facts
"Advocates for Truth in Lending, Inc." (AFTIL) is a
non-profit, non-stock corporation organized to engage in pro bono concerns and
activities relating to money lending issues. It was incorporated on July 9,
2010,and a month later, it filed this petition, joined by its founder and
president, Eduardo B. Olaguer, suing as a taxpayer and a citizen.
HISTORY OF
CENTRAL BANK’S POWER TO FIX MAX INTEREST RATES
1.
R.A. No. 265, which created
the Central Bank on June 15, 1948, empowered the CB-MB toset the maximum interest rates which banks may
charge for all types of loans and other credit operations.
2.
The Usury Law was
amended by P.D.1684, giving
the CB-MB authority to prescribe
different maximum rates of interest which may be imposed for a loan or
renewal thereof or the forbearance of
any money, goods or credits, provided that the changes are effected
gradually and announced in advance. Section 1-a of Act No. 2655 now reads:
3.
In its Resolution
No. 2224 dated December 3, 1982, the
CB-MB issued CB Circular No. 905, Series of 1982, effective on January 1, 1983.
It removed the ceilings on interest
rates on loans or forbearance of any money, goods or credits:
Sec. 1. The rate of
interest, including commissions, premiums, fees and other charges, on a loan or
forbearance of any money, goods, or credits,
regardless of maturity and whether secured or unsecured, that may be charged or
collected by any person, whether
natural or juridical, shall not be
subject to any ceiling
prescribed under or pursuant to the Usury Law, as amended.
4.
R.A. No. 7653
establishing the BSP replaced the CB:
Sec. 135.
Repealing Clause. — Except as may be provided for in Sections 46 and 132 of
this Act, Republic Act No. 265, as amended, the provisions of any other law,
special charters, rule or regulation issued pursuant to said Republic Act No.
265, as amended, or parts thereof, which may be inconsistent with the
provisions of this Act are hereby repealed. Presidential Decree No. 1792 is
likewise repealed.
Note: R.A. 7653 –
the law that created BSP to replace CB – Note: this law did not retain the same
provision as that of Section 109 in RA 265.
PETITIONER’S
ARGUMENTS
·
To justify their
skipping the hierarchy of courts petitioners contend the transcendental importance of their Petition:
a)
CB-MB statutory or
constitutional authority to prescribe the maximum rates of interest for all
kinds of credit transactions and forbearance of money, goods or credit beyond
the limits prescribed in the Usury Law;
b)
If so, whether the
CB-MB exceeded its authority when it issued CB Circular No. 905, which removed
all interest ceilings and thus suspended Act No. 2655 as regards usurious
interest rates;
·
Petitioners
contend that under Section 1-a of Act No. 2655, as amended by P.D. No. 1684,
the CB-MB was authorized only to
prescribe or set the maximum rates of interest for a loan or renewal thereof or
for the forbearance of any money, goods or credits, and to change such
rates whenever warranted by prevailing economic and social conditions, the
changes to be effected gradually and on scheduled dates; that nothing in P.D. No. 1684 authorized the
CB-MB to lift or suspend the limits of interest on all credit transactions,
when it issued CB Circular No. 905. They further insist that under Section 109
of R.A. No. 265, the authority of the CB-MB was clearly only to fix the banks’ maximum rates of interest, but always within the
limits prescribed by the Usury Law.
·
CB Circular No.
905, which was promulgated without the benefit of any prior public hearing, is
void because it violated NCC 5 which provides that "Acts executed against
the provisions of mandatory or prohibitory laws shall be void, except when the
law itself authorizes their validity."
·
weeks after the
issuance of CB Circular No. 905, the benchmark 91-day Treasury bills shot up to
40% PA, as a result. The banks followed suit and re-priced their loans to rates
which were even higher than those of the "Jobo" bills.
·
CB Circular No.
905 is also unconstitutional in light of the Bill of Rights, which commands
that "no person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal protection of the
laws."
·
R.A. No. 7653 did
not re-enact a provision similar to Section 109 of RA 265, and therefore, in
view of the repealing clause in
Section 135 of R.A. No. 7653, the BSP-MB has been stripped of the power either to prescribe the maximum rates of interest
which banks may charge for different kinds of loans and credit transactions,
or to suspend Act No. 2655 and continue enforcing CB Circular No. 905.
Ruling
CB-MB merely
suspended the effectivity of the Usury Law when it issued CB Circular No. 905.
In Medel v. CA, it was said that the circular did not repeal nor amend
the Usury Law but simply suspended its effectivity; that a Circular cannot
repeal a low; that by virtue of CB the Usury Law has been rendered ineffective;
that the Usury has been legally non-existent in our jurisdiction and interest
can now be charged as lender and borrow may agree upon.
Circular upheld the parties’ freedom of contract to agree freely on the
rate of interest citing Art. 1306 under which the contracting parties may
establish such stipulations, clauses terms and conditions as they may deem
convenient provided they are not contrary to law, morals, good customs, public
order or public policy.
BSP-MB has
authority to enforce CB Circular No. 905.
RA 265 covered
only banks while Section 1-a of the Usury Law, empowers the Monetary Board, BSP
for that matter, to prescribe the maximum rate or rates of interest for all
loans or renewals thereof or the forbearance of any money, good or credits …
The Usury Law is
broader in scope than RA 265, now RA 7653, the later merely supplemented the
former as it provided regulation for loans by banks and other financial
institutions. RA 7653 was not unequivocally repealed by RA 765.
CB Circular 905 is
essentially based on Section 1-a of the Usury Law and the Usury Law being
broader in scope than the law that created the Central Bank was not deemed
repealed when the law replacing CB with the Bangko Sentral was enacted despite
the non-reenactment in the BSP Law of a provision in the CB Law which the
petitioners purports to be the basis of Circular 905. Magulo ba? Hahaha. Basta
the present set up is: The power of the BSP Monetary Board to determine
interest rates emanates from the Usury Law [which was further specified by
Circular 905].
Granting that the CB had power to "suspend" the Usury Law, the
new BSP-MB did not retain this power of its predecessor, in view of Section 135
of R.A. No. 7653, which expressly repealed R.A. No. 265. The petitioners point
out that R.A. No. 7653 did not reenact a provision similar to Section 109 of
R.A. No. 265.
A closer perusal shows that Section
109 of R.A. No. 265 covered only loans extended by banks, whereas under
Section 1-a of the Usury Law, as amended, 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.
Act No. 2655, an
earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No. 7653,
merely supplemented it as it concerns loans by banks and other financial
institutions. Had R.A. No. 7653 been intended to
repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal
terms.
Moreover, the rule is settled that repeals
by implication are not favored, because laws are presumed to be passed with
deliberation and full knowledge of all laws existing pertaining to the subject.An
implied repeal is predicated upon the condition that a substantial conflict or
repugnancy is found between the new and prior laws. Thus, in the absence of an
express repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exists in the terms of
the new and old laws. We
find no such conflict between the provisions of Act 2655 and R.A. No. 7653.
#generalia specialibus non derogant
The lifting of
the ceilings for interest rates does not authorize stipulations charging
excessive, unconscionable, and iniquitous interest.
In Castro v. Tan,
the Court held that the imposition of unconscionable interest is immoral and
unjust. It is tantamount to a repugnant spoliation and an iniquitous
deprivation of property repulsive to the common sense of man.
They
are struck down for being contrary to morals, if not against the law, therefore
deemed inexistent and void ab initio. However this nullity does not affect the
lender’s right to recover the principal of the loan nor affect the other terms
thereof.
PROCEDURAL
MATTERS
The Petition
is procedurally infirm.
The CB-MB was created to perform executive functions with respect to the
establishment, operation or liquidation of banking and credit institutions. It does not perform judicial or quasi-judicial functions. Certainly, the
issuance of CB Circular No. 905 was done in the exercise of an executive
function. Certiorari will not lie in the instant case.
Petitioners
have no locus standi to file the Petition
Locus standi is defined as "a right of appearance in a court of
justice on a given question." In private suits, Section 2, Rule 3 of the
1997 Rules of Civil Procedure provides that "every action must be
prosecuted or defended in the name of the real party in interest," who is
"the party who stands to be benefited or injured by the judgment in the
suit or the party entitled to the avails of the suit." Succinctly put, a
party’s standing is based on his own right to the relief sought.
Even in public interest cases such as this petition, the Court has
generally adopted the "direct
injury" test that the person who impugns the validity of a statute
must have "a personal and
substantial interest in the case such that he has sustained, or will sustain
direct injury as a result." while petitioners assert a public right it
is nonetheless required of them to make out a sufficient interest in the
vindication of the public order and the securing of relief.
Petitioners also do not claim that public funds were being misused in
the enforcement of CB Circular No. 905 which would have made the action a
public one, "and justify relaxation of the requirement that an action must
be prosecuted in the name of the real party-in-interest."
The Petition
raises no issues of transcendental importance.
In Prof. David v. Pres.
Macapagal-Arroyo,the Court summarized the requirements before taxpayers,
voters, concerned citizens, and legislators can be accorded a standing to sue,
viz:
(1) the cases involve constitutional issues;
(2) for taxpayers, there must be a claim of illegal disbursement of
public funds or that the tax measure is unconstitutional;
(3) for voters, there must be a showing of obvious interest in the
validity of the election law in question;
(4) for concerned citizens, there must be a showing that the issues
raised are of transcendental importance which must be settled early; and
(5) for legislators, there must be a claim that the official action
complained of infringes upon their prerogatives as legislators.
In CREBA v. ERC, guidelines as determinants on whether a matter is of
transcendental importance, namely:
1.
the character of
the funds or other assets involved in the case;
2.
the presence of a
clear case of disregard of a constitutional or statutory prohibition by the
public respondent agency or instrumentality of the government; and
3.
the lack of any
other party with a more direct and specific interest in the questions being
raised.
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