Manuel & Co. v. Central Bank
REITERATIONFacts
The Antecedents: On April 25, 1960, the Central Bank, through the Monetary Board, issued Circular No. 105 to gradually lift restrictions on gold and foreign exchange transactions, limiting sales at the official rate (P2.00 to $1.00) to specified transactions and pegging others to the free market rate. Circular No. 106 provided regulations for agent banks selling foreign exchange in the free market. Subsequently, Resolution No. 641 pegged the free market rate at P3.20 to $1.00 plus a 25% margin levy, effective April 25, 1960. On September 9, 1960, Resolution No. 1341 reduced the free market rate to P3.00 to $1.00, effective September 12, 1960, with the 25% margin levy, which was later reduced to 20% and then 15% by Circulars Nos. 118 and 122. On October 26, December 8, and December 12, 1961, petitioner purchased US dollars from the Central Bank through its agent bank at the rate of P3.00 to $1.00, plus a 15% margin levy, paying P52,573.47 for $17,524.49, plus P7,896.02 as margin fee. Procedural History: On January 22, 1962, petitioner filed a claim with the Central Bank for a refund of P20,153.16, alleging payment in excess of the statutory par value of P2.00 to $1.00. The Central Bank denied the claim, stating it acted under Republic Act No. 2609 and not Section 49 of Republic Act No. 265. Petitioner then filed a petition for certiorari in the Court of First Instance of Manila, seeking to nullify Monetary Board Resolutions Nos. 641 and 1341 and to secure a refund. On June 29, 1963, the court dismissed the petition, upholding the Central Bank's position that it acted within its authority by changing the rate of exchange, not the par value. The Petition: Petitioner appealed directly to the Supreme Court, arguing that the questioned resolutions and implementing memorandum were null and void and that the sum of P20,153.16 should be refunded.
Issue(s)
Whether the Monetary Board Resolutions Nos. 641 and 1341, which pegged the free market rate of exchange for US dollars, were within the Central Bank's power and authority. Whether these resolutions involved a change in the par value of the Philippine peso in relation to the US dollar.
Ruling
The Supreme Court affirmed the dismissal of the petition, upholding the validity of the Monetary Board Resolutions Nos. 641 and 1341. The Court ruled that the Central Bank acted within its statutory authority in adjusting the rate of exchange as part of a decontrol program, and that these actions did not constitute a change in the par value of the peso, which requires legislative action.
Ratio Decidendi
On the issue of whether the Monetary Board Resolutions Nos. 641 and 1341 were within the Central Bank's power and authority: The Court held that the Central Bank acted within its statutory authority. These resolutions were part of a decontrol program mandated by Republic Act No. 2609, which authorized the Central Bank to adopt a four-year program of gradual decontrol. The Court distinguished between the 'par value' of a currency, which is its official value defined by law based on gold content, and the 'rate of exchange,' which is the price determined by supply and demand in the market. The resolutions in question adjusted the 'rate of exchange' for transactions in the free market, not the 'par value' of the peso. The Court cited its previous ruling in Chamber of Agriculture & Natural Resources vs. Central Bank (14 SCRA 630) which upheld the validity of similar measures under the decontrol program. On the issue of whether these resolutions involved a change in the par value of the Philippine peso: The Court ruled that the resolutions did not involve a change in the par value of the peso. The par value is fixed by law (Section 48 of Republic Act No. 265 and Section 6 of Commonwealth Act No. 699) and any modification requires a specific procedure involving the Monetary Board, the President, and Congress, as outlined in Section 49 of Republic Act No. 265. The resolutions explicitly referred to 'buying and selling rates... for all transactions in the free market,' not a change in par value. The Court emphasized that 'par value' and 'rate of exchange' are not synonymous; the former is legally defined, while the latter is market-driven. The actions taken by the Central Bank were administrative adjustments to the exchange rate to implement a decontrol policy, not a devaluation of the peso.
Main Doctrine
The Central Bank, in implementing a decontrol program under Republic Act No. 2609, may adjust the rate of exchange for foreign currency transactions, which is distinct from the 'par value' of the currency as defined by law. Such adjustments do not constitute a devaluation requiring legislative action.