Banking Board of Ecuador

RESOLUTION No. JB-2015-3476

THE BANKING BOARD

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitional Provision of the Organic Code of Monetary and Financial Matters, published in the Official Registry Second Supplement No. 332, of September 12, 2014, whose text states that resolutions contained in the Compilation of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, and the norms issued by the control bodies, will remain in force in all that does not oppose what is provided in the Organic Code of Monetary and Financial Matters, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the case; and, with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until it resolves all complaints, appeals, and other administrative procedures it was hearing on the date of entry into force of the same, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT by Resolution No. 054-2015-F, of March 5, 2015, the Monetary and Financial Policy and Regulation Board resolved to extend by an additional one hundred and eighty days the period for the Banking Board to continue acting and resolve all complaints, appeals, and other administrative procedures within its competence;

THAT through Official Letter No. PORV-LIQ-OF-2014-0676, of April 16, 2014, the Liquidator of Porvenir Insurance and Reinsurance Company S.A. informed ASPROS C.A. Producer Insurance Advisory Agency that the claim for the credit must be presented before the ordinary courts in accordance with the second paragraph of number 3 of article 60 of the General Insurance Law, since "The publications referred to in the first paragraph of number three of article 60 of the General Insurance Law were carried out on the first, fifteenth, and thirtieth of October 2013, in virtue of which the sixty-day period to appear expired on December 27, 2013";

THAT through communication entered in the Superintendence of Banks on April 28, 2014, Mr. José Gabriel Argüello Ballesteros, General Manager of ASPROS C.A. Producer Insurance Advisory Agency, with the professional sponsorship of Dr. Gabriel Varela Ordóñez, filed an appeal against the administrative act contained in Official Letter No. PORV-LIQ-OF-2014-0676, of April 16, 2014; and, with Official Letter No. JB-2014-2279, of August 26, 2014, the Secretary of the Banking Board forwarded to the appellant the Resolution No. SBS-INS P-2014-176, of August 14, 2014, with which the appeal filed was granted;

THAT the arguments of the appellant contained in the communication entered in the Superintendence of Banks are as follows:

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• That he be included in the list of creditors of the insurer and that the amount owed corresponds to the payment of commissions for the management and placement of insurance contracts in his favor;
• That in the insurance company, the settlements and invoices corresponding to the settlements for the commissions are recorded, documents that prove the existence of the credit in favor of the insurance agency; and,
• That the appealed official letter be declared null and void and that the broker be placed on the list of creditors of the insurer for the sum of US$ 23,664.52;

THAT article 59 of the General Insurance Law establishes:

"Art. 59.- The Superintendent of Banks will represent the entity judicially and extrajudicially in the forced liquidation process; appoint and remove employees; grant and revoke mandates; accept or deny on behalf of the entity in liquidation, the claims presented to it; sell the assets that form the liquidation estate; and, in general, carry out any operation or transaction with the broadest powers.

The Superintendent of Banks may appoint a liquidator to represent him in the liquidation, delegating the attributes conferred by law.

(...);"

THAT the pertinent part of article 60 of the aforementioned General Insurance Law, on the basis of which the Liquidator of Porvenir Insurance and Reinsurance Company S.A., in Liquidation, issued the appealed administrative act, provides as follows:

"Art. 60.- Upon initiating the forced liquidation of a controlled entity, the Superintendent of Banks or the liquidator shall be obliged to:

(...)

3. Notify persons who may have claims against the entity in the liquidation process, so that they present proof of their credits and designate a domicile, within a period of sixty days from the notification, which shall be made through three publications in a newspaper of national circulation, between which there must be at least ten days.

Claims presented after the stated period shall be substantiated before the ordinary courts in a summary verbal trial.

(...);"

THAT, on the other hand, article 425 of the Constitution of the Republic establishes:

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"Art. 425.- The hierarchical order of application of norms shall be as follows: The Constitution; international treaties and conventions; organic laws; ordinary laws; regional norms and district ordinances; decrees and regulations; ordinances; agreements and resolutions; and other acts and decisions of the public powers.

In case of conflict between norms of different hierarchy, the Constitutional Court, judges, administrative authorities, and public servants shall resolve it through the application of the higher hierarchical norm."

THAT the second paragraph of article 1 and the third paragraph of article 159 of the General Law of Institutions of the Financial System, in force at the date of filing this appeal, provided as follows:

"Art. 1.- (...)

Public financial institutions, insurance and reinsurance companies are governed by their own laws regarding their creation, activities, operation, and organization. They shall be subject to this Law regarding the application of financial solvency and prudential norms and the control and surveillance carried out by the Superintendence within the legal framework regulating these institutions in all that is applicable according to their legal nature. The Superintendence shall apply the norms contained in this Law on forced liquidation, when there are causes that so merit.

(...);"

"Art. 159.- (...)

To persons whose names appeared as creditors in the accounting records of the financial institution, that status shall be recognized in the liquidation, for the sum recorded in said records, even if they had not presented claims or proof.

(...);"

THAT article 9 of the General Insurance Law provides:

"Art. 9.- Legal entities that make up the private insurance system, for their constitution, organization, and operation, shall be subject to the provisions of this Law, the Commercial Code, the Companies Law in a supplementary manner, and the norms issued for this effect by the Superintendence of Banks and Insurance."

THAT the second paragraph of article 93 of the General Regulation to the General Insurance Law provides as follows:

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"Art. 93.- (...)

For the fulfillment of liquidations, whether voluntary or forced, it must be governed by the provisions of the General Insurance Law, the Companies Law in a supplementary manner, as well as by the norms issued regarding this by the Superintendence of Banks";

THAT article 3 of chapter II.- Norms for the forced liquidation of insurance companies and reinsurance companies, title XIV.- Of the voluntary and forced liquidation processes of insurance companies and reinsurance companies, book II.- General norms for institutions of the private insurance system, of the Compilation of Resolutions of the Superintendence of Banks and of the Banking Board, provides as follows:

"ARTICLE 3.- The forced liquidation process shall be carried out in accordance with what is provided in the General Insurance Law, the general regulation, the Companies Law as a supplementary norm, and what is provided in this chapter";

THAT the second paragraph of article 393 of the Companies Law, in force at the date of filing this appeal, provided as follows:

"Art. 393.- The liquidator shall publish for three consecutive days, in a widely circulated newspaper in the place of the company's main domicile, and in those where the company's branches operate, if any, a notice notifying creditors so that within the term of twenty days counted from the last publication, they present the documents that accredit their right.

Once this term has passed, the liquidator shall take into account only the creditors who have proven their status and all those who appear recognized as such in the company's accounting, with due justification";

THAT in the communication entered in the Superintendence of Banks on April 28, 2014, with which Mr. José Gabriel Argüello Ballesteros, General Manager of ASPROS C.A. Producer Insurance Advisory Agency, filed an appeal against the administrative act contained in Official Letter No. PORV-LIQ-OF-2014-0676, of April 16, 2014, several factual grounds are recorded which, due to their importance within the present case, are transcribed below:

"(...)

...on April 2, 2007, between the legal representatives of the companies PORVENIR INSURANCE AND REINSURANCE COMPANY S.A. PORVESEGUROS and ASPROS C.A. ADVISORY PRODUCER AGENCY

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OF INSURANCE, the INSURANCE AGENCY CONTRACT was celebrated and signed in due and legal form, which was approved by the Superintendence of Banks and Insurance on May 23, 2007, and registered under number 1110-00664-87.

(...)

...Thus, once all legal requirements were met, the insurance agency on my behalf, in due and legal form, proceeded to manage, obtain, and place insurance contracts for the company PORVENIR INSURANCE AND REINSURANCE COMPANY S.A. PORVESEGUROS, insurance contracts whose details are expressed below:

ITEM #	INSURED	TYPE OF INSURANCE	POLICY NO.	VALIDITY	NET PREMIUM PAID USD $	% COMMISSION	GENERATED COMMISSION VALUE USD $	WITHHOLDING USD$	COMMISSION TO PAY USD $
1	MILITARY CIRCLE OF THE ARMED FORCES	COLLECTIVE LIFE	577	01/12/2012 TO 3	98,155.1	8%	7,852.42	196.31	7,656.11
2	MILITARY CIRCLE OF THE ARMED FORCES	COLLECTIVE LIFE	577	01/01/2013 TO 01/02/2013	97,912.1	8%	7,832.97	195.82	7,637.15
3	MILITARY CIRCLE OF THE ARMED FORCES	COLLECTIVE LIFE	577	01/02/2013 TO 01/03/2013	97,840.6	8%	7,827.25	156.54	7,670.71
i	MUÑOZ MORAN JAVIER BEETHOVEN	VEHICLE	957	15/02/2011 TO 15/02/2012	797.7	17%	135.61 PLUS VAT 151.88	14.78	137.10
					TOTAL		23,664.52	563.45	23,101.07

...Once the insurance agency on my behalf carried out the management and placement of the insurance contracts detailed above and having paid the corresponding premium by the insured, Aspros generated and acquired the right to collect the commission in its favor, which the company Porvenir, now in liquidation, is obliged to pay.

...Thus, the insurance company itself, now in forced liquidation, issued invoice numbers 001-001-000007594, 001-002-000000568, 001-002-000001494, 001-001-000000647 (002-001-000068869) and their respective commission settlements, copies of which we attach, documents in which, in addition to the value of the premium paid by the

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insured, the summary of the commission to be paid to the insurance advisor is recorded; invoices and settlements that, having been legally issued by the insurance company in favor of the insured, are full proof of the existence of the credit in favor of the insurance agency, as these were and are recorded in the accounting records and financial statements of the insurance entity, before and now in liquidation.

...Regarding the detailed commissions, Aspros proceeded in due form to issue and deliver to the insurer, the respective sales receipts, invoice numbers 001-001-3653, 001-001-3657, 001-001-3661, 001-001-3664 so that the commissions due to it, which were detailed by the insurer itself in its own accounting as stated in the previous letter h), are paid promptly. The delivery of our invoices to the Porvenir insurer was carried out between February and March 2013, that is, before its forced liquidation, as evidenced by the attached copies; however, despite this and being registered in its accounting, the insurer did not proceed with the payment of the claimed commissions, so they currently appear in its accounting records as a debt payable in favor of the insurance advisor and therefore constitute a credit in favor thereof.

...Such is the record and recognition in the accounting and financial statements of the insurer, of the pending payment credits of the commissions claimed in favor of Aspros, that Porvenir even proceeded to issue and deliver to Aspros the withholding certificates in accordance with current tax regulations, withholding certificate numbers S-001-001-000022347, S-001-001-000022460, S-001-001-000022533, S-001-001-000022620, which we also attach.

...For more abundant proof that in the accounting records of the insurer, the values of the claimed commissions appear as a credit in favor of the insurance advisor; the insurer itself proceeded to issue the corresponding withholding certificates made for the concept of 5X1000 of the contribution to the Superintendence of Banks and Insurance, certificates that we also attach.

...Furthermore, Porvenir proceeded to issue to the order of Aspros the check from Banco Territorial number 005086 drawn against account number 201025152 for the sum of USD $ 7,656.11 solely for the commission generated by the life insurance managed and placed which is detailed in item 1 of the detail table constant in letter f) of number 3 of this appeal, a check that has the value of the generated commission minus the tax withholding accounted for, the same which was returned by the drawn bank and therefore unpaid, the same which continues to appear as a credit in the accounting records of the insurer.

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...By Resolution SBS-2013-342 dated May 15, 2013, published in Official Registry No 14 of June 13, 2013, lawyer Pedro Solines Chacón in his capacity as Superintendent of Banks and Insurance, resolved to declare FORCED LIQUIDATION of the company PORVENIR INSURANCE AND REINSURANCE COMPANY S.A. PORVESEGUROS in application of article 53 and letters a), b) and g) of article 55 of the General Insurance Law.

(...)

It is important to then warn, that the accounting records of the invoices and withholding certificates, documents indicated and detailed... generated by the insurance commissions in favor of Aspros; upon being issued, delivered, and received by Porvenir in the months of February and March 2013, that is, before the declaration of forced liquidation of the insurer; they were already in the accounting accounts and financial statements of PORVENIR INSURANCE AND REINSURANCE COMPANY S.A. PORVESEGUROS now in forced liquidation, therefore, ASPROS C.A. ADVISORY PRODUCER AGENCY OF INSURANCE appeared and appears in the accounting records of the insurance company, in such a way that it appears accountingly as a creditor in said insurance institution for the claimed insurance commissions.

Definitively, since February 2013 and even more so since the liquidator at the time fulfilled what was provided in number 1 of article 60 of the Compilation of the General Insurance Law, the creditor status of ASPROS C.A. ADVISORY PRODUCER AGENCY OF INSURANCE over the insurance commissions now claimed was evident, a situation that has no relation with Official Letter No PORV-LIQ-OF-2014-0676 of April 16, 2014, the subject of this appeal, therefore, the legal grounds that follow to explain.

(...)

...Since there are proof of defense documents in the possession and in the accounting records, both of the insurer and the insurance advisor (invoices, withholding certificates, and settlements), it is not necessary for ASPROS C.A. ADVISORY PRODUCER AGENCY OF INSURANCE to comply with what is provided in the second paragraph of number 3 of article 60 of the Compilation of the General Insurance Law, as expressed by lawyer Luis Armando Polit Herrería, in his capacity as LIQUIDATOR of PORVENIR INSURANCE AND REINSURANCE COMPANY S.A. PORVESEGUROS IN LIQUIDATION, in his Official Letter No PORV-LIQ-OF-2014-0676 issued in the city of Guayaquil on April 16, 2014.

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THAT what is asserted by the appellant in the communication through which this appeal was filed, is supported by the documentation sent along with said communication and which forms part of the file formed around this case. Based on said documentation, it can be inferred that the insurance company itself, now in forced liquidation, has recognized that it maintains values registered in its accounting in favor of ASPROS C.A. Producer Insurance Advisory Agency;

THAT therefore, in application of the constitutional principle enshrined in the transcribed article 425 of the Constitution of the Republic, in this case, what is provided in the third paragraph of the also transcribed article 159 of the General Law of Institutions of the Financial System, in force at the date of the claim and which had the character of organic, in concordance with what is provided in article 393 of the Companies Law, also in force at the date when this claim was made; must be applied, and not what is provided in article 60 of the General Insurance Law, the norm on the basis of which the appealed administrative act was issued;

THAT by virtue of the above, this collegiate body shares the criterion of the Subdirection of Entities in Liquidation and Coercive Action, contained in the technical report contained in Memorandum No. SELC-2014-463, of October 16, 2014, which states:

"In support of articles 424, 425 of the Magna Carta, and in concordance with paragraph 2 of article 1 and paragraph 3 of article 159 of the General Law of Institutions of the Financial System with the character of organic and in force at the date of the formulation of the Appeal, article 9 of the General Insurance Law, article 93 of the Regulation of the General Insurance Law, article 3 of Resolution JB-2013-2621, and paragraph 2 of article 393 of the Companies Law, this Office considers that it is appropriate to accept the Appeal, insofar as the Liquidator has recognized that the appellant maintains values registered in the accounting of his represented entity in favor of ASPROS C.A. PRODUCER ADVISORY AGENCY OF INSURANCE.

In compliance with the aforementioned norms, the credit in favor of ASPROS C.A. PRODUCER ADVISORY AGENCY OF INSURANCE must be registered by Porvenir Insurance and Reinsurance Company S.A., in Liquidation, without the need for an order from a Competent Judge, and recognized in accordance with the order of precedence established in article 62 of the General Insurance Law"; and,

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0408 of May 19, 2015, recommended to the Banking Board to accept the claim contained in the appeal filed; and,

IN exercise of its legal attributes,

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RESOLVES:

SINGLE ARTICLE.- ACCEPT the claim contained in the appeal filed by Mr. José Gabriel Argüello Ballesteros, General Manager of ASPROS C.A. Producer Insurance Advisory Agency; DECLARE NULL AND VOID Official Letter No. PORV-LIQ-OF-2014-0676, of April 16, 2014, based on article 59 of the General Insurance Law; and, consequently, ORDER the liquidator of Porvenir Insurance and Reinsurance Company S.A., in Liquidation, to register the credit in favor of ASPROS C.A. Producer Insurance Advisory Agency, so that it is recognized in accordance with the order of precedence established in article 62 of the General Insurance Law.

NOTIFY.- Given in the Superintendence of Banks, in Quito, Metropolitan District, on June 10, two thousand fifteen.

Econ. Rodrigo Landeta Parra
GENERAL INTENDANT, S
PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on June 10, two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD