The Insurance Commission (IC) said it has won its case against College Assurance Plan Philippines Inc. (CAP) after the Supreme Court ruled assets of unit Comprehensive Annuity Plans and Pensions (CAP Pensions) should be excluded from the assets to be sold by the pre-need firm.
In a 30-page decision penned by Associate Justice Marvic Leonen, the SC’s Third Division agreed with the IC that CAP Pension has a separate legal entity despite being 86 percent-owned by CAP.
The high court maintained that “CAP Pension may own properties and incur liabilities independently” of CAP; and that, despite being a subsidiary, CAP Pension is not liable for the obligations of the mother company.
The IC said the ruling effectively protects the rights and interests of the planholders of CAP Pension and will now proceed with the conservatorship of the company.
“First we will examine the financial condition of CAP Pension to see what assets of the company remain, we will then appoint a conservator to recommend the direction that we will take,” said Insurance Commissioner Dennis Funa.
The ruling stemmed from two cases jointly decided by the high court – G.R. Nos. 218193 and 213130 – where the Rehabilitation Court issued an order disposing of “subsidiaries and affiliates” CAP, which included CAP Pension.
On Sept. 13, 2010, following the effectivity of the Pre-Need Code of the Philippines in December 2009, the IC placed CAP Pension under conservatorship due to capital impairment and trust fund deficiencies. The IC’s action placing CAP Pension under conservatorship led to the Rehabilitation Court to issue an order on April 15, 2011 asserting its jurisdiction over CAP “and all its assets, including CAP Pension, through the approved rehabilitation plan.” Subsequently, the IC appealed the order resulting to the current High Tribunal decision.
The decision is also related to the IC and the Securities and Exchange Commission’s move to oppose the extension and modification of CAP’s rehabilitation plan that includes the sale and disposition of CAP Pension’s assets to pay CAP obligations.
In the Supreme Court’s Decision, it clarified that the Rehabilitation Court’s Resolution issued on November 8, 2006 can only mean that CAP’s board of directors, stockholders, and officers were directed to dispose of the company’s equities or stockholdings in CAP Pension.
Moreover, the Rehabilitation Court could not have validly ordered the sale of CAP Pension itself as if the company was one of CAP’s assets to be disposed, according to the IC.
The IC said the decision also “clearly distinguished” CAP Pension’s conservatorship proceedings from CAP’s rehabilitation proceedings.
CAP’s rehabilitation is a court-supervised proceeding that is ongoing, while CAP Pension’s conservatorship is a proceeding undertaken in the exercise of the IC’s authority under the Pre-Need Code of the Philippines.
The SC stated in the decision that the IC, “as the primary agency governing pre-need companies, should not be restrained from fulfilling its mandate.”
The SC however dismissed the IC and SEC’s opposition to CAP’s modified rehabilitation plan and its extension citing that it will entail a review of evidence, which the court cannot do in appeals.
“However, even as the Supreme Court dismissed the IC and SEC’s opposition, it stressed that ‘CAP Pension’s assets are not and should not be included in the rehabilitation plan’,” the IC said.
Saddled by debts due to risky investment prior to the 1997 Asian financial crisis, CAP fell into difficulties in the early 2000s that led to the company filing for rehabilitation and its pre-need and pension plan businesses falling into conservatorship.
