G.R. No. 12610. October 25, 1963
BACOLOD MURCIA MILLING CO., INC., PETITIONER AND APPELLANT, VS. CENTRAL BANK OF THE PHILIPPINES, RESPONDENT AND APPELLEE.
LABRADOR, J.:
Manila, Hon. Magno Gatmaitan, presiding, dismissing a petition for
prohibition filed by petitioner-appellant, praying that the court
declare Circular No. 20 of the Central Bank, particularly section 4 (a)
thereof, null and void, and that the Central Bank be perpetually
enjoined from enforcing the same. The complaint contains a petition for
the issuance of a writ of preliminary injunction.
Circular No. 20 of the Central Bank was promulgated on December 9, 1949 and section 4(a) thereof provides:
“4. (a) All receipts of foreign exchange shall be
sold daily to the Central Bank by those authorized to deal in foreign
exchange. All receipts of foreign exchange by any person, firm,
partnership, association, branch office, agency, company or other
unincorporated body or corporation, shall be sold to the authorized
agents of the Central Bank by the recipients within one business day
following the receipts of such foreign exchange. Any person, firm,
partnership, association, branch office, agency, company or other
unincorporated body, or corporation, residing or located within the
Philippines, who acquires on and after the date of this Circular
foreign exchange shall not, unless licensed by the Central Bank,
dispose of such foreign exchange in whole or in part, nor receive less
than its full value, nor delay taking ownership thereof except as such
delay is customary; provided, further, that within one day upon taking
ownership, or receiving payment, of foreign exchange the aforementioned
persons and entities shall sell such foreign exchange to designated
agents of the Central Bank.”
Section 8 also provides:
“Strict observance of the provisions of this
Circular is enjoined; and any person, firm or corporation, foreign or
domestic, who, being bound to the observance thereof, or of such other
rules, regulations or directives as may hereafter be issued in
implementation of this Circular, shall fail or refuse to comply with,
or abide by, or shall violate the same, shall be subject to the penal
sanctions provided in the Central Bank Act.” –
The facts and circumstances giving rise to the petition are, as found by the court below, as follows:
“On or about December 17, 1956, plaintiff sold and
exported to Olavarria & Co., Inc. of New York, United States of
America 48,192 piculs (equivalent to 3,000 tons) of sugar for the total
price of $416,640.00 U.S. currency, and as a consequence drew against
said Olavarria & Co., Inc. two (2) drafts for the total sum of
$336,995.40 U.S. Currency, to cover an initial payment of 95% of said
purchase price (Exh. 4E’ and ‘F’); said drafts were then entrusted and
delivered for collection to the Philippine Bank of Commerce, which duly
accepted the undertaking to collect the amount thereof for the account
of plaintiff, but called the attention of plaintiff that under existing
rules and regulations all exchange proceeds of the drafts must be sold
to the Central Bank authorities at the prevailing rate of exchange set
up by the Central Bank (Exhibits ‘E’, ‘F’, ‘G’, and ‘H’) creating a
reserve supply of dollars which the Central Bank thereafter disposed to
parties in need thereof, but at the rate also of 2 to 1. Plaintiff
apparently felt, that it had suffered enough; therefore, on December
29, 1956, it wrote to the defendant Central Bank that ‘we seriously
doubt the legality and validity of your rules and regulations on this
particular point, and cannot therefore agree and cannot give our
consent to the sale of the dollar proceeds of our said drafts to the
Central Bank of the Philippines, unless the Central Bank should agree
to pay us, as fair consideration and just compensation, the real
international worth and prevailing market value of the said dollar
proceeds of our sugar,”“It was because of this that on 28
January 1957, plaintiff brought this special civil action for
prohibition in order to stop the defendant Central Bank from taking:
further action to enforce Circular No. 20. Plaintiff says that the
forced sale of foreign exchange to the Central Bank required in
Circular No. 20 is ‘ultra vires’; and that the practice of the Central
Bank in paying for such exchange only at the legal parity rate with the
purpose of reselling the same to other private parties at the same rate
is a confiscation of private property not for public use nor for just
compensation. Respondent contends the contrary.”
The defenses presented by the respondent-appellee in its answer are
(1) that Circular No. 20 is presumed to be valid; (2) that the
Philippines is a signatory member of the International Monetary Fund
Agreement and as such is bound to respect or to maintain the par value
of the Philippine currency; (3) that Circular No. 20 was approved in an
exchange crisis in accordance with Section 74 of the Central Bank Act
and said circular was approved by the President of the Philippines and
by the International Monetary Fund; (4) that the powers of the Central
Bank to curtail, regulate and license the use of foreign exchange
include the right to require that all foreign exchange be surrendered
and that the plaintiff has not exhausted all the administrative
remedies available in the ordinary course of law, etc.
The court below found, as plaintiff’s evidence itself shows, that
there is a monetary crisis. It also found that the export of sugar by
plaintiff was a transaction on foreign exchange; it declared that
plaintiff would stand to lose by the operation of the exchange control
circular, but that the enactment of a law on currency and even the
issuance of paper money as legal tender are attributes of the sovereign
power (citing Juillard vs. Greennan, 110 U.S. 421); that the
devaluation of the dollar by authority of the Congress of the United
States and the provision legalizing payment of contractual obligations
and other restrictions may not be considered as a capricious or
arbitrary exercise of its powers; and the damage done to plaintiff in
this case may be considered damnum absque injuria.
The foregoing decision is the subject of the present appeal.
In its brief appellant argues that the court below failed to pass
upon the specific objections of appellant to the circular and its
provision, namely,
- That the compulsory sale regulation expressly violates
Section 73 of the Central Bank Charter, that it may engage in exchange
transactions only with banking- institutions and other entities
specified; - That the circular establishes a monopoly
by allowing, commandeering of foreign exchange, when its charter allows
commandeering only of gold (Sec. 72) ; - That
compelling private persons to sell foreign exchange to the Central Bank
can not be included in the power “to subject to license all
transactions in gold and foreign exchange during an exchange crisis” as
defined in Section 74 of the Charter.
The first three objections may be explained away by the observation
that the power granted in Section 72, 73, and 80 of the Central Bank
Charter, which plaintiff-appellant claims to have been violated, are
the powers of the Bank in normal times, and not during an exchange
crisis, when the Bank may adopt the remedies indicated in Section 74 of
its Charter, entitled “Emergency Restrictions on Exchange Operations.”
Issue
The most important issue now before the Court is whether the
exchange control provision contained in Section 4 (a) of Central Bank
Circular No. 20, may be considered as sufficiently authorized by the
provisions of the Charter. Petitioner sustains the negative of the
issue, i.e., that the establishment of exchange control can not
be considered authorized by the provisions of Section 74 of the Bank
Charter and is, therefore, null and void. Respondent supports the
affirmative, arguing that such establishment (of exchange control) may
be considered authorized by implication from the general duty imposed
upon the Bank of preserving and maintaining the international value of
the peso.
Reasons Adduced To Justify Exchange Control
The provisions of Republic Act 265 are so broad and encompassing
with respect to the Bank’s powers that it is difficult to believe that
exchange control was not authorized within the scope of the Charter.
The fact that the Charter does not expressly grant the Bank the power
to require the forcible sale of foreign exchange is no reason, per se, for holding that the Bank may not do so; the inquiry should be whether the Act contains sufficient standards on which the exercise of a power could be premised. On this score Republic Act No. 265 is not wanting.
In Section 2, the Central Bank is charged with the duty “to
administer the monetary and banking system of the Republic, to maintain
monetary stability in the Philippines; to preserve the international
value of the peso; and to promote a rising level of production,
employment and real income in the Philippines.” In Section 64, it is
given the duty to “control any expansion of contraction in the money
supply, or any rise or fall in prices, which, in the opinion of the
Board is prejudicial to the attainment or maintenance of a high level
of production, employment and real income.” Under this section, the
Monetary Board shall have due regard “for their effects (measures) on
the availability and cost of money to particular sectors of the economy
as well as to the economy as a whole, and their effects on the
relationship or domestic prices and costs to world prices and costs.”
Dealing on the international reserve Section 68 enjoins the Central
Bank to maintain an international reserve “adequate to meet any
foreseeable net demands on the Bank for foreign currencies.” In gauging
the adequacy of the international reserve, the guide is the
“prospective receipts and payments of foreign exchange by the
Philippines.” Further, the Monetary Board is required to consider the
“volume and maturity of the Central Bank’s own liabilities in foreign
currencies, the volume and maturity of the foreign exchange assets and
liabilities of other banks operating in the Philippines, and in so far
as they are known or can be estimated, the volume and maturity of the
foreign exchange assets and liabilities of all other persons and
entities in the Philippines.”
In Section 70, the Central Bank shall take remedial measures as are
appropriate and within the powers granted whenever the international
reserve falls “to an amount which the Monetary Board considers
inadequate to meet the prospective net demands on the Central Bank for
foreign currencies, or whenever the international reserve appears to be
in imminent danger of falling to such a level, or whenever the
international reserve is falling as a result of payments or remittances
abroad, which, in the opinion of the Monetary Board, are contrary to
the national welfare.”
It would seem, from a study of the provisions cited, that the Act
contains sufficient standards as the term is understood in Philippine
jurisprudence. It is recognized that a body created by law has the
power to promulgate rules and regulations to implement a given
legislation and effectuate its policies. (See People vs. Pedro R. Exconde, G. R. No. L-9820, Aug. 30, 1957; Calalang vs. Williams, 70 Phil. 727; Pangasinan Transportation vs. Public Service Commission, 70 Phil. 22; People vs. Rosenthal, 68 Phil. 328; People vs. Vera, 39 Phil. 660; Rubi vs. The Provincial Board of Mindoro, 39 Phil. 660.)
Even the Legislature was perhaps aware that by the nature of the
vast subject matter which R.A. No. 265 1114 covers, it could not forsee
every conceivable means or power by which the objectives of the law
could be achieved. That is why under Section 14 the Monetary Board is
given the authority to “prepare and issue such rules and regulations as
it considers necessary for the effective discharge of the
responsibilities and exercise the powers assigned to the Monetary Board
and to the Central Bank.” This is reiterated under Section 70
aforecited, under which when the international stability of the peso is
threatened, the Central Bank may “take such remedial measures as are
appropriate and within the power granted to the Monetary Board and the
Central Bank under the provisions of this Act.” (R.A. No. 265)
Against appellant’s contention that the rules and regulations which
the Central Bank or the Monetary Board may promulgate are only such as
are within the powers granted by the Charter, and that the latter does
not grant the Central Bank the power to impose the forcible sale of
foreign exchange, it is pointed out that the test of whether a power
has been granted to a body created by law is not necessarily whether
the Charter expressly grants such power, but whether the law contains sufficient standards on which its exercise may be based. (People vs. Jolliffe, 105 Phil. 677.)
The forcible sale of foreign exchange to the Central Bank, in
relation to the powers and responsibilities given to it in Secs. 2, 14,
64, 68, 70, 74 and other sections of R. A. No. 265 can be regarded as
falling within the category of “implied powers” as those necessary for
the effective discharge of its responsibilities.
“Implied powers flow from a grant of expressed
powers and are those powers necessary or incidental to the exercise of
the expressed powers.” (Shelby Oil Co. vs. Pruitt &
McCrory, 221 P. 709, 710, 94 Okl. 232). “Implied powers are such as are
necessary to carry into effect those which are expressly granted, and
which must therefore be presumed to have been within the intention of
the legislative grant.” (City of Madison vs. Daley, 58 F. 751, 755);“* * * incidental powers are such as are necessary in order to enable a
corporation to carry into execution the specific powers conferred upon
it by its Charter.” (First M.E. Church vs. Dixon, 152 N.E. 887, 890, 178 III. 260.)
Criticism Of The Theory Supporting Control
The gist of the argument for exchange control, therefore, is the rule of necessity, i.e.,
its establishment would affect the international stability of the peso
and it is necessary to establish it to maintain international reserve,
etc. The writer does not understand how commandeering of the foreign
exchange by the Central Bank itself is necessary to carry out the
purpose of establishing the stability of the peso or maintaining the
international reserve. Commandeering does not increase foreign exchange
neither does it decrease demand therefor. With the licensing of exports
and imports possession of foreign exchange becomes known, and the
stability can be maintained by the limitation of licenses for the
importation of goods to such foreign exchange as may have been secured
through exports. It is not necessary that the Central Bank get the
foreign exchange itself for it to distribute among persons whom it
chooses; it is sufficient that the foreign exchange obtained be
apportioned among legitimate importers in accordance with the relative
necessity of such imports. If the demand for exchange exceeds the
foreign exchange earned by exports, the demand, if deemed necessary to
preserve the economy of the country, can be met by the international
reserves or by international loans, etc. By limiting the sale of
foreign exchange to be used for imports to the amounts earned through
exports and obtained by loans, the stability of the currency could be
secured, even without the Bank commandeering the foreign exchange
earned by exporters in the course of their business operations.
By way of remark it may be added that exchange control is unwise in
that the profits that are derived from the producer of export products
and which could stimulate further production of export products is
removed from the hands of the producer and transferred to the
importer-trader to the ultimate detriment of the over-all economy,
reducing production and increasing importation. And by placing the
allocation of foreign exchange in the hands of the Government
opportunities for graft and corruption are multiplied resulting not in
the demoralization of industry only but in that of the whole
Government. The previous administration is witness to the deleterious
effect of exchange control.
Theory Sustained By Appellant
The theory sustained by appellant is that exchange control can not
be embraced or intended within the meaning of the clause “may
temporarily suspend or restrict sales of exchange by the Central Bank
and may subject all transactions in gold and foreign exchange to
license”, embodied in the provisions of Section 74 of the Bank’s
Charter.
Let us examine the merits of appellant’s arguments.
Evitt,[1] states that
“exchange control” is one form of exchange restriction; the most
drastic form thereof and the last step in a series of exchange
restrictions. He considers exchange control separately from exchange
restriction.
“Forms of Exchange Restrictions.
* * * * * * *
“The expression ‘exchange restrictions’ is applied
not only to official regulation of dealings in foreign exchange, but
also to any disabilities attaching to the ownership of certain forms of
the home currency.
* * * * * * *
“Each of the main methods is capable of
refinements. An exchange ‘quota’ system may be introduced, allowing the
purchase at the official selling rate of a monthly allowance of
exchange based on the average over a previous period; arbitrary
‘rationing’ of exchange to buyers may be resorted to; exporters may be
required to hand over only a proportion of the proceeds in foreign
currency of their exports, leaving them free to dispose of any balance
in whatever manner they choose, etc. Again, import and export
restrictions and official control of exchange dealings are usually
combined, and may be reinforced by regulations against the granting of
‘clean’ credits or overdrafts to foreigners (to prevent outside
speculation against the currency), by the enforced surrender on the
part of home owners of any assets which they may hold abroad, usually
at an arbitrarily fixed price, and by the prohibition of the export of
capital in any form.
* * * * * * *
“All these restrictions are fairly simple both to
operate and to understand. The serious complications arise when
restrictions are placed on the actual use of certain funds in the home
country. Since the object of the government when imposing any trade or
exchange restrictions is to reduce the demand for and increase the
supply of foreign currencies against the home currency so that a larger
balance of foreign exchange shall be available for government purposes,
it follows that this object would be defeated if foreign owners of
capital were able to withdraw that capital from the country at will, or
if foreign exporters were allowed to take payment from home currency
and then offer that currency for sale in the exchange market, or if
existing home debtors to foreign creditors could have any pressure
brought to bear on them by the latter to discharge such debts
immediately in full either by payment in home currency (no foreign
exchange being available) or in goods, services, or securities. To
prevent such possibilities, the restrictions on trade and exchange are
frequently reinforced by restrictions on the working of foreign-owned
accounts, either banking or trading by restrictions as to the uses
which may be made of the proceeds of specified operations in trade and
finance, and, more drastic still, the declaration of moratoria on
certain forms of foreign debts.” (H.E. Evitt, Manual of Foreign
Exchange, pp. 289-291.)* * * * * * *
“Methods of Exchange Control.
* * * * * * *
“The most drastic form of official action is that
by which all exporters are compelled by law to sell only in terms of
the currencies of buying countries and to hand over to the home Central
Bank or State Bureau the entire proceeds of such sales. Such foreign
currency will be purchased from the exporter by the central authority
only at an arbitrarily fixed ‘official’ rate of exchange in terms of
the home currency. At the same time importers wishing to buy goods from
abroad must first apply for a license to import and must also apply to
the central authority for the allocation of the necessary foreign
exchange. This latter will only be sold to them at another arbitrarily
fixed ‘official’ rate (which may bear little relation to current market
quotation), and which even then may only be obtainable in a series of
small amounts. It is under such conditions that clandestine dealings in
exchange take place and which lead to the creation of a ‘Black Bourse’
or illegal exchange market. Such markets have persisted under these
conditions in spite of rigorous attempts to suppress them, as the
prospects of large profits for the operators appear to outweigh the
fears of fines and imprisonment. A slight relaxation of this form of
control is to be found when the central authority is permitted to offer
specified sums of foreign exchange for sale by tender to prospective
buyers who already hold the necessary licenses, instead of ‘rationed’
sales at the ‘official’ rate.
“In a still more relaxed form, the duty of
acquiring all foreign exchange from exporters and alloting it to
importers may be handed over to approved home banks instead of being
carried out by the State Bank or a State Bureau. Even so, it is usually
stipulated that official buying and selling rates shall be fixed and
that a stated percentage of all foreign exchange acquired by the banks
shall be sold to the State at the fixed price.” (Ibid., pp. 300-301.)
Henius in his Dictionary of Foreign Trade explains that “exchange
restrictions apply to official regulation (such as licensing) and also
to disabilities attaching to ownership of foreign exchange, but control or commandeering of all exchange is a last stage or step in regulation.”
“The term exchange restrictions is applied not only to official regulation
of dealings in foreign exchange, but also to any disabilities attaching
to the ownership of certain forms of home currency. * * * In their
early form, exchange restrictions usually consist of regulations
requiring importers to open market the foreign exchange needed to pay
for their imports. * * * The next stage is for the State to require all
exporters of home produce to sell only in terms of foreign currencies
to the government banking agent, which will pay out the equivalent in
home currency to the exporter at the official rate of exchange.“Laws or regulations for exchange control generally commandeer all
foreign exchange arising from the country’s export and release that
exchange as a means of paying for imports in accordance with certain
conditions.” (Henius, Dictionary of Foreign Trade, 2nd Ed., pp.
292-293.)
Another author explains the monopolistic and compulsory nature of exchange control, thus:
“Where there is an effective exchange control,
residents are required to sell to the control at a rate set by the
control, all foreign exchange that comes into their possession from any
source whatsoever. Residents are unable to buy foreign exchange from
any source except the exchange control, for purposes, in amounts, and
at rates fixed by the control. The exchange control thus becomes a
monopsonistic buyer of foreign exchange to which all residents must
sell as soon as they acquire exchange and a monopsonistic seller, the
only source from which residents may acquire foreign exchange for
payment abroad. The heart of all exchange control is compulsion.”
(International Trade & Commercial Policy, 2nd. Ed., Lawrence W.
Towle, p. 93)
From the above it would appear that the grant of the power to adopt
“exchange restrictions” and to license exchange should, if a reasonable
construction is to be adopted, not be extended to include the most
drastic step of control, namely, the commandeering of the exchange
earned by private individuals and the power to pay therefor at prices
which the controller or commandeerer itself fixes.
It is true that under Section 70 of the Central Bank Charter the
Bank may adopt such remedial measures as are appropriate to maintain
the international reserve to a desired level, as directed in Section 70
of the Charter, which provides:
“Sec. 70. Action when the international stability of the peso is threatened.—Whenever
the international reserve of the Central Bank falls to an amount which
the Monetary Board considers inadequate to meet the prospective net
demands on the Central Bank for foreign currencies, or whenever the
international reserve appears to be in imminent danger of falling to
such a level, or whenever the international reserve is falling as a
result of payments or remittances abroad which, in the opinion of the
Monetary Board, are contrary to the national welfare, the Monetary
Board shall:“(a) Take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Central Bank under the provisions of this Act.” (Italic ours)
As indicated in the italized portions of the provision cited, the remedial measures must be within the powers granted under the provisions of the Act.
We venture the suggestion that the commandeering of an exporter’s
dollars for a price less by 50% than its value and the selling of said
dollars to an importer to the exclusion of the exporter himself,[1] cannot
be said to be authorized even under the pretext of an exchange crisis,
by the provisions acts taken to remedy an exchange crisis must be
within the powers granted and exchange control is not mere licensing of
foreign exchange or the restriction thereof.
If, as contended, there is need for the Government to adopt such a
radical compulsory and confiscatory measure as the exchange control,
the matter should be reported to the President and the Legislature for
the formulation of a law authorizing such confiscation, because such
confiscation can be exercised only under a clear and express provision of law
authorizing or directing such confiscation. In other words, it is only
the legislature that has the power to determine when the police power
should be exercised and when the circumstance for the exercise thereof
exist. The Central Bank can not be said to have been given the
authority to pass or enact by law the exchange control provision that
it had established.
In short, the writer holds the view that
the Central Bank Act merely authorizes the Monetary Board to license or
to restrict or regulate foreign exchange; said Act does not authorize
it to commandeer foreign exchange earned by exporters and pay for it
the price it fixes, later selling it to importers at the same rate of
purchase. The writer further holds the belief that the power to
commandeer amounts to a confiscatory power that may not be exercised by
the Central Bank under its Charter; that such confiscatory measures if
justified by a monetary crisis can be adopted by the legislature alone
under its police power. In the opinion of the writer, therefore, the
disputed Section 4 (a) of Circular No. 20 of the Central Bank is beyond
the power of the Central Bank to adopt under the provisions of its
Charter, particularly Section 74 thereof.
That exchange
control helped to ward off the exchange crisis is true; but it was by
no means the only way to do so. It was not necessary for the bank to
commandeer all foreign exchange to maintain the international monetary
reserve. This could be done by mere licensing of the sale of foreign
exchange, directing those that earn the dollars, for example, to sell
to those that are licensed to import the foreign commodities needed by
the country’s population and economy. As the exports are to be licensed
also, the bank could merely restrict the freedom of the exporter holding the foreign exchange, requiring him to sell the foreign exchange to the licensed importer.
Lastly, it may not be amiss to state here that the alleged necessity
and wisdom of the exchange control has been refuted by the success of
the decontrol measure adopted by this administration upon its inception.
Estoppel Bars Action To Compel Payment At P3.00 To the Dollar
The majority of the members of the Court, however, are of the belief
that petitioner’s present suit is subject to the defense of estoppel.
As petitioner obtained the license to export under the provisions of
Circular No. 20, it may not question the right of power of the Bank to
enforce the provisions of said circular requiring surrender of the
proceeds of the shipment obtained through the use of the license. When
the petitioner secured the license it was aware of the fact that the
license was being issued under general Circular No. 20, subject to the
right of the Bank to commandeer the proceeds of the exportation.
Although aware of said provisions petitioner nevertheless secured the
license; it may not now after the use of the license to secure
exportation, refuse to comply with the obligation it has assumed under
the license to surrender the foreign exchange earned. Under general
principles of law such action on the part of the petitioner cannot be
sustained because he is estopped from questioning the right of the Bank
to commandeer the dollars earned through the license.
The
defense of estoppel, however, can be set up only with respect to the
demand for the payment of the foreign exchange earned at the rate of P3
to $1. The defense of estoppel is no bar to the petitioner’s present
petition to prohibit the enforcement of Circular No. 20. The defense to
this position of the petitioner must be found in the other provisions
or principles of law.
Suit Barred By Republic’s Exchange Commitments And By Republic Act No. 265
One last defense raised by the Bank against the action is that under
present laws and because of international agreements which the country
has entered into, the Bank may not unilaterally change the present rate
of exchange of P2 to the dollar. The members of the Court agreed that
this defense is valid and bars the present suit.
Sections 3 and 4 of Article IV of the International Monetary Fund
Agreement of which the Philippines is a signatory, provides as follows:
“SEC. 3. Foreign Exchange dealings based on parity.—The
maximum and the minimum rates for exchange transactions between the
currencies of members taking place within their territories shall not
differ from parity:(i) in the case of spot exchange transactions, by more than one per cent; and
(ii) in the case of other exchange transactions, by a margin which
exceeds the margin for spot exchange transactions by more than the Fund
considers reasonable.”“SEC. 4. Obligations regarding exchange stability—
(a)
Each member undertakes to collaborate with the Fund to promote exchange
stability, to maintain orderly exchange arrangements with other
members, and to avoid competitive exchange alterations.(b)
Each member undertakes, through appropriate measures consistent with
this Agreement, to permit within its territories exchange transactions
between its currency and the currencies of other members only within
the limits prescribed under section 3 of this article.”
The
main purpose of the agreement is to promote exchange stability, to
maintain orderly exchange arrangements among members, and to avoid
competitive exchange depreciation. (Art. 1, par. iii, International
Monetary Fund Agreement.)
To comply with its obligations under the agreement, especially as
regards exchange stability, the Bank may not change the par value of
the peso in relation to the dollar without previous consultation or
approval by the other signatories to the agreement. Circular No 20 must
have been communicated to the other members of the agreement—and it is
assumed that no contemplated change therein had been communicated to
the other signatories at the time of the filing of this case.
The Central Bank, therefore, may not be compelled to ignore Circular
No. 20, which was adopted with the advice and acquiescence of the other
members of the International Monetary Fund, and it may not be compelled
by mandamus to prohibit its enforcement.
Furthermore, under Article 49 of Republic Act No. 265, the Central
Bank does not have the power to change the par value of the peso, a
change which the present suit would require. This can be done only by
the President upon proposal of the Monetary Board and with the approval
of Congress. Were the petition of the petitioner for the payment of his
dollar earnings at the rate of P3 to the dollar granted, the Central
Bank would be violating the above provision of Republic Act No. 265
because it would be consenting to an actual change in the par value of
the peso in relation to the dollar without previous approval or
authority of those empowered to make the change.
Wherefore, the petition should be, as it is hereby, dismissed, without costs. So ordered.
Bengzon, C. J., Padilla, Concepcion, Barrera and Regala JJ., concur.
Reyes, J. B. L. J., concur that the suit is barred by estoppel and the Monetary Fund Agreement.
Bautista Angelo and Dizon, JJ., concur in the result.
[1] H.E. Evitt, Manual of Foreign Exchange, Sir Isaac Pitman & Sons, Ltd., London 1946.
[1] An exporter is paid only
P2 per dollar. The dollar thus earned by the exporter is sold to the
importer for P2. The importer brings into the country with the dollar
goods valued or that can be sold for P3, thus gaining fully 50% on the
dollar earned by the exporter. Hence, the exporter is discriminated
against in favor of the importer. We have witnessed the results of the
unjust policy; exportations have decreased, importers grew like
mushrooms everywhere.
July 16, 1963
LABRADOR, J.:
The motion raises two important issues: (1) that petitioner can not
be held to have been estopped by his failure to protest against the
enforcement of Circular No. 20 on time, and (2) that the injunction
should issue on the ground that Circular No. 20 is unconstitutional.
On the first issue, the record discloses that on December 16, 1949
Export Regulations (Annex 1-B to Reply Memo. of Appellee), formerly
known as E.C. Form No. 2, was promulgated with the following provisions:
“Without a specific license from the Central Bank no
goods, merchandise and/or commodities may be shipped, forwarded, or
sent direct to the exporter’s head office and/or agents abroad, or to
any foreign branch or agency of such exporter, which are not covered by
a draft or drafts drawn in U.S. dollars representing the full value of
the goods, merchandise and/or commodities being or to be shipped,
forwarded, or sent abroad, and unless the collection of the proceeds of
sale of such goods, merchandise and/or commodities is to be undertaken
by, or entrusted to, a bank which is incorporated or licensed to do
business in the Philippines.
* * * * * * * *
“All commercial banks incorporated and/or licensed
to do business in the Philippines are hereby designated agents of the
Central Bank of the Philippines, for the purpose of these regulations,
and a general license is hereby granted such bank to handle bills and
shipping documents arising from the exportation of goods, commodities,
and/or merchandise from the Philippines to foreign countries, and/or
the collection of such bills or the proceeds of sale of such goods,
merchandise and/or commodities in accordance with these regulations.”
Consonant with the above regulations, especially with the first
paragraph quoted, petitioner herein had secured its export license for
the sugar shipped with the accompanying drafts drawn in U.S. dollars
representing the value of the whole sugar. In accordance with paragraph
2 above quoted, the drafts accompanying the sugar were, as per
regulations, entrusted to the Commercial Bank “for the collection of
the proceeds of the sale” of the sugar. So that the petitioner herein
was well aware that it was exporting its sugar subject to the
conditions set forth in the said regulations, especially the paragraphs
quoted above.
The supposed protest made by the petitioner herein against the
collection of the proceeds of the sale in U.S. dollars by the Central
Bank came after the shipment had been made under the conditions
specified in the license issued by the Central Bank accompanying the
corresponding draft and subject to the export regulations already
mentioned. If the petitioner had really protested the enforcement of
Circular No. 20, it should have refused to secure the license with the
draft mentioned, with the authority granted to the commercial banks to
collect the dollars for the Central Bank.
We therefore, find no merit in the first ground of the motion for reconsideration.
With respect to the second ground, it is Our considered opinion
that the matter has long ‘become moot’. Under Republic Act No. 2609,
the power of the Central Bank to commandeer the dollars earned by
exporters was superseded by the provisions of the said Act, which
provided in part:
“Section 1. The provisions of any law to the
contrary notwithstanding’ when and as long as the Central Bank of the
Philippines subjects all transactions in gold and foreign exchange to
licensing in accordance with the provisions of section seventy-four of
Republic Act Numbered Two hundred sixty-five, the Central Bank, in
respect of all sales of foreign exchange by the Central Bank authorized
agent banks, shall have authority to establish a uniform margin of not
more than forty per cent over the banks’ selling rates stipulated by
the Monetary Board under section seventy-nine of Republic Act Numbered
Two hundred sixty-five, which margin shall not be changed oftener than
once a year except upon the recommendation of the National Economic
Council and the approval of the President. The Monetary Board shall fix
the margin at such rate as it may deem necessary to effectively curtail
any excessive demand upon the international reserve.“In
implementing the provisions of this Act, along with other monetary,
credit and fiscal measures to stabilize the economy, the monetary
authorities shall take steps for the adoption of a four-year program of
gradual decontrol.”
The above law was implemented by Circular No. 133 of the Central Bank dated January 21, 1962 (58 Off. Gaz., p. 882).
The issue to prohibit the enforcement of said Circular No. 20 is
therefore, moot and it is unnecessary for Us to pass upon the same.
Wherefore, the motion for reconsideration filed by the petitioner should be, as it is hereby, denied.
Bengzon, C. J., Bautista Angelo, Concepcion, Reyes, J. B. L. and Regala, JJ., concur.