
In administrative proceedings, the filing of charges
and giving reasonable opportunity for the person
so charged to answer the accusations against him
constitute the minimum requirements of due
process. The essence of due process is simply to be
heard, or as applied to administrative proceedings,
an opportunity to explain one's side, or an
opportunity to seek a reconsideration of the action
or ruling complained of. 17
Validity of the Cease and
Desist Order
The validity of the SEC's cease and desist order is further sustained
for having sufficient factual and legal bases. IaESCH
The acts specifically restrained by the subject cease and desist
order were Primanila's sale, offer for sale and collection of payments
specifically for its Primasa plans. Notwithstanding the findings of both the
SEC and the CA on Primanila's activities, the company still argued in its
petition that it neither sold nor collected premiums for the Primasa
product. Primanila argued that the offer for sale of Primasa through the
Primanila website was the result of mere inadvertence, after the website
developer whom it hired got hold of a copy of an old Primasa brochure
and then included its contents in the company website even without the
knowledge and prior approval of Primanila.
It bears emphasis that the arguments of Primanila on the matter
present factual issues, which as a rule, are beyond the scope of a petition
for review on certiorari. We underscore the basic rule that only questions
of law may be raised in a petition for review under Rule 45 of the Rules of
Court. The Supreme Court is not a trier of facts. It is not our function to
review, examine and evaluate or weigh the probative value of the evidence
presented, for a question of fact would arise in such event. 18 Thus, it is
equally settled that the factual findings of administrative agencies, such as
the SEC, are generally held to be binding and final so long as they are
supported by substantial evidence in the record of the case. Our
jurisdiction is limited to reviewing and revising errors of law imputed to
the lower court, the latter's findings of fact being conclusive and not
reviewable by this Court. 19
In ruling on the petition's denial, we rely on the substantial evidence
that supports the SEC's and CA's findings. Section 5, Rule 133 of the Rules
of Court defines "substantial evidence" as such relevant evidence which a
reasonable mind might accept as adequate to support a conclusion. 20 In
the instant case, this substantial evidence is derived from the results of
the SEC investigation on Primanila's activities. Specifically on the product
Primasa plans, the SEC ascertained that there were detailed instructions
on Primanila's website as to how interested persons could apply for a
plan, together with the manner by which premium payments therefor
could be effected. A money deposit by CED to Primanila's Metrobank
account indicated in the advertisement confirmed that the bank account
was active.
There could be no better conclusion from the foregoing
circumstances that Primanila was engaged in the sale or, at the very least,
an offer for sale to the public of the Primasa plans. The offer for Primasa
was direct and its reach was even expansive, especially as it utilized its
website as a medium and visits to it were, as could be expected, from
prospective clients.
The Court finds weak and implausible the argument of Primanila
that the inclusion of the Primasa advertisement on its website was due to
mere inadvertence. It was very unlikely that Primanila's website developer
would include in the Primanila website sections or items that were not
sanctioned by the company. As a hiree of the company, the website
developer could have only acted upon the orders and specific instructions
of the company. As prudence requires, there also normally are employees
of a company who are specifically tasked to monitor contents and
activities in its company website. It was therefore inconceivable that
Primanila only knew of the Primasa post on its website after it received
the subject cease and desist order. In any case, Primanila should be held
responsible for the truthfulness of all data or information that appeared
on its website, especially as these were supplied by persons who were
working under its authority.
It is beyond dispute that Primasa plans were not registered with the
SEC. Primanila was then barred from selling and offering for sale the said
plan product. A continued sale by the company would operate as fraud to
its investors, and would cause grave or irreparable injury or prejudice to
the investing public, grounds which could justify the issuance of a cease
and desist order under Section 64 of the SRC. Furthermore, even prior to
the issuance of the subject cease and desist order, Primanila was already
enjoined by the SEC from selling and/or offering for sale pre-need
products to the public. The SEC Order dated April 9, 2008 declared that
Primanila failed to renew its dealer's license for 2008, prompting the
SEC's NTD to issue a letter dated January 3, 2008 addressed to Primanila's
Chairman and Chief Executive Officer Eduardo S. Madrid, enjoining the
company from selling and/or offering for sale pre-need plans to the
public. It also had not obtained a secondary license to act as dealer or
general agent for pre-need pension plans for 2008. 21
In view of the foregoing, Primanila clearly violated Section 16 of
the SRC and pertinent rules which barred the sale or offer for sale to the
public of a pre-need product except in accordance with SEC rules and
regulations. Under Section 16 of the SRC:
Sec. 16. Pre-Need Plans. — No person shall
sell or offer for sale to the public any pre-need
plan except in accordance with rules and
regulations which the Commission shall prescribe.
Such rules shall regulate the sale of pre-need plans
by, among other things, requiring the registration
of pre-need plans, licensing persons involved in
the sale of pre-need plans, requiring disclosures to
prospective plan holders, prescribing advertising
guidelines, providing for uniform plans, imposing
capital, bonding and other financial responsibility,
and establishing trust funds for the payment of
benefits under such plans.
As the foregoing provisions are necessary for the protection of
investors and the public in general, even the Pre-Need Code, 22 which now
governs pre-need companies and their activities, contains similar
conditions for the regulation of pre-need plans.
WHEREFORE, the petition is DENIED. The Decision dated March 9,
2010 and Resolution dated September 15, 2010 of the Court of Appeals in
CA-G.R. SP. No. 104083 are AFFIRMED.
SO ORDERED.
IHaECA

THIRD DIVISION
[G.R. No. 202052. March 7, 2018.]
SECURITIES AND EXCHANGE COMMISSION
(SEC) and INSURANCE COMMISSION
(IC), petitioners, vs. COLLEGE ASSURANCE
PLAN PHILIPPINES, INC., respondent.
DECISION
BERSAMIN, J :
p
The dispute concerns the use of the assets of the
trust fund of the respondent as a pre-need company. We
reiterate that the law clearly establishes the trust fund
for the sole benefit of the planholders, and its assets
cannot be used to satisfy the claims of the creditors of
the company. HTcADC
The Case
This appeal assails the decision promulgated on
June 14, 2011, 1 whereby the Court of Appeals (CA) nullified
the orders issued by the Regional Trial Court (RTC),
Branch 149, in Makati City on April 29, 2009, 2 September
18, 2009 3 and January 18, 2010 4 in SP. No. M-6144
entitled In the Matter of Petition for Corporate
Rehabilitation; College Assurance Plan Philippines, Inc.,
Petitioner, and disposed thusly:
WHEREFORE, premises considered,
finding grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the
public respondent, the instant petition
is GRANTED. The assailed Orders dated April 29,
2009, September 18, 2009 and January 18, 2010 of
the Regional Trial Court of Makati City, Branch
149, is hereby NULLIFIED. Petitioner College
Assurance Plan Philippines, Inc., through its
Receiver, is directed to pay its outstanding
obligation to Smart Share Investment, Ltd., and
Fil-Estate Management, Inc. in the amount of $6
million as set aside by the Trustee, Philippine
Veterans Bank.
SO ORDERED. 5
Antecedents
The CA narrated the following factual and
procedural antecedents:
Petitioner College Assurance Plan
Philippines, Inc. (CAP) is a duly registered
domestic corporation with the primary purpose
of selling pre-need educational plans. To
guarantee the payment of benefits under its
educational plans, CAP set up a Trust Fund
contributing therein a certain percentage of the
amount actually collected from each planholder.
The Trust Fund, with the aid of trustee banks, is
invested in assets and securities with yields
higher than the projected increase in tuition fees.
With the adoption of the policy of deregulation of
private educational institutions by the
Department of Education in 1993 and the
economic crisis and peso devaluation which
started in 1997, CAP and its Trust Fund were
adversely affected.
In 2000, Republic Act No. 8799 (Securities
Regulation Code) was passed. Pursuant thereto,
the Securities and Exchange Commission (SEC)
promulgated on August 16, 2001 the New Rules
on the Registration and Sale of Pre-Need Plans
under Section 16 of the Securities Regulation
Code. With the adoption of the Pre-Need
Uniform Chart of Accounts for the accounting
and reporting of the operations of the pre-need
companies in the Philippines and the new rules
on the valuation of trust funds invested in real
property, CAP incurred a trust fund deficiency of
P3.179 billion as of December 31, 2001. In
compliance with the directive of SEC to submit a
funding scheme to correct the deficiency, CAP,
among others, proposed to purchase MRT III
Bonds and assign the same to the Trust Fund.
Hence, on August 6, 2002, CAP purchased MRT
III Bonds with a present value then of $14 million
from Smart 6 and FEMI, 7 and assigned the same
to the Trust Fund. The purchase price was to be
paid by CAP in sixty (60) monthly installments
payable over five (5) years. This obligation was
secured by a Deed of Chattel Mortgage over
9,762,982 common shares of Comprehensive
Annuity Plans & Pension Corporation owned by
CAP. In 2003, after having paid US$6,536,405.01
of the total purchase price, CAP was ordered by
the SEC Oversight Board to stop paying
SMART/FEMI due to its perceived inadequacy of
CAP's funds.
On August 23, 2005, CAP filed a Petition for
Rehabilitation. After finding the petition to be
sufficient in form and substance, a Stay Order
was issued by the court effectively staying and
suspending the enforcement of all claims against
CAP. Mr. Mamerto Marcelo, Jr. was appointed as
Interim Rehabilitation Receiver.
In its Order dated December 16, 2005, the
trial court gave due course to CAP's Petition for
Rehabilitation and directed the Receiver to
submit a report on the rehabilitation plan. The
2006 Revised Business Plan was approved by the
court on November 8, 2006. Under the
Rehabilitation Plan, CAP intended to sell in 2009
the MRT Bonds at 60% of their face value of
US$81.2 million.
While negotiations to effect the sale were
ongoing, Smart demanded that CAP settle its
outstanding balance of US$10,680,045.25 as
February 28, 2009 and warned that, should CAP
insist on holding on to the MRT III Bonds instead
of selling them, Smart would demand the
immediate return of the MRT III Bonds as full and
final settlement of CAP's outstanding obligation.
The Receiver denied that CAP has agreed to pay
its liabilities to FEMI and Smart from the
proceeds of the prospective sale of the MRT III
Bonds. On April 13, 2009, the Receiver filed a
Manifestation seeking the public respondent's
approval of the sale of MRT III Bonds, with a face
value of US$81,2000,000.00, n "at the best
possible price" to the Development Bank of the
Philippines (DBP) and the Land Bank of the
Philippines.
In the Order of April 15, 2009, the public
respondent approved the sale n of MRT III Bonds
"at the best possible price." Two days later, the
Receiver received a letter from FEMI that Smart
intended to annotate a notice of unpaid seller's
lien on the MRT III Bonds with Deutsche Bank,
the custodian bank. However, Smart opted not to
do so and would instead assist in finding a buyer
provided that the seller's lien of US$9.5 million
will be settled through the arrangement it
presented, subject to the approval of the
rehabilitation court. The Receiver then filed a
Manifestation with Motion dated April 22, 2009
where he sought the public respondent's
approval of CAP's payment of its obligations to
 Smart and FEMI, partly from the proceeds of the
sale of the MRT III Bonds.aScITE
The MRT III Bonds were in fact sold at
US$21,501,760 to DBP and Land Bank. The Buyers
agreed to purchase the MRT III Bonds at a
premium of 3.30% made possible by: (1) Smart's
desistance from enforcing its unpaid seller's lien,
(2) FEMI's relinquishing its four (4) board seats
with Metro Rail Transit Corporation, (3) swap
arrangement of FEMI shares held by CAP to
liquidate $3.5 million of the outstanding
obligation; and (4) substantial discount of $1.2
million from CAP's outstanding liabilities. The
contract of sale was perfected and partly
consummated — FEMI gave up its four (4) board
seats in MRTC, the MRT III Bonds were delivered
to the buyers, and the buyers paid $21,501,760 to
CAP, which amount was credited to its trust
accounts with Philippine Veterans Bank (PVB).
However, CAP's payment to Smart and FEMI
remained to be executed. 8
Based on the foregoing antecedents, the receiver
moved for the payment of the respondent's obligations to
Smart and FEMI. The RTC approved the motion in open
court on April 24, 2009. 9 However, on April 29, 2009, the
RTC withdrew the approval and instead ordered the
receiver and the respondent to file their reply to the
opposition. 10 After the exchange of pleadings, the RTC
issued a joint order dated September 18, 2009 denying
the motion to approve payment to Smart as well as the
motion to approve the respondent's additional equity
infusion in CAP General Insurance. 11
Subsequently, the respondent received summons
from the High Court of Hong Kong Special Administrative
Region, Court of First Instance, directing it to either
satisfy the claim of Smart and FEMI, or to return the
Acknowledgment of Service, stating whether it intended
to contest the proceedings or to make an admission. In
view of this, the respondent filed its motion dated
December 21, 2009 in the RTC seeking authorization to
pay the claims of Smart and FEMI and explaining that the
institution of the action in Hong Kong presented a real
threat that the buyers would rescind their contact with
the respondent and demand the return of the purchase
price of $21,501,760.00. 12
On January 18, 2010, the RTC issued the assailed
order denying the respondent's motion for payment to
Smart and FEMI, and holding that in keeping with the
principle of "equality is equity" in rehabilitation
proceedings, the respondent's assets should be held in
trust for the equal benefit of all the creditors, both
secured and unsecured, who stood on equal footing
during the rehabilitation. 13 The RTC disposed as follows:
WHEREFORE, premises considered, the
motion dated December 21, 2009 for authority to
settle CAP's obligations to Smart Share
Investments Ltd. and Fil Estate Management, Inc.
is hereby denied for utter lack of merit.
SO ORDERED. 14
Decision of the CA
The foregoing developments impelled the
respondent to bring a petition for certiorari to the CA,
insisting therein that: 15
I
RESPONDENT COURT ACTED WITHOUT OR IN
EXCESS OF JURISDICTION, OR WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK
OF EXCESS OF JURISDICTION, WHEN IT
UNILATERALLY MODIFIED THE TERMS AND
 CONDITIONS OF THE SALE OF THE MRT III
BONDS AS AGREED UPON BY THE PARTIES
II
RESPONDENT COURT ACTED WITHOUT OR IN
EXCESS OF JURISDICTION, OR WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION, WHEN IT
DENIED THE RECEIVER'S MOTION, KNOWING
FULLY WELL THAT SUCH ACTION WILL BE
DETRIMENTAL TO THE INTERESTS OF CAP AND
ITS STAKEHOLDERS
On August 17, 2010, upon the application of the
respondent, the CA directed Philippine Veterans Bank
and the receiver to set aside US$6 million from the
proceeds of the sale of the MRT III Bonds pending the
determination of the suit. 16
On June 14, 2011, the CA promulgated the assailed
decision, 17 whereby it found and declared that the RTC
had committed grave abuse of discretion in disapproving
the payment of the respondent's obligation to Smart and
FEMI from the proceeds of the sale of the MRT III Bonds.
The CA opined that payment to Smart and FEMI
constituted "benefits" that could be validly withdrawn
from the trust fund pursuant to Rule 16.4 of the New
Rules on the Registration and Sale of Pre-Need Plans under
Section 16 of the Securities and Regulation Code (New
Rules) in relation to Section 30 of Republic Act No.
9829 (Pre-Need Code of the Philippines); 18 that because
the MRT III Bonds had not been fully paid, the unpaid
portion of the purchase price thereof could not be
considered as part of the trust fund; that considering that
there was an unpaid seller's lien, the payment to Smart
and FEMI from the proceeds of the sale could not be
considered as payment to an ordinary creditor, but as
payment to the contributors of the source of the assets
of the trust fund; 19 that at any rate the respondent's
outstanding obligation to Smart and FEMI could be
considered as an administrative expense not covered by
the stay order, and was an expense to preserve the assets
of the trust fund; 20 and that the "equality is equity"
principle did not apply because Smart and FEMI had
played a significant role in the sale of the MRT III Bonds
that had worked for the benefit of the planholders. 21
The petitioners sought reconsideration, but the CA
denied their motion for that purpose on May 21,
2012. 22
HEITAD
Hence, this appeal.
Issues
The petitioners hereby submit the following for
consideration:
I
WHETHER OR NOT THE PAYMENT OF
RESPONDENT'S OUTSTANDING OBLIGATION
TO SMART AND FEMI, REPRESENTING THE
BALANCE OF THE PURCHASE PRICE OF THE
MRT III BONDS CAN BE VALIDLY WITHDRAWN
FROM THE RESPONDENT'S TRUST FUND.
II
WHETHER OR NOT PAYMENT OF
RESPONDENT'S OUTSTANDING OBLIGATION
TO SMART AND FEMI CAN BE CONSIDERED AN
ADMINISTRATIVE EXPENSE AND, THUS, AN
ALLOWABLE WITHDRAWAL FROM THE
RESPONDENT'S TRUST FUND.
III
WHETHER OR NOT THE TRIAL COURT ACTED
WITHOUT OR IN EXCESS OF JURISDICTION OR
WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF
 JURISDICTION IN DENYING PAYMENT OF
RESPONDENT'S OBLIGATION TO SMART AND
FEMI FROM THE PROCEEDS OF THE SALE OF
THE MRT III BONDS, WHICH FORM PART OF
THE RESPONDENT'S TRUST FUND. 23
The petitioners maintain that the trust fund, being
essentially and primarily constituted for the sole and
exclusive benefit of the planholders, should be treated
separately and distinctly from the paid-up capital and
assets of the respondent; that Section 30 of R.A. No.
9829 provided that the trust fund should in no case be
used to satisfy the claims of the creditors of the pre-need
company; 24 that because the proceeds of the sale of the
MRT III Bonds formed part of the assets of the trust fund,
they were not owned by the respondent, but by the
trustee insofar as the legal title was concerned and by the
planholders as beneficial owners; 25 that contrary to the
view of the CA, the infusion to the trust fund made by the
respondent to cover its deficiency could not have diluted
the nature and purpose of the trust fund because the
respondent was legally required to make the necessary
deposit in case of fund insufficiency; 26 that the "benefits"
mentioned in Section 16.4, Rule 16 of the New
Rules referred to those that the pre-need company
undertook to deliver to planholders; that consequently
the "cost of services rendered or property delivered"
should refer to the cost of any service or property that
the pre-need company undertook to deliver to the
planholders in the future as specified in their respective
pre-need plans; that the cost of property infused by the
pre-need company in order to cover the deficiency in the
trust fund was excluded; and that the CA erred in ruling
that the payment to Smart and FEMI constituted
"benefits" or "cost of services or property delivered" that
could be withdrawn from the trust fund. 27
Lastly, the petitioners posit that administrative
expenses included whatever was incurred in the
operation of the trust fund, like trust fees, bank charges
and investment expenses used in the operation of the
trust fund, taxes on the fund, and reasonable withdrawals
for minor repairs and cost of ordinary maintenance of the
fund, but did not include the cost of the capital asset
infused in the trust fund. 28
In its comment, 29 the respondent counters that the
settlement of its obligation to Smart and FEMI was a
necessary condition of the sale of the MRT III Bonds; that
the RTC had already approved the payment of said
obligations on April 24, 2009, but withdrew the approval
on April 29, 2009 despite its knowledge that the sale had
been partly consummated; 30 that the RTC as the
rehabilitation court had no power to modify the terms of
the contract of sale as negotiated and agreed upon by the
parties; 31 that the "cost of services" that could be validly
withdrawn from the trust fund included payments of
obligations, aside from those made to the planholders,
trustees, banks, and the Government, among others; that
the payment of its obligation to Smart and FEMI
constituted a "cost" of converting the MRT III Bonds to
much-needed cash that redounded to the benefit of the
planholders; 32 that the sale of the MRT III Bonds, having
been realized through the concessions made by Smart
and FEMI, was made for the benefit of the
planholders; 33 and that disapproving the payment to
Smart and FEMI would result to a protracted litigation
that might be ultimately detrimental to its rehabilitation,
among other consequences. 34
 Did the CA correctly rule that the obligation to pay
to Smart and FEMI constituted "benefits" or "cost of
services rendered or property delivered" or
"administrative expense" that could be validly withdrawn
from the trust fund pursuant to Section 16.4, Rule 16 of
the New Rules and Section 30 of R.A. No. 9829?
Ruling of the Court
The appeal is meritorious.
I values payable to the Planholders, annuities,
The obligation to pay Smart and FEMI did not
constitute the "benefits" or "cost of services
rendered" or "property delivered" under Section
16.4, Rule 16 of the New Rules and Section 30
of R.A. No. 9829
The petitioners submit that the trust fund should
Section 16.4, Rule 16 of the New Rules, which
governs the utilization of the trust fund, states as follows:
16.4. No withdrawal shall be made from the
Trust Fund except for paying the Benefits such
as the monetary consideration, the cost of
services rendered or property delivered, trust
fees, bank charges and investment expenses in
the operation of the Trust Fund, termination
contributions of cancelled plans to the fund and
taxes on Trust Funds. Furthermore, only
reasonable withdrawals for minor repairs and
costs of ordinary maintenance of trust fund
assets shall be allowed. (Bold scoring supplied for
emphasis)
ATICcS

The term "benefits" used in Section 16.4 is defined

be treated separately and distinctly from the corporate
as "the money or services which the Pre-Need Company
assets and obligations of the respondent. On the other
undertakes to deliver in the future to the planholder or
hand, the respondent insists that the CA correctly ruled
his beneficiary." 37 Accordingly, benefits refer to the
that the payment to Smart and FEMI constituted a valid
payments made to the planholders as stipulated in their
withdrawal from the trust fund because it was upon a
pre-need plans. Worthy of emphasis herein is that the
"benefit" in the nature of "cost for services rendered or
trust fund is established "to ensure the delivery of the
property delivered."
guaranteed benefits and services provided under a pre-
We uphold the submission of the petitioners.
need plan contract." 38 Hence, benefits can only mean
In respect of pre-need companies, the trust fund is
payments or services rendered to the planholders by
set up from the planholders' payments to pay for the cost
virtue of the pre-need contracts.
of benefits and services, termination values payable to
Moreover, Section 30 of R.A. No. 9829 expressly
the planholders and other costs necessary to ensure the
stipulates that the trust fund is to be used at all times for
delivery of benefits or services to the planholders as
the sole benefit of the planholders, and cannot ever be
provided for in the contracts. 35 The trust fund is to be
applied to satisfy the claims of the creditors of the
treated as separate and distinct from the paid-up capital
company, viz.:
of the company, and is established with a trustee under a
Section 30. Trust Fund. — To ensure the
trust agreement approved by the Securities and
delivery of the guaranteed benefits and services
Exchange Commission to pay the benefits as provided in
provided under a pre-need plan contract, a trust
the pre-need plans. 36
fund per pre-need plan category shall be
established. A portion of the installment payment
collected shall be deposited by the pre-need
company in the trust fund, the amount of which
will be as determined by the actuary based on the
viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at
all times remain for the sole benefit of the
planholders. At no time shall any part of the
trust fund be used for or diverted to any
purpose other than for the exclusive benefit of
the planholders. In no case shall the trust fund
assets be used to satisfy claims of other
creditors of the pre-need company. The
provision of any law to the contrary
notwithstanding, in case of insolvency of the
pre-need company, the general creditors shall
not be entitled to the trust fund.
Except for the payment of the cost of
benefits or services, the termination values
payable to the planholders, the insurance
premium payments for insurance-funded
benefits of memorial life plans and other costs
necessary to ensure the delivery of benefits or
services to planholders, no withdrawal shall be
made from the trust fund unless approved by
the Commission. The benefits received by the
planholders shall be exempt from all taxes and
the trust fund shall not be held liable for
attachment, garnishment, levy or seizure by or
under any legal or equitable processes except to
pay for the debt of the planholder to the benefit
plan or that arising from criminal liability
imposed in a criminal action.
The trust fund shall at all times be
sufficient to cover the required pre-need reserve.
(Bold underscoring supplied)
Section 30 prohibits the utilization of the trust fund
for purposes other than for the benefit of the
planholders. The allowed withdrawals (specifically, the
cost of benefits or services, the termination values
payable to the planholders, the insurance premium
payments for insurance-funded benefits of memorial life
plans and other costs) refer to payments that the pre-
need company had undertaken to be made based on the
contracts.
Accordingly, the CA gravely erred in authorizing
the payment out of the trust fund of the obligations due
to Smart and FEMI. Even assuming that the obligations
were incurred by the respondent in order to infuse
sufficient money in the trust fund to correct its
deficiencies, such obligations should be paid for by its
assets, not by the trust fund. Indeed, Section 30 definitely
provided that the trust fund could not be used to satisfy
the claims of the respondent's creditors. Worthy to
reiterate is our pronouncement in Securities and
Exchange Commission v. Laigo, 39 as follows:
In the course of delving into the complex
relationships created by the agreement and the
existing regulatory framework, this Court finds
that Legacy's claimed interest in the enforcement
of the trust and in the trust properties is mere
apparent than real. Legacy is not a beneficiary.
First, it must be stressed that a person is
considered as a beneficiary of a trust if there is a
manifest intention to give such a person the
beneficial interest over the trust properties. This
is the considered opinion expressed in the
Restatement of the Law of
Trust (Restatement) which Justice Vicente Abad
Santos has described in his contribution to the
Philippine Law Journal as containing the more
salient principles, doctrines and rules on the
subject. Here, the terms of the trust agreement
plainly confer the status of beneficiary to the
planholders, not to Legacy. In the recital clauses
of the said agreement, Legacy bound itself to
provide for the sound, prudent and efficient
management and administration of such portion
of the collection "for the benefit and account of
the planholders," through LBP (as the trustee).
This categorical declaration doubtless
indicates that the intention of the trustor is to
make the planholders the beneficiaries of the
trust properties, and not Legacy. It is clear that
because the beneficial ownership is vested in the
planholders and the legal ownership in the
trustee, LBP, Legacy, as trustor, is left without
any iota of interest in the trust fund. This is
consistent with the nature of a trust
arrangement, whereby there is a separation of
interests in the subject matter of the trust, the
beneficiary having an equitable interest, and the
trustee having an interest which is normally legal
interest.
Second, considering the fact that a
mandated pre-need trust is one imbued with
public interest, the issue on who the beneficiary
is must be determined on the basis of the entire
regulatory framework. Under the New Rules, it is
unmistakable that the beneficial interest over the
trust properties is with the planholders. Rule 16.3
of the New Rules provides that: [n]o
withdrawal shall be made from the trust fund
except for paying the benefits such as monetary
consideration, the cost of services rendered or
property delivered, trust fees, bank charges and
investment expenses in the operation of the trust
fund, termination values payable to the
planholders, annuities, contributions of cancelled
plans to the fund and taxes on trust funds.
Rule 17.1 also states that to ensure the
liquidity of the trust fund to guarantee the
delivery of the benefits provided for under the
plan contract and to obtain sufficient capital
growth to meet the growing actuarial reserve
liabilities, all investments of the trust fund shall
be limited to Fixed Income Instruments, Mutual
Funds, Equities, and Real Estate, subject to
certain limitations.
Further, Rule 20.1 directs the trustee to
exercise due diligence for the protection of the
planholders guided by sound investment
principles in the exclusive management and
control over the funds and its right, at any time,
to sell, convert, invest, change, transfer, or
otherwise change or dispose of the assets
comprising the funds. All these certainly
underscore the importance of the planholders
being recognized as the ultimate beneficiaries of
the SEC-mandated trust.
This consistently runs in accord with the
legislative intent laid down in Chapter IV of R.A.
No. 8799, or the SRC, which provides for
the establishment of trust funds for the
payment of benefits under such plans. Section
16 of the SRC provides: TIADCc
 SEC. 16. Pre-Need Plans. — No
person shall sell or offer for sale to
the public any pre-need plan except
in accordance with rules and
regulations which the Commission
shall prescribe. Such rules shall
regulate the sale of pre-need
plans by, among other things,
requiring the registration of pre-
need plans, licensing persons
involved in the sale of pre-need
plans, requiring disclosures to
prospective plan holders,
prescribing advertising guidelines,
providing for uniform accounting
system, reports and record keeping
with respect to such plans, imposing
capital, bonding and other financial
responsibility, and establishing trust
funds for the payment of benefits
under such plans. [Emphasis
supplied]
It is clear from Section 16 that the
underlying congressional intent is to make the
planholders the exclusive beneficiaries. It has
been said that what is within the spirit is within
the law even if it is not within the letter of the
law because the spirit prevails over the letter.
This will by the legislature was fortified
with the enactment of R.A. No. 9829 or the Pre-
Need Code in 2009. The Congress, because of the
chaos confounding the industry at the time,
considered it necessary to provide a stronger
legal framework so that no entity could claim
that the mandate and delegated authority of the
SEC under the SRC was nebulous. The Pre-Need
Code cemented the regulatory framework
governing the pre-need industry with precise
specifics to ensure that the rights of the pre-
need planholders would be categorically defined
and protected. x x x 40
The CA observed that only the paid value of the
MRT III Bonds should be made part of the trust fund; that
with the MRT III Bonds being subject to the unpaid
seller's lien, Smart and FEMI were considered as
contributors to the source of the assets of the trust fund,
and for that reason were not to be treated as ordinary
creditors of the respondent. 41
We cannot sustain the observations of the CA.
There had been no indication by the respondent to
the trustee bank that only the paid value of the MRT III
Bonds should accrue to the trust fund. Even in its
comment, the respondent intimated that the bonds were
assigned to the trust fund without any reservations or
conditions imposed thereon, to wit:
4. x x x With the adoption and immediate
retroactive implementation of the Pre-Need
Uniform Chart of Accounts for the accounting
and reporting of the operations of pre-need
companies in the Philippines and the new rules
on the valuation of trust funds invested in real
property, CAP incurred a trust fund deficiency of
P3.179 billion as of 31 December 2001. It must be
stressed at this point theretofore, CAP has
strictly complied with the Trust Fund reserve and
build-up requirement of the SEC. The SEC,
however, required CAP to immediately submit a
funding scheme to correct the deficiency, under
pain of summary suspension of its permit to sell
and the imposition of other sanctions.
 5. In compliance with the above directive Village, Makati City, represented in
of the SEC, CAP proposed the infusion to the this act by its Senior Vice President,
Trust Fund of cash, several post-dated checks, ALFREDO R. COLLADO, and
land and buildings in Digos, Davao del Sur and hereinafter referred to as "CAP";
Kidapawan, North Cotabato, and MRT III Bonds -and-
valued at $4,728,000.00. To cover the remaining BANK OF COMMERCE TRUST
balance of the Trust Fund, CAP proposed to, SERVICES GROUP AS TRUSTEE FOR
among other, purchase more MRT III Bonds and COLLEGE ASSURANCE PLAN
assign the same to the Trust Fund. Hence, on 6 PHILIPPINES, INC. TRUST FUND, a
August 2002, CAP purchased MRT III Bonds on corporation duly organized and
installment, with a present value then of $14 existing under Philippine laws, duly
million, from Smart and FEMI, and assigned the authorized/licensed to perform trust
same to the Trust Fund. 42 functions, with principal place of
Thus, we uphold the petitioners' following stance business at Banker's Centre, 6764
that the MRT III Bonds already formed part of the assets Ayala Avenue, Makati City,
of the trust fund upon infusion, viz.: represented in this act by its
[I]n so far as the Trust Fund is concerned, Assistant Vice President of the Trust
the MRT III bonds, upon their infusion thereto, Services Group, LYDIA E. VIRTUSIO,
and consequently, the proceeds of the sale and hereinafter referred to as
thereof, were considered as the Trust Fund "TRUSTEE";
assets themselves. WITNESSETH: That
The Agreement dated August 6, 2002 x x x xxx xxx xxx
indicates, thus: WHEREAS, upon the sale and delivery by
AGREEMENT Vendors to CAP of said Bonds, CAP shall assign
KNOW ALL MEN BY THESE the Bonds with a present value of approximately
PRESENTS: US$14,000,000.00 to the Trust Fund
This AGREEMENT was made administered by and in the possession of the
and entered into on 6 August 2002 TRUSTEE.
at Hong Kong SAR, by and between: xxx xxx xxx
COLLEGE ASSURANCE PLAN NOW, THEREFORE, for and in
PHILIPPINES, INC., a corporation consideration of the foregoing premises, the
duly organized and existing under parties agree as follows:
Philippine laws with principal place xxx xxx xxx
of business at the 6th [F]loor, CAP I 5. CAP represents and warrants that:
Building, Amorsolo Street, Legaspi
 a. It has the legal right to
transfer ownership of and interest in
the Bonds in favor of TRUSTEE in
accordance with the provisions of the
contracts, agreements and
instruments relating to the issuance
and/or transfer thereof. It further
warrants that the Bonds are not
mortgaged nor in any way
encumbered in favor of any person or
corporation.
xxx xxx xxx
That the unpaid purchase price of the MRT
III bonds in favor of Smart and FEMI was not the
liability of the respondent's Trust Fund is clearly
shown in the Trust Fund Statements of
respondent's Trust Fund with the Bank of
Commerce (BOC). Specifically, the Balance Sheet
as of December 31, 2002 for CAP's Trust Fund
Account No. TG-91-07-00001-C x x x did not
include among the respondent's Trust Fund
liabilities the subject outstanding obligation of
respondent to Smart and FEMI. AIDSTE
Likewise, the Balance Sheet as of February
28, 2009 of the Trust Account of respondent with
Philippine Veteran's Bank (PVB) with Trust
Account Nos. TA 4450-58-000124 (Old TA No. 81),
TA 4450-58-000126 (Old TA No. 85) and TA 4450-
58-000123 (Old TA No. 91), x x x did not report
any liability relating to the MRT III bonds.
It should likewise be emphasized that the
MRT III bonds substituted the liquid assets
available in the restricted PVB Trust Funds under
Account Nos. 85 and 91, which were all free from
any liens and encumbrances under the
management of BOC as trustee.
On the other hand, respondent CAP's
unaudited financial statements for the year
ended December 31, 2008 submitted to
petitioner SEC x x x disclosed that respondent
has an outstanding loan obligation to Smart and
FEMI. Note 8 of the said corporate financial
statements reported the details of the acquired
MRT III bonds and the terms of respondent's
liability thereto. x x x
xxx xxx xxx
It also bears emphasis that in a
Certification dated April 18, 2009 x x x issued by
respondent, the same "unpaid principal balance
on the MRT Bonds was declared by CAP as one of
their (sic) obligations in its court-approved
rehabilitation program" x x x.
The foregoing financial reports submitted
by respondent to the SEC as well as its April 18,
2009 Certification only show that indeed the
MRT III bonds were infused to respondent's
Trust Fund free from any liens and
encumbrances, and that the purchase price
thereof is and remains to be respondent's loan
obligation to Smart and FEMI, or its corporate
liability, and not of the Trust Fund. 43
II
Payment to Smart and FEMI was not an administrative
expense to be withdrawn from the trust fund
The CA ruled that the respondent's outstanding
obligation to Smart and FEMI could be considered an
administrative expense that was not covered by the stay
order.
The ruling of the CA was not warranted.
 Section 16.4, Rule 6 of the New Rules made an
exclusive enumeration of the administrative expenses
that may be withdrawn from the trust fund, as follows:
trust fees, bank charges and investment expenses in the
operation of the trust fund, taxes on trust funds, as well
as reasonable withdrawals for minor repairs and costs of
ordinary maintenance of trust fund assets. Evidently, the
purchase price of the bonds for the capital infusion to the
trust fund was not included as an administrative expense
that could be validly taken from the trust fund.
Yet, assuming that the unpaid obligation to Smart
and FEMI constituted an administrative expense, its
payment was the liability of the respondent's assets, not
of the trust fund. It is already clear and definite enough
that the trust fund was separate and distinct from the
corporate assets of the respondent. In other words, only
the planholders as the beneficiaries of the trust fund
could claim against the trust fund, to the exclusion of
Smart and FEMI as the respondent's creditors.
ACCORDINGLY, the Court GRANTS the petition
for review on certiorari; SETS ASIDE and REVERSES the
decision promulgated on June 14, 2011 and the resolution
promulgated on May 21, 2012 of the Court of Appeals in
CA-G.R. SP No. 113576; and REINSTATES the orders
dated April 29, 2009, September 18, 2009 and January 18,
2010 issued by the Regional Trial Court, Branch 149, in
Makati City in SP. No. M-6144.
No pronouncement on costs of suit.
SO ORDERED.