FIRST DIVISION

[G.R. No. 159979. December 9, 2015.]

CAPITAL INSURANCE and SURETY CO., INC. , petitioner, vs.

DEL MONTE MOTOR WORKS, INC., respondent.

DECISION

BERSAMIN, J : p

Are the securities deposited by the insurance company pursuant to

Section 203 of the Insurance Code subject of levy by a creditor? The
petitioner, a duly registered insurance company, hereby appeals to seek the
reversal of the unfavorable affirmative ruling on this issue of the Court of
Appeals (CA) promulgated on September 15, 2003. 1 The CA therein held
that the securities were not covered by absolute immunity from liability, but
could be made to answer for valid and legitimate claims against the
insurance company under its contract.
Antecedents
On March 3, 1997, the respondent sued Vilfran Liner, Inc., Hilaria F.
Villegas and Maura F. Villegas in the Regional Trial Court in Quezon City
(RTC) to recover the unpaid billings related to the fabrication and
construction of 35 passenger bus bodies. It applied for the issuance of a writ
of preliminary attachment. Branch 221 of the RTC, to which the case was
assigned, issued the writ of preliminary attachment, which the sheriff served
on the defendants, resulting in the levy of 10 buses and three parcels of land
belonging to the defendants. The sheriff also sent notices of garnishment of
the defendants' funds in the Quezon City branches of BPI Family Bank, China
Bank, Asia Trust Bank, City Trust Bank, and Bank of the Philippine Island. 2
The levy and garnishment prompted defendant Maura F. Villegas to file an
Extremely Urgent Motion to Discharge Upon Filing of a Counterbond,
attaching thereto CISCO Bond No. 00011-00005/JCL(3) dated June 10, 1997
and its supporting documents purportedly issued by the petitioner. 3 On July
2, 1997, the RTC approved the counterbond and discharged the writ of
preliminary attachment. 4
On January 15, 2002, the RTC rendered its decision in favor of the
respondent, 5 holding and disposing:
Premises considered, this Court hereby renders judgment in
favor of the plaintiff ordering the defendants Vilfran Liner, Inc., Hilaria
F. Villegas and Maura Villegas jointly and solidarily liable to pay
plaintiff the following: EATCcI

1. P11,835,375.50 including interest as of February 1997,

representing the balance of their service contracts with plaintiff on
the fabrication and construction of 35 passenger bus bodies.
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 2. P70,000.00, as litigation fees.
3. 25% of the recoverable amount, as attorney's fees; and
4. Costs of suit.
The foregoing judgment shall be enforceable against the
counterbond posted by defendant Vilfran Liner, Inc. dated June 10,
1995.
Defendants-third party plaintiffs are entitled to recover from the
third party defendants whatever amount is adjudged against the
former under the premises. Third party-defendants are directed to
reimburse defendants-third party plaintiffs for such monetary
judgments adjudged against the latter under the premises.
SO ORDERED. 6

To enforce the decision against the counterbond dated June 10, 1997,
the respondent moved for execution. The RTC granted the motion, 7 over the
petitioner's opposition. 8 Serving the writ of execution, 9 the sheriff levied
against the petitioner's personal properties, and later issued the notice of
auction sale. On August 15, 2002, the sheriff also served a notice of
garnishment against the security deposit of the petitioner in the Insurance
Commission. 10
On September 11, 2002, the respondent moved to direct the release by
the depositary banks of funds subject to the notice of garnishment from the
accounts of the petitioner, and to transfer or release the amount of
P14,864,219.37 from the petitioner's security deposit in the Insurance
Commission. 11 On September 26, 2002, the petitioner opposed the
respondent's motion. 12
Prior to the filing of its opposition, the petitioner presented evidence in
the RTC on September 12, 2002 in the form of the affidavits of its witnesses,
namely: Sheila L. Padilla and Nelia C. Laxa, who were both subjected to cross
examination.
In her sworn affidavit, 13 Sheila L. Padilla stated thusly:
1. I am presently the Manager of the Surety Service Office of
the Capital Insurance and Surety Co., Inc. ("CISCO"). I was a liaison
officer of CISCO in 1998;
2. My duties and functions as Manager of the Surety Service
Office are to evaluate and verify documents submitted by the
principal before the approval and issuing a certain bond. I am also
responsible for the liquidation and cancellation of Customs Bonds and
its clearances with the different ports;
3. I am familiar with the procedures followed by CISCO in
1997 before they issue and accept surety bonds which include
counterbonds for attachment;
4. ....
5. If the insured amount exceeds P5 Million the approval of
the President of CISCO or the Chief Operating Officer is required and
either one of them signs the bond. The amount of the deposit or the
value of the mortgaged property should be equal to or in excess of
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 the amount of the coverage. After submission of the documents and
payment of the premium the surety bond is issued to the insured. The
duplicate originals of the bond and the Indemnity Agreement are
transmitted to the main office. The collaterals and the other
documents are kept in Service Office which issued the bond. The
main office includes the surety bond issued in the quarterly report to
the main Insurance Commission;
6. I know a certain Mr. Pio Ancheta and Mr. Carlito D. Alub
who were the Vice-President for Surety and Asst. Branch Manager of
the Manila Service Office of CISCO, respectively, in 1997. They are no
longer connected with CISCO since 1998;
7. I first learned of the purported issuance of CISCO BOND
NO. JCL(3)00005 issued on July 10, 1997 from our Manila Service
Office sometime in July of 2002 when I was tasked by our counsel,
Atty. Rodolfo Gascon, to verify the same from the records of CISCO;
8. At that time the Manila Service Office of CISCO was
already closed so I searched for the purported CISCO BOND NO.
JCL(3)00005 in our warehouse but despite diligent efforts could not
locate the same;
9. There is no proof from CISCO's records that CISCO BOND
NO. JCL(3)00005 was ever issued or transmitted to the main office for
filing. There is no proof in our records that the premium has been
paid or that the counter-security which CISCO normally requires has
been issued by insured;
10. I also know that the authority of Mr. Ancheta and Mr.
Carlito D. Alub to issue surety like the CISCO BOND NO. JCL(3)00005
is restricted to only P5 Million. Any amount beyond that should have
the approval of the President, Mr. Aurelio M. Beltran;
11. The amount of the coverage of the purported CISCO
BOND NO. JCL(3)00005 is beyond the maximum retention capacity of
CISCO which is P10,715,380.54 as indicated in the letter of the
Insurance Commissioner dated August 5, 1996 (which appears in p.
320 of the Court Records);
12. CISCO's records also show that as early as 1998, an
audit was conducted of the accountable forms in the Manila Service
Office before it was closed in 1998. An audit was conducted where it
was discovered that CISCO BOND NO. JCL(3)00005 was missing and
unaccounted. DHITCc

Similarly, Nelia C. Lax, declared in an affidavit 14 the following:

1. I was a member of the Audit Department of Capital
Insurance and Surety Co., Inc. ("CISCO");
2. I n 1998 before the Manila Service Office of CISCO was
closed, I was tasked to audit the records and accountable forms of the
said office, including the forms for JCL(3) which are the counterbonds
for attachments;
3. I and Mr. Joel S. Chua made a count of all the accountable
forms of the said office, including the JCL(3) forms approved by the
Insurance Commissioner and we discovered the CISCO BOND NO.
JCL(3)00005 was missing and unaccounted for;
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 4. Mr. Chua and I prepared a report of our audit findings
indicating therein the missing CISCO BOND NO. JCL(3)00005. A copy
of the audit report is attached hereto as Annex "A" and the pertinent
portion thereof as Annex "A-1";
5. Upon being presented, a photocopy of the missing CISCO
BOND JCL(3)00005, I noticed that the signature appearing thereon
above my name as witness is not my signature.
On October 2, 2002, the petitioner, through its Very Urgent Motion to
Stay Auction Sale of Levied Personal Properties , sought the stay of the
auction sale until the RTC resolved the issue of validity or enforceability of
CISCO BOND No. JCL(3)00005. 15
On December 18, 2002, the RTC issued its assailed resolution, 16 viz.:
The Motion dated September 11, 2002 of plaintiff is hereby
GRANTED. As prayed for, the Manager or any authorized officer of the
following banks are ordered to release the funds under the account of
Capital Insurance and Surety Co., Inc., subject of Notice of
Garnishment of Deputy Sheriff Manuel S. Paguyo, to wit:
a) Asia United Bank, Pasig City
b) Banco de Oro, Head Office, Pasig City
c) Philippine National Bank, Banawe, Quezon City
d) East-West Bank, Makati City
e) United Coconut Planters Bank, Makati City
f) Manila Bank, Ayala Avenue, Makati City
g) International Exchange Bank, Makati City
Furthermore, the Commissioner of the Office of the Insurance
commissioner is hereby ordered to comply with its obligations under
the Insurance Code by upholding the integrity and efficacy of bonds
validly issued by duly accredited Bonding and Insurance Companies;
and to safeguard the public interest by insuring the faithful
performance to enforce contractual obligations under existing bonds.
Accordingly said office is ordered to withdraw from security deposit of
Capital Insurance & Surety Company, Inc. the amount of
P11,835,375.50 to be paid to Sheriff Manuel S. Paguyo in satisfaction
of the Notice of Garnishment served on August 16, 2002. 17
On December 27, 2002, the sheriff served a copy of the assailed
resolution on the then Insurance Commissioner Edgardo T. Malinis, with the
request for him to release the security deposit. However, Insurance
Commissioner Malinis turned down the request to release, citing Section 203
of the Insurance Code, which expressly provided that the security deposit
was exempt from execution. 18
On January 8, 2003, the respondent moved to cite Insurance
Commissioner Malinis in contempt of court for refusing to comply with the
RTC's resolution. 19
On January 16, 2003, the RTC, finding no lawful justification for the
Insurance Commissioner's refusal to comply with the order of the RTC,
declared him guilty of indirect contempt of court. 20
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 Meanwhile, on January 21, 2003, the petitioner filed a Motion for
Reconsideration 21 against the December 18, 2002 resolution, but the RTC
denied the motion on January 30, 2003. 22
Thus, the petitioner assailed the resolution of December 18, 2002 and
the order of January 30, 2003 by petition for certiorari in the CA. 23
Decision of the CA
On September 15, 2003, the CA dismissed the petitioner's petition for
certiorari, explaining:
Per records of the Office of the Insurance Commission,
petitioner CISCO is a duly accredited insurance and bonding
company. Hence, a counterbond issued by it constitutes a valid and
binding contract between petitioner CISCO and the court. As such,
the counterbond it issued . . . is valid. No evidence was presented by
petitioner CISCO to dispute its validity. Its contention that Pio Ancheta
and Carlito Alub, petitioner CISCO's Vice President for Surety and
Asst. Branch Manager, respectively, of the Manila Service Office were
not authorized to sign the counterbond does not hold water. . . . .
Further, petitioner CISCO avers that the subject CISCO Bond No.
00005/JCL(3), is among those missing from its custody. Granting
without admitting that this is true, it is incumbent upon petitioner
CISCO to inform the court of such loss. Sad to say, petitioner CISCO
failed to do so. . . . .
xxx xxx xxx
If indeed, CISCO Bond No. JCL (3)00005 was lost, petitioner
CISCO should have inform (sic) the court of such loss. It is incumbent
upon petitioner CISCO to protect and safeguard the bonds it issues.
Needless to say, this Court finds the petitioner CISCO's act as a thinly
veiled attempt to renege on its obligation under the insurance
contract it issued. 24cEaSHC

The CA opined that the security deposit could answer for the
depositor's liability, and be the subject of levy in accordance with Section
203 of the Insurance Code, viz.:
Section 203 of the Insurance Code is clear and unequivocal that
the security deposit will be held by the Insurance Commissioner for
the faithful performance by the depositing insurer of all its obligations
under its insurance contracts. As aptly pointed out by the lower court,
Section 203 does not provide for an absolute immunity of the security
deposit from liability. The security deposit under this section is not
designed to shield the insurance companies from valid and legitimate
claims under its contract, for to do so would render bonds futile and
useless.
Section 192 of the same Code will not apply as an exception to
Section 203 because the former speaks of a situation where the
Insurance Commissioner shall hold the security deposit for the benefit
of the policy holders and from time to time with his assent allow the
company "to withdraw any of such securities" as long as the company
is solvent. It contemplates of a situation where the security deposit
may be returned only if the company ceased to do business. It does
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 not in any manner exempt the security deposit from the insurance
company's obligations under its contracts. . . . . 25
Issues
Hence, this appeal, with the petitioner raising the following as issues:
I
THE COURT OF APPEALS ERRED IN RULING THAT THE COUNTERBOND
FILED IN THE TRIAL COURT WAS A VALID AND SUBSISTING
OBLIGATION OF THE PETITIONER
II
THE COURT OF APPEALS ERRED IN RULING THAT THE SECURITIES
DEPOSITED BY THE PETITIONER INSURANCE COMPANY MAY BE THE
SUBJECT OF LEVY IN CONTRAVENTION OF SECTION 203 OF THE
INSURANCE CODE 26
Ruling of the Court
The appeal is meritorious.
I.
Validity of the petitioner's counterbond
Essentially, the petitioner, through the officers of its Audit Department
and its Manila Surety Service Office, disputed the validity of CISCO Bond No.
00005/JCL(3) on several grounds, namely: (1) under the petitioner's rules,
any coverage exceeding P5,000,000.00 required the approval of its President
and Chief Operating Officer. Given that the amount involved was
P10,715,380.54, but the counterbond was signed only by Pio C. Ancheta, the
Vice President for Surety, and Carlito D. Alub, the Assistant Branch Manager
of the Manila Surety Service Office, whose authority to issue surety bonds
was restricted to only P5,000,000.00; hence, the counterbond was invalid for
being issued without proper authority; (2) an audit of the records and
accountable forms of the petitioner revealed that the counterbond was
among the missing and unaccounted for; (3) a photocopy of the missing
counterbond showed that Nelia Laxa's signature appearing above her name
as witness was a forgery; and (4) no evidence was presented to prove that
the premiums for the counterbond were paid.
The petitioner cannot evade liability under the counterbond by hiding
behind its own internal rules. Although a prospective applicant seeking
insurance coverage is expected to exercise prudence and diligence in
selecting the insurance provider, such responsibility does not require the
prospective applicant to know and be aware of the insurer's internal rules,
policies and procedure adopted for the conduct of its business. Considering
that the petitioner has been a duly accredited bonding company, the officers
who signed the bonds were presumed to be acting within the scope of their
authority in behalf of the company, and the courts were not expected to
verify the limits of the authority of the signatories of the bonds submitted in
the regular course of judicial business, in the same manner that the
applicants for the bonds were not expected to know the limits of the
authority of the signatories. To insist otherwise is absurd. It is reasonable to
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 hold here, therefore, that as between the petitioner and the respondent, the
one who employed and gave character to the third person as its agent
should be the one to bear the loss. That party was the petitioner.
Likewise, the petitioner's argument that the counterbond was invalid
because the counterbond was unaccounted for and missing from its custody
was implausible. The argument totally overlooks a simple tenet that honesty,
good faith, and fair dealing required it as the insurer to communicate such
an important fact to the assured, or at least keep the latter updated on the
relevant facts. A contrary view would place every person seeking insurance
at the insurer's mercy because the latter would simply claim so just to
escape liability, thus causing uncertainty to the public and defeating the very
purpose for which the insurance was contracted.
The petitioner's contention that there was no evidence to show that the
premiums for the counterbond were paid has no merit. To start with, the
petitioner did not present any evidence to back up the contention. The bare
allegation of non-payment had no weight, for mere allegation,
unsubstantiated by evidence, did not equate to proof. 27 In any event, both
the RTC and the CA found that the counterbond was approved and signed by
both Ancheta and Alub, whose signatures were genuine. If the premiums
were not paid, such officers of the petitioner would not have approved the
counterbond in the first place. CTIEac

An insurer or bonding company like the petitioner that seeks to defeat

a claim on the ground that the counterbond was invalidly issued has the
burden of proving such defense. However, the petitioner did not discharge
the burden herein. No less than the officers charged with the responsibility of
making sure that all forms and records of the petitioner were audited
admitted that the missing counterbond was in fact a valid pre-approved form
of the Insurance Commission, so that the absence or lack of the signature of
the president did not render the bond invalid. Moreover, Laxa knew that as a
matter of long practice both Ancheta and Alub normally signed and approved
the counterbonds, regardless of the amounts thereof. She further knew of no
rule that limited the authority of Ancheta and Alub to issue and sign
counterbonds only up to P5,000,000.00.
In this regard, the CA correctly sustained the following findings of the
RTC on the matter, 28 to wit:
On this score, this Court quotes with approval the lower court's
resolution, to wit:
Ms. Nelia Laxa's affidavit, in substance, declares
that she was a member of the Audit Department of
CISCO; that in 1998, before the Manila Service Office of
CISCO was closed, she was tasked to audit the records
and accountable forms including the forms for JCL (3)
which are the counterbond for attachment; that she and
Mr. Chua discovered that CISCO Bond No. JCL (3)00005
was missing and unaccounted for; that she prepared an
audit report indicating the missing CISCO Bond No.
JCL(3)00005.
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 On cross examination, Ms. Laxa admitted that as an
employee of the Manila Service Office of CISCO in 1997
she was not aware of the Office policy of CISCO that Mr.
Ancheta and Mr. Alub were not authorized to sign
counterbonds issued over P5M and that she knew as a
clerk in 1997, it was Mr. Ancheta and Mr. Alub who
approve counterbonds regardless of the amount (TSN,
Sept. 17, 2002, pp. 43-44); that she admitted that the
missing JCL (3) forms were formerly on file with the Manila
Service Office of CISCO in 1997 and were missing in July
2002. (TSN, Sept. 17, 2002, pp. 45-46); that when asked
by the Court after being shown of CISCO Bond No. JCL (3)
00005, she admitted that it was a valid pre-approved
form by the insurance commission and that the
signatures of Mr. Ancheta and Mr. Alub on CISCO Bond
No. JCL (3)00005 are their signatures based on her
familiarity with the signatures of both persons. (TSN,
Sept. 17, 2002, pp. 50-53)
Likewise, Ms. Ester Abrogado, Chief Insurance Specialist of the
Rating Division of the OIC testified that she is familiar with the
security deposit of insurance companies which are required to have a
minimum paid up capital stock of P15M, 25% of which is deposited
with the OIC in the form of security deposit. . . . . This testimony was
corroborated by Sigfredo Aclaracion, Supervising Insurance
Specialist, Regulation Division of the OIC who further stated that they
have no way of finding out whether a particular bond issued by a
bonding company is valid or spurious; and that there is no legal
opinion from the Department of Justice, the Office of the Corporate
General Counsel or the legal Department OIC on the matter of the
liability of security deposit to answer for a judgment which become
final and executor.
We emphasize that we have no reason to disturb the factual findings of
the RTC, as affirmed by the CA, in the absence of any clear showing by the
petitioner of any abuse, arbitrariness or capriciousness committed by the
trial court; hence, the findings of facts of the RTC, especially after being
affirmed by the CA as the appellate court, are binding and conclusive upon
this Court. 29
II.
The security deposit was immune
from levy or execution
Anent the security deposit, Section 203 of the Insurance Code provides
as follows:
Every domestic insurance company shall, to the extent of an
amount equal in value to twenty-five per centum of the minimum
paid-up capital required under section one hundred eighty-eight,
invest its funds only in securities, satisfactory to the Commissioner,
consisting of bonds or other evidences of debt of the Government of
the Philippines or its political subdivisions or instrumentalities, or of
government-owned or controlled corporations and entities, including
the Central Bank of the Philippines: Provided, That such investments
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 shall at all times be maintained free from any lien or encumbrance;
and Provided, further, That such securities shall be deposited with
and held by the Commissioner for the faithful performance by the
depositing insurer of all its obligations under its insurance contracts.
The provisions of section one hundred ninety-two shall, as far as
practicable, apply to the securities deposited under this section.
Except as otherwise provided in this Code, no judgment
creditor or other claimant shall have the right to levy upon
any securities of the insurer held on deposit under this
section or held on deposit pursuant to the requirement of the
Commissioner.
The forthright text of provision indicates that the security deposit is
exempt from levy by a judgment creditor or any other claimant. This
exemption has been recognized in several rulings, particularly in Republic v.
Del Monte Motors, Inc., 30 the prequel case for this ruling, where the Court
has ruled: SaCIDT

. . . As worded, the law expressly and clearly states that the

security deposit shall be (1) answerable for all the obligations of the
depositing insurer under its insurance contracts; (2) at all times free
from any liens or encumbrance; and (3) exempt from levy by any
claimant.
To be sure, CISCO, though presently under conservatorship, has
valid outstanding policies. Its policy holders have a right under the
law to be equally protected by its security deposit. To allow the
garnishment of that deposit would impair the fund by decreasing it to
less than the percentage of paid-up capital that the law requires to be
maintained. Further, this move would create, in favor of respondent,
a preference of credit over the other policy holders and beneficiaries.
Our Insurance Code is patterned after that of California. Thus,
the ruling of the state's Supreme Court on a similar concept as that of
the security deposit is instructive. Engwicht v. Pacific States Life
Assurance Co. held that the money required to be deposited by a
mutual assessment insurance company with the state treasurer was
"a trust fund to be ratably distributed amongst all the claimants
entitled to share in it. Such a distribution cannot be had except in an
action in the nature of a creditors' bill, upon the hearing of which, and
with all the parties interested in the fund before it, the court may
make equitable distribution of the fund, and appoint a receiver to
carry that distribution into effect." (Emphasis supplied)
Republic v. Del Monte Motors, Inc. 31 also spelled out the purpose for
the enactment of Section 203 of the Insurance Code, to wit:
Basic is the statutory construction rule that provisions of a
statute should be construed in accordance with the purpose for which
it was enacted. That is, the securities are held as a contingency
fund to answer for the claims against the insurance company
b y all its policy holders and their beneficiaries. This step is
taken in the event that the company becomes insolvent or
otherwise unable to satisfy the claims against it. Thus, a
single claimant may not lay stake on the securities to the
exclusion of all others. The other parties may have their own
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 claims against the insurance company under other insurance
contracts it has entered into. (bold emphasis ours)
The simplistic interpretation of Section 203 of the Insurance Code by
the CA ostensibly ran counter to the intention of the statute and the Court's
pronouncement on the matter. We cannot uphold the CA's interpretation,
therefore, because the holders or beneficiaries of the policies of an insolvent
company would thereby likely end up becoming unpaid claimants. Besides,
denying the exemption would potentially pave the way for a single claimant,
like the respondent, to short-circuit the procedure normally undertaken in
adjudicating the claims against an insolvent company under the rules on
concurrence and preference of credits in order to ensure that none could
obtain an advantage or preference over another by virtue of an attachment
or execution. To allow the respondent to proceed independently against the
security deposit of the petitioner would not only prejudice the policy holders
and their beneficiaries, but would also annul the very reason for which the
law required the security deposit.
What right, if any, did the respondent have in the petitioner's security
deposit?
According to Republic v. Del Monte Motors, Inc., 32 the right to claim
against the security deposit is dependent on the solvency of the insurance
company, and is subject to all other obligations of the insurance company
arising from its insurance contracts. Accordingly, the respondent's interest in
the security deposit could only be inchoate or a mere expectancy, and thus
had no attribute as property.
Was the Insurance Commissioner's refusal to release the security
deposit despite the garnishment on execution legally justified?
The Insurance Commissioner's refusal to release was legally justified.
Under Section 191 and Section 203 of the Insurance Code, the Insurance
Commissioner had the specific legal duty to hold the security deposits for the
benefit of all policy holders. In this regard, Republic v. Del Monte Motors, Inc.
33 has also been clear, viz.:

The Insurance Code has vested the Office of the Insurance

Commission with both regulatory and adjudicatory authority over
insurance matters.
The general regulatory authority of the insurance commissioner
is described in Section 414 of the Code as follows:
"Sec. 414. The Insurance Commissioner shall have the
duty to see that all laws relating to insurance, insurance
companies and other insurance matters, mutual benefit
associations, and trusts for charitable uses are faithfully
executed and to perform the duties imposed upon him by
this Code, and shall, notwithstanding any existing laws to
the contrary, have sole and exclusive authority to
regulate the issuance and sale of variable contracts as
defined in section two hundred thirty-two and to provide
for the licensing of persons selling such contracts, and to
issue such reasonable rules and regulations governing the
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 same.
"The Commissioner may issue such rulings, instructions,
circulars, orders and decisions as he may deem necessary
to secure the enforcement of the provisions of this Code,
subject to the approval of the Secretary of Finance.
Except as otherwise specified, decisions made by the
Commissioner shall be appealable to the Secretary of
Finance." (Emphasis supplied) cHECAS

xxx xxx xxx

Included in the above regulatory responsibilities is the duty to
hold the security deposits under Sections 191 and 203 of the Code,
for the benefit and security of all policy holders. In relation to these
provisions, Section 192 of the Insurance Code states:
"Sec. 192. The Commissioner shall hold the securities,
deposited as aforesaid, for the benefit and security of all
the policyholders of the company depositing the same,
but shall as long as the company is solvent, permit the
company to collect the interest or dividends on the
securities so deposited, and, from time to time, with his
assent, to withdraw any of such securities, upon
depositing with said Commissioner other like securities,
the market value of which shall be equal to the market
value of such as may be withdrawn. In the event of any
company ceasing to do business in the Philippines the
securities deposited as aforesaid shall be returned upon
the company's making application therefor and proving to
the satisfaction of the Commissioner that it has no further
liability under any of its policies in the Philippines."
(Emphasis supplied)
Undeniably, the insurance commissioner has been given a wide
latitude of discretion to regulate the insurance industry so as to
protect the insuring public. The law specifically confers custody
over the securities upon the commissioner, with whom these
investments are required to be deposited. An implied trust is
created by the law for the benefit of all claimants under
subsisting insurance contracts issued by the insurance
company.
As the officer vested with custody of the security
deposit, the insurance commissioner is in the best position to
determine if and when it may be released without prejudicing
the rights of other policy holders. Before allowing the withdrawal
or the release of the deposit, the commissioner must be satisfied that
the conditions contemplated by the law are met and all policy holders
protected. (bold emphasis supplied)
Under the circumstances, the Insurance Commissioner properly
refused the request to release issued by the sheriff under the notice of
garnishment, and was not guilty of contempt of court for disobedience to the
assailed order of December 18, 2002 of the RTC.
WHEREFORE, the Court PARTIALLY GRANTS the petition for review
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 on certiorari; REVERSES the decision of the Court of Appeals in so far as it
allowed the withdrawal of P11,835,375.50 from petitioner Capital Insurance
& Surety Company's security deposit in the Insurance Commission to comply
with the notice of garnishment served on August 16, 2002; AFFIRMS the
decision promulgated on September 15, 2003 in all other respects; and
MAKES NO PRONOUNCEMENT on costs of suit.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Perez and Perlas-Bernabe, JJ., concur.

Footnotes
1. Rollo , pp. 31-41; penned by Associate Justice Remedios A. Salazar-Fernando,
and concurred in by Associate Justice Eubulo G. Verzola (deceased) and
Associate Justice Edgardo F. Sundiam (deceased).

2. Id. at 33.
3. Id.

4. Id. at 34.
5. Id. at 13.

6. Id.

7. Id. at 95.
8. Id. at 93-94.

9. Id. at 96-97.

10. Id. at 98.

11. Id. at 35.

12. Id. at 14.

13. Id. at 119-121.

14. Id. at 106-107.

15. Id. at 128-129.

16. Id. at 131-145.

17. Id. at 144-145.

18. Id. at 148-149.

19. Id. at 150-154.

20. Id. at 156-157.

21. Id. at 158-163.

22. Id. at 164-165.

23. Id. at 166-183.
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 24. Supra note 1, at 36-39.
25. Id. at 39-40.

26. Id. at 18-19.

27. Real v. Belo, G.R. No. 146224, January 26, 2007, 513 SCRA 111, 125.

28. Rollo , pp. 37-38.

29. Plameras v. People of the Philippines, G.R. No. 187268, September 4, 2013,
705 SCRA 104, 122.

30. G.R. No. 156956, October 9, 2006, 504 SCRA 53, 60-61.

31. Id. at 61-62.

32. Id. at 60-61.

33. Id. at 62-65.

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