DOJ Opinion No. 166, s. 1989

DOJ OPINION NO. 166 , s. 1989 August 21, 1989 Hon. Adelita A. Vergel de Dios Commissioner, Insurance Commission United Nations Avenue Manila Madam : This refers to your request for opinion on whether or not you can validly assume the position of Chairman of the Board of Trustees of the Insurance Institute for Asia and the Pacific, Inc. (IIAP) to which you were elected pursuant to a provision in the By-Laws of the Institute which calls for the election of "insurance leaders" from the Philippines and other countries to the Board of Trustees. We take it that you wish to know if there will be a conflict of interest if you assume the chairmanship of the Board of Trustees of the IIAP concurrently with your position as Insurance Commissioner in view of Section 414 of the Insurance Code (P.D. No. 1460, as amended) which imposes upon the Insurance Commissioner the duty, among others, "to see that all laws relating to . . . trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by (the Insurance) Code." At the outset it is noted that Section 414 of the Insurance Code is not a prohibitory provision. However, Section 414 should be read and construed together with the other pertinent provisions of the Insurance Code, to wit: "Sec. 410. The term ' trust for charitable uses' , within the intent of this Code, shall include all real or personal properties or funds, as well as those acquired with the fruits or income therefrom or in exchange or substitution thereof, given to or received by any person, corporation, association, foundation, or entity, except the National Government, its instrumentalities or policies subdivisions, for charitable, benevolent, educational, pious, religious, or other uses for the benefit of the public at large or a particular portion thereof or for the benefit of an indefinite number of persons." (Emphasis supplied); prcd "Sec. 411. The term 'trustee' shall include any individual, corporation, association, foundation , or entity, except the National Government, its instrumentalities or political subdivisions, in charge of, or acting for, or concerned with the administration of, the trust referred to in the section immediately preceding and with the proper application of trust property; (Emphasis supplied.) "Sec. 412. The term 'trust property' shall include all real or personal properties or funds pertaining to the trust as well as those acquired with the fruits or income therefrom or in exchange or substitution thereof; and "Sec. 413. All trustees shall, before entering in the performance of the duties of their trust, obtain a certificate of registration from the Commissioner. . . ." In the light of the aforequoted provisions, it is believed that a conflict of interest will arise if you assume the chairmanship of the Board of Trustees of the IIAP. The IIAP (formerly Asian Institute of Insurance, Inc.) was incorporated pursuant to P.D. No. 530 as non-stock, non-profit corporation for the purpose of establishing and operating and Institute for insurance education, training and management. The financing needed to operationalize the Institute is sourced from contributions of persons and entities, both within and outside the Philippines, in the form of donations, bequests, endowments or other forms (7th Whereas, P.D. No. 530; Third Clause, Amended Articles of Incorporation of IIAP). Pursuant to Section 1 of P.D. No. 530, the Insurance Commissioner "shall approve the Articles of Incorporation and By-Laws of the Asian Institute of Insurance, Inc. (now IIAP) to ascertain the carrying out of the purposes" enunciated in said Decree. The IIAP is a private corporation and judging from the nature of its incorporation, its purposes and sources of financing, it is a trustee corporation for educational purposes subject to the above-quoted provisions of the Insurance Code on "Trusts for Charitable Uses" (Chapter VII, Title 2), the implementation of which forms part of the functions imposed upon the Insurance Commissioner under Section 414 of the same Code. Verily, there will be a conflict of interest if the Insurance Commissioner assumes the chairmanship of the Board of Trustees of the IIAP. In fact, such conflict of interest also arises under P.D. No. 530 which empowers the Insurance Commissioner to approve the Articles of Incorporation and By-Laws of the Institute. Relevantly, the Code of Conduct and Ethical Standards for Public Officials and Employees (R.A. No. 6713) defines "conflict or interest" as follows: "Sec. 3. xxx xxx xxx "(1) 'Conflict of Interest' arises when a public official or employee is a member of a board, and officer, or a substantial stockholder of a private corporation or owner or has a substantial interest in a business, and the interest of such corporation or business, or his rights or duties therein may be opposed to or affected by the faithful performance of official duty." (Emphasis supplied) Similarly, the said Code (R.A. No. 6713) prohibits public officials and employees during their incumbency from owning, controlling, managing or accepting employment "as officer, employee, consultant, counsel, broker agent, trustee or nominee in any private enterprise regulated, supervised or licensed by their office unless expressly allowed by law" (see Sec. 7 [B] [G], R.A. No. 6713). Considering the functional relationship between the Board of Trustees of the IIAP and the Insurance Commissioner, a perceived conflict of interest arises under R.A. No. 6713 from the moment the Insurance Commissioner assumes the chairmanship of the Board of Trustees of the IIAP since her duties as such chairman will likely affect the faithful performance of her official duty as Insurance Commissioner. prcd Furthermore, the Insurance Commissioner is prohibited under said Act from accepting the position of trustee of the IIAP which is a private enterprise supervised/regulated/licensed by her office. Wherefore, your query is answered accordingly. Very truly yours, (SGD.) SEDFREY A. ORDOEZ Secretary of Justice