Pacific Oxygen & Acetylene Co. v. Central Bank
REITERATIONFacts
The Antecedents: Plaintiff Pacific Oxygen and Acetylene Company (POAC) applied for a commercial credit (letter of credit) of $63,964.00, later increased to $67,874.00, in favor of Independent Engineering Co., Inc. (USA) to cover the shipment of a plant. POAC also applied for forward exchange to cover this commitment. Procedural History: The Philippine Trust Company, an agent of the Central Bank, established the letter of credit and entered into forward exchange contracts with the Central Bank to cover its dollar commitments. The Central Bank executed a forward exchange contract on January 17, 1962, for delivery on March 17, 1962. Subsequently, the Central Bank suspended the margin levy on January 21, 1962. The beneficiary drew drafts against the letter of credit on February 9 and 13, 1962, which were honored. POAC paid the 15% margin fee under protest on March 14, 1962, amounting to P30,839.49, and subsequently filed a suit for recovery. The Petition: The lower court ruled in favor of POAC, ordering the refund of the margin fee. The Central Bank appealed.
Issue(s)
Whether the 15% margin fee was validly collected from the plaintiff. Whether the date of the forward exchange contract execution or the date of actual delivery/payment of foreign currency determines the applicability of the margin fee.
Ruling
The appealed judgment is reversed. The collection of the margin fee was valid. Costs against plaintiff-appellee.
Ratio Decidendi
On whether the 15% margin fee was validly collected: The applicable law, Republic Act No. 2609, empowers the Central Bank to establish a uniform margin fee on all sales of foreign exchange by it and its authorized agent banks. The lower court itself found that the Central Bank executed a forward exchange contract on January 17, 1962, to cover its U.S. dollar commitments against the letter of credit opened for the plaintiff. This execution occurred prior to the suspension of the margin levy on January 21, 1962. Therefore, the sale of foreign exchange by the Central Bank was subject to the margin fee. On whether the date of the forward exchange contract execution or the date of actual delivery/payment of foreign currency determines the applicability of the margin fee: The Court held that the date of the execution of the forward exchange contract is controlling. The law clearly states that the margin fee applies to "all sales of foreign exchange." A contract of sale is perfected at the moment there is a meeting of minds upon the thing and the price, from which moment parties may reciprocally demand performance. In this case, the sale of foreign exchange through the forward exchange contract was perfected on January 17, 1962, when the Central Bank executed the contract. The subsequent honoring of the drafts and actual delivery of foreign currency on February 9 and 13, 1962, were merely the performance of an already perfected contract. The suspension of the margin levy on January 21, 1962, therefore, did not affect the transaction that was already consummated in terms of agreement on the sale of foreign exchange.
Main Doctrine
The margin fee on foreign exchange sales is collectible based on the date the forward exchange contract was executed, not on the date of actual delivery or payment of the foreign currency.