Legacy’s P300M trust fund solely for benefit of planholders, says SC

The Supreme Court nullified the decision of the Makati City Regional Court to include the over P300-million trust fund of failed pre-need firm Legacy Consolidated Plans Inc. in the court-managed liquidation proceedings.

In a 24-page decision, the high court’s Second Division through Associate Justice Jose Catral Mendoza said Makati RTC Branch 56 Judge Reynaldo Laigo committed grave abuse of discretion when he included the trust fund as among the corporation’s assets to be distributed to its creditors.

The high court said Judge Laigo disregarded the State’s policy of protecting the consumers as stated under the Securities and Regulations Code (SRC).

“The RTC should have known, and ought to know, the overarching consideration the Congress intended in requiring the establishment of trust funds–to uphold first and foremost the interest of the planholders,” the high court said.

“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 to the trust funds, created primarily for them, is judicially respected and affirmed,” the high court added.

In the mid-2000, the industry collapsed for various reasons and was unable to pay its obligations to the planholders.

This resulted in the pre-need firm being the subject of a petition for involuntary insolvency filed in 2009 by several planholders, which the firm did not object to.

That same year, the Makati RTC declared Legacy insolvent and directed it to submit an inventory of its assets and liabilities, pursuant to the provisions of Republic Act No. 1956 or the Insolvency Law.

Subsequently, Judge Liago ordered the insolvency assignee to take possession of the trust fund of Legacy despite opposition from SEC, which insisted that trust funds were specifically established for the purpose of guaranteeing the delivery of benefits due to the planholders.

The SEC then took the case to the Supreme Court.

In its ruling, the high court said that “to rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the injustices being committed against the planholders and violate not only the spirit of the trust agreement but, more importantly, the lawmaker’s intent.”

“The planholders would be prejudiced as they would be forced to share in the assets that would be distributed pro rata to all creditors, whether planholders or not,” it explained.

At the same time, the high court ordered the SEC to “process the claims of legitimate planholders with dispatch.”

Legacy has a P300-million trust fund but has P1.1-billion liabilities to planholders.

Concurring with the ruling were Associate Justices Antonio Carpio, Arturo Brion, and Mariano del Castillo.