18-Republic of The Philippines vs. Del Monte Motors, Inc., G.R. No. 156956, 09 October 2006
18-Republic of The Philippines vs. Del Monte Motors, Inc., G.R. No. 156956, 09 October 2006
18-Republic of The Philippines vs. Del Monte Motors, Inc., G.R. No. 156956, 09 October 2006
156956 1 of 6
DECISION
PANGANIBAN, CJ.:
The securities required by the Insurance Code to be deposited with the Insurance Commissioner are intended to
answer for the claims of all policy holders in the event that the depositing insurance company becomes insolvent or
otherwise unable to satisfy their claims. The security deposit must be ratably distributed among all the insured who
are entitled to their respective shares; it cannot be garnished or levied upon by a single claimant, to the detriment of
the others.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse the January 16, 2003
Order of the Regional Court (RTC) of Quezon City (Branch 221) in Civil Case No. Q-97-30412. The RTC found
Insurance Commissioner Eduardo T. Malinis guilty of indirect contempt for refusing to comply with the December
18, 2002 Resolution of the lower court. The January 16, 2003 Order states in full:
"On January 8, 2003, [respondent] filed a Motion to Cite Commissioner Eduardo T. Malinis of the Office of
the Insurance Commission in Contempt of Court because of his failure and refusal to obey the lawful order
of this court embodied in a Resolution dated December 18, 2002 directing him to allow the withdrawal of
the security deposit of Capital Insurance and Surety Co. (CISCO) in the amount of P11,835,375.50 to be
paid to Sheriff Manuel Paguyo in the satisfaction of the Notice of Garnishment pursuant to a Decision of
this Court which has become final and executory.
"During the hearing of the Motion set last January 10, 2003, Commissioner Malinis or his counsel or his
duly authorized representative failed to appear despite notice in utter disregard of the order of this Court.
However, Commissioner Malinis filed on January 15, 2003 a written Comment reiterating the same grounds
already passed upon and rejected by this Court. This Court finds no lawful justification or excuse for
Commissioner Malinis' refusal to implement the lawful orders of this Court.
"Wherefore, premises considered and after due hearing, Commissioner Eduardo T. Malinis is hereby
declared guilty of Indirect Contempt of Court pursuant to Section 3 [of] Rule 71 of the 1997 Rules of Civil
Procedure for willfully disobeying and refusing to implement and obey a lawful order of this Court."
Republic of the Phil. v. Del Monte Motors, Inc. G.R. No. 156956 2 of 6
The Facts
On January 15, 2002, the RTC rendered a Decision in Civil Case No. Q-97-30412, finding the defendants (Vilfran
Liner, Inc., Hilaria Villegas and Maura Villegas) jointly and severally liable to pay Del Monte Motors, Inc.,
P11,835,375.50 representing the balance of Vilfran Liner's service contracts with respondent. The trial court further
ordered the execution of the Decision against the counterbond posted by Vilfran Liner on June 10, 1997, and issued
by Capital Insurance and Surety Co., Inc. (CISCO).
On April 18, 2002, CISCO opposed the Motion for Execution filed by respondent, claiming that the latter had no
record or document regarding the alleged issuance of the counterbond; thus, the bond was not valid and
enforceable.
On June 13, 2002, the RTC granted the Motion for Execution and issued the corresponding Writ. Armed with this
Writ, Sheriff Manuel S. Paguyo proceeded to levy on the properties of CISCO. He also issued a Notice of
Garnishment on several depository banks of the insurance company. Moreover, he served a similar notice on the
Insurance Commission, so as to enforce the Writ on the security deposit filed by CISCO with the Commission in
accordance with Section 203 of the Insurance Code.
On December 18, 2002, after a hearing on all the pending Motions, the RTC ruled that the Notice of Garnishment
served by Sheriff Paguyo on the insurance commission was valid. The trial court added that the letter and spirit of
the law made the security deposit answerable for contractual obligations incurred by CISCO under the insurance
contracts the latter had entered into. The RTC resolved thus:
"Furthermore, the Commissioner of the Office of the Insurance Commission is hereby ordered to comply
with its obligations under the Insurance Code by upholding the integrity and efficacy of bonds validly
issued by duly accredited Bonding and Insurance Companies; and to safeguard the public interest by
insuring the faithful performance to enforce contractual obligations under existing bonds. Accordingly said
office is ordered to withdraw from the security deposit of Capital Insurance & Surety Company, Inc. the
amount of P11,835.50 to be paid to Sheriff Manuel S. Paguyo in satisfaction of the Notice of Garnishment
served on August 16, 2002."
On January 8, 2003, respondent moved to cite Insurance Commissioner Eduardo T. Malinis in contempt of court
for his refusal to obey the December 18, 2002 Resolution of the trial court.
Ruling of the Trial Court
The RTC held Insurance Commissioner Malinis in contempt for his refusal to implement its Order. It explained that
the commissioner had no legal justification for his refusal to allow the withdrawal of CISCO's security deposit.
Hence, this Petition.
Issues
Petitioner raises this sole issue for the Court's consideration:
"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."
The Court's Ruling
Republic of the Phil. v. Del Monte Motors, Inc. G.R. No. 156956 3 of 6
The general regulatory authority of the insurance commissioner is described in Section 414 of the Code as follows:
"Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to insurance,
insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses
are faithfully executed and to perform the duties imposed upon him by this Code, and shall, notwithstanding
any existing laws to the contrary, have sole and exclusive authority to regulate the issuance and sale of
variable contracts as defined in section two hundred thirty-two and to provide for the licensing of persons
selling such contracts, and to issue such reasonable rules and regulations governing the same.
"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, subject to the approval of the Secretary
of Finance. Except as otherwise specified, decisions made by the Commissioner shall be appealable to the
Secretary of Finance." (Emphasis supplied)
Pursuant to these regulatory powers, 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; (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 in the above regulatory responsibilities is the duty to hold the security deposits under Sections 191 and
203 of the Code, for the benefit and security of all policy holders. In relation to these provisions, Section 192 of the
Insurance Code states:
"Sec. 192. The Commissioner shall hold the securities, deposited as aforesaid, for the benefit and security of
all the policyholders of the company depositing the same, but shall as long as the company is solvent,
permit the company to collect the interest or dividends on the securities so deposited, and, from time to
time, with his assent, to withdraw any of such securities, upon depositing with said Commissioner other like
securities, the market value of which shall be equal to the market value of such as may be withdrawn. In the
event of any company ceasing to do business in the Philippines 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." (Emphasis
supplied)
Undeniably, the insurance commissioner has been given a wide latitude of discretion to regulate the insurance
industry so as to protect the insuring public. The law specifically confers custody over the securities upon the
commissioner, with whom these investments are required to be deposited. An implied trust is created by the law for
the benefit of all claimants under subsisting insurance contracts issued by the insurance company.
As the officer vested with custody of the security deposit, the insurance commissioner is in the best position to
determine if and when it may be released without prejudicing the rights of other policy holders. Before allowing
the withdrawal or the release of the deposit, the commissioner must be satisfied that the conditions contemplated
by the law are met and all policy holders protected.
Commissioner's Actions Entitled to Great Respect
In this case, Commissioner Malinis refused to release the security deposit of CISCO. Believing that the funds were
Republic of the Phil. v. Del Monte Motors, Inc. G.R. No. 156956 6 of 6
exempt from execution as provided by law, he sought to protect other policy holders. His interpretation of the
provisions of the law carries great weight and consideration, as he is the head of a specialized body tasked with the
regulation of insurance matters and primarily charged with the implementation of the Insurance Code.
The emergence of the multifarious needs of modern society necessitates the establishment of diverse administrative
agencies. In addressing these needs, the administrative agencies charged with applying and implementing particular
statutes have accumulated experience and specialized capabilities. Thus, in a long line of cases, this Court has
recognized that their construction of a statute is entitled to great respect and should ordinarily be controlling, unless
clearly shown to be in sharp conflict with the governing statute or the Constitution and other laws.
Clearly, then, the trial court erred in issuing the Writ of Garnishment against the security deposit of CISCO. It
follows that without the issuance of a valid order, the insurance commissioner could not have been in contempt of
court.
WHEREFORE, the Petition is GRANTED and the assailed Order SET ASIDE. No costs.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.