[3] SECURITIES AND EXCHANGE COMMISSION v LAIGO
GR. No. 188639 | September 2, 2015 | Mendoza, J.
SUMMARY: Legacy, a pre-need provider, complied with the requirement of the SEC to
create trust funds, and entered into a trust agreement with Landbank. When Legacy
Legacy became the subject of a petition for involuntary insolvency, SEC opposed the
inclusion of the trust funds in Legacy’s assets (If the trust fund is included in Legacy’s
estate, it will be open to claims of Legacy’s creditors). Judge Laigo ordered the
inclusion of the trust funds in the corporate assets. SC held that the trust fund should
not be included, because the legislative intent in requiring pre-need companies to
create a trust fund is to protect the interest of the planholders in the investment plans.
To rule otherwise would be an injustice against the planholders as they will be forced
to share in the assets with other creditors
PROVISIONS APPLICABLE:
Pre-Need Code, Sec. 30.
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Assets in the trust fund shall at all times remain for the sole benefit of the planholders.
At no time shall any part of the trust fund be used for or diverted to any purpose other
than for the exclusive benefit of the planholders. In no case shall the trust fund assets
be used to satisfy claims of other creditors of the pre-need company. The provision of
any law to the contrary notwithstanding, in case of insolvency of the pre-need company,
the general creditors shall not be entitled to the trust fund.
Except for the payment of 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 necessary to ensure the delivery of
benefits or services to planholders, no withdrawal shall be made from the trust
fund unless approved by the Commission.
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DOCTRINE:
● Pre-need plans are contracts which provide for the performance of future services
or the payment of future monetary considerations at the time of actual need, for
which planholders pay in cash or installment at stated prices, with or without
interest or insurance coverage (Securities Regulation Code).
● The trust fund is for the sole benefit of the planholders and cannot be used to
satisfy the claims of other creditors
FACTS:
● Based on RA No. 8799 (Security Regulation Code), Section 16, SEC is mandated to
prescribe rules and regulations governing the pre-need industry
● SEC issued the “New rules on the Registration and Sale of Pre-Need Plans” to
govern the industry prior to the passage of the Pre-Need Code of the Philippines
o Requires pre-need providers to create trust funds as a requirement for
registration
o Trust Fund – fund set up from planholders’ payments, different from the
paid-up capital of the pre-need company; established with a trustee under
a trust agreement.
● Legacy, a pre-need provider, complied with the trust fund requirement and entered
a trust agreement with Landbank.
● The industry of pre-need providers collapsed in mid-2000
o Legacy was unable to pay its obligations to the planholders
● Legacy became the subject of a petition for involuntary insolvency filed by
respondent planholders
o Legacy was declared insolvent by RTC and was ordered to submit an
inventory of assets and liabilities, in accordance with the Insolvency Law
o SEC was ordered by RTC to submit documents about assets and
liabilities of Legacy
● SEC opposed the inclusion of the trust fund in the inventory of corporate assets.
Alleged that:
o Doing so would contravene the “New Rules” creating the trust fund for the
exclusive purpose of guaranteeing the delivery of benefits due to the
planholders
o To include such in the insolvent’s estate will contravene its purpose
▪ Because it will be open to claims of non-planholders Commented [1]: in cases of liquidation, following the
● Nonetheless, Respondent Judge Laigo ordered the insolvency Assignee Mendoza hierarchy of the disposing of assets to creditors might
to take possession of the trust fund, hence including it in Legacy’s corporate prejudice plan-holders
assets.
o The trust fund was included in the estate of the insolvent, which could be pro-rata residual distribution to all unsecured non-
open to claims of Legacy’s creditors with official claims priority creditors (which, as the case suggests, includes
o Trust fund could be withdrawn by the Assignee to be used for expenses plan holders)
incurred in discharging his functions
o Judge Laigo also enjoined SEC from validating the claims of planholders
against the trust properties
● SEC filed this petition for certiorari assailing respondent Judge Laigo’s order,
ordering the inclusion of the trust fund in the corporate assets to the prejudice of
the planholders
o SEC intends to secure the trust fund which was supposedly for the
planholders who “invested their lifetime savings and hard-earned money
in Legacy”
▪ The trust fund should redound exclusively to the benefit of the
planhoders because they’re the ultimate beneficial owners
▪ Legacy’s interest over the trust properties was only by virtue of
it being the trustor, not the owner
ISSUES w/ HOLDING & RATIO:
[1] W/N the trust funds of Legacy form part of its corporate assets — NO
● The trust fund is for the sole benefit of the planholders and cannot be used to
satisfy the claims of other creditors
o Section 30 of Pre-Need Code
▪ Trust funds are to redound solely to the planholders
▪ In no case shall the trust fund assets be used to satisfy the
claims of other creditors of the pre-need company
o Legacy is not a beneficiary (claimed interest is more apparent than real)
▪ A person is a beneficiary if there is a manifest intention to give
such person the beneficial interest over the trust properties
● Terms of the trust agreement plainly confer status of
beneficiary to the planholders, not Legacy
▪ Clear from even the SRC that the underlying congressional intent
is to make the planholders the exclusive beneficiaries
o The will of the Legislature was fortified with the enactment of the Pre-
Need Code in 2009(RA No. 9829)
▪ Clarifying the authority of SEC
▪ Ensuring that the rights of the pre-need planholders is
categorically defined and protected
▪ Also set up the need for establishing a trust fund and the
responsibilities of the trustee
o To rule that Legacy has retained a beneficial interest in the trust fund is
to perpetuate the injustices committed against the planholders
▪ Planholders must not be prejudiced as to be forced to share in
the assets with other creditors
o Provisions only has the effect of Legacy agreeing to facilitate the
payment of benefits from the trust fund to the intended beneficiaries
[2] W/N the respondent judge committed grave abuse of discretion in issuing the order
— YES
• Enjoining the SEC from validating the claims against the trust fund is grave abuse of
discretion
o Insolvency court has no authority to order reversion of properties that do
not form part of Legacy’s insolvent estate
o Claims against the trust fund must be distinguished from claims against
Legacy
▪ Claims against trust fund are directed against LBP, the trustee
o Pre-Need Code clearly differentiates claims against the pre-need
company and those against the trust fund
[3] W/N the insolvency court has authority to enjoin petitioner SEC from further
validating the claims of Legacy’s planholders — NO
• Jurisdiction over claims against the trust fund, filed prior to the effectivity of the Pre-
Need Code, SEC remains to have the authority to regulate, manage, and hear all
claims involving trust fund assets.
o From effectivity of the Pre-Need Code, the Insurance Commission has the
primary and exclusive power to adjudicate claims involving pre-need
plans
o However, those pending claims and cases filed with SEC continue in its
full and final conclusion
o Prior to the transfer to the IC of matters pertaining to pre-need plans and
trust funds, the SEC had the authority to regulate, manage, and hear
claims
[4] W/N the provisions of the Pre-Need Code regarding liquidation is in the nature of a
procedural law that can be retroactively applied to the case at bar — YES
● The Pre-Need Code is curative and remedial in character, and can be applied
retroactively
o Primary protection of the Code to planholders can apply retroactively
o Provisions of said code confirm the right to exclusively claim against the
trust funds
o No new substantive right was created or bestowed
● Court upholds its duty to protect the ordinary Filipino workers who are seeking a
future for their children through pre-need contracts.
RULING
Court grants the petition filed by SEC – The trust fund is not to be included in Legacy’s
corporate assets. Judge Laigo gravely abused his discretion in treating the fund as part
of the insolvent’s estate and enjoining SEC’s validation of planholders’ claims against
the trust properties.
Notes:
● RA No. 8799 (Securities Regulation Code) defines pre-need plans as contracts
which provide for the performance of future services or the payment of future
monetary considerations at the time of actual need, for which planholders pay in
cash or installment at stated prices, with or without interest or insurance coverage
o Includes life, pension, education, interment, and other plans
● The overarching consideration of the Legislature in setting up funds is to protect
the interest of the planholders in the investment plans