Trust fund of plan holders
AFTER nine long years, there is hope for the plan holders of shuttered pre-need company Legacy Consolidated Plans Inc. (LCP) whose demand for payment of their claims was stalled by a Makati trial court.
In 2009, LCP, together with other companies of the defunct Legacy Group of Companies of the late businessman Celso delos Angeles, closed shop.
It filed for voluntary dissolution with the court. Finding the company insolvent, the court ordered its receiver to take possession of LCP’s assets, including its trust fund, preparatory to their distribution to its creditors.
Trust funds refer to the money the law requires pre-need companies to set aside from the payments of plan holders to pay the benefits when the plans mature.
The court also ordered the Securities and Exchange Commission (SEC), the primary regulator then of pre-need companies, to stop processing the claims of LCP’s plan holders.
In opposing this order, the SEC argued that, following existing regulations, trust funds are established for the purpose of guaranteeing the delivery of benefits due to the plan holders.
The judge rejected this argument. With the rebuff, the SEC, believing the issue involved is of transcendental importance, skipped going through the Court of Appeals and brought the case directly to the Supreme Court for resolution.
Abuse of discretion
Ruling in SEC’s favor, the tribunal said the judge committed a grave abuse of discretion in ordering the transfer of the trust fund to the receiver and in stopping SEC from validating the plan holders’ claim for benefits from the trust fund held by the Land Bank of the Philippines.
The justices said “he turned a blind eye to the will of the Congress as expressed through the SRC [Securities Regulation Code] and the Pre-Need Code. In the process, he endangered the claims of the planholders by allowing the probability that they would be drastically reduced or dissipated.”
The Pre-Need Code provision referred to states:
“At no time shall any part of the trust fund be used for or diverted to any purpose other than for the exclusive benefit of the plan holders. In no case shall the trust fund assets be used to satisfy claims of other creditors of the pre-need company. The provision of any law to the contrary notwithstanding, in case of insolvency of the pre-need company, the general creditors shall not be entitled to the trust fund.”
The tribunal further stated that “to rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the injustices being committed against the plan holders.
“The RTC should have known, and ought to know, the overreaching consideration the Congress intended in requiring the establishment of trust funds—to uphold first and foremost the interest of plan holders.”
The tribunal fell short of reprimanding the judge [which it probably should have done] for ignorance of the law.
Repayments
By this time, with accrued interest, LCP’s trust fund would be worth over P300 million, as against the P1.06 billion in claims the plan holders would have been entitled to had the company not collapsed and the plans matured.
It is apparent the trust fund is insufficient to reimburse the plan holders their installment payments, let alone the benefits due them.
The payments made represent money they scrimped from cutting down on food expenses, reducing their children’s school allowance or foregoing medical treatments to remain current in their installment payments, with the expectation that when the plans mature they will receive money sufficient to pay for their children’s education or meet future financial obligations.
What makes the situation more pitiful is the majority of these plan holders are public school teachers, soldiers, overseas workers, market vendors or low income workers who live from pay check to pay check and for whom every centavo counts.
It’s bad enough the plan holders will receive peanuts if the trust funds were distributed solely among them; worse, if LCP’s other creditors (some of whom are companies owned or controlled by De los Angeles) were allowed to share in it, the plan holders may get crumbs or none at all, depending on how the receiver handles the disposition of the fund.
The fate of LCP plan holders is being similarly suffered by thousands of plan holders of other pre-need companies that have become insolvent or bankrupt.
Sadly, none of their owners or managers has been held criminally or civilly liable for mismanagement of funds.
Receivers
The tribunal’s decision on the treatment of trust funds is instructive to all courts where liquidation or insolvency cases involving pre-need companies are pending at present.
It expressed its sentiments on this issue with these remarks: “The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future for their children through pre-need contracts. Their incredibly long wait is over as this is the moment when their rightful and exclusive right to the trust funds, created primarily for them, is judicially respected and affirmed.”
The LCP plan holders have already suffered more than enough, they should be spared from further emotional aggravation through unreasonable deductions from the trust fund by the receiver or delay in the processing of their claims.
With the trust fund issue settled, the ball is now in the court of the SEC to facilitate the payment of the claims of LCP’s plan holders.
It should ensure the money goes to the right claimants, not to poseurs or fixers, with minimum bureaucratic hassle.
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