SECURITIES AND EXCHANGE COMMISSION 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.

G.R. No. 188639. September 02, 2015

Facts:

SEC issued the New Rules on the Registration and Sale of Pre-Need Plans to govern the pre-need
industry prior to the enactment of R.A. No. 9829, otherwise known as the Pre-need Code of the
Philippines (Pre-Need Code). It required from the pre-need providers the creation of trust funds as a
requirement for registration.

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 (IBP). In mid-2000, the industry collapsed for a range of
reasons. Legacy, like the others, was unable to pay its obligations to the planholders. This resulted in
Legacy being the subject of a petition for involuntary insolvency. Eventually, it was declared insolvent by
the RTC.

RTC ordered the SEC, being the pre-need industry's regulator, to submit the documents pertaining to
Legacy's assets and liabilities. SEC opposed the inclusion of the trust fund in the inventory of corporate
assets alleging that it 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.
Despite the opposition of the SEC, the judge ordered the insolvency Assignee to take possession of the
trust fund. The judge viewed the trust fund as Legacy's corporate assets. 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fund could be withdrawn by the Assignee to be used for the expenses he would incur in the discharge of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.

Meanwhile, SEC filed a petition before the Supreme Court, contending 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.

Issue:

Are the trust funds of Legacy form part of its corporate assets?

Ruling:

No, 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. That, in no case shall the trust fund assets be used to
satisfy claims of other creditors of the pre-need company.
Firstly, 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.

Secondly, 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.

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.
SECURITIES AND EXCHANGE COMMISSION & INSURANCE COMMISSION VS. COLLEGE ASSURANCE PLAN
PHILIPPINES, INC.

G.R. No. 213130. September 09, 2020

INSURANCE COMMISSION VS. COLLEGE ASSURANCE PLAN PHILIPPINES, INC.

G.R. No. 218193, September 9, 2020

Facts:

College Assurance Plan Philippines, Inc. (CAPPI) is a domestic corporation engaged in the sale of "pre-
need educational plans" CAPPI owns 86% of the outstanding capital stock of its subsidiary, the
Comprehensive Annuity Plans and Pension (CAP Pension). In 2005, CAPPI filed a Petition for
Rehabilitation and was eventually issued a Stay Order by the RTC.

Meanwhile, Republic Act No. 9829 or the Pre-Need Code of the Philippines took effect in 2009. Pursuant
to Section 5 and Section 49 of the law, the Insurance Commission sent a letter to CAP Pension, directing
its President to "show cause why the company should not be put under conservatorship." Receiving no
response, the Insurance Commission informed the Board of Directors of CAP Pension that the
corporation was placed under conservatorship and that a conservator had been designated.

CAPPI filed an Urgent Motion to Enforce Stay Order before the rehabilitation court. Subsequently, the
rehabilitation court issued an Order, reiterating its jurisdiction over CAPPI and all its assets, including
CAP Pension, through the approved rehabilitation plan. Rehabilitation Receiver and the Philippine
Veterans Bank (PVB), as trustee of CAPPI, filed a Manifestation and Motion praying for the payment of
the expenses and fees to the planholders from the proceeds of the sale of the properties of the
companies controlled by CAP Pension. The rehabilitation court granted the same.

Eventually, the Insurance Commission and the Securities and Exchange Commission filed a Petition for
Certiorari before the Court of Appeals assailing the rehabilitation court's orders. The Court of Appeals
dismissed the Insurance Commission's petition. It found that the rehabilitation court did not gravely
abuse its discretion, as it "validly acquired jurisdiction over CAP Pension ahead of the Insurance
Commission when it granted CAP's Petition for Rehabilitation.

Issue:

Is the CAP Pension along with its assets had been under the rehabilitation court's jurisdiction?

Ruling:

No. Well-settled is the rule that "a corporation has a personality separate and distinct from that of its
individual stockholders." This separate personality allows the corporation to acquire properties in its
own name and incur obligations. A stockholder owning all or nearly all the capital stock of a corporation
is not a ground to disregard a corporation's personality.

There are stark differences between the businesses of respondent and CAP Pension. Respondent
corporation was a pioneer in the pre-need industry in selling educational plans which guaranteed the
planholders' payment for tuition and other school fees. On the other hand, CAP Pension, respondent's
subsidiary, sold pre-need plans for other purposes: "(1) post-graduate funds; (2) starting a business; (3)
additional income during the children's growing-up years; (4) building up one's estate; (5) funds for
eventual retirement; (6) augment other pension/retirement benefits; and (7) funds for final
expenses."Needless to state, each corporation has a distinct personality, does business separately, and
has its own clientele of planholders.

The subsidiary is not a mere asset of the parent corporation. "If used to perform legitimate functions, a
subsidiary's separate existence may be respected, and the liability of the parent corporation as well as
the subsidiary will be confined to those arising in their respective business."

The 2006 Resolution cannot operate to place CAP Pension under the rehabilitation court's custodia legis,
having full rein over its assets. This treated respondent and CAP Pension as one, rendering nugatory the
separate and distinct personality of each corporation. It was likewise erroneous to consider the assets of
CAP Pension as commingled with respondent's.
SECURITIES AND EXCHANGE COMMISSION (SEC) AND INSURANCE COMMISSION (IC) VS. COLLEGE
ASSURANCE PLAN PHILIPPINES, INC.

G.R. No. 202052. March 07, 2018

Facts:

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 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. 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. 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.

In 2005, CAP filed a Petition for Rehabilitation and eventually, a Stay Order was issued by the court.
Under the approved Rehabilitation Plan, CAP intended to sell the MRT Bonds at 60% of their face value
of US$ 81.2 million. While negotiations were ongoing, Smart demanded that CAP settle its outstanding
balance 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.

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.

On appeal, the CA 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. It opined that payment to Smart and FEMI constituted "benefits" that could be validly withdrawn
from the trust fund. Furthermore, 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; 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. 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. It held 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.
Issue:

Can the payment of respondent's outstanding obligation to SMART and FEMI, representing the balance
of the purchase price of the MRT III bonds be validly withdrawn from the respondent's trust fund?

Ruling:

No. In respect of pre-need companies, the trust fund is set up from the planholders' payments to pay for
the cost of benefits and services, termination values payable to the planholders and other costs
necessary to ensure the delivery of benefits or services to the planholders as provided for in the
contracts. The trust fund is to be treated as separate and distinct from the paid-up capital of the
company, and is established with a trustee under a trust agreement approved by the Securities and
Exchange Commission to pay the benefits as provided in the pre-need plans.

The term "benefits" used in Section 16.4 is defined as "the money or services which the Pre-Need
Company undertakes to deliver in the future to the planholder or his beneficiary." Accordingly, benefits
refer to the payments made to the planholders as stipulated in their pre-need plans. Hence, benefits can
only mean payments or services rendered to the planholders by virtue of the pre-need contracts.

Moreover, Section 30 of R.A. No. 9829 expressly stipulates that the trust fund is to be used at all times
for the sole benefit of the planholders, and cannot ever be applied to satisfy the claims of the creditors
of the company.

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 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..
PRIMANILA PLANS, INC., HEREIN REPRESENTED BY EDUARDO S. MADRID VS. SECURITIES AND EXCHANGE
COMMISSION

G.R. No. 193791. August 02, 2014

Facts:

Primanila operated as a pre-need company. SEC declared that Primanila committed a flagrant violation
of Republic Act No. 8799, otherwise known as The Securities Regulation Code (SRC). It claimed that the
petitioner 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. Some of the
findings in the investigation include the fact that Primanila’s website was offering a pension plan
product called Primasa Plan; that 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; its failure to renew its Dealer’s License for 2008; that it has
not been issued a secondary license to act as dealer or general agent for pre-need pension plans for
2008 nor a registration statement has been filed by Primanila for the approval of a pension plan product
called Primasa Plan; that it failed to deposit the required monthly contributions to the trust fund in
violation of Pre-need Rule, among others. Thus, the SEC was prompted to issue a cease and desist order
against the petitioner.

Aggrieved, it filed a Motion for Reconsideration/Lift Cease and Desist Order but it was denied. On
appeal, the CA dismissed the petition and upheld the issuance of SEC in toto.

Issue:

Is the cease and desist order valid?

Ruling:

Yes. 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.

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 which states that “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, 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.