GR No.

L-12610 October 25, 1963

Bacolod-Murcia Milling Co., Inc. vs. Central Bank of the Philippines

Facts:

The plaintiff Bacolod-Murcia Milling Co., Inc. sold and exported to Olavarria & Co., Inc. of New
York United States of America 3,000 tons of sugar. As a consequence, two drafts in US currency were
drawn against Olavarria to cover the payment of the purchase price. The drafts were entrusted to
Philippine Bank of Commerce (PBCom), which called the attention of the plaintiff that under the existing
rules and regulations all proceeds of the drafts must be sold to the respondent Central Bank authorities
at the prevailing rate of exchange set up by the latter in order to create reserve supply of dollars which
thereafter disposed to parties in need but at the rate of 2 to 1. Plaintiff then wrote to Central Bank
questioning the validity and legality of the said rules and regulations and refused to give consent to the
sale of the dollar proceeds of the two drafts unless the latter will pay the real international worth and
prevailing market value of the said dollar proceeds. A special action for prohibition was filed with the
Court of First Instance (CFI) to stop the Central Bank from enforcing the Circular No. 20, which contains
the said rules and regulations, for being ultra vires.

The respondent, in its defense, held that: Circular No. 20 is presumed to be valid; the
Philippines, as a signatory of the International Monetary Fund Agreement, is bound to respect or to
maintain the par value of the Philippine currency; the circular is for the exchange crisis; and the said
rules are within the power vested to the Central Bank.

The trial court ruled in favor of the respondent. Hence, this appeal.

Issue:

Whether or not the exchange control provision provided in the Circular No. 20 is sufficiently
authorized by the Charter of the Central Bank.

Held:

The appeal is unmeritorious.

As provided in the charter of the Central Bank, it has the duty to administer the monetary and
banking system of the Republic; to maintain monetary stability of the Philippines; to preserve the
international value of peso; and to promote the rising level of production, employment and real income
in the Philippines. 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 rather if the law contains sufficient
standards on which its exercise may be based.

The Court held, as found by the trial court, that indeed there was exchange crisis. And the
exchange control helped to ward such crisis. However, it was not the only way to do so. It was not
necessary for the Central Bank to commander all foreign exchange to maintain the international
monetary reserve. Such could be done by licensing of the sale of foreign exchange and directing those
who earn dollars to sell to those who are licensed to import the foreign commodities needed by the
country's population and economy.

However, the Court cannot grant the appeal on the grounds of estoppel and international
agreements. The respondent properly raised the defense of estoppel as the petitioner cannot question
the right or power of the Central Bank to enforce the provisions of the said circular because the
petitioner obtained a license by virtue of such circular. Also, the defense that the Philippines is a
signatory of the international agreements prevents the respondent to unilaterally change the present
rate of exchange of P2 to $1. Ergo, the appeal of the petitioner still cannot be granted.