G.R. No.
158085 October 14, 20015 Sun Life is a cooperative company under the Law
REPUBLIC OF THE PHILIPPINES, represented by the CIR, petitioner, vs.
SUNLIFE ASSURANCE COMPANY OF CANADA, respondent.
Topic: Mutualization
Facts:
1. Sun life is a mutual life insurance company organized under the laws
of Canada, but is authorized by the SEC to engage business in the
Philippines.
2. Sun Life filed with the CIR its insurance premium tax and paid
such tax, as well as its documentary stamp tax (DST).
3. CTA rendered a decision in Insular Life Assurance v. CIR, which
held that mutual life insurance companies are purely
cooperative companies and are exempt from payment of
premium tax and DST. Hence, Sun Life filed a claim for tax
credit with the CIR, as it has erroneously paid such taxes.
4. Since CIR failed to act on such claim, and the period to file a claim is
slowly expiring, Sun Life filed with the CTA a pet. for review,
praying for the issuance of a tax credit certificate. Sun Life
argue that it was a mutual life insurance company, vested with
the characteristics of a cooperative company. Primarily, the
management and affairs of Sun Life were conducted by its members;
second, it is operated with money collected from its members; and
lastly, it has for its purpose the mutual protection of its members, and
not for profit or gain.
5. CIR filed its answer, arguing that Sun Life does not fall within such
exemption of a cooperative company under Sec. 121 (now Sec. 123)
of the Tax Code.
6. CTA ruled in favor of Sun Life, holding that it was a mutual life
insurance company; hence, it was a cooperative company. Being
such, it is entitled to the same interpretation of the Court in earlier
cases, exempting such companies.
7. CA affirmed the ruling of CTA.
8. Hence, this petition for review by the CIR, arguing that Sun Life was
not a cooperative company since it was for profit; and that Sun Life
must first be registered with the Cooperative Development Authority
before being considered a cooperative company.
Issue: W/N Sun Life is a cooperative company, exempt from payment from
payment of premium tax and DST.
Held: Yes. Sun Life is a cooperative company.
1. The Tax Code defines a cooperative as an association conducted
by the members thereof with the money collected from among
themselves and solely for their own protection and not for profits.
Without a doubt, Sun Life is a cooperative company.
2. [Doctrine] First, it is managed by its members. A stock
insurance company doing business in the Philippines may
alter its organization and transform itself into a mutual
insurance company. Sun Life has been mutualized or
converted to a nonstock mutual life insurance corporation
pursuant to Sec. 266 (probably now Sec. 268) of the Insurance
Code. In its by-laws, ownership has been vested in its members
who are entitled to one vote, and elect from among themselves
the board of trustees.
3. Second, it is operated with money collected from its members.
The members constitute both insurer and insured who contribute
by a system of premiums to the creation of a fund from which all
losses and liabilities are paid.
4. Third, it is licensed for the mutual protection of the members,
and not for the profit of anyone. Such members are responsible
for the payment of all its losses. Verily, a mutual life insurance
company is a cooperative that promotes the welfare of its own
members. It does not operate for profits, but for mutual benefit of its
members. They receive their insurance at cost, while reasonable
properly guarding and maintaining stability and solvency of the
company. Economic benefits filter to the members. (see notes for
extra info)
5. Just because Sun Life is registered as a non-stock corporation, the
company can no longer make any profits. Earning profits is merely its
secondary purpose. It may engage in business activity for profit, as
long as it would not change its nature as a non-profit entity.
6. The distinguishing feature of a cooperative enterprise is the
mutuality of cooperation among its member-policyholders
united for that purpose. So long as respondent meets this
essential feature, it does not even have to use and carry the
name of a cooperative to operate its mutual life insurance
business.
(not so relevant) Registration with the Cooperative Development Authority is
not required
1. The Tax Code does not require such registration with the CDA in
order to enjoy such exemption from premium tax and DST. Also, the
Cooperative Code do not apply. The Cooperative Code was created
 for the registration of small producers and consumers to form a an overpayment, a benefit to which the member-policyholder
business enterprise they themselves controlled. These cooperatives is equitably entitled.
included barrios, federations, etc. Obviously, Sun Life does not fall
under such classes.
2. Also, when the current Cooperative Code was enacted, all existing
cooperatives were required to be registered. However, Sun Life was
not required to be registered. Not even the Insurance Code requires
registration.

3. Having determined that Sun Life is a cooperative that does not

have to be registered with the CDA, Sun Life is entitled to the
exemption from both premium taxes and DST. And having been
seasonably filed and amply substantiated, a tax credit
certificate must be granted to Sun Life.

WHEREFORE, petition is DENIED.

Notes:
- Factors that determine that Sun Life was for the protection of
the members:
o In the event that the company itself fails before their policies
expire, the members do not acquire the status of creditors.
Rather, they simply become debtors for whatever premiums
they have not paid in full. Only when the premiums have
accumulated to a sum larger than that required to pay for its
losses will the members be entitled to dividend.
o The rates of premiums charged by a mutual life insurance
company is larger than expected as such companies has no
capital stock, and relies solely on premiums to meet losses,
contingencies and expenses.
o Sharing in the common fund, any member may choose to
withdraw dividends, or to apply them in order to reduce a
subsequent payment of premium, purchase addition
insurance, or accelerate the payment period.
o The so-called dividend that is received by member-
policyholders is not a portion of profits set aside for
distribution to the stockholders in proportion to their
subscription to the capital stock of a corporation. One, a
mutual company has no capital stock to which subscription is
necessary; there are no stockholders to speak of, but only
members. And, two, the amount they receive does not
partake of the nature of a profit or income. The quasi-
appearance of profit will not change its character. It remains