THE INSURANCE COMMISSIONER, PETITIONER AND APPELLEE, VS. GLOBE ASSURANCE CO., INC., RESPONDENT AND APPELLANT.

Appeal from a decision of the Court of First Instance of Manila,
directing the liquidation of respondent-appellant Globe Assurance Co.,
Inc., and making permanent the preliminary injunction issued soon after
the institution of this case.

The facts are not disputed. In
January and February, 1956, a representative of petitioner herein, the
Insurance Commissioner, acting upon his orders, examined the records of
respondent herein—a surety and insurance corporation, duly organized
and existing under and by virtue of the laws of the Philippines and
authorized thereunder to engage in fire, marine, motor car, fidelity
and surety, casualty and miscellaneous insurances (except life), with
main offices in the City of Manila—to ascertain its financial
conditions and determine its methods of doing business as an insurance
firm. The result of the examination was set forth in a report submitted
to the petitioner, and approved by him, finding that respondent had
committed several irregularities described in said report—some of which
are hereinafter stated—and that, as of December 31, 1955, respondent
had, as a consequence, P430,615.39 worth of assets, as against total
liabilities amounting to P173,794.60 and a paid-up capital of
P500,000.00, which was, accordingly, impaired to the extent of
P243,179.21. On March 10, 1956, petitioner wrote, therefore, the letter
Exhibit B advising respondent of the aforementioned findings and
demanding that said impairment be covered up and that the other
requirements made, in said letter and in previous communications be
complied with within five (5) days from notice. This demand not having
been heeded, respondent’s certificate of authority to transact
insurance business was suspended by virtue of another letter (Exhibit
C) of petitioner herein dated March 26, 1956. Subsequently, or on
October 5, 1956, the latter filed with the Court of First Instance of
Manila the petition with which this case was begun, setting forth
substantially the facts above mentioned and praying that respondent be
required to show cause why it should not be liquidated, that, after due
notice and hearing, an order be issued liquidating its corporate
existence, and that, meanwhile, a writ of preliminary injunction be
issued restraining respondent, as well as its officers and agents, from
transacting business with the general public and from committing any
act which may interfere with the proceedings or result in the wastage
or disposition of its assets. Said writ of preliminary injunction was
issued on October 13, 1956.

Respondent’s answer admitted the main allegations of fact made in the petition and alleged, inter alia,
that it had been “trying its best to rehabilitate its finances”; that
“its liquidation is not timely and proper”; that, on October 22, 1956,
or after the commencement of this proceedings, a plan to rehabilitate
itself was submitted to the petitioner, who did not disapprove it; and
that it would be able to rehabilitate itself fully, in accordance with
said plan, within 180 days. Respondent, therefore, prayed, either that
the case be set for hearing only after the lapse of 180 days from the
filing of said answer, or that it be granted said period to
rehabilitate itself, and that, after hearing, the petition be dismissed
forthwith.

In due course, the Court of First Instance of
Manila rendered the decision aforementioned, from which respondent has
appealed, upon the ground that an error and a grave abuse of discretion
had been committed in ordering its liquidation. We find no merit in the
appeal.

Respondent does not deny the accuracy of any of the
aforementioned findings, made by an examiner of the Government and
approved and adopted by the petitioner, with respect to its precarious
financial condition. It maintains, however, that the lower court should
not have ordered its liquidation, for it was not bound to do so under
the law, and that it should have granted, instead the period of time
requested by respondent to rehabilitate itself, because, at any rate,
its certificate of authority to transact business had been suspended by
petitioner herein, and the lower court had enjoined respondent from
transacting its business, so that no danger for the public could
possibly result from the granting of a period for its rehabilitation.
Respondent’s pretense would, perhaps, have a semblance of validity if
its aforementioned plan of rehabilitation offered a reasonable
assurance of success. No such assurance, however, is discernible for
said plan.

To begin with, the same was—contrary to
respondent’s claim—disapproved by the petitioner, whose view carries
weight, he being best qualified, by reason of his position and
experience in the field of insurance, to pass upon the soundness of
said plan. Secondly, said view was confirmed by subsequent events.
Indeed, respondent merely asked for 180 day from the filing of his answer,
dated October 25, 1956, within which to complete its rehabilitation in
accordance with said plan. Yet, such rehabilitation was far from being
an accomplished fact when—after several postponements granted upon
respondent’s request—this case was eventually tried on August 1, 1957,
or over 90 days after the expiration of said period. Then, too, respondent had been found to have committed, inter alia, the following irregularities:

1. It had granted loans without security, and mostly to its president and his wife;
2. Several
   communications of the petitioner demanding that the granting of cash
   advances and loans without security be stopped, were disregarded by
   respondent. Worse still, the amounts of such cash advances and loans increased as follows:

   “(a)		Accounts Receivable—Miscellaneous as of February 28, 1954	P550.00
   (b)		Accounts Receivable—Miscellaneous as of November 15, 1954	10,120.55
   (c)		Accounts Receivable—Miscellaneous as of September 30, 1955	26,900.59
   (d)		Accounts Receivable—Miscellaneous as of December 31, 1955	73,271.59″

3. The company had issued numerous bonds in amounts ranging from
   P60,000.00 to P275,000.00, or far in excess of its maximum writing
   capacity of P25,628.08;

4. Its cash on hand, as of December 31, 1955, was
   only P5,631.33, contrary to the provisions of Circular No. 57 of the
   Secretary of Finance, approved on April 6, 1955, pursuant to which,
   respondent must maintain at all times, free from all liens, cash in
   bank amounting, at least, to P50,000.00;

5. Respondent’s records did not even show that it had
   cash deposited in banks. Its daily collections were kept in the
   company’s safe, a practice which is not in accordance with current
   sound business procedure.

In other words, the irregularities committed by respondent
were such as to affect the faith and trust that insurance companies
must command. Hence, this case is clearly distinguishable from that of
the Government of the P.I. vs. El Hogar Filipino (50 Phil., 399) and that of Government vs.
Philippine Sugar Estates (38 Phil., 15), in that both involved
technical violations of the law, not affecting the financial soundness
of the respondents herein, whereas those committed by respondent herein
affected adversely the interest of the parties dealing with it, as well
as the stability of the firm. Thus, public interest demands the
liquidation and dissolution of respondent herein.

Wherefore, the decision appealed from is hereby affirmed, with costs against respondent-appellant. It is so ordered.

Paras, C. J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J. B. L., Barrera, Paredes and Dizon, JJ., concur.