SECOND DIVISION
[G.R. No. L-23039. November 26, 1986.]
RAMCAR, INC., v. CENTRAL BANK OF THE PHILIPPINES.
R E S O L U T I O N
This appeal raises the legal question as to when the margin levy on the sale of foreign exchange is collectible by the Central Bank.
Ramcar, Inc. is an importer of automobile spare parts. To cover the cost of various importations, it opened with the Philippine National Bank [PNB] between October 30, 1961 and January 2, 1962, sixteen [16] free market letters of credit in the total amount of $103,469.07 in favor of its suppliers abroad. [Joint Record on Appeal, p. 22]. The PNB, in turn, applied with the Central Bank to purchase, for the account of Ramcar, the foreign exchange necessary to cover said letters of credit. On October 31, November 2, 6, 16 and 22, December 13, 18, 28 and 29, 1961 and January 3, 1962, the PNB and the Central Bank executed "forward exchange contracts" for the purchase of foreign exchange. [Ibid, p. 24].
In due time, the foreign beneficiaries [suppliers] drew against their respective letters of credit and presented the drafts to the foreign correspondent banks of PNB for payment. Ramcar subsequently accepted the drafts [or actual drawings made against the letters of credit by the suppliers] during the period from January 24, 1962 to April 10, 1962. It was also during that period that the PNB, as the authorized agent of e Central Bank, assessed and collected from Ramcar the total sum of P46,564.15 as 15% margin levy on the sale of foreign exchange. Ramcar paid under protest and later demanded a refund of the aforesaid amount from the Central Bank claiming that its collection was illegal. When the Central Bank refused, Ramcar assailed the validity of the collection of the margin levy before the Court of First Instance of Manila [Civil Case No. 54859].
The lower court, relying on the ruling in Belman Compañia Inc. v. Central Bank, 104 Phil. 877, held that Ramcar was entitled to the return of the margin levy with respect to the drafts drawn against the letters of credit which were paid by PNB’s correspondent bank after January 21, 1962 amounting to P34,058.50, with 6% interest thereon per annum from the date of the filing of the complaint [Joint Record on Appeal, pp. 275-276]. Both parties interposed an appeal.
There is no dispute as to the legality of Central Bank Circular No. 122 imposing the 15% margin fee on all sales of foreign exchange. The collection of margin fee was authorized by Republic Act No. 2609, Section 1, which empowered the Central Bank "in respect of all sales of foreign exchange by [it] and its authorized agent banks, . . . to establish a uniform margin of not more than 40% over the bank’s selling rates stipulated by the Monetary Board . . ." [55 O.G. 8600].
The conflict arose because on January 21, 1962, the Central Bank suspended the collection of the margin levy on foreign exchange. The end result was that while the letters of credit were opened and the forward exchange contracts were executed during the effectivity of Circular No. 122, the drafts covering said letters of credit were drawn and accepted by the importer when the collection of the margin levy had already been suspended.
The decisive issue, therefore, is whether the margin fee becomes collectible upon the execution of the forward exchange contract as maintained by the Central Bank; or upon acceptance by the drawee of the actual drawings made by the foreign suppliers as contended by Ramcar; or upon payment of the amount in foreign currency to the creditor by the correspondent bank, as ruled by the court below.
Applying the rule enunciated in the Belman case that there is no executed or consummated sale of foreign exchange until payment is made in foreign currency of the amount applied for in the letter of credit duly approved and granted by the correspondent bank, the lower court held that the date of such payment in foreign currency determined whether such amount in foreign currency was subject to the tax imposed by the government. [Joint Record on appeal, p. 271].
While that may have been the prevailing jurisprudence at that time [March 21, 1964], this Court, however, subsequently examined and overruled the doctrine of the Belman case and allied adjudications. In the case of Pacific Oxygen and Acetylene Co. v. Central Bank, G.R. No. L-21881, March 1, 1968, 22 SCRA 917, and similarly in the case of Vargas Plow Factory, Inc. v. Central Bank, G.R. No. L-25732, February 27, 1969, 27 SCRA 84, which are on all fours with the case at bar, this Court reached the conclusion that "Republic Act No. 2609, empowering the Central Bank to collect a margin fee in respect of all sales of foreign exchange by the Central Bank and its authorized agents . . ., as well as the Central Bank circulars implementing said law, made no distinction between perfected and consummated, or between executory and executed, sales. Under our Civil and Commercial Codes, a sale comes into existence upon its perfection by mutual consent, even if the subject matter or the consideration has not been delivered . . ., It follows that the true sale took place when the forward exchange contracts were executed . . ." [Ibid, pp. 87-88, citing Articles 1315, 1316, 1458, 1461, 1462 and 1475, Civil Code].
Consequently, the margin fee in the instant case accrued and became collectible in October, November and December of 1961 and January of 1962 when the forward exchange contracts were entered into, or before the levy was suspended. Hence, the margin fee paid by Ramcar Under protest was properly collected.
Moreover, to sustain the lower court would be to give the automobile importer an unfair advantage over the Central Bank.
The essence of a forward exchange contract is to enable the buyer, the moment he enters into such contract, to buy from his own bank with his own currency, the amount of foreign exchange he needs to pay for his purchases abroad at a definite rate and a given future date. The idea is to save him from the risk of exchange fluctuations by providing him with a "hedge." [Brief for Defendant-Appellant, pp. 26-27].
As well-pointed out by the Central Bank, since Ramcar had availed itself of the benefits accruing between October 31, 1961 and January 3, 1962 under the forward exchange contracts by liquidating its obligations, at the prevailing contract rates, thereby safeguarding itself against exchange risks, said importer should also comply with the obligation imposed by the law on those dates, which is the payment of the 15% margin fee on its purchase of foreign exchange. [Joint Record on Appeal, p. 300].
Accordingly, the decision under appeal is reversed and the complaint for refund is ordered dismissed. No costs.
Ramcar, Inc. is an importer of automobile spare parts. To cover the cost of various importations, it opened with the Philippine National Bank [PNB] between October 30, 1961 and January 2, 1962, sixteen [16] free market letters of credit in the total amount of $103,469.07 in favor of its suppliers abroad. [Joint Record on Appeal, p. 22]. The PNB, in turn, applied with the Central Bank to purchase, for the account of Ramcar, the foreign exchange necessary to cover said letters of credit. On October 31, November 2, 6, 16 and 22, December 13, 18, 28 and 29, 1961 and January 3, 1962, the PNB and the Central Bank executed "forward exchange contracts" for the purchase of foreign exchange. [Ibid, p. 24].
In due time, the foreign beneficiaries [suppliers] drew against their respective letters of credit and presented the drafts to the foreign correspondent banks of PNB for payment. Ramcar subsequently accepted the drafts [or actual drawings made against the letters of credit by the suppliers] during the period from January 24, 1962 to April 10, 1962. It was also during that period that the PNB, as the authorized agent of e Central Bank, assessed and collected from Ramcar the total sum of P46,564.15 as 15% margin levy on the sale of foreign exchange. Ramcar paid under protest and later demanded a refund of the aforesaid amount from the Central Bank claiming that its collection was illegal. When the Central Bank refused, Ramcar assailed the validity of the collection of the margin levy before the Court of First Instance of Manila [Civil Case No. 54859].
The lower court, relying on the ruling in Belman Compañia Inc. v. Central Bank, 104 Phil. 877, held that Ramcar was entitled to the return of the margin levy with respect to the drafts drawn against the letters of credit which were paid by PNB’s correspondent bank after January 21, 1962 amounting to P34,058.50, with 6% interest thereon per annum from the date of the filing of the complaint [Joint Record on Appeal, pp. 275-276]. Both parties interposed an appeal.
There is no dispute as to the legality of Central Bank Circular No. 122 imposing the 15% margin fee on all sales of foreign exchange. The collection of margin fee was authorized by Republic Act No. 2609, Section 1, which empowered the Central Bank "in respect of all sales of foreign exchange by [it] and its authorized agent banks, . . . to establish a uniform margin of not more than 40% over the bank’s selling rates stipulated by the Monetary Board . . ." [55 O.G. 8600].
The conflict arose because on January 21, 1962, the Central Bank suspended the collection of the margin levy on foreign exchange. The end result was that while the letters of credit were opened and the forward exchange contracts were executed during the effectivity of Circular No. 122, the drafts covering said letters of credit were drawn and accepted by the importer when the collection of the margin levy had already been suspended.
The decisive issue, therefore, is whether the margin fee becomes collectible upon the execution of the forward exchange contract as maintained by the Central Bank; or upon acceptance by the drawee of the actual drawings made by the foreign suppliers as contended by Ramcar; or upon payment of the amount in foreign currency to the creditor by the correspondent bank, as ruled by the court below.
Applying the rule enunciated in the Belman case that there is no executed or consummated sale of foreign exchange until payment is made in foreign currency of the amount applied for in the letter of credit duly approved and granted by the correspondent bank, the lower court held that the date of such payment in foreign currency determined whether such amount in foreign currency was subject to the tax imposed by the government. [Joint Record on appeal, p. 271].
While that may have been the prevailing jurisprudence at that time [March 21, 1964], this Court, however, subsequently examined and overruled the doctrine of the Belman case and allied adjudications. In the case of Pacific Oxygen and Acetylene Co. v. Central Bank, G.R. No. L-21881, March 1, 1968, 22 SCRA 917, and similarly in the case of Vargas Plow Factory, Inc. v. Central Bank, G.R. No. L-25732, February 27, 1969, 27 SCRA 84, which are on all fours with the case at bar, this Court reached the conclusion that "Republic Act No. 2609, empowering the Central Bank to collect a margin fee in respect of all sales of foreign exchange by the Central Bank and its authorized agents . . ., as well as the Central Bank circulars implementing said law, made no distinction between perfected and consummated, or between executory and executed, sales. Under our Civil and Commercial Codes, a sale comes into existence upon its perfection by mutual consent, even if the subject matter or the consideration has not been delivered . . ., It follows that the true sale took place when the forward exchange contracts were executed . . ." [Ibid, pp. 87-88, citing Articles 1315, 1316, 1458, 1461, 1462 and 1475, Civil Code].
Consequently, the margin fee in the instant case accrued and became collectible in October, November and December of 1961 and January of 1962 when the forward exchange contracts were entered into, or before the levy was suspended. Hence, the margin fee paid by Ramcar Under protest was properly collected.
Moreover, to sustain the lower court would be to give the automobile importer an unfair advantage over the Central Bank.
The essence of a forward exchange contract is to enable the buyer, the moment he enters into such contract, to buy from his own bank with his own currency, the amount of foreign exchange he needs to pay for his purchases abroad at a definite rate and a given future date. The idea is to save him from the risk of exchange fluctuations by providing him with a "hedge." [Brief for Defendant-Appellant, pp. 26-27].
As well-pointed out by the Central Bank, since Ramcar had availed itself of the benefits accruing between October 31, 1961 and January 3, 1962 under the forward exchange contracts by liquidating its obligations, at the prevailing contract rates, thereby safeguarding itself against exchange risks, said importer should also comply with the obligation imposed by the law on those dates, which is the payment of the 15% margin fee on its purchase of foreign exchange. [Joint Record on Appeal, p. 300].
Accordingly, the decision under appeal is reversed and the complaint for refund is ordered dismissed. No costs.
