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REPUBLIC v. DEL MONTE MOTORS

FACTS:

This case involves a Petition for Review seeking to reverse the order of the Regional Trial Court (RTC) of Quezon City, finding Insurance Commissioner Eduardo T. Malinis guilty of indirect contempt for refusing to comply with its resolution. The resolution directed the commissioner to allow the withdrawal of the security deposit of Capital Insurance and Surety Co. (CISCO) to satisfy a notice of garnishment. The garnishment arose from a decision holding defendants liable to pay Del Monte Motors, Inc. The trial court ruled that the security deposit held by the Insurance Commissioner can be withdrawn to satisfy the notice of garnishment. The commissioner, however, refused to implement the order, leading to the contempt charge. The sole issue to be determined is whether the security deposit held by the Insurance Commissioner can be garnished or levied in favor of only one insured.

ISSUES:

  1. Whether the partial releases of the security deposit render the case moot.

  2. Whether the security deposit is exempt from levy and garnishment.

  3. Whether or not the security deposit of the insurance company can be used to satisfy the claims of a single claimant to the exclusion of others.

  4. Whether the trial court erred in issuing the Writ of Garnishment against the security deposit of CISCO.

RULING:

  1. The issue is not totally moot because only a portion of the respondent's claim was satisfied, and the Insurance Commission has required the replenishment of the security deposit. The possibility of further garnishment in the future and the public interest involved in the case justify the Court's decision to resolve the issue.

  2. The Court ruled that the security deposit is exempt from levy and garnishment. The Insurance Code expressly states that the security deposit shall be answerable for all the obligations of the depositing insurer under its insurance contracts, but it should also be maintained free from any liens or encumbrances. Allowing the garnishment of the security deposit would impair the fund and give preference to a single claimant over other policyholders and beneficiaries. The purpose of the security deposit is to answer claims against the insurance company by all policyholders and beneficiaries in the event of insolvency or inability to satisfy claims.

  3. No, the security deposit of the insurance company cannot be used to satisfy the claims of a single claimant to the exclusion of others. The right to lay claim on the fund is dependent on the solvency of the insurer and is subject to all other obligations of the company arising from its insurance contracts. The interest of the claimant is merely inchoate and does not have the attribute of property. It would be premature to make the security deposit answerable for the present obligation of the insurance company to the claimant. Only after all other claimants under subsisting policies issued by the insurance company have been heard can the claimant's share be determined.

  4. The Petition is granted and the assailed Order is set aside. The Supreme Court held that the trial court erred in issuing the Writ of Garnishment against the security deposit of CISCO. It was ruled that without the issuance of a valid order, the insurance commissioner could not have been in contempt of court.

PRINCIPLES:

  • A case is not considered moot if there is a possibility of further garnishment in the future and the case involves public interest and matters of public policy.

  • Provisions of a statute should be construed in accordance with the purpose for which it was enacted.

  • The security deposit is answerable for all the obligations of the depositing insurer under its insurance contracts and should be maintained free from any liens or encumbrances.

  • The purpose of the security deposit is to answer claims against the insurance company by all policyholders and beneficiaries in the event of insolvency or inability to satisfy claims.

  • The right to the security deposit is dependent on the solvency of the insurer and is subject to all other obligations of the insurance company arising from its insurance contracts.

  • An inchoate right has no attribute of property and is merely an expectancy.

  • The Insurance Commissioner has both regulatory and adjudicatory authority over insurance matters.

  • The Insurance Commissioner has the power to hold the security deposits for the benefit and security of all policyholders and to determine if and when it may be released without prejudicing the rights of other policyholders.

  • The ruling of the Supreme Court 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.