Case Summary (G.R. No. L-19638)
Factual Background and Correspondence
In 1960 the Commissioner formally expressed doubts about Article 22’s legality and urged its repeal. After an interim period and a threat to suspend the Bureau’s license (and members’ certificates) if the provision remained effective, petitioners filed for declaratory relief in May 1961. No member was accused of misconduct beyond maintaining the internal rule.
Jurisprudential Test for Restraints of Trade
Philippine courts apply a reasonableness standard: a restraint is unlawful only if it is greater than necessary to protect legitimate interests or if it unduly harms public welfare. This flexible approach evaluates the nature and purpose of the restraint, its necessity to protect contracting parties, and its overall impact on competition and the public.
Purpose and Effect of Article 22
Uncontradicted testimony showed Article 22 aims to:
- Promote ethical underwriting and discourage underrating among numerous non-life insurers
- Facilitate accurate rate-making through comprehensive data sharing
- Maintain public confidence by preventing cut-throat practices
Reinsurance limitations under Article 22 do not affect insured parties’ coverage or liability.
Reasonableness and Public Policy Analysis
The Court found Article 22 neither immoral nor unreasonable. It regulates, rather than destroys, competition by fostering sound rate-making and ethical practices. Drawing on U.S. antitrust reasoning, the Court observed that reasonable cooperative measures to combat industry abuses serve the public interest.
Regulatory Framework and Commissioner’s Circular
Circular No. 54 required all non-life insurers or their rating organizations to file basic rate schedules for approval. The Bureau, through its Constitution (Article 2), executed these filings on behalf of members, and the Commissioner granted the Bureau annual licenses from 1954 until 1960 without objection to Article 22. No insurer may charge unapproved rates, ensuring continued regulatory oversight and consumer protection.
Implied Consent and Delay in Challenge
By licensing the Bureau repeatedly and approving its constitution (which contained Article 22), the Commissioner impliedly recognized the provision’s legality for six years. His belated challenge in 1960, after years of compliance, undermines the assertion of immediate public harm.
Distinction from Foreign Pr
...continue readingCase Syllabus (G.R. No. L-19638)
Background and Procedural Posture
- Thirty-nine non-life insurance companies, members of the Philippine Rating Bureau, filed a special civil action for declaratory relief in the Court of First Instance of Manila to uphold the legality of Article 22 of the Bureau’s Constitution.
- Twenty additional non-life insurers intervened in support of the petition, bringing the total number of Bureau-member petitioners and intervenors to fifty-nine companies.
- The Insurance Commissioner, respondent in the case, challenged Article 22 as an illegal or undue restraint of trade and threatened to suspend the Bureau’s license and the certificate of authority of any member violating that provision.
- On May 16, 1961, petitioners commenced the action; after trial, the trial court declared Article 22 valid and enforceable.
- The Insurance Commissioner appealed to the Supreme Court, insisting that Article 22 is null and void as it unlawfully restrains trade.
Facts
- Article 22 provides that Bureau members “agree not to represent nor to effect reinsurance with, nor to accept reinsurance from, any Company, Body, or Underwriter licensed to do business in the Philippines not a Member in good standing of this Bureau.”
- On March 11, 1960, the Commissioner wrote the Bureau expressing doubt about Article 22’s validity and requesting its repeal.
- On April 11, 1960, the Commissioner inquired about the Bureau’s action on his request; the Bureau responded that deletion of Article 22 was under committee consideration.
- On May 9, 1961, the Commissioner warned that non-compliance would lead to suspension of the Bureau’s license and that of individual members.
- The Bureau’s Constitution (approved April 28, 1954) and the Commissioner’s Circular No. 54 (February 26, 1954) had long authorized the Bureau to file and make rates for its members, including reinsurance arrangements.
Issue
- Does Article 22 of the Philippine Rating Bureau Constitution constitu