CESAR V. PURISIMA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF FINANCE AND EMMANUEL F. DOOC, IN HIS CAPACITY AS INSURANCE COMMISSIONER, PETITIONERS, VS. SECURITY PACIFIC A…

Purisima versus Security Pacific Assurance Corporation

The Case

This is a petition for review on certiorari brought by the Secretary of Finance and the Insurance Commissioner against a group of insurance companies. The public officers ask the Supreme Court to reverse the Court of Appeals, which had upheld a writ of preliminary injunction restraining the enforcement of department orders raising the minimum paid-up capital of insurance companies. The case matters because it is the Court's cleanest recent statement on the moot and academic doctrine: when a supervening law supplies exactly what the challenged administrative orders demanded, the Court will abstain from deciding the constitutional question and dismiss the petition outright.

Procedural History

The insurance companies filed a complaint before the Regional Trial Court of Quezon City, Branch 98, with an application for a temporary restraining order and a writ of preliminary injunction, attacking the department orders as an unconstitutional delegation of legislative power. The trial court initially denied the application and upheld the validity of the orders. The sitting judge then inhibited himself, and the case was re-raffled. A supplemental complaint followed, and the case landed in Branch 80, which this time granted the writ of preliminary injunction. The trial court recognized the constitutionality of the department orders but saw a need to determine the reasonableness of the capital requirement. The public officers moved for reconsideration, which was denied. They then filed a petition for certiorari before the Court of Appeals, which dismissed the petition for lack of merit and affirmed the trial court's orders. Reconsideration was denied, so the public officers came to the Supreme Court by petition for review on certiorari.

Facts

On September 1, 2006, the Department of Finance issued Department Order Number 27-06, which raised the minimum paid-up capital stock requirement of life, non-life, and reinsurance companies. It suspended the adoption of the risk-based capital framework for non-life insurance and integrated fixed capitalization compliance with that framework. Members of the Philippine Insurers and Reinsurers Association later received a letter from the Deputy Insurance Commissioner and an advisory from Commissioner Emmanuel Dooc reminding them that their paid-up capital had to equal the amount scheduled by the order, after they failed to meet the minimum paid-up capital of 175 million pesos by the end of December 2011.

Ten insurance companies then sued the Secretary of Finance, Cesar Purisima, and Commissioner Dooc. They alleged that the department order was unconstitutional because it vested in the Secretary of Finance the legislative power to increase the minimum paid-up capital, violating the doctrine of non-delegation of legislative power. They also cited manpower problems and serious business losses and asked that the order and related circulars be suspended. The public officers answered that compliance was assessed yearly based on each company's net worth and equity structure, and that the order was not oppressive because it was germane to keeping insurance companies solvent and protecting the public.

A supplemental complaint was filed after Department Order Number 15-2012 required a further increase in paid-up capital from 250 million pesos to 1 billion pesos beginning 2012. The re-raffled trial court then granted the writ of preliminary injunction. While the case was pending, on August 15, 2013, Republic Act Number 10607, the Amended Insurance Code, was signed into law, prescribing its own capitalization requirements for all life and non-life insurance companies.

Issues

• Whether or not the petition has been rendered moot and academic by the passage of the Amended Insurance Code, which fixed the capitalization requirements that the challenged department orders sought to impose.
• Whether or not the Court should nonetheless rule on the merits of the propriety of the writ of preliminary injunction issued by the trial court.

Applicable Provisions

Section 194 of the Amended Insurance Code, Republic Act Number 10607, provides:

Section 194. Except as provided in Section 289, no new domestic life or non-life insurance company shall, in a stock corporation, engage in business in the Philippines unless possessed of a paid-up capital equal to at least One billion pesos (P1,000,000,000.00): Provided, That a domestic insurance company already doing business in the Philippines shall have a net worth by June 30, 2013 of Two hundred fifty million pesos (P250,000,000.00). Furthermore, said company must have by December 31, 2016, an additional Three hundred million pesos (P300,000,000.00) in net worth; by December 31, 2019, an additional Three hundred fifty million pesos (P350,000,000.00) in net worth; and by December 31, 2022, an additional Four hundred million pesos (P400,000,000.00) in net worth.

This provision is the supervening event: it now supplies the capitalization requirement by statute, so the department orders that the injunction restrained no longer present a live controversy.

Ruling

On the first issue, the Court held that the petition had been rendered moot and academic. The Court reasoned that the issuance of Department Order Number 27-06 and Department Order Number 15-2012, as regards the capitalization requirement, had been overtaken by the passage of the Amended Insurance Code. It defined the doctrine in these terms:

A case or issue is considered moot and academic when it ceases to present a justiciable controversy by virtue of supervening events, so that an adjudication of the case or a declaration on the issue would be of no practical value or use.

The Court anchored this on the constitutional requirement that judicial power be exercised only over actual controversies, explaining that courts have no authority to pass upon issues through advisory opinions, and do not sit to adjudicate mere academic questions to satisfy scholarly interest. As a condition precedent to the exercise of judicial power, an actual controversy between litigants must first exist, involving a conflict of legal rights susceptible of judicial resolution. The Court also noted that both the public officers and the insurance companies themselves recognized the mootness of the issues in their pleadings.

On the second issue, the Court declined to rule on the merits. Having found the case moot, it deemed it proper to abstain from ruling on the merits, and so it did not reach the question of whether the trial court properly issued the writ of preliminary injunction.

Doctrine

A case or issue is moot and academic when it ceases to present a justiciable controversy by virtue of supervening events, so that adjudication would be of no practical value or use. Judicial power under the Constitution extends only to actual controversies involving rights that are legally demandable and enforceable; courts may not render advisory opinions or resolve hypothetical or academic questions. When a supervening statute supplies the very requirement that the challenged administrative orders imposed, the constitutional challenge to those orders becomes moot, and the Court will abstain from deciding the merits.

Disposition

The petition was dismissed for being moot and academic, and the Court ordered that entry of final judgment be issued immediately.

Remember This

Memorize the definition: a case is moot and academic when a supervening event removes the justiciable controversy so that adjudication has no practical value or use. Examiners use this case to test whether you will refuse to decide a constitutional question that a later statute has already rendered academic, and whether you can spot the supervening law as the event that mooted the challenge.