Lex Rex Ph

Icon vs. NLIC Digest

Icon Development Corp vs. National Life Insurance Corp (NLIC)
GR 220686


Icon obtained several loans from NLIC. To secure its loans, Icon mortgaged several of its properties in Makati City and Tayabas, Quezon. Icon made several payments but suddenly refused to pay in 2008. After Icon defaulted, NLIC filed an extrajudicial foreclosure alleging that Icon failed to pay almost P274 million. After the sheriff set an auction of Icon’s mortgaged properties, Icon filed several complaints before RTC including TRO. One of the grounds is that NLIC, as an insurance company, is under conservatorship hence the directors had no authority to do so. The conservator, Atty. Chua, filed a Manifestation that he authorized the extrajudicial foreclosure.

Lower Courts: RTC favored Icon. CA reversed RTC and favored NLIC. Icon appealed to SC

Issues and Ruling:

Can the board or officers of an insurance company under conservatorship make demands, declare the corporation’s debtors in default, and initiate a petition for extrajudicial foreclosure of mortgaged properties since the collection of debts must be the sole power of the conservator?


(1) Placing an insurance company under conservatorship (or rehabilitation proceedings) does not in any way diminish the function of the board of directors. It retains its juridical personality.

The demands made by the board, and even without the authority of the conservator, were sufficient to put Icon in default. To prevent the board or officers from collecting debts will surely defeat the very purpose of conservatorship]

(2) Atty Chua filed a Manifestation stating that he authorized the filing of the foreclosure proceedings;

(3) Only the conservator can question the authority of the board of directors to initiate foreclosure proceedings and not the petitioner Icon;

While the conservator is given vast powers by the Insurance Code, its powers do not include totally replacing or acting as a substitute for the existing board of directors and corporate officers to the extent that the board/officers are made effective during rehabilitation. Although the conservator has the power to overrule the decisions of the board of a distressed company, this should not be construed as totally undressing the board of their functions during the rehabilitation proceeding. The board and officers may continue to exercise their powers such as collecting debts via foreclosure of mortgaged properties.

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