G.R.No.

1886
39 ,Sept
e mber02,2015-SECURI TIESAND
EXCHANGECOMMI SSION,Pet
iti
oner
,v.HON.REYNALDOM.
LAIGO,IN HI
SCAPACI TYASPRESI DING JUDGEOFTHE
REGIONAL TRIAL COURT,NATI ONAL CAPITAL J
UDICIAL
REGION,MAKATICI TY,BRANCH 5 6,GLICERIA AYAD,
SAHLEE DELOS REYES AND ANTONI O P.HUETE,J R.
,
Respo
ndent
s.
PHI
LIPPI
NESUPREMECOURTDECI
SIONS

SECONDDI
VISI
ON

G.
R.No
.18
863
9,Se
pte
mbe
r02
,20
15

SECURITIESAND EXCHANGE COMMI SSION,Pet

iti
one
r,v.
HON. REYNALDO M. LAI GO, IN HI S CAPACITY AS
PRESIDING J UDGE OF THE REGI ONAL TRIAL COURT,
NATIONAL CAPI TAL JUDI
CIAL REGI ON,MAKATI CITY,
BRANCH5 6
,GLI CERI
AAYAD,SAHLEEDELOSREYESAND
ANTONIOP. HUETE,JR.
,Res
ponde
nts.
DECISION

MENDOZA,
J.:

Inthisp eti
tionfo rcertiorari1underRu l
e6 5o ft heRu l
eso f
Court,petitionerSecuritiesandEx changeCo mmi ssio
n( SEC),
thro
u ght heOffi c
eo ft heSo li
cit
orGe neral( OSG) ,assail
s
theJ une2 6 ,2009Or de r2( June2 6,2009Or der )issuedby
resp
o ndentJ udgeRe ynal doM.Lai go(JudgeLai go)o ft he
RegionalTr ialCo ur
t,Br anc h5 6,MakatiCity( RTC),inSp .
Proc.No .M-6 758
,3ap etitio
nfo rinvol
untaryi ns o
lvencyo f
Legac yCo nsoli
datedPl ans ,Inco
rporat
ed( Legac y),ordering
theinclusi
o no fthet r
us tfu ndinitscorporateas setstot he
prej
u dic
eo ft hep l
anholde rs.

Fac
tualAnt
ece
dent
s

Repu
bli
c Act(R.A.
) No
.8 7
9 9
,o t
herwi
sek nown as t
he
Se
curit
iesRegu
lati
onCode(SRC)
,s p
eci
fic
all
y Secti
on16
thereo
f,mandat edtheSe curi
tiesandEx changeCo mmi s
sion
(SEC)top rescri
berulesandr egulati
onsgo verni
ngt hep re-
needi ndustry.Pu r
suant ther e
to ,t he SEC i ssuedt he
corr
espondingNe wRulesontheRe gi s
trati
onandSal eo fPr e
-NeedPl ans(Ne wRules)
4t ogo vernt hep re
-needi ndustry
pri
ortot hee nactme
nto fR.A.No .9 829,otherwi
sek nownas
thePr e
-ne edCo deoft hePhilippines(Pre-Ne edCo de).It
requi
redfr omt hepre-needp r
o v
ide r
st hec reat
iono ftrust
fundsasar equireme
ntfo rregi
s t
rat i
on.

Asde fi
nedinRu l
e1 .
9oft heNe wRules,
"'Tru
stFund'means
afu nds etu pfr omp l
anho l
ders
'p ayment
s,separ
ateand
dis
tinctfromt hep ai
d-upc api
talofar egi
ster
edp r
e-need
company,establ
ishedwithat r
usteeunderatrus
tagreement
approvedbyt heSEC,t opayfo rthebenefi
tsasprovi
dedin
thep r
e-needp l
an."

Legacy,beingapre-ne
edp rov
ider,c
ompli
edwi
ththetru
st
fundr equ
ireme
ntande nter
edi ntoatru
stagr
eementwi
th
theLandBanko ft
hePhili
ppi
nes( I
BP).

Inmid-2000,thei
ndust
rycol
lapse
dforarangeofreasons
.
Legacy,l
ik
et heothe
rs,wasunabl
etopayi
tsobl
igat
ionsto
t
hep
lanho
lde
rs.

Thisresu lt
edi nLe gacybe i
ngt hesubjecto fap eti
tionfo r
i
nv o
luntar yinsolvencyfi l
edo nFebruary1 8,2009byp rivate
respondent si nt heirc apac
itya sp l
anholders.Thr oughi ts
manifest ati
onfi ledint heRTC,Le gacydidno to bjec
tt ot he
proceedings.Ac c
o r
dingly,itwasde cl
aredi ns
o l
v e
ntbyt he
RTCi nit sOr der,5dat edAp ri
l27,2 0
09.Thet r i
alc o
u rtalso
orderedLe gacyt os ubmitani nventoryo fit sas s
e t
sand
l
iabil
iti
esp ursuantt oSe cti
ons15and1 6o fAc tNo .1956 ,
6
otherwis
ek nown as t he Inso
lvency Law,t he ap pl
icable
bankruptc ylawatt hatt i
me.

OnMay1 5,2009,t
heRTCo rder
edt heSEC,be i
ngthep
r e
-
nee
d industry'
sr e
gul
ato
r,t o su bmitt he do
cuments
pe
rtai
ningtoLegacy'
sas
setsandli
abili
ti
es.

InitsManife s
tatio
nwi thEv al
uati
on,datedJ une1 0,2009,the
SECo p
po s
e dtheinclu
sionoft hetrustfu ndint heinventory
ofc orporateas setso nt hegr ound thatt odos owo uld
contravenet heNe w Ru le
swhi c
ht reate dt rustfu ndsas
princ
ipall
y e stabli
shed fo r the e xcl
u s
ive p urpose o f
guaranteeingthede l
iveryofbe nefit
sdu etot heplanholde
r s
.
I
twaso ft hep o
siti
onthattheincl
usio
noft het r
ustfun
di n
t
heinsolv
ent '
se s
tateanditsbeingopene
dt oclai
msbyno n-
p
lanho
lders wo ul
d c ont
ravene t he p u
r p
ose fo r its
e
stabl
ishme nt
.

OnJ une26,2009,des p
itetheo p
p o
sit
ionoft heSEC,Ju dge
Laigoorderedt heinsolve
nc yAs si
gnee,Ge nerT.Me ndoza
(Assi
gnee)totakep osse
ssi
ono fthetrustfund.JudgeLaigo
vie
wedt hetrustfundasLe gacy'scorpo
rateasset
sand,fo r
sai
d r easo
n, i ncl
uded i t i n t he inso
lvent
's e s
tat e
.
Thus:
ChanRobl
es vi
rtual
Lawli
br ary

WHEREFORE, th
e Cour
t r
ule
s as
fo
ll
ows:
ChanRo
ble
svi
rtual
Lawl
ibr
ary

1.Direc
tingtheafo re
-name dbankstor e
portt oAss
ignee,
GenerT.Me ndo z
a,who seaddressi
satc /oGNCAHo l
dings,
Inc
.,Uni
t3 22,
3 /F,LRIde si
gnCenter
,210NicanorGarc
iaSt.,
MakatiCity,thet otalfundsaso ftodayde po
site
dt othe
i
nsolv
entde btor'sr es
pe c
tiveTrus
tFu nds,wit
hinfive( 5
)
daysfromr ec
e i
pto fthisOrder
.
2.Subje
ctfundscanbewi t
hdr awnbytheAs s
igneeonlyupon
OrderoftheCo ur
tfo rdi
stributi
onamongthec re
ditorswho
haveoffici
all
yfil
e dthei
rv ali
dc l
aimswit
ht hisCourt,and
forallthee x
pensestobeinc urredbytheAs si
gneei nthe
cours
eo fthedischar
geofhi sdu ti
esandresponsi
bil
it
iesas
suchAssi
gnee.

3.Sto
p p
ingtheSe cur
iti
e sandEx changeCommissi
on(SEC)
from furt
hervalidati
ng t he cl
aimso fp l
anho
lders(now
cre
dit
ors)per
tai
ningtot hei
rp r
e-ne edpl
ans
.

x
xxx
xxx
xx

SOORDERED.
7

TheRTCs t
at e
dt hatthet r
u s
tfundc o
uldbewithdrawnby
theAssigneet obeu se
dfo rt heex
penseshewouldincu
ri n
thedi
sc hargeofhi sfunct
ionsandtobedi s
tri
butedamo ng
thecredito
r swhohado ffi
cial
lyfi
ledthei
rvali
dclai
mswi th
theco
ur t.
ThePr
ese
ntPe
tit
ion

Intentonp ro t
e cti
ngt hei nt
e r
e s
to fthei nvestingpublicand
securin
gt het rustfunde xcl
usivel
yfo rt hep lanhol
de r
s,t he
SECfi led" thisp resentr ecoursedirectlytot hi
sHo norable
Courti nac cordanc ewit hSe c
t i
on5( 1 ),Arti
c leVIIIoft he
1987Co nstituti
o nfort her easonthatt hemat t ersi
nvolvean
iss
ueo ft ransc e
ndent alimp ortancet o nume rous hard-
workingFilipi
no swhoha dinvestedt he
irl i
fetimes avi
ngsand
hard-earne dmo neyinLe gacy,ho pi
ngt hatthr oughthisp r
e -
needc omp anyt heywi l
lbeabl et ofu lfi
llthe irdreamso f
providi
ngabr i
ghtfu t
u refort hei
rc hi
ldren."8

TheSEC'
sPo
sit
ion

Ine ss
e nc
e,t heSEC c onte ndst hatJ u dgeLai gogr avel
y
abu sedhisdi s
c r
etioni ntr eat i
ngt het rustfu ndasp artof
thei nsolv
enc ye st
at eo fLe gacy.I targu est hatt het ru
st
fu nd shouldr e
dou nd e xcl
u siv
elyt ot he be nefi
to ft he
planholders,whoar et heultimat ebe nefi
c i
alo wners;thatthe
tru s
tfu ndishe l
d, man agedanda dmi nis
te r
e dbyt het rus
tee
bankt oaddr essandans we rt heclaimsagai nstthep re-need
comp anybyal lit
sp lanholder sand/o rbe nefici
aries;thatto
considerthes aidfundasc or porateas
s et
si stoo pe
nt he
floodgatest ocredi
torsofLegac yo t
herthant hepl
anhol
ders;
and t hat,ini s
sui
ng the o
r de r,Judge Laigoe ffec
tivel
y
all
owe dno n-planho
lderstore acht hetrustfu ndinp at
ent
vi
o l
ationoft heNe wRu l
eses tabli
shedtop rotec
tt hepre-
needi nve
st ors.

InitsMe mo r
andu m,9t heSECs t
ressedt hatt hesetti
ng-up
oft het rustfu n dse ffecti
vel
yc reate
dade marcati
onl i
ne
betwe ent hec laimso fplanhol
dersv i
s-a-v i
st hos
eo ft he
otherc reditorso fLe gacy;thatLe gac
y'si nteres
to verthe
trustp ro
p erti
eswaso nlybyv i
rtueo fi
tbe i
ngat rusto
rand
nott heo wner;andt hatt heSECwasau thoriz
e dtovali
date
cl
aimso fp lanholdersinthee xe
rcis
eo fitsp owerasregulat
or
ofpr e-needc orpo r
ations.

Furt
her
,theSECi softhep
osi
ti
onthatSect
ion52o
fthePre
-NeedCode1
0s houl
dbegivenre
troact
iveeffe
ctforbe
ing
pro
cedu
rali
nc har
acter
.

Thu
s,t
heSECr
ais
est
hefo
ll
owi
ng
I
SSUES

I
.
Whetherorno
ttheTr
ustFu
ndso
fLe
gac
yfo
rmp
arto
fit
s
Cor
po r
ateAss
ets
.

I
I.
Whetherornotrespo
ndentTrialCo ur
tJ u
dgec ommit
ted
graveabuseofdis
cret
ionamountingtolacko rexc
essof
ju
r i
sdi
cti
oni
nis
sui
ngtheher
einassail
edOrderdate
dJune26,
2009.

I
II.
Whet
herorno
tt hecl
aimsofpl
anhol
dersaret
obetreat
ed
di
ffere
ntl
yfro
mt hecl
aimsofo
thercre
dito
rso
fLegac
y.

I
V.
WhetherornotLegacyr
etai
nsowne
rshipoverthetru
st
fundsass
etsde
spi
teth
eex
ecut
iono
ftrustagr
eeme
nts.
V.

Whetherorno tthei nso

lvenc
yc ou r
t,p
resi
dedbyr es
pondent
Tri
alCou r
tJu dge,hastheau thori
tytoenj
oinpeti
ti
onerSEC
from furtherval
idat i
ngthec l
aimsofLegacy'
sp l
anhol
ders
and treati
ng them asi fthe y areordi
narycredit
orso f
Legacy.

VI
.

Whethe
ro rnott
heprov
isio
no fthePre
-needCodere
gardi
ng
l
iqui
dati
onisinthenatureofap r
oce
du r
all
awthatca
nbe
ret
roacti
vel
yappl
ie
dtot hecaseatbar.
11

Pr
ivat
eRe
spo
nde
nts'
pos
iti
on

I
nt hei
rCo mment/Opposi
ti
on,12the pri
vater es
pondents
,
Gli
ceraAyad,SahleeDelosReyesandAnt o
nioP.Huerte
,J r
.
(p
rivatere
spondents)
,submitthatnothi
ngint heNewRu l
es
expr
e s
slypr
ovide
dt hatthetrustfundisexcl
udedfromt he
i
nventoryo fc o
rporate ass
ets whic
hi sr equi
redt o be
submitted t o t he insolvency c ourt;t hat t he SEC' s
i
nt er
fe re
ncei nthei nsol
venc yp r
o c
eedingsisincongruou
st o
thel egalsys te
m;and t hatu ndert hep rovis
ionso ft he
Insol
vencyLaw,al lc l
aims,inc l
udingthoseagainstt hetrust
fundss houl
dbefi ledinthel iqui
dationproceedi
ngs .
13Henc e
,
priv
ater espondentsassertt hatnogr aveabuseo fdiscret
ion
wasc ommitte dbyJ udgeLai goini s
sui
ngt heJ une2 6,2009
Order.

TheAs
signe
e'sPo
sit
ion

Inhi ss e
p arateCo mme ntso nPe ti
tio
n 14andMe mo randu m,15
theAs signe econte ndst hatt het rustfu ndfo rmsp arto f
Le gacy'sc o r
porateas setsfo rt hefo l
lowi
ngr easo ns:fi rst,
the i nsolvencyc ou rthasj ur
isdic
tiono veral lt he c l
aims
agains tt heinsol
ve ntandt het r
ustfu ndfo rmsp ar to ft he
comp any' sc orporat e asse ts
.I tc ited Abr er
av .Co l
lege
As surancePl an,
1 6whe ret heCo urthe ldthatc l
aimsar isi
ng
fr omp r
e -needc ont ractss houldnotbet reateds e par a
t el
y
fr omo the rclai
msagai nstap re-needc ompany.Ass uc h,the
claimso ve rthet rustfu nd,be ingclaimsagainstLe gac y,are
ne cessarilylodged wi t
ht hei nsol
vencyc ourt.Se cond,t he
set t
ingu po fthet rustfu ndi same reschemet oat tainan
admi nistrativeend,t hati s,theas surancethatt hebe ne fi
ts
wi
llbede
li
ver
edu
nde
rthep
re-ne
edc
ont
rac
ts.

Co nsi
dering t hatLe gac yi st he de btorasr egardss uch
bene fi
ts,itiso nl
yt hr
ou ghit,ort hroughtheinsolve
ncyc ou
r t
,
thatt heas s e
tsi ncludi
ngt het rustfu ndcanbedi str
ibut
e d
tos ati
sfyv al
idc laims.Third,t hought hetrusteebank shold
l
e galtitl
eo vert hefu nds,t her ealp ar
tie
s-in-inter
estar e
thep re-nee dc omp ani
esast het e
r mso fthetrustagr eement
bet weenLe gacyandLBP( ast r
u s
t ee
)s howthisintent
.

TheAssi
gneeals osu
bmi t
sthatnolawauthori
zedt heSECt o
int
erfer
eint heinso
lvencypro
ceedi
ngsbecauseitsautho
rity
undertheSRCi sonlytoregul
atethesal
eo fpre-needplans
andnottoregulatethemanagementoftrustfunds.

Insu m,theAs signe einterpret

st heJ une2 6,2009Or de
ri n
thi
swi s
e :thatt hec redi
t o
rs,pl
anho l
de r
so rnot,shoul
dfirst
li
neu pandfi l
ev alidc l
aimswiththei nsol
vencycou r
tandno t
gete nt
angledi nt hev al
idati
onproc e
s softheSEC;andt hat
oncet he p l
anho l
de rshav e qual
ified,t hey wil
lbe gi ven
preferenceint hedi stri
butio
no fthet r
ustassets.Moreo
v er
,
hep rop
o se
st hati ft het r
ustfundas set
swillnotbee nough
tos ati
sfy allc laims,t hep l
anholdersc ans ti
lljoi
no ther
cl
aimant
sandp art
ici
pat
eint hedi
stri
buti
onoft
heo
the
r
as
setsofthep
re-needcomp
any.1
7cr
alawre
dnad

Fromtheforegoi
ng,theCou r
tisc
all
edt
ode
ter
minewhether
Ju
dge Lai go gr av
e l
y abu s
ed his di scr
etio
n
i
n:ChanRo
ble
sv i
rtu
alLawl
ibrary

I
ncl
udi
ngt
het
rus
tpr
ope
rti
esi
nthei
nso
lve
nt'
ses
tat
e;and

Pr
ohibi
ti
ngt heSECfro
mv al
idati
ngt
hec
lai
msfi
le
dbyt
he
pl
anhol
dersagai
nstt
hetru
stfund.

TheCo
urt
'sRu
li
ng

Theo ver archi

ngc onsiderati
o nint helegi
sl
ativemandat eto
establ
isht ru s
tfundsi sthep r
ote c
t i
onoftheinter
esto fthe
planho
lde r
si ntheinv es
tme ntp lans.TheSRCp rovi
desi nno
uncertaint ermsthei ntentt omak es uc
hint
erestsparamount
aboveal lelse.Thu
s, i
tdire ct
e dtheSECt ocomeupwit hrul
es
and re gu l
ationstogo vernno to nl
yt rus
tfu ndsbu tthe
indust
r yasawh ol
e.Pu rsuantt oitsmandateandde legated
au
t hor
ity,theSECc ameo utwiththeNewRules
,whic
hthe
Congresslate
ro nto
u ghene
dt hrou
ghtheenac
tme nto
fthe
Pr
e -NeedCo de,car
r yi
ngs i
milarpro
tec
tio
nbu tfarmore
detai
ledinscope
.

Itisint
hiscontextthatthisCourtrule
stogr antt
hepeti
ti
on
fil
edbyt heSEC.TheCo urtfindsthatJ udgeLai
gogravel
y
abusedhisdiscreti
onint reati
ngt het r
u stfundasasset
s
thatformparto fLegacy'sins
olvencyestateandi
nenj
oini
ng
theSEC' sval
idatio
no ft heplanhol
ders'clai
msagai
nstthe
trustpr
operti
es.

TheTr
ustFu
ndi
sfo
rth
eso
lebe
nefi
t
o
fth
epl
anho
lde
rsandc
anno
tbeu
sedt
o
s
ati
sfyt
hec
lai
mso
fot
herc
redi
tor
sofLe
gac
y

Sect
ion30ofthePre
-Ne edCodeclear
lyp rov
idesthatthe
pr
oceeds oftrus
t funds shal
lr edound sole
lyt ot he
pl
anhol
der
s.Se
cti
on30reads:
ChanRo
blesvir
tual
Lawli
brary

Tr
ustFu
nd
SECTI ON 3 0.Tr us
tFu nd.— Toe nsuret hede li
ve ryo ft he
guarant ee dbe nefit
sands ervi
cesp rovi
de du nde rap re -nee d
pl
anc ontract ,at r
us tfu ndp erp r
e -needp lanc ate gorys hall
be e stabl i
she d.A p ort i
ono ft he installme nt p ayme nt
col
lecte ds hallbede po
s i
tedbyt hep re-ne edc omp anyi nthe
tr
u stfu nd, theamo u nto fwhi c
hwi llbeasde termi nedbyt he
actuarybas e do nt hev iabil
itys t
u dyo ft hep re-ne edp l
an
approve dbyt heCo mmi ssion.Assetsint het rustfu nds hallat
al
lt ime sr emai nfort hes o l
ebe nefito ft hep lanho l
de rs.At
not imes hallanyp ar
to ft het ru s
tfu ndbeu se dfo ro r
di
ve rtedt oanyp u
rp oseo therthanfo rthee x
clu s
ivebe nefit
oft hep lanho lders
.I nnoc aseshallthet ru stfu ndas se tsbe
usedt os atisfyc l
aimso fo therc r e
ditorso ft hep re -nee d
comp any. The p rovis
iono f any l aw t ot he c ontrar y
notwithstandi ng,i nc aseo fi nso l
vencyo ft he p re -nee d
comp any,t hege neralc reditor
ss hallno tbee nt i
tledt othe
tr
u stfu nd.

Exce
p tforthep aymentoft hecostofbe ne
fitsorservi
ces
,
the ter
minationv al
uesp ayabl
et ot he pl
anhol
ders,the
i
nsurancepremiump aymentsforinsur
ance-fundedbenefi
ts
ofme mori
allifep l
ansando the
rc ost
sne ces
sarytoe ns
ure
the del
ive
ryo f benefi
tso rs erv
icest op l
anhol
ders,no
withdrawals hallbe made fr om t he t r
u s
t fu nd u nl
e ss
ap p
ro v
e dbyt heCo mmis
s i
on.Thebe nefitsreceivedbyt he
planholdersshallbeexemptfr o
mal ltaxe sandt het r
u s
tfu nd
shallnotbehe ldli
ableforattachme nt,gar ni
shme nt,l
ev yo r
seizurebyo ru nderanylegalorequitablep rocess
ese xceptt o
payfo rthede btoft hep l
anhol
de rt ot hebe nefitp l
ano r
thatar i
si
ng fr omc rimi
nall i
abil
it
yi mp os
e di nac ri
mi nal
action.

[
Emp
has
esSu
ppl
ie
d]

TheAs s
igneear guesthatLe gacyhasr etainedabe nefi
cial
int
erestinthet rustfunddespitethee x
ec uti
onofthet ru
s t
agreementandt hatthep roperti
esc anbet hesubje
c tof
ins
olv
encyp r
oc e
e di
ngs.Inthisregard,theAs si
gneecal
lsthe
Court'
sat te
nt i
ont othet rusta gree
me ntp rovi
si
onswhic h
suppo
sedlyr efert othei nterestofLe gacyint het ru
s t
prope
rties
,towit :
ChanRobl
e s
virt
ualLawli
brary

TheTRUSTEEhe re
byu ndertakestoperfo
rmthefuncti
ons
anddu ti
esofaTRUSTEEp r o
videdforinthi
sAgreement
withtheutmostgoodfaith,c
area ndpru
dencere
qui
redbya
fiduc
iaryr e
lati
on,being unde rs
too
d,howeve
r,that the
COMPANYs hal
lbes o
lel
yande xcl
usi
ve(sic
)responsibl
efo r(1)
fulfi
lli
ngthese r
vicesreferr
edt ointher e
citalclause
s,(ii
)
thes ettl
ement/paymento fc l
ai
mso fanyp e r
sono rfi r
m
avail
ingofs uchs er
vic
es,(ii
i)compli
ancewithal llawsand
governmental regul
atio
ns o np re-need plans,and ( i
v)
submissi
ono fo ther datao ri nformati
on as may be
prescri
bedbytheCo mmi ss
ion
.

x
xx

xxxt heTr us
te es hallfr o
mt i
met ot imeo nt hewr it
ten
direct ionso ft heCo mpanymak ep ayme ntso uto ftheTr us
t
Fundt ot heCo mp any.Tot hee x tentpermi ttedbyl aw,the
Tru s
t ees hallbeu nde rnol iabi
lityfo ranyp ayme ntmade
pursu antt ot he di re
ct iono ft he Comp any.Any wr it
ten
direct iono ft heCo mp anys hallc ons
titut eac ert
ificati
on
thatt hedi stri
bu tionofp ayme nts odirecte diso newhi chthe
Comp anyi sau thor i
zedt odi rect.Fr omtimet ot i
meandwhe n
direct edi nwr iti
ngbyt heCo mp any,theTr ustees hallpay
mo nies fr om t he Tr us t Fu nd i n amo untse qu alt ot he
outstandi ngamo unto ft heTr ustFu ndatanygi vent i
met o
defr ayt heCo mp any'so bligationst othePl anho l
dersu nder
i
t sp re -ne edp lanc ontr actandp rovi
de dfu rthert hatt he
comp anys hal
lber eimbu rsedbyt heTr uste efr omt heTr us
t
Fund for what
ever amountsit has adv
anc
ed t
oit
s
be
nefic
iar
ies
.18[
Ital
ic
ssup
plie
d]

TotheAs s
igne e
,these"co
ntrol
"me c
hanismsareindi
cativ
eo f
theinter
esto fLegacyintheenforcementofthet rus
tfu nd
becausetheagr eementgive
sitthep owertodic
t at
eo nLBP
thefulfi
ll
me nto fthetrust,s
uchast hedeli
veryo fmo ni
es
toittofacil
itatethepaymenttotheplanho
lders
.

TheCo
urt
,ho
wev
er,
see
sitdi
ffe
rent
ly.

Int he c o
u r
seo f delvi
ng intothe co
mp l
exr elati
onships
cr
e ated by t he agr e
eme nt and t
he exis
ting r egulator
y
frame work,thisCo u
rtfindst hatLe
gacy'sclaimedi nterest
i
nt hee nforceme ntofthetr us
tandi
nthet r
us tp r
o p
e r
t i
esis
me reapparentt hanreal.
Le gacyi
snotabeneficiary.

Fi
rst,itmu stbestres
sedt hatap e
rsoni sconsi
de r
edasa
benefi
ciar
yo fatrusti
ft hereisamani festi
ntenti
o ntogi
ve
su
c hap e r
sonthe be nefici
ali nte
re s
to ve rt he tru
st
prop
e r
ties
.19Thi
si sth
ec onsi
de r
edo pi
nionexpressedinthe
Restat
eme ntoft heLaw o fTr ust(Re s
tatement)20which
Jus ti
ceVicenteAbadSant oshasde scribedi nhiscont
r i
buti
on
tot hePhi l
ipp
ineLawJ ou
rnalasc o ntainingt hemo resali
ent
principl
es,doc t
rinesandr ul
eso nt hes ubject.
2 1Here,the
ter mso fthet rustagreementp lainlyc onfert hestatusof
be nefici
arytot hep l
anhol
ders,nott oLe gac y.Inther e
cit
al
clauseso ft he s ai
d agreeme nt
,Le gac y bound itsel
ft o
pro vi
defo rt hes ou
nd,p r
udenta nde fficientmanage ment
andadmi ni
strati
o nofsuchportio
no ft hec ol
lec
t i
on"forthe
be nefitandac countofthep l
anho lder s,"
2 2throughLBP( as
thet rustee)
.

Thi sc ategoric
alde cl
aration do ubtlessi ndic
at est hatt he
inte ntiono ft het rustori stomak et hep lanholderst he
be ne fici
arieso ft hetru stprope rti
e s,andno tLe gac y.Itis
cleart hatbe causet hebe neficialo wne r
shipisv est
e di nthe
planho l
de r
sand t hel egalo wne rshipi nt het r
ustee ,LBP,
Le gac y,ast rustor,isl
e ftwithou tanyi o
tao fintere stinthe
tru stfu nd.Thi sisc onsist
entwi tht henat ureo fat r
ust
arr ange me nt,whe rebyt hereisas e parationofi nterestsin
thes u bj
e ctmat tero ft hetrus t,thebe nefici
aryhav i
ngan
equ ita bl
ei nterest,andt het r
us teehav i
ngani nter
e stwhich
isno r mallylegalinterest.
23cralawr ednad

Se
cond,c
ons
ide
ring t
hefac
tthatamandat
edp
re-ne
ed
trus
ti so nei mbu e
dwi thp u blicint erest,thei s
sueo nwhot he
benefici
ar yi smu stbede termi ne do nt hebas i
so fthee nt i
re
regulatory fr ame wo r
k . Unde r t he Ne w Ru l
es,i t i s
unmistak ablet hatt hebe ne fi
ciali nte resto verthet rust
properti
e siswi ththep lanho lders.Ru l
e1 6.3oft heNe wRu l
es
provi
de st hat:[ n]owi thdr awals hal lbemadefr omt het rust
fund e xc eptfo rp aying t he be nefitss uch asmo net ary
consi
de ration,t hec osto fs ervicesr enderedo rp ro p
e rty
deli
ve r
ed,t ru s
tfe es ,bankc har ge sandi nvestmente x
p enses
i
nt he o perationo ft he t rust fu nd,t erminatio
nv alues
payablet ot he p lanho l
de rs,a nnu i
ties,c ontri
butions o f
cancell
edp l
anst othefu ndandt axeso nt rustfunds.

Rule17.1als
os tat
esth attoensuret heli
quidityo fthet ru
s t
fundt oguaranteethede li
veryoft hebe nefitsprovidedfo r
undert hep l
anc ontractand t oo btai
ns uffic
ientc apital
growtht ome etthegr owingactuarialreserveliabil
iti
es,all
i
nv e
stme nt
so ft het rustfu nd shallbel i
mitedt oFixed
IncomeInstruments,
Mu t
ualFunds,Equ i
ti
e s
, andRe alEstate,
subjec
tt ocertai
nli
mitat i
ons
.

Furt
her,Rul
e2 0.
1 dire
ctsthe t
ruste
et oe xe
rci
se due
di
li
gencefortheprotec
tio
nofthep l
anho
lder
sgu i
dedby
so
undinve
stmentp
rinc
ipl
esint
heexcl
usi
vemanagementand
co
ntrolovert hefu ndsandi tsright
,atanyt i
me ,tosel
l,
co
nvert,invest,c hange,t r
ansfer,oro therwis
ec hangeor
di
sposeo ft he as set
sc o
mpris
ing the fu nds.Al lthe
se
cer
tainl
yu nderscoret heimpor
tanceoft heplanhol
dersbei
ng
re
cogniz
ed as t he u l
timate benefi
ciarie
so ft he SEC-
mandatedt ru
s t
.

Thiscons
ist
entl
yr unsinac co
rdwi ththel e
gislat
iveinte
nt
l
aiddo wninChapterIVo fR.A.No .879
9,ort heSRC,which
provi
desfo rthe establ
ishmento ft rus
tfu ndsfo rthe
paymentofbenefit
su ndersuchplans
.Secti
on1 6oft heSRC
provi
des:
ChanRobl
esvi
rtual
Lawlibr
ary

SEC.1 6.Pr e-Ne edPl an s.-Nop ersons hal

ls elloro ffe rfo r
saletot hep u bli
canyp r e-needp l
ane x
cep ti nac cordanc e
withr u les and r egu lat ions whicht he Co mmi ssi
ons hall
prescri
be .Su chr ul
ess hallr egulatet hes aleo fp r
e -need
plansby,amo ngo the rt hings,requ i
ringt her egi
s tr
at i
ono f
pre-nee dp l
ans ,li
cens ingp e r
sonsinvolvedi nt hes al
eo fp re-
ne e
dp lans,r equ i
ri
ngdi s closurestop rospect i
v eplanho lders,
prescri
bi ng adv ertisi
ng gu i
deli
nes,p r
o vi
ding fo ru niform
accountings ys tem,r ep or tsandr e cordk eepingwi t
hr e sp
ec t
tos uchp l
ans,i mposingc ap i
tal
,bo ndingando therfi nancial
responsibil
ity,an de stabl ishingt r
u stfu ndsfo rthep ayme nt
o
fbe
nefi
tsu
nde
rsu
chp
lans
.[Emp
has
iss
upp
li
ed]

I
tiscl
e arfromSecti
on1 6thattheu nder
lyingcongress i
onal
i
nte
ntist omaketheplanhol
dersthee xcl
usivebeneficiari
es.
I
thasbe ensai
dthatwhatiswithi
nt hespi
ritiswithi
nt helaw
e
venifitisnotwi
thinthele
t t
eroft helawbe cau
set hes pi
rit
p
revai
lsoverthel
etter
.24cr
alawrednad

Thiswillbyt hel e
gi sl
atu rewasfo rtifiedwi tht heenac tment
ofR. A.No .9829o rthePr e-Ne edCo dei n2 009 .
25cralawred
TheCo ngr e
ss ,
be causeo ft hec haosc o
nfo undingt heindustry
att het ime,c onsideredi tne ces s
ar yt op rov i
deas tronger
le
galfr ame works ot hatnoe n ti
t yc o
uldc l
aimt hatt he
mandat eandde legatedau thorityo ft heSECu ndert heSRC
wasne bu l
ous.Th ePr e-Ne e dCo dec eme ntedt her egu l
atory
frame workgo verning t hep re-ne e di ndustry wi t
hp reci
se
specifi
cst oe nsuret hat t he r ightso ft he p re-need
pl
anho l
de rswo uldbec ategoricall
yde fi
ne dandp r
o tect
ed.
Similar p rovis
ions i n t he Pr e -Ne ed Co de ar e t he
foll
owing:ChanRo blesvi
r tualLawlibrar y

SECTI
ON 32.Ter
msandCo ndi
ti
onsofaTrustFund.— A
tr
ustfundmustbee
stabl
is
hedsepar
ate
lyfo
re ac
ht yp
eof
pre-nee
dp l
anwiththetrus
tde par
tmento fatrus
tc o
mpany,
bankorinves
tmenthousedoingbusi
nessinthePhi
li
ppi
nes
.No
trustfundshal
lbee s
tabl
ishedbyap re-needcompanywit
h
anaffil
iat
et r
ustenti
tysubjectt
oSe c
t i
on38hereo
f.

Thetrus
tagr e
e mentshal
lbes ubmitt
e dtotheCo mmissi
on
forapp
rovalbeforeexe
cutio
nands hal
lcont
ainthefollo
wing
sal
ie
ntprovi
si
ons,amongothers
:ChanRobl
esv
irt
ualLawl
ibrary

(
a)Themanne
rinwhi
cht
het
rus
tfu
ndi
stobeo
per
ate
d;

(b)I
nvest
mentpower
so fthetru
ste
ewi t
hresp
ecttot
rus
t
depo
sit
s,i
ncl
udi
ngthechar
acte
randkindofi
nves
tme
nt;

(
c)Audi
ti
ngandsett
lemento
fac
cou
ntso
fthet
rus
teewi
th
r
esp
ecttothet
rus
tfu n
d;

(
d)Bas
isu
ponwhi
cht
het
rus
tfu
ndmaybet
ermi
nat
ed;

(
e)Pr
ovi
si
onsfo
rwi
thdr
awal
sfr
omt
het
rus
tfu
nd;
(f)Thatt hetru
steeshal
ls u
bmittothep o
wero
fthe
Commiss
iontoe
xamineandver
ifythet
rus
tfund;

(
g)Anu nde
r t
ak i
ngbythet
rus
teethatits
hal
labi
debyt
he
r
ule
sandr egulati
onso
ftheCommi
ssio
nwithr
espec
ttot
he
t
rustfu
nd;and

(h)Anunder
tak
ingbythetr
ust
eethati
tshal
lsubmitsu
ch
othe
rdatao rinfo
rmat
ionasmay bepre
scri
bed by t
he
Commis
sio
n.

SECTION3 3
.Re s
ponsi
bil
iti
esoftheTr
ust
ee.-Thet
rus
tee
shal
l:
ChanRobl
esv
irt
ualLawl
ibr
ary

(a)Adminis
terandmanagethetru
stfu
ndwi t
hutmostgoo
d
fait
h,careandprude
ncerequ
ire
dbyafidu
ciaryr
elat
ion
shi
p;

(
b)Thetrus
te eshallhav
et hee xcl
usi
vemanagementand
c
ont
rolov
ert hefu ndsandt her i
ghtatanyt i
met osel
l,
c
onv
ert,i
nves
t ,c
hange ,trans fe
ro ro t
her
wis
ec hangeor
dis
poseo ft he ass
etsc omp r
isi
ng t
he funds wit
hinthe
paramet
ersp r
escri
bed by t he pre-ne
edc o
mpany and
provi
ded t hese parame t
ers are compl
iant wit
h the
Commissi
on'
sr e
gulat
ions;and

(c
)No tusethetr us
tfu ndtoinvesti
no rext
e ndanyl oano r
credi
t ac commo dati
ont o t he p r
e-needc o
mp any, i ts
di
r ec
tors,offi
cers,stockhol
ders,andr el
atedi nterestsas
wella st op e
rsons ore nt
erpri
sesc o
ntrol
li
ng,o wnedo r
contro
ll
edby, oru nderc ommo ncontro
lwiths aidcomp any,
i
tsdi rec
tors,officers
,s toc
khol
dersandr elatedi nterests
exceptfore nt
iti
e swhicharedirectprovi
derso fp re-need
companies.

SECTION3 4.Investme nto ft heTru stFund.— Toe nsurethe

li
quidi
tyo ft het r
ustfu ndt ogu aranteet hede l
iv
eryoft he
benefi
t sprovidedfo ru ndert hep lanc ontractandlik
e wi
se
obtains ufficien
tc api
talgr owtht o me e tthe growing
actuarialreservel iabil
ities
,al linv est
me ntso ft het ru
st
fund/so fap re
-ne e
dc omp any s hal
lbe l imi
tedt ot he
fol
lowing and su bj
ect to li
mitati
ons, t o
wit:
ChanRo blesvi
rtualLawl i
brary
(a)Fi x
edi nco
mei nstruments
.— Thesemaybeclas
sifie
di nto
short-term andl ong-terminstruments
.Theinstr
u menti s
short-te r
mi ft hemat uri
typ er
iodisthre
ehundreds ixty-
fiv
e ( 365
) days o r l ess. This c ategory
i
ncludes:ChanRoblesvi
rtual
Lawli
brary

(
1) Gov
ernments
ecu
rit
ieswhi
chshallno
tbel
esst
hant
en
p
erc
ent(10%)oft
hetru
stfundamount;

(2)Savings/t
imedeposi
tsanduni
tinves
tme nttrus
tfu nds
maintai
nedwithandmanagedbyadulyauthori
zedbankwith
sati
sfact
o r
ye xami
nat
ionrati
ngasoft helastexamina
t i
on
bytheBSP;

(3)Co mmerci
alpapersdulyregis
teredwiththeSECwitha
creditrati
ngo f"1"fo rshort-te
r m and"AAA"forl
ong-
term base
do nt herati
ngs cal
eo fanac cr
edit
edPhi
li
ppi
ne
RatingAgencyoritsequi
vale
ntatt hetimeofi
nves
tment
.

Themaximume xpo
sur
et olo
ng-ter
mcommercialp
apersshal
l
notexc
ee dfifte
enp er
cent(15
%)o fthetotaltru
stfu nd
amou
ntwhi l
et heexp
osuretoeachco
mme r
cialpaperis
suer
shal
lno
tex
cee
dte
npe
rce
nt(
10%)o
ftheal
lo
cat
edamo
unt
;
and

(
4)Direc
tloanstoc o
rpor
atio
nswhi c
har efi
nanci
all
yst
able
,
p
rofi
tabl
efo rthelas
tthree(3)yearsandhaveagoodtr
ack
r
ecor
do fpayingthei
rprev
iousl
oans.

The
seloansshallbefull
ysecuredbyar ealest
atemortgage
uptotheextentofsix
typ e
rcent(60%)oft hezo
nalv
alu
at i
on
oftheprop
ert yattheti
met heloanwasgrante
d.

Thepropert
ys ha
llbec ove
redbyatransfe
rc ert
ifi
cateof
ti
tleregi
ste
redint henameofthemo
rtgagorandfreefro
m
l
iensandencumbrances
.

Themax i
mum amounttobeallo
catedfo rdirectlo
ansshal
l
notexc
e e
dfivepe
r ce
nt(5%)oft het o
talt
rustfundamount
whil
etheamo u
nttobegr ant
edt oe achcor
porateborr
ower
shal
lnotexc
eedtenperc
ent(10%)o ftheamountall
ocat
ed.

Themax
imu
mte
rmo
fthel
oans
hou
ldbenol
onge
rthanfo
ur
(
4)ye
ars
.

Di
rectloanstoplanhol
dersareex
emp tfromtheli
mit
ati
ons
se
tfo rt
hu ndert hi
ss ec
tion
:Provi
ded,Thatsuc
hloansto
pl
anhol
dersshal
lno texceedtenp
ercent(10%)ofthetot
al
tr
ustfundamo u
nt .

(
b)Equ
iti
es.— Inv
est
mentsinequ
iti
esshal
lbelimit
edto
s
toc
ksl
is
tedonthemai
nboardofal
ocals
tockex
change.

Inv
es t
me nt
s in duly r egi
ste
red c ol
lec
tive investment
i
nstrumentssuchasmu t
ualfundsar eall
owe dhe r
eu nder
:
Provi
ded,Thatsuchfundsar ei
nves
tedo nl
yi nfix
edi ncome
i
nstruments and bl
uec hip
ss ecuri
ti
es,s ubj
ectt ot he
l
imitati
onspre
scr
ibedbylaws,rul
esandregulati
ons.

Theseinvestmentsshallincl
udes tocksissu
edbyc ompanies
thatar efinanci
all
ys table,ac tiv
e l
yt r
aded,p os
sessgo od
trackrecordofgr o
wt handhav ede cl
ar eddivi
dendsfort he
pastthree(3)years.Notwithstandingt heprohi
biti
onagainst
transa
ctions wit
h di rec
t o
r s
,o fficers,stockhol
ders and
rel
atedi ntere
sts,thet r u
s t
eemay i nves
ti ne qui
ti
eso f
co
mpani
esrel
atedt othet
ruste
ep ro
videdthe
sec omp ani
es
co
mplywi
ththefor
e go
ingc
rit
eriap
rovide
dinthisp
ar agraph
fore
qui
tyinv
est
me nts
.

Theamou nttobeall
ocat
e dforthispurposeshal
lnotexceed
thi
rtyp ercent(30%)oft hetotalt rus
tfu nd whil
et he
i
nvest
me nti n any p
artic
ularis
s ues hal
lno te x
ceedt en
per
cent(1 0%)oftheall
ocatedamo u
nt.Theinvestmentshal
l
bereco
rde dattheaggregateofthelowerofc os
tormar ket
.

Exis
tinginv
estmentswhic
hareno
tinac
cor
dancehere
with
shal
lbe di s
pose
do f wi
thi
nth
ree(3)year
s fro
m t he
effecti
vi
tyofthisAct.

(c)Re alEstate .— The ses hal

li ncl
uder eale statep rope
rt i
es
lo
cated i ns tr ategic ar eas o f c i
ties and fi rstc lass
mu ni
cipali
ti
e s.Thet ran
s ferc er t
ifi
cateo ft i
tle( TCT)s hal
l
be int he name o ft he s e ll
er,fr ee fr o m l i
ens and
encumbr ancesan ds hal
lbet ransferredi nt henameo ft he
trust
e e i n t r u
st fo r t he p lanholders u nless t he
sel
ler/transfe rori st he p r
e -needc omp any whe re
in an
annotationt ot heTCTr elativ
et othes ale/transfe rmaybe
all
owed. Itshallber ecordedatac quisi
tionco s
t.
Howe ver
,ther ealest ateshallbeap p r
aisede veryt hree( 3)
yearsbyal icensedr ealestateapp raiser
,ac c
redi t
e dbyt he
Phil
ippi
neAs soci
atio
no fRe alEs t
at eAp prais
e r
s ,tor eflect
theincreaseo rde c
re aseinthev al
u eo fthep rop
e rty.Inc ase
theap prai
s alwo ul
dr esul
tinani nc reaseint hev al u
e ,only
si
xtyp ercent(6 0%)o ft heapp r
aisalincreaseisallowedt obe
recordedint hebo okso fthetrustfu ndbu tincas eo fde cl
ine
i
nv alu
e,t he e nti
re de c
li
ne shallbe r ec
o r
ded.Ap prai
sal
i
ncre ments ho
u l
d no tbe u s
e dt oc ov
eru pt he r equired
mont hl
yc o
nt ri
bu t
iont othet r
u s
tfu nd.

Thet otalr ec
ordedv alueoft her ealestateinves
tmentshall
note x
ce edt enpercent(10%)o fthet o
talt r
ustfundamount
oft hep r
e -needc o
mp any.I
nt heev e
ntt hattheexis
tingreal
estateinve s
tme ntexceedstheafo resaidlimit
,thesameshall
bel ev
eledo fft othep resc
ribe dlimitwithinthre
e( 3)ye
ar s
fromt hee ffe c
tivi
tyo fthi
sCo de
.

Inv
estmento fthet rus
tfund, whic
hisnotinaccordancewith
thep r
ecedingp aragraphs
,s hal
lno tbeallo
we du nle
sst he
pri
orwr i
tte
nap p r
o v
aloft heCo mmissi
onhadbe ens ec
ured:
Provi
ded,further,Thatnodep os
itorinv
est
me ntinanys i
ngle
enti
tys hallex
ce edfifteenp ercent( 15%)o ft hetotalvalue
ofthet rustfu nd:Pro v
ided,finally,Thatt heCo mmi ssi
onis
autho
r i
zedt oadjustt hep ercentageal l
ocationp e
rc ategory
setforthhe rei
nno tine xcessoft wop ercentage( 2%)p oi
nts
upwardo rdownwar dan dnoo ftene rthano ncee veryfive(5)
years
.Thefi rstadj ustme nthe reunde rmay bemadeno
earl
ierthanfi v
e( 5)ye arsfr o
mt hee ffectivi
tyo ft hi
sAc t
.
Thepre-ne edcomp anys hal
lnotu set hetrustfu ndt oextend
anyloant oortoinvestini t
sdir e
ct ors,s
tockholders,offi
cers
orit
saffi l
iates
.

x
xx

SECTION 3 6.Tru stFu ndDe fic i

encies.— Up onapprovalby
the Commi ssio
no ft he p re-needr ese
rv ec ompu tati
on
submitt
e dint hep recedings ection,anyde fici
encyi nt he
trus
tfu nd,whe nc omp aredt ot he r ese
rv eli
abili
tiesas
repor
tedi nt hep re-ne edr e
s e
r vev aluati
onr eport
,s hallbe
fundedbyt hep re-nee dc ompanywi thins i
xty(60)daysfr om
such app r
oval.Fai luret oc o v
ert he de fi
cienc
yi n an
appropr
iatemanne rwi thint het imer equi
re dshallsubject
thep re-needc o mpany t ot hep ayme ntof ap enalty,in
addit
iont ootherr emedi esexercis
abl ebyt heCo mmi s
s i
on,as
provi
dedfo rint hisCode .Anye xc
e sso fthet rus
tfu ndo ver
theactu
arialres
e r
vel i
abi
li
ti
esmaybec
redi
tedt
ofu
tur
e
depo
sitre
qu i
rements.

SECTI ON 3 7.Liqui
dityRe serve
.— Thet rus
t eeshallatall
ti
me smai ntainali
qu i
dit
yr es
ervewhi chshal
lbes uffici
entto
cov
era tleastfift
ee npercent(15 %)o fthetrustfu ndbutin
nocas el essthano nehu ndredt wenty-fivepercent( 125
%)
oftheamo untoftheav ail
ingplansfo rthesu c
ce e
dingye ar
.
Fort hispu rpos
e,thep re-needc omp anyshalltimelysubmit
tot he t rusteeas ummar yo f be nefi
tsp ayable fort he
suc
ce edingye ar.

Thefol
lowi
ngshal
lqual
ifyasi nv
estme
ntsfo
rthel
iqu
idi
ty
res
erv
e:ChanRo
ble
svi
rtu
alLawl
ibrary

(a)Loanssecuredbyaho l
d-ou
to nassi
gnme ntorpl
edge
depo
sitsmaint
ainedeit
herwiththetrust
eeo rothe
rbanks
,
orofde pos
itsubst
itu
teo fthet r
ust
eeitsel
fo rmort
gage
andchatt
elmortgagebondsi
ssuedbythetru
stee;

(b)Trea
sur
ynote
sorbil
ls
,o t
hergov
ernme ntsec
uri
ti
eso
r
bonds
, and s
uchothe
re v
idenc
esori ndebt
ednes
s or
obl
igati
onsthese
rvi
ci
ngandrepaymentofwhi
char
efu
ll
y
guarant
e e
dbytheRepu
bli
coft
hePhil
ippi
nes
;

(
c)Re
p ur
chaseagr
e ement
swi
thanyofthosement
ione
din
I
tem"b"abov
e,asunder
lyi
ngi
nst
rume
ntsthe
reo
f;and

(
d)Sav
ingsorti
mede
pos
itswi
thgo
ver
nme
nt-o
wne
dbank
sor
c
ommerci
albank
s.

SECTI ON3 8.Trustees.— Up onap pro v

alo ft heCo mmi ssi
onor
whe nt he Co mmi ssio
nr equ ires fo rt he p rotectiono f
planhol
de rs,t he p re-need c ompany s halle ntrustt he
manage mentandadmi ni
strationo ft het rustfu ndt oany
reputablebank 'st r
u stde partme nt,t rustc o
mp anyo rany
entity au thorized t op erfor m t rust fu ncti
ons i nt he
Phili
ppines:Pr o v
ided,Thatnodi rectorand/o roffic e
ro fthe
pre-nee dc omp anys hallatt hes amet i
mes e rv
easdi rect
or
and/o ro fficero ft heaffi liateo rr elate dt ruste ntit
y:
Provided,fu rther,Thatnot rustfu nds hallbee stablis
hedby
ap re-ne edc omp anywi thas ubsidiary,affi li
ateo rr el
ated
truste ntity.Ho wever,s uc
hmaybeal l
owe d:Pr ovided,That
the foll
owing c
ondi ti
ons are compli
ed
with:ChanRo blesvi
rtualLawli
br ary
(
a)A wr itt
en appro
valo
f t
he Co
mmi
ssi
on hasbe
en
p
rev
iou
slyo
btaine
d;and

(b)Publ
icdi
scl
osur
eoft heaffil
i
atio
nwit
hthet
rus
tent
ity
beinc
ludedi
nallmate
rial
sinwhatev
erfo
rm.

The Co mmiss
ions hal
lhavet he au
t ho
rit
yt op re
scri
be
appropr
iaterulesthatshal
lensur
et hattheyiel
do fthe
trus
tfu ndismaximize
d,co
nsi
ste
ntwit
ht herequ
ire
mentsof
safetyandli
quidi
ty.

[
Ital
ic
sSu
ppl
ie
d]

"Unde rthep ri
nc i
pleoflegi
slativeappr o
valofadmini s
trati
ve
i
nt e
rp ret
ation by r e-enac
tme nt ,the r e
-enactme nto fa
statute,s ubstantial
lyu nchange d( as int hi
sc ase),is
persuasi
veindic ati
ono ftheado ptionbyCo ngresso fap ri
or
executiv
ec onstr ucti
on.
"26Ac c
ordingly,whereas tatuteis
suscepti
bleo ft heme ani
ngp lacedu ponitbyar ul
ingo fthe
governme ntage n
cyc hargedwi thi t
se nforcementandt he
l
e gi
slaturet he reafterr eenactst he p ro
visi
ons wi t
hout
s
ubst
anti
al change,s uc
h acti
on is to so
me e xt
ent
c
onfi
rmator
yt hatt he r
uli
ng c
arr
iesou
tt he l
egi
sl
ati
ve
p
urpos
e.2
7cral
awrednad

TheCo u rtcanno tgoagai nstthatlegi

slativeintentfo ritis
thedu tyo fthisinstit
utiontor e
adwhatt helawintends . I
tis
ac ardinalrulet hat,insee k
ingtheme ani ngoft hel aw,t he
fir
s tc oncerno ft hej udges houl
d bet odiscoveri ni ts
provi
s i
onst hei ntento ft helawmaker.Unqu es
tionably,t he
l
aws houldne verbei nterp r
etedins uchawayast oc ause
i
njusticeast hisi sneverwi thi
nt hele gisl
ativ
ei nte nt.An
i
ndisp e
ns abl
ep arto fthatintent,i
nfact, forwep resumet he
good mo tiv
es o f t he l egis
latu
re , i s t o r ender
jus
t i
ce.28cral
awr ednad

Tor ul
et hatLegac yhasr e tai
nedabe nefi c
ialinterestinthe
trustfundi st op er
p etuatet heinj
us ticesbe i
ngc ommitted
againstthep l
anh ol
dersandv iol
atenoto nlyt hespiri
toft he
trust agreeme nt but,mo r eimportant ly,t he lawmak er'
s
intent
.I fi ndeed Le gacy had ani nte restt hatc ould be
reached by i t sc redit
o rse ve
n du ring i nsol
vency,t he
planhol
de r
swo uldbep re
j udice
da sthe ywo uldbefo rc
e dto
shareint heass e
t sthatwo u l
dbedi s
t ribu t
e dp roratat oal
l
credit
ors,whe t
he rpl
anho ldersornot.I two uldc o
ntradictthe
ve
r ypurp
oseforwhichthet
rus
twasmandat
ed by t
he
Congr
essi
nthefi
rstp
lace
.

Third,t hep e rcei

vedi nte
r e s
to fLe gacy,ast oute dbyt he
Assi
gne e ,hass i
mp l
ynobas is.Itmayap peart hatLe gacy
unde rtheagr eementhasc ontrolovert hee nforceme nto f
thet rustbe c auseofi t
sp ro vi
sionss t
atingthatLe gacys hall
"sol
e l
yand e xcl
u s
ivel
y][ be ]r esponsi
blefo rfu l
fil
li
ngt he
servicesr efe rr
e d toi nt he r e ci
tal cl
au ses and t he
settleme nt/payme nto fclaimso fanyp ersonorfi rmav ail
ing
ofs uchs ervices"andt hat" [a]nywr ittendirectionoft he
Comp any[ tot het rus
tee]s hallconstituteace rt
ificati
ont hat
thedi str i
butiono fp ayme nts odi rectediso newhi c
ht he
Comp anyi sau t
horizedtodi r
e c
t" 2
9Su c hprovi
sions,howe ver,
cannotbec onstruedasLe gac yhav i
ngr e
tainedabe neficial
i
nter estint het rustfund.

Tobeginwi th,theaforest atedp ro

visi
onsr efersolel
yt othe
del
ive
r yo ft hepr o
ceedso ft het rustfr om LBPt oLe gacy
and thenfi nall
yt ot hebe ne fici
aries.I neffe ct
,Le gacy
merel
yagr eedt ofac i
li
t atet hep ayme nto ft hebe nefi
ts
fromt hetru stfundtot hei nte ndedbe nefici
ari
e s
,actingas
acondu i
to ranage nto ft het r usteeint heenforceme ntof
thetrustagr eement.Unde rt hege neralpr i
nci
ple
so ftr us
t,a
tru
stee,byt het e
rmso ftheagr e
eme ntmaybep ermittedto
del
egatet oage ntsortoco-trustee
so rtootherp e
rsonsthe
admini
strationoft hetru
sto rthep erfor
manceo factwhich
coul
dno to therwisebep ro
pe r
lyde le
gated.30Thus,byt he
ter
mso ft he trust
,asi nt hisc ase,a trus
tee may be
author
izedo rpermitanagentt odoac tssuc
hast hedeli
very
ofthebene fitsoutofthetrustfund.

TheCo ur tcanno ts ubscribee i

thert ot heAs signee'sp osi
tion
thatLe gac yi sade btoro ft hep l
anho l
de rsr el
ativet ot he
tru s
tfu nd.I nt rust,iti st het ru s
t ee,andno tthet rus
to r
,
whoo wesfi du c
iarydu tyt ot hebene ficiar y.TheRe stateme nt
isc l
earo nt hisp oi
nt.Se ct i
o n1 70t her eofp rovidest hatt he
"tr u
st eeisu nde radu t
yt ot hebe nefic i
ar yt oadmi nistert he
tru s
ts olelyint heinte re
s to ft hebe ne ficiary."31Se ct i
on1 82
alsos tatest hatt hedu tyo fat r
us t
e ei st op ayi ncomet ot he
be neficiary.32Thu s,LBPi st askedwi tht hefi duc i
arydu tyt o
actfo rt hebe ne fi
to ft hep l
anho l
de rsast omat ter swithin
thes copeo ft her el
ation .
3 3Li k
eade bto r
,LBPo we st he
planho l
de rst hea mo untsdu efr omt het r ustfu nd.Ast ot he
planho l
de rs,asc reditor
s ,t heyc anr ight fu l
lyu see qu i
table
reme die sagai nstt het rust eefo rt hep r
o tectiono ft he i
r
intere stint het ru
s tfu ndand,i np ar ti
c ular,t hei
rr ightt o
de mandt hep ayme nto fwhati sdu et he m fr omt hefu nd.
Ver i
ly,Le gacyi souto ft hep i
ctureande xi
stso nlyasa
repre s
ent ati
veo fthet rus
tee,LBP,witht heli
mitedr oleo
f
facil
itatingt hedeli
veryoft hebenefi
tso fthet r
ustfu ndto
thebe nefi c
iari
es-thep l
anholde
rs.Thet r
ustfu ndsho u
ldnot
revertt oLe gacy,whi
chhasnobe nefic
iali
nt e
restove ri
t.Not
beinganas seto fLegacy,thetrustfundisimmu nefr omits
reachandc annotbei ncl
udedbyt heRTCi nthei nsolv
enc
y
estate.

Int hee nd,t hefai lureo fJ u dgeLai got oc onsidert he

provisi
onso ft heSRC,t heNe wRu le sandt hel awo ntrusts
,
thats houldhav ewar rantedt hee x clus
iono ft het rustfu nd
fromt hei nsolve ncye stateo fLe gacy,c onst it
u t
e d grave
abu s
eo fdiscre tion.Int reati
ngt het rustfu ndasfo rming
parto f Le gac y'si nsolv
enc ye s
t ate,J udge Lai go a cted
againstwhatwasc ontemplatedbyl aw.Het urne dabl i
nde ye
tot hewilloft heCo ngressase xpre ssedthr o
u ght heSRCand
thePr e-Ne edCo de .I
nt hep ro
ce ss
, hee ndange r edt hec l
aims
oft hep lanholde rsby al l
o wi
ng t hep robabilityt hatt hey
wo ul
dbedr asticallyredu cedo rdi ssipated.Hes ho ul
dhav e
actedp rudentlybe ari
ngi nmi ndt hatt hee st ablis
hme nto f
thet ru s
twasp re c
isel
yfo rt hee xcl
u s
ivebe nefito ft he
planholders.
Enj
oini
ngt
heSECfr
omv
ali
dat
ingt
he
c
lai
msagai
nstt
het
rus
tfu
ndi
sgr
ave
abu
seo
fdi
scr
eti
onfo
rthei
nso
lve
ncy
c
our
thasnoau
tho
rit
ytoo
rde
rth
e
r
eve
rsi
ono
fpr
ope
rti
est
hatdono
t
fo
rmp
arto
fLe
gac
y'si
nso
lve
nte
stat
e.

The As signeec ited Abr erav .Co l

lege Assurance Pl an34
(Abr er
a),whe r
et he Co u
rthe l
dt hatc lai
msc overed by
rehabili
tationproce edi
ngsbe foretheRTCs houl
di ncl
u deall
claimsorde mandso fwhateverna tur
eo rcharacteragai nsta
de btoro ri t
sp r
op ert
y.Att he hearto ft he Assign ee'
s
argu menti sthatbe causetheau thori
tyiswitht heRTC,t he
SEChasnor i
ghtt ointerfereintheinsol
vencyp r
o c
e e
di ngs.

Itisane r
rorfo rt heAs si
gne etoassu
met hattheau tho
rit
y
oft heRTCe x
tendst othec lai
msagainstthet rus
tfu nd.
Clai
msagai nstt het rustfu ndmu stbedisti
ngui
s he
dfr om
cl
aimsagains tLegac y.Theclaimsagai
nstthetrustfundar e
dir
ec t
edno tagai nstLe gacy,butagainstLBP,thet rus
tee,
bei
ngt hede btorrelativ
et othetrustpro
perti
es.
The Pr e-Ne ed Co de i sc le
ar o nt his
.I tr eco gnizest he
distinctionbe t
we enc lai
msagai nstt hep re -needc omp any
andt hoseagai nstt het r
ustfu nd.Se cti
on5 2( b)s tate sthat
li
qu i
dat ion" proce
edi ngsinc ourtshal
lp ro
cee di nde pendent l
y
ofp ro c
ee dingsint heCo mmi ss
ionfo rt hel i
qu idationo f
claims ,andc r
editorso fthep r
e-needc omp anys hal lhaveno
pe r
s onali
ty what soe verint heCo mmi ss
ionp roce edingst o
li
tigat ethe ircl
aimsagai nstt hetrustfunds."Ther easonwhy
claimsagai nstthet rustfu ndscanp roceedi nde p
e nde ntl
yo f
thep roceedingsint hec o
u rtsisthefac tt hatt hel atteris
direc tedagai nstadi fferentp erso
no rentity.

Moreover,t
heAs s
igneemu s
tber emi
nde dthattheiss
uein
Abreraisnotsi
mil
art otheque
stio
nraisedherebytheSEC.
Inthec aseatbe nch
,theSECqu es
tio
nst hepropr
ietyof
i
ncludi
ng the trust fu
nd int he i
nvento
ryo f Legacy'
s
cor
po r
ateasse
ts.

J
uri
sdi
cti
ono
verc
lai
msfi
le
d
agai
nstt
het
rus
tfu
nd
Fromt he effe cti
vityo ft he Pre-Ne e
d Co de,i tist he
InsuranceCommi ss
ion(IC)t hat"shallhavet hep ri
maryand
exclu
s i
vepowe rt oadjudi
cat eanyandal lc l
aimsinvol
vi
ngp re
-needp l
ans.
" 35Thet r
ansitoryp rovisi
onso ft hePr e
-Nee d
Code ,howev
e r,p ro
videthat" [
notwi
t hst
andinganyp r
ovi
sion
tot hec ontrary,allp endingc lai
ms ,comp l
aintsandc ases
(referri
ngt op re-needc o
nt ractandt rustclai
ms )fi
ledwith
the SEC s hall be c ontinued in i ts fu ll and final
conclusi
on.
"36 c
ra l
awrednad

ThePr e-Ne ed Coder ecognizest hatt hej u r

isdictiono ver
pending c l
aims agai nstt he t rust funds p riort oi ts
effectiv
ityi sves
t edwi tht heSEC.Su chau t
ho ritycanbe
easi
lydiscernedeve nfr omt hep r
o vi
sio
nso ft heSRC. Sec ti
on
4 t hereof p rovi
de s t hat de spite t he t ransfer o f
juri
sdict
ion37t ot he RTC o ft hose mat terse nume rated
underSe c ti
on5o f P. D.No .9 0 2-A,38t he SEC r emains
authori
zedt o"exe
r ci
s esucho therp owersasmaybep rovided
bylawaswe llastho sewhi c
hmaybei mpl
iedfr om,o rwhi ch
arene cessaryori ncidentalt ot he c arrying o uto f,t he
expressp owersgrant edt heCo mmi ssi
on3 9t oac hie
vet he
objecti
vesandp urposeso fthe selaws."40Re l
e v
antt heretois
Section 3 6.
5 ( b) o f t he SRC whi ch s tates
that:
ChanRo ble
svi
rt ualLawli
brar y
TheCo mmi s
sionmay,havingdu eregardt ot hep ublicint erest
ort hep ro
tectio
no finvestors
,r egul
ate,su per vi
s e,ex amine,
suspend oro therwis
e disconti
nues uch and o the rs i
milar
fundsu ndersuchr u
lesandr egulati
onswhic ht heCo mmi ssion
mayp r
o mul
gat e
,andwhi chmayi ncl
udet ak i
ngc us t
o dyand
manage mento fthefu n
di tsel
faswe llasinv estme ntsi n,and
disburs
e mentsfrom,thefu ndsu nders uchfo r mso fc ontrol
ands upervi
sionbyt heCo mmi ss
ionasi tmayfr omt imet o
timer e
qu i
re.Theauthori
t ygrantedt otheCo mmi s
sionu nde r
thissubsecti
ons hal
lalsoap pl
yt oallfu ndse s tablishe dfo r
thep rotecti
ono finvestors(whichne cessari
lyi nclude sthe
trustfu nds),whe t
here s
tabli
shed by t he Co mmi ss i
ono r
otherwise.
41

Concomi
tantl
y,undertheNewRu les
,theSEC" may,atits
dis
creti
on,demandfortheconve
rsio
nt ocas
horotherne
ar
cashassetsoft heinves
tmentsmadebyt heTrus
teeto
prote
cttheinte
restofthePl
anhol
ders.
"42

Ther
efore,ev
enp ri
ortot hetrans
fert otheICo fmatt
ers
per
taini
ngtop re
-needplansandt ru
stfu nds
,theSEChad
aut
horit
yt oregul
ate,manage,andhe arallc
lai
msinv
olv
ing
trus
tfu nd as
se t
s,ifi nitsdis
creti
on,pu
bli
cintere
sts o
requi
red.Accordi
ngly,allcl
aimsagains
tthet r
ustfu nds
,
whic
hhav ebeenp endingbeforeit
,ar ecl
ear
lywithi
nt he
SEC'sautho
rit
yt oruleupon.

Pr
e-Ne
edCo
dei
scu
rat
iveand
r
eme
diali
nchar
act
erand,
the
refo
re,
c
anbeap
pli
edr
etr
oac
tiv
ely

Finall
y,itmu stbes tresse
dt hatt hep ri
maryp rotecti
on
accorded by the Pre-Need Co de t ot he pl
anholdersis
curativ
e and r emedialand,t herefore
,c an be ap pli
ed
retroacti
vel
y.Ther uleist hatwhe r ethep r
ovisi
onso fa
statutec l
ari
fyane xi
sti
ngl aw anddono tcontemp l
atea
change int hatlaw,the statute may be givenc u r
ative,
reme di
aland r etro
activee ffect.4
3 To r ev
iew,c urati
ve
statutes aret hos
ee nact
e dt oc ure defects
,abr i
dge
superflui
ti
es,andc ur
bc ertainev i
ls
.44Ass tr
essedbyt he
Co u
rtinFabianv.Desi
erto,
45cralawrednad

I
ftherul
et ak
e sawayavest
edri
ght
,iti
snotpro
cedur
al.I
f
t
herul
ecreatesar i
ghts
uchast
heri
ghttoapp
eal,i
tmaybe
cl
ari
fiedasas u
bstant
ivemat
ter;butifito
p er
atesasa
meansofimpl
ementi
nganexi
sti
ngrightt
hentherul
edeal
s
merel
ywithp
rocedu
re.

[
Emp
has
isSu
ppl
ie
d]

Ar eadi ngo fthePr e-Ne edCo deimme di

atelys howsthati ts
provisi
o nsop er
ateme rel
yi nfu rtheranceo ft her emedyo r
confirmat iono fther ighto ft hep l
anho l
derst oe xcl
usiv e
ly
cl
aimagai nstthet ru
s tfu ndsasi ntende dbyt hel egis
latu re.
None ws ubstanti
ver ightwasc re
at edo rbestowe du pont he
planholde r
s.Se cti
on5 2o ft hePr e
-Ne edCo deo nlye choes
andc l
ar i
fiestheSRC' sintentt oexcl
u defromt heinsol
ve ncy
proce edingt rustfund as se
t st hathav ebe ene s
tabli
s hed
"exclusivel
yfo rthebe nefito fp l
anholders.
"I twasp r
ecis e
ly
enact edt ofo i
lthetac ti
co ft ak i
ngu ndu eadvantageo fany
ambi guitie
si ntheNewRu les.

Anydo u
bto rreserv
ationinthi
sregardhasbeendispell
edby
thePre-NeedCo de.Section57thereo
fp r
ovidesthat"[a]ny
pre-ne
edc ompanywho ,attheti
meo ftheeffectiv
itvofthis
Codehasbe enregis
teredandl i
cens
edt ose
llpre-needplans
ands i
milarcontracts
,s hal
lbec onsi
dere
dr e
gistere
dand
li
censed u ndert he p rovi
si
on o f thi
s Co de and i ts
imple
me ntingr ul
esandr egul
ati
onsands hallbes ubjectto
andgo vernedbyt hep rov
isi
onshereo
fxxx.
"Thu s,Legac yand
allothere xi
sti
ngp re-needcomp a
niesc
anno tclaimt hatthe
provi
sio
nso fthePr e
-Ne edCo dearenotap pl
icabl
et ot hem
andt ot hec l
aimswhi chaccruedpri
ortot hee nactme ntof
thesaidlaw.

"[I
]thasbe ens aidt hatar emedialstatutemu stbes o
construe dast omak ei teffecttheevidentp u
rp os
efo rwhich
itwase nacted,s othatift hereasono fthes tatutee x
tends
top astt ransactions
,aswe llast
ot hoseinthefu t
ure,thenit
wil
lbes oap pl
ie
dal thought hestatutedo e
sno tintermss o
direct:46Wi tht hePr e-NeedCodehav ingtheat t
ributeo fa
reme dials t
atute ,Legacyandallp r
e-ne edprovidersort hei
r
creditorsc annot ar guet hat i
tc anno t be r et
r o
activel
y
applied.

Co
ncl
usi
on

Ins u
m,imp ro
videntl
yo rderi
ngt heincl
usi
onoft het r
ust
fundi nLegacy'sins
olv
enc yestatewit
houtregar
dt othe
avowedstatepoli
cyofp r
o t
ecti
ngt heco
nsumerofp r
e-need
plans,aslai
ddo wnint heSRC,t heNewRu l
es,andt hePre-
Ne edCo de,const
itu
te sgraveabuseofdiscr
e t
ion.TheRTC
should havek nown,and o ughttok now,the overarchi
ng
consi
de rat
iont he Co ngres
si ntende
d inr equi
ring the
establi
shmento ftrustfunds-t oupho
ldfir
standfo r
emost
theinterestoftheplanhol
ders.

TheCo urtuphol
dsitsdu tytop rotec
tt heo rdinaryFili
pi
no
workerswhoarese ek
ingafu turefort hei
rc hil
drent hr
ough
pre-needcontr
acts.Thei
rincredi
blylongwai tiso verasthi
s
i
st hemo mentwhent hei
rright
fu lande x
c l
usiv
er ighttothe
tru
s t funds,createdp rimari
ly fort hem,i sj udi
ci
all
y
res
p ec
tedandaffirme d.

WHEREFORE,t
hep eti
ti
onisGRANTED.TheJune26,200
9
Orderoft
heRegi
onalTri
alCo
urt
,Branc
h56,Makat
iCit
y,is
decl
are
dNULLandVOID.

The Sec
u r
iti
esand Exc
hange Commiss
ioni
sdirect
edt o
pro
cessthecl
aimso
flegi
ti
mateplanho
lder
swi
thdi
spat
ch.