CASE ASSIGNMENT #3
Pilipinas Monetary Board (BSP-MB), in its
3. Nacar vs. Gallery Frames, 703 SCRA 439
(2013)
4. Bank of Commerce vs. Planters
Development Bank, 681 SCRA 521 (2012)
CASE DIGESTS:
NACAR v GALLERY FRAMES (2013)
Remember this case sa Labor and Credit
Trans? About sa interest rate in re: decision sa
labor case. Insert EASTERN SHIPPING LINES
Facts:
The LA found Gallery Frames guilty of illegal
dismissal. Nacar was awarded with damages
consisting of backwages and separation pay;
P158, 919.92.
GM appealed to SC. SC affirmed the decision of
LA. An Entry of Judgment was later issued
certifying that the resolution became final and
executory on May 27, 2002. The case was,
thereafter, referred back to the Labor Arbiter.
A pre-execution conference was consequently
scheduled, but respondents failed to appear.
On November 5, 2002, Nacar filed a Motion for
Correct Computation, praying that his
backwages be computed from the date of his
dismissal on January 24, 1997 up to the
finality of the Resolution of the Supreme Court
on May 27, 2002. Upon re-computation, the
Computation and Examination Unit of the NLRC
arrived at an updated amount in the sum of
₱471,320.31. GM moved to quash the motion
claiming that after the decision becomes final
and executory, the same cannot be altered or
amended anymore.
ISSUE: APPROPRIATE INTEREST
RULING: Nacar is entitled to interest.
Recently, however, the Bangko Sentral ng
Resolution No. 796 dated May 16, 2013,
approved the amendment of Section 2 of
Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799, Series of
2013, effective July 1, 2013, the pertinent
portion of which reads:
The Monetary Board, in its Resolution No. 796
dated 16 May 2013, approved the following
revisions governing the rate of interest in the
absence of stipulation in loan contracts,
thereby amending Section 2 of Circular No.
905, Series of 1982:
Section 1. The rate of interest for the
loan or forbearance of any money,
goods or credits and the rate allowed in
judgments, in the absence of an express
contract as to such rate of interest, shall
be six percent (6%) per annum.
Section 2. In view of the above,
Subsection X305.1 of the Manual of
Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the
Manual of Regulations for Non-Bank
Financial Institutions are hereby
amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of
an express stipulation as to the rate of
interest that would govern the parties, the rate
of legal interest for loans or forbearance of any
money, goods or credits and the rate allowed
in judgments shall no longer be twelve percent
(12%) per annum - as reflected in the case of
Eastern Shipping Lines and Subsection
X305.1 of the Manual of Regulations for Banks
and Sections 4305Q.1, 4305S.3 and 4303P.1 of
the Manual of Regulations for Non-Bank
Financial Institutions, before its amendment by
BSP-MB Circular No. 799 - but will now be six
percent (6%) per annum effective July 1,
2013.
It should be noted, nonetheless, that the new
rate could only be applied prospectively and
not retroactively. Consequently, the twelve
percent (12%) per annum legal interest shall
apply only until June 30, 2013. Come July 1,
2013 the new rate of six percent (6%) per
annum shall be the prevailing rate of interest
when applicable.
In Advocates for Truth in Lending, Inc.
and Eduardo B. Olaguer v. Bangko Sentral
Monetary Board,  SC affirmed the authority
of the BSP-MB to set interest rates and to issue
and enforce Circulars when it ruled that "the
BSP-MB may prescribe the maximum rate or
rates of interest for all loans or renewals
thereof or the forbearance of any money,
goods or credits, including those for loans of
low priority such as consumer loans, as well as
such loans made by pawnshops, finance
companies and similar credit institutions. It
even authorizes the BSP-MB to prescribe
different maximum rate or rates for different
types of borrowings, including deposits and
deposit substitutes, or loans of financial
intermediaries."
HENCE, GM is ordered to pay interest of
12% per annum of the TOTAL
MONETARY AWARDS computed from
MAY 27, 2002 to JUNE 30, 2013 AND 6%
per annum from July 1, 2013 until full
satisfaction.
BANK OF COMMERCE VS. PLANTERS
DEVELOPMENT BANK, 681 SCRA 521
(2012)
Facts:
RCBC owned 7 Central Bank Bills valued at
70M. These were sold to Bank of Commerce;
then sold to Planters Development Bank two
sets of Central Bank Bills.
Another transaction: PDB sold to BOC
TREASURY BILLS worth 70M. However, instead
of delivering the Treasury Bills, the PDB
delivered the seven CB bills to the BOC.
This is a samok case but here are the facts:
The three (3) of which was allegedly sold back
by the BOC to the PDB, which was transferred
to Bancap and later on reacquired by BOC. The
remaining four was sold to Capital One Equities
Corporation which was transferred to All Asia
which transferred the same to RCBC. One of
which was sold back to All Asia but the BSP
refused to release the amount covering the
said CB. The other three CB was sold by RCBC
to IVI, payment of which was also refused by
BSP which was subsequently acquired by BOC.
The second set is consisting of two (2) CB bills
which were sold to PDB by RCBC. The latter
delivered the same to turn Bancap and sold the
CB to Almanah Islamic Investment Bank which
was bought by BOC.
FIRST SET:
On April 20, 1994, according to the
BOC, it "sold back" to the PDB three of
the seven CB bills. In turn, the PDB
transferred these three CB bills to
Bancapital Development Corporation
(Bancap). On April 25, 1994, the BOC
bought the three CB bills from Bancap –
so, ultimately, the BOC reacquired these
three CB bills.
On April 20, 1994, the BOC sold the
remaining four (4) CB bills to Capital
One Equities Corporation which
transferred them to All-Asia Capital and
Trust Corporation (All Asia). On
September 30, 1994, All Asia further
 transferred the four CB bills back to the
RCBC.
As the registered owner of the
remaining three CB bills, the RCBC sold
them to IVI Capital and Insular Savings
Bank. Again, when the BSP refused to
release the amount of this CB bill on
maturity, the RCBC paid back its
transferees, reacquired these three CB
bills and sold them to the BOC –
ultimately, the BOC acquired these three
CB bills.
SECOND SET:
On April 19, 1994, the RCBC, as
registered owner, (i) sold two CB bills
with a total face value of ₱ 20 million to
the PDB and (ii) delivered to the PDB
the corresponding Detached
Assignment.
On even date, the PDB delivered to
Bancap the two CB bills (April 19
transaction). In turn, Bancap sold the
CB bills to Al-Amanah Islamic
Investment Bank of the Philippines,
which in turn sold it to the BOC.
The PDB requested to record its claim over the
said CBs in the BSP’s books, explaining that its
non-possession of the CB bills is "on account of
imperfect negotiations thereof and/or
subsequent set off or transfer. But it was
denied by BSP on the ground that under
Section 8 of CB Circular No. 28 it requires the
presentation of the bond before a registered
bond may be transferred on the books of the
BSP. PDB also asked BSP Deputy Governor
Edgardo Zialcita that (i) a notation in the BSP’s
books be made against the transfer, exchange,
or payment of the bonds and the payment of
interest thereon; and (ii) the presenter of the
bonds upon maturity be required to submit
proof as a holder in due course (of the firstset
of CB bills). The PDB relied on Section 10 (d) 4
of CB Circular No. 28 however; Nuqui again
denied the request, reiterating the BSP’s
previous stand.
RTC dismissed the PDB’s petition as well as the
counterclaim and the counter complaint/cross-
claim for interpleader of BOC and BSP
respectively assailing that it has no jurisdiction
over the case.
ISSUE: BSP supervisory powers
RULING:
The BSP Monetary Board is a quasi-judicial
agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of
Appeals, the BSP Monetary Board is an
independent central monetary authority and a
body corporate with fiscal and administrative
autonomy, mandated to provide policy
directions in the areas of money, banking and
credit. It has power to issue subpoena, to sue
for contempt those refusing to obey
the subpoena without justifiable reason, to
administer oaths and compel presentation of
books, records and others, needed in its
examination, to impose fines and other
sanctions and to issue cease and desist order.
Section 37 of Republic Act No. 7653, in
particular, explicitly provides that the BSP
Monetary Board shall exercise its discretion in
determining whether administrative sanctions
should be imposed on banks and quasi-banks,
which necessarily implies that the BSP
Monetary Board must conduct some form of
investigation or hearing regarding the same.
The Monetary Board shall determine the
interest rates, maturities and other
characteristics of said obligations of the
Bangko Sentral, and may, if it deems it
advisable, denominate the obligations in gold
or foreign currencies.
The primary objective of the BSP is to maintain
price stability. The BSP has a number of
monetary policy instruments at its disposal to
promote price stability. To increase or reduce
liquidity in the financial system, the BSP uses
open market operations, among others.  Open
market operation is a monetary tool where the
BSP publicly buys or sells government
securities from (or to) banks and financial
institutions in order to expand or contract the
supply of money. By controlling the money
supply, the BSP is able to exert some influence
on the prices of goods and services and
achieve its inflation objectives.
While R.A. No. 7653  empowers the BSP to
conduct administrative hearings and render
judgment for or against an entity under its
supervisory and regulatory powers and even
authorizes the BSP Governor to "render
decisions, or rulings x x x on matters regarding
application or enforcement of laws pertaining
to institutions supervised by the BSP and laws
pertaining to quasi-banks, as well as
regulations, policies or instructions issued by
the Monetary Board," it is precisely the text of
the BSP’s own regulation (whose validity is not
here raised as an issue) that points to the
BSP’s limited role in case of an allegedly
fraudulent assignment to simply (i) issuing and
circularizing a ‘"stop order" against the
transfer, exchange, redemption of the
certificate of indebtedness, including the
payment of interest coupons, and (ii)
withholding action on the certificate.
A similar conclusion can be drawn from the
BSP’s administrative adjudicatory power in
cases of "willful failure or refusal to comply
with, or violation of, any banking law or any
order, instruction or regulation issued by the
Monetary Board, or any order, instruction or
ruling by the Governor." The non-compliance
with the pertinent requirements under CB
Circular No. 28, as amended, deprives a party
from any right to demand payment from the
BSP.
In other words, the grant of quasi-judicial
authority to the BSP cannot possibly extend to
situations which do not call for the exercise by
the BSP of its supervisory or regulatory
functions over entities within its jurisdiction.
The fact alone that the parties involved are
banking institutions does not necessarily call
for the exercise by the BSP of its quasi-judicial
powers under the law.
The SC held that even without resorting to
statutory construction aids, matters involving
the subject CB bills should necessarily be
governed by CB Circular No. 769-80. Even
granting, however, that reliance on CB Circular
No. 769-80 alone is not enough; SC find that
CB Circular No. 769-80 impliedly repeals CB
Circular No. 28.
CB Circular No. 28 and CB Circular No.
769-80 provide the BSP with a course of
action in case of an allegedly fraudulently
assigned certificate of indebtedness.
Under CB Circular No. 28, in case of
fraudulent assignments, the BSP would have to
"call upon the owner and the person
presenting the bond to substantiate their
respective claims" and, from there, determine
who has a better right over the registered
bond.
On the other hand, under CB Circular No.
769-80, the BSP shall merely "issue and
circularize a ‘stop order’ against the transfer,
exchange, redemption of the [registered]
certificate" without any adjudicative function
(which is the precise root of the present
controversy). As the two circulars stand, the
patent irreconcilability of these two provisions
does not require elaboration. Section 5, Article
V of CB Circular No. 769-80 inescapably
repealed Section 10 (d) 4 of CB Circular No.
28.