C.J. Panganiban
Facts:
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million pesos for service contracts with Del Monte, and such was sourced from the counterbond posted by Vilfran. CISCO issued the counterbond. CISCO opposed but was rebuffed. The RTC released a motion for execution commanding the sheriff to levy the amount on the property of CISCO. To completely satisfy the amount, the Insurance Commissioner was also commanded to withdraw the security deposit filed by CISCO with the Commission according to Sec 203 of the Insurance Code.
Insurance Commissioner Malinis was ordered by the RTC to withdraw the security bond of CISCO for the payment of the insurance indemnity won by Del Monte Motor against Vilfran Liner, the insured.
Malinis didn’t obey the order, so the respondent moved to cite him in contempt of Court. The RTC ruled against Malinis because he didn’t have legal basis.
Issues:
1. Whether or not the security deposit held by the Insurance Commissioner pursuant to Section 203 of the Insurance Code may be levied or garnished in favor of only one insured.
2. Whether or not the Insurance Commissioner has power to withhold the release of the security deposit.
Held: No. Yes. Petition granted.
Ratio:
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held on deposit pursuant to the requirement of the Commissioner.
The court also claimed that the security deposit shall be (1) answerable for all the obligations of the depositing insurer under its insurance contracts; (2) at all times free from any liens or encumbrance; and (3) exempt from levy by any claimant.
“To allow the garnishment of that deposit would impair the fund by decreasing it to less than the percentage of paid-up capital that the law requires to be maintained. Further, this move would create, in favor of respondent, a preference of credit over the other policy holders and beneficiaries.”
“Also, the securities are held as a contingency fund to answer for the claims against the insurance company by all its policy holders and their beneficiaries. This step is taken in the event that the company becomes insolvent or otherwise unable to satisfy the claims against it. Thus, a single claimant may not lay stake on the securities to the exclusion of all others. The other parties may have their own claims against the insurance company under other insurance contracts it has entered into.”
2. The Insurance Code has vested the Office of the Insurance Commission with both regulatory and adjudicatory authority over insurance matters.
Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings, instructions, circulars, orders and decisions as he may deem necessary to secure the enforcement of the provisions of this Code.”
“The commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to persons or entities desiring to engage in insurance business in the Philippines;16 (2) revoke or suspend these certificates of authority upon finding grounds for the revocation or suspension; (3) impose upon insurance companies, their directors and/or officers and/or agents appropriate penalties -- fines, suspension or removal from office -- for failing to comply with the Code or with any of the commissioner's orders, instructions, regulations or rulings, or for otherwise conducting business in an unsafe or unsound manner.”
Included here is the duty to hold security deposits under Secs 191 and 202 of the Code for the benefit of policy holders. Sec 192, on the other hand, states:
“the securities deposited as aforesaid shall be returned upon the company's making application therefor and proving to the satisfaction of the Commissioner that it has no further liability under any of its policies in the Philippines.”
He has been given great discretion to regulate the business to protect the public. Also “An implied trust is created by the law for the benefit of all claimants under subsisting insurance contracts issued by the insurance company.” He believed that the security deposit was exempt from execution to protect the policy holders.
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