Section 5
SEC. 5. Section One hundred seventy-five (A) to Section One hundred seventy-five (U), of the same Act, is further amended to read as follows: "SEC. 175(A). Grounds for Liquidation. — The Insurance Commission shall apply under this Act for an order directing it to liquidate any domestic insurance company or a Philippine branch of a foreign insurance company having security deposits or trusted assets in the country, whenever it finds that the company cannot be permitted to resume business with safety to its policyholders, or to its creditors, or to the public, or, upon the ground that the company has consented to such proceeding through a majority of its directors, stockholders, or members. "SEC. 175(B). Order of Liquidation: Rights and Liabilities. — An order to liquidate the business of an insurance company shall direct the Insurance Commission to continue in possession, as the case may be, of the property of the company and to liquidate the business of the same and to deal with the property and business of the company in the name of the Insurance Commission or in the name of the company as the Court may direct, and to give notice to all creditors who may have claims against the company to present their claims. "The Commission shall be vested by operation of law with the title to all of the property, contracts, rights of action, and all of the books and records of the insurance company as of the date of the entry of the order so directing them to liquidate. The filing or recording of such order in any office where instruments affecting title to property are required to be filed or recorded shall impart the same notice that a deed, contract of sale or other evidence of title duly filed or recorded would have imparted. The rights and liabilities of the company and of its creditors, policyholders, stockholders, members and all other persons interested in its estate shall, unless otherwise directed by the court, be fixed as of the date of the entry of the order directing the liquidation of such insurance company in the office of the clerk of court where the company had its principal office for the transaction of business upon the date of the institution of proceedings under this Act. The right of claimants holding contingent claims on said date to share in an insolvent estate shall be determined by this Act. "The Insurance Commission shall reinsure all the policy obligations of the company in any solvent insurance company authorized to do business, if the unearned premium reserve of such company is sufficient to effect such reinsurance. If such unearned premium reserve is insufficient for the purpose, the Insurance Commission shall reinsure a percentage of each policy of such company outstanding to the extent that its unearned premium reserve may be sufficient for the purpose. No contract of reinsurance shall be entered into by the Insurance Commission except in the pursuance of an order of the court directing the reinsurance and establishing the general form of the contract for the same. "SEC. 175(C). Grounds for Dissolution of Domestic Insurance Company. —The Insurance Commission may apply under this Act for an order dissolving the corporate existence of a domestic insurance company at any time after an order of liquidation has been granted, or at any time upon the grounds specified in this Act. "SEC. 175(D). Commencement of a Proceeding. — The Insurance Commission may, the Solicitor-General representing it, commence any proceeding under this Act by an application to the Court of competent jurisdiction, in the Judicial District in which the principal office of the insurance company involved is located, for an order directing such company to show cause why, the Insurance Commission should not have the relief prayed for. On the return of such order to show cause, and after a full hearing, which shall be held by the court without delay such court or judge shall either deny the application or grant the same together with such other relief as the nature of the case and the interest of policyholders, creditors, stockholders, members, and the public may require. All proceedings under this Act shall be given preference in the courts. "SEC. 175(E). Service of Order to Show Cause. — The order to show cause and the papers upon which the same is made in any proceedings under this Act shall be served upon the insurance company named in such order by delivering them to the president, or other head of the corporation, the secretary or clerk to the corporation, the cashier, the treasurer or a director or managing agent; if it be a voluntary, unincorporated or a joint stock association, order or society, by delivering them to the president, vice-president, treasurer, director, trustee or other officer or a member with managerial powers. "SEC. 175(F). Injunctions. — Upon application by the Insurance Commission for an order to show cause under this Act, or at any time thereafter, the Court in which such order is made, or any judge thereof may without notice, issue an injunction restraining the company named in the order, its officers, directors, stockholders, members, trustees, agents, servants, employees, policyholders, attorneys, managers, and all other persons from the transaction of its business or the waste or disposition of its property until further order of the court. "Such court or judge may at any time during a proceeding under this Act issue such other injunctions or orders as may be deemed necessary to prevent interference with the Insurance Commission or the preceding, or waste of the assets of the company, or the prosecution of any action, or the obtaining of preferences, judgments, attachment or other liens, or the making of any levy against the corporation or against its assets or any part thereof. "SEC. 175(G). Annual Report. — The Insurance Commission shall transmit to the Secretary of Finance in its annual report, the names of all insurance companies proceeded against under this article together with such facts as shall acquaint the policyholders, creditors, stockholders, and the public with all proceedings. To that end the officer in charge of any such company shall file annually with the Insurance Commission a report of the affairs of such company. "SEC. 175(H). Appointment of Deputies; Employment of Assistants; Payment of Salaries and Expenses. — For the purpose of this Act, the Insurance Commission shall have the power to appoint under its hand and official seal, one or more officers-in-charge as its agent or agents, and to employ such counsel, clerks and assistants as may be deemed necessary, and to give these persons such powers as may be considered wise. "The compensation of such officers-in-charge, counsels, clerks and assistants, and all expenses of conducting any proceeding under this Act shall be fixed by the Insurance Commission, subject to the approval of the court, and may, on certificate of the Insurance Commission, be paid out of the funds or assets of such company. "SEC. 175(I). Examinations; Immunity; Action upon Refusal to be Examined. — At any time during the progress of any proceeding taken under this Act, the Insurance Commission shall have the powers, either by itself or by its duly authorized representatives to subpoena witnesses, to compel their attendance, to administer oaths, and to examine any person under oath, and in connection therewith to require the production of any books or papers relevant to the inquiry. If a person subpoenaed to attend such inquiry fails to obey to the command of a subpoena without reasonable excuse, or if a person in attendance upon such inquiry, shall, without reasonable cause, refuse to be sworn, or to be examined, or to answer a question, or to produce a book or papers when ordered to do so by the officer duly conducting such inquiry, or if a corporation, association, partnership, or individual fails to perform any act required hereunder to be performed, he shall be required by the court to comply with the order of the officer duly conducting such inquiry. "If any person shall ask to be excused from testifying or producing any book or paper or other document before the Insurance Commission or before any person duly designated by it to conduct any such investigation upon the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him may tend to incriminate him to or degrade him to subject him to a penalty or forfeiture, and shall notwithstanding be directed by the Insurance Commission or by the person duly designated by the Insurance Commission to conduct any such inquiry to testify or to produce any book, paper or document, he must nonetheless comply with such direction but in such event he shall not thereafter be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he may testify or produce, documentary or otherwise, pursuant thereto and no testimony so given or produced shall be received against him upon any criminal action, suit or proceeding, investigation or inquiry. No person testifying shall be exempt from prosecution or punishment for any perjury or other false statement committed or made by him in his testimony given as herein provided for. "SEC. 175(J). Exemption from Filing Fees. — The Insurance Commission shall not be required to pay fee to any public officer for filing, recording, or in any manner authenticating any paper or instrument relating to any proceeding under this Act. "SEC. 175(K). Deposit of Monies Collected: Preference. — The monies collected by the Commission in a proceeding under this Act, shall be, from time to time, deposited in one or more banks, savings banks, or trust companies authorized by the Central Bank of the Philippines to do business in the Philippines. "SEC. 175(L). Voidable Transfer. — Any transfer of, or lien upon, the property of an insurance company made or created within four months prior to the granting of an order to show cause under this Act, with the intent of giving to any creditor or of enabling him to obtain greater percentage of his debt than any other creditor of the same class which is accepted by such creditor having reasonable cause to believe that such preference will occur, shall be voidable. "The Insurance Commission as liquidator may avoid any transfer or lien upon the property of an insurance company which any creditor, stockholder or member of the company might have avoided and may recover the property so transferred or its value from the person to whom it was transferred unless he was a bona fide holder for value prior to the date of the entry of the order of liquidation. The property may be recovered or its value collected from whomever may have received it except a bona fide holder for value. "SEC. 175(M). Priority of Claims for Wages. — All wages actually owing to clerical employees of the insurance company against whom a proceeding under this Act is commenced, for services rendered within three months prior to the commencement of such proceedings, not exceeding one thousand five hundred pesos to each employee, shall be paid prior to the payment of every other debt or claim, and in the discretion of the Insurance Commission may be paid as soon as possible after the proceeding has been commenced. At all times, sufficient funds shall be reserved for the expenses of administration. "SEC. 175(N). Offset. — In all cases of .mutual debts or mutual credits between the insurance company and another person, such credits and debts shall be offset and the balance only shall be allowed or paid. "No offset shall be allowed in favor of any such person, however, where (a) the obligation of the company to such person would not then entitle him to share as a claimant in the assets of such insurance company, or (b) the obligation of the company to such person was purchased by or transferred to such person with a view of its being used as an offset, or (c) the obligation of such person is to pay an assessment levied against the members of a mutual insurance company or to pay a balance upon a subscription to the capital stock of a stock insurance corporation. "SEC. 175(O). Sale or Other Disposition of Assets and Compromise Claims. — The Insurance Commission may, subject to the approval of the Court, (a) sell or otherwise dispose of the real and personal property, or any part thereof, of the insurance company against whom a proceeding has been brought under this Act and (b) sell or compound all doubtful or uncollectible debts or claim owned by or owing to such company provided that whenever the amount of such debt or claim owned by or owing to such company does not exceed one thousand pesos, the Insurance Commission may compromise or compound the same upon such terms as it may deem for the best interest of said company without obtaining the approval of the Court. "SEC. 175(P). Borrowing on the Pledge of Assets. — For the purpose of facilitating the liquidation provided for by this Act the Insurance Commission may, subject to the approval of the Court, borrow money and execute, acknowledge and deliver notes or other evidence of indebtedness therefor and secure the repayments of same by the mortgage, pledge, assignment, transfer in trust, or hypothecation of any or all of the property, whether real, personal or mixed, of the company against whom a proceeding has been brought under this Act and the Insurance Commission, subject to the approval of the Court, shall have power to take any and all other action necessary and proper to consummate any such loans and to provide for the repayment thereof. "SEC. 175(Q). Time to File Claims Against Insolvent Insurance Company. — Upon the granting of an order for the liquidation of an insurance company, the Court shall after such notice and hearing, as it deems proper, make an order declaring such company to be insolvent. Thereupon, regardless of any prior notice which may have been given to creditors, the Insurance Commission shall notify all persons who may have claims against such company and who have not filed proper proofs thereof, to present the same to him at a place specified in such notice within four months or some longer time in the discretion of the Court, if the Insurance Commission shall certify that it is necessary, and not otherwise, from the date of the entry of such order. The last day for the filing of proofs of claim shall be specified in the notice. The notice shall be given in a manner determined by the Court. "Proofs of claim may be filed subsequent to the date specified but, no such claim shall share in the distribution of the assets until all allowed claims, proofs of which have been filed before said date, have been paid in full with interest. "SEC. 175(R). Proof and Allowance of Claims. — A proof of claim shall consist of a statement under oath, in writing, signed by the claimant, setting forth the claim, the consideration thereof, and whether any, and if so, what payments have been made thereon, and that the sum claimed is justly owing from the company to the claimant. Whenever a claim is founded upon an instrument in writing such instrument, unless lost shall be filed with the proof of claim. If such instrument is lost or destroyed, a statement of such fact and of the circumstances of loss or destruction shall be filed under oath with the claim. "Upon the liquidation of any insurance companies which has issued policies insuring the lives of persons, the Insurance Commission shall, within thirty days after the last day set for filing of claims, make a list of the persons who have not filed proofs of claims with the Insurance Commission, to whom it appears to its entire satisfaction from the books of the company, there are owing amounts on such policies and the Insurance Commission shall set opposite the name of each person the amount so owing to such person. Each person whose name shall appear upon the list shall be deemed to have duly filed prior to the last day set for the filing of claims a proof of claim for the amount set opposite his name of said list. "No contingent claim shall share in a distribution of the assets of the company which has been adjudicated to be insolvent except that such claims shall be considered, if properly presented, and may be allowed to share where (1) such claim becomes absolute against the company on or before the last day fixed for the filing of proofs of claim against the assets of such company, or (2) there is a surplus and the liquidation is thereafter conducted upon the basis that such company is solvent. "Where an insurance company has been adjudicated to be insolvent, any person who has a cause of action against an assured of such company, which the subject of indemnity under a liability policy issued by such company, shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such claim may be contingent, and such claim may be allowed; provided (1) that it may be reasonably inferred from the proof presented upon such claim that such person would be able to obtain a judgment upon such cause of action against such company; (2) that such person shall furnish suitable proof that no further valid claims against such company arising out of his cause of action other than those already presented can be made unless for good cause shown the Court in which the proceeding is pending shall otherwise direct; (3) that the total liability of such company to all claimants arising out of the same act of its assured shall be no greater than the total liability would be were it not in liquidation; (4) that no judgment taken by default or by collusion, against such an assured shall be considered as evidence in the liquidation proceeding either of the liability of such assured to such person upon such cause of action or of the amount of damages to which such person is therein entitled. "No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the security and the amount for which the claim is allowed, unless the claimant shall surrender his security to the Insurance Commission in which event the claim shall be allowed in the full amount for which it is valued. "SEC. 175(S). Distribution of Assets; Priorities; Unclaimed Dividends. — At any time after the last day fixed for filing of proofs of claim in the liquidation of an insurance company, the Court may, upon the application of the Insurance Commission, authorize it to declaim out of the funds remaining in its hands after the payment of expenses one or more dividends. Such order shall specify what claims, if any, are entitled to priority of payment and shall direct the manner in which dividends shall be paid. Where there has been no adjudication of insolvency, the Insurance Commission shall pay all allowed claims in full and shall distribute the balance of the assets remaining in his hands in accordance with the direction of the Court. "Dividends remaining unclaimed or unpaid in the hands of the Insurance Commission for six months after the final order of distribution may be deposited in one or more banks, trust companies or savings banks authorized by the Central Bank of the Philippines to do business in the Philippines to the credit of the Insurance Commission, in trust for the person entitled thereto. All these deposits shall be entitled to priority of payment in case of the insolvency or voluntary liquidation of the depository on an equality with any other priority given by the General Banking Act. "SEC. 175(T). The Insurance Commission or its representative duly designated or appointed under this Act shall not be subject to any action, claim or demand by, or liability to, any person in respect of anything done or omitted to be done in good faith in the exercise, or in connection with the exercise, of the powers conferred on the Insurance Commission or its aforesaid representative."