The Insurance Commission said Monday it will proceed with the conservatorship of the Comprehensive Annuity Plans and Pension, or CAP Pension, following the Supreme Court’s ruling on the 15-year-long legal battle for the rehabilitation of the pension fund and its parent company College Assurance Plans Philippines Inc.
The Supreme Court’s Third Division ruled that the assets of CAP Pension, a subsidiary of College Assurance Plans Philippines Inc., should not be included in the latter’s rehabilitation proceedings because CAP Pension’s legal personality is separate from CAPPI and it was not liable for the obligations of the pre-need firm to clients.
CAPPI was widely known for its educational plans that guaranteed payment of tuition when the beneficiaries of the plans entered college while CAP Pension was one of CAPPI’s subsidiaries that provided pension benefits to beneficiaries upon the plans’ maturity.
Associate Justice Marvic Leonen, in a 30-page decision, affirmed the position of the Insurance Commission by enjoining CAPPI from including the properties of CAP Pension in CAPPI’s corporate rehabilitation proceedings pending before the Regional Trial Court of the City of Makati, Branch 149 (the rehabilitation court).
The Supreme Court held that while CAPPI owns 86 percent of CAP Pension’s stock, the latter “retained a [legal] personality separate and distinct from [CAPPI] throughout its rehabilitation proceedings.” The high court maintained that “CAP Pension may own properties and incur liabilities independently of [CAPPI]”; and that, “[a]s a subsidiary, [CAP Pension] is not liable for the obligations of [CAPPI].”
Insurance Commissioner Dennis Funa said in a statement that with the Supreme Court ruling, the commission could proudly state that it was able to protect the rights and interests of the plan holders of CAP Pension, consistent with the agency’s mandate under the Pre-Need Code of the Philippines.
“The Insurance Commission will now proceed with the conservatorship of the company,” Funa said.
“But first we will examine the financial condition of CAP Pension as of today to see what assets of the company remains, we will then appoint a conservator to recommend the direction that we will take,” he said.
The Supreme Court said in the decision that the Insurance Commission, “as the primary agency governing pre-need companies, should not be restrained from fulfilling its mandate”.
It ordered the Insurance Commission to proceed with the conservatorship of CAP Pension and the rehabilitation court to “continue its rehabilitation efforts”. It said “this ruling is ultimately aimed at protecting the interests of the plan holders of both pre-need companies”.
The two cases (i.e., G.R. Nos. 218193 and 213130) jointly decided by the high court stemmed from the rehabilitation court’s issuance of a resolution on Nov. 8, 2006 ordering the sale and disposition of “subsidiaries and affiliates” of CAPPI, which included CAP Pension. On Sept. 13, 2010, following the effectivity of the Pre-Need Code of the Philippines on Dec. 4, 2009, the Insurance Commission placed CAP Pension under conservatorship due to capital impairment and trust fund deficiencies.
The commission’s action placing CAP Pension under conservatorship led to the Regional Trial Court of the City of Makati, Branch 149’s issuance of an order on April 15, 2011 “reiterating its jurisdiction over CAPPI and all its assets, including CAP Pension, through the approved rehabilitation plan”.
Subsequently, the Insurance Commission moved for the reconsideration of the order dated April 15, 2011, opposing the motion of CAPPI’s rehabilitation receiver to include the sale of CAP Pension’s properties to pay CAPPI’s obligations.
The Insurance Commission’s motion for reconsideration was subsequently denied, which was later effectively affirmed by the Court of Appeals in a decision dated April 28, 2015. This decision was assailed by the Insurance Commission in G.R. No. 218193. In the other case filed before the Supreme Court (G.R. No. 213130), the Insurance Commission, together with the Securities and Exchange Commission, appealed another decision of the Court of Appeals dated June 18, 2014 upholding the rehabilitation court’s order on Sept. 5, 2013.
The Insurance Commission and SEC jointly opposed said order that approved the extension of the corporate rehabilitation proceedings of CAPPI and the modification of the rehabilitation plan. The modified rehabilitation plan again entailed the sale and disposition of CAP Pension’s assets to pay CAPPI’s obligations.
The Supreme Court’s decision clarified that the rehabilitation court’s resolution issued Nov. 8, 2006 can only mean that CAPPI’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 CAPPI’s assets to be disposed.
The high court also clearly distinguished CAP Pension’s conservatorship proceedings from CAPPI’s rehabilitation proceedings in the decision as separate remedies that are under two separate jurisdictions. CAPPI’s rehabilitation is a court-supervised proceeding that is presently ongoing, while CAP Pension’s conservatorship is a proceeding undertaken in the exercise of the Insurance Commission’s authority under the Pre-Need Code of the Philippines.
The Supreme Court also said that “[t]o rule that CAP Pension was placed under custodia legis by the order of the rehabilitation court is prejudicial to the interests of CAP Pension’s planholders” and that “CAP Pension’s planholders need protection in the same manner and degree as [CAPPI’s] planholders who had been amply protected through the rehabilitation proceedings”.
Notwithstanding the foregoing, the Supreme Court dismissed the Insurance Commission and SEC’s opposition to the Sept. 5, 2013 order of the rehabilitation court extending the period of CAPPI’s corporate rehabilitation and modifying the rehabilitation plan.
Denying the IC and SEC’s petition in G.R. No. 213130, the Supreme Court ruled that it could not entertain said agencies’ objections to said order because the same will entail a review of evidence, which the high court cannot do in appeals. However, even as the Supreme Court dismissed the IC and SEC’s opposition, it said that “CAP Pension’s assets are not and should not be included in the rehabilitation plan”.
Acknowledging that the decision “will affect thousands of plan holders”, the Supreme Court stated in closing that “to dismiss the rehabilitation proceedings because of the erroneous assumption that CAP Pension and its assets were placed under the rehabilitation court’s jurisdiction would severely frustrate justice”.
CAPPI’s real estate investments, even exceeding the limitations set by the company’s previous regulator, SEC, led to the company’s downfall beginning in the early 2000s.