G.R. No. 69078 December 4, 1989
CENTRAL BANK OF THE PHILIPPINES, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT, ARTEX DEVELOPMENT CO., INC., EASTERN TEXTILE MILLS, INC., CENTRAL MANUFACTURING CORP., PACIFIC KNITTING MILS, INC., and ATLAS TEXTILE DEVELOPMENT CORPORATION, respondents.

FACTS

Private respondents are domestic textile corporations. In the 1950s, petitioner Central Bank, through its Monetary Board, established a policy for the integration of the local textile industry to promote investment and save foreign exchange. Private respondents, as participants in this government-mandated program, were required to submit integration schedules and import capital machinery on a deferred payment basis. Their project studies and applications for necessary foreign exchange allocations for these machinery imports were approved by the Central Bank’s Monetary Board through several resolutions prior to April 23, 1960.
Subsequently, Republic Act No. 2609 mandated a program of gradual decontrol. Implementing this, the Monetary Board issued Central Bank Circular No. 105 on April 25, 1960, which set a new decontrol exchange rate of P3.20 to US$1.00. However, this circular explicitly excluded from the new rate “existing contractual obligations previously approved by the Monetary Board,” thereby preserving the old preferred rate of P2.00 to US$1.00 for such obligations. Despite this exclusion, the Central Bank later issued Circular No. 121 on March 2, 1961, which removed this protective clause. Consequently, private respondents were compelled to purchase foreign exchange at the higher free market rate to service their deferred payment obligations for the imported machinery, prompting them to file an action for declaratory relief.

ISSUE

Whether the Central Bank is obligated to allow private respondents to purchase foreign exchange at the preferred rate of P2.00 to US$1.00 to service their deferred payment obligations for machinery imported under the integration program.

RULING

Yes. The Supreme Court affirmed the decision of the Intermediate Appellate Court, ruling in favor of private respondents. The legal logic rests on the principles of fairness, estoppel, and the nature of the commitments made by the Central Bank. The Court distinguished this case from Batchelder v. Central Bank, where a general policy resolution was held not to create a contractual obligation. Here, private respondents did not merely act under a general policy. They were direct and specific participants in a formal integration program mandated and supervised by the Central Bank. Their importation of capital machinery was undertaken only upon the Bank’s prior approval of the foreign currency costs and the corresponding peso payments, with explicit directives to use deferred payment terms.
By requiring their participation and approving their specific applications, the Central Bank induced private respondents to incur substantial obligations. Having led them to rely on the program’s terms, which initially guaranteed the preferred exchange rate for approved obligations, the Central Bank is estopped from retroactively applying subsequent circulars that would nullify this vested right and cause them grave prejudice. The Court emphasized that while the Central Bank is committed to maintaining monetary stability, this duty must be harmonized with basic fairness and the government’s own developmental objectives. The faithful compliance of private respondents with the Bank’s directives created an obligation on the part of the government to honor the terms of the integration program as originally agreed, including the preferred exchange rate for their approved foreign exchange allocations.