GR L 21881; (March, 1968) (Digest)
G.R. No. L-21881; March 1, 1968
PACIFIC OXYGEN & ACETYLENE COMPANY, plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
FACTS
The plaintiff, Pacific Oxygen & Acetylene Company, applied for and was granted an irrevocable letter of credit in favor of a U.S. supplier to cover the shipment of a plant. The Philippine Trust Company, as an agent of the Central Bank, established the letter of credit and subsequently applied with the Central Bank for the purchase of forward exchange to cover its dollar commitments under that letter of credit. The Central Bank executed forward exchange contracts for the sale of the required foreign exchange to the Philippine Trust Company on October 6, 1961, and January 18, 1962. On January 21, 1962, the Central Bank suspended the margin levy. The drafts against the letter of credit were honored by the correspondent bank on February 9 and 13, 1962. The plaintiff was then charged and paid under protest a 15% margin fee on the transaction, which it sought to recover, arguing the fee was invalid as the payment in foreign currency occurred after the suspension of the levy.
ISSUE
Whether the margin fee was validly collected by the Central Bank under Republic Act No. 2609, given that the forward exchange contracts were executed prior to the suspension of the levy, but the foreign exchange was delivered and the drafts were honored after the suspension.
RULING
Yes, the margin fee was validly collected. The Supreme Court reversed the lower court’s decision. The applicable law, Republic Act No. 2609, authorizes the collection of a margin fee “in respect of all sales of foreign exchange by the Central Bank and its authorized agent banks.” The Court held that a contract of sale of foreign exchange is perfected at the moment there is a meeting of minds upon the object and the price. The forward exchange contracts between the Central Bank and the Philippine Trust Company were perfected on January 17 and 18, 1962, which was before the suspension of the margin levy on January 21, 1962. Therefore, the transaction was subject to the fee. The date of the actual delivery or payment of the foreign currency to the creditor is not controlling for determining the liability for the margin fee. The lower court’s reliance on a precedent concerning a different tax (the excise tax in Belman Cia., Inc. v. Central Bank) was erroneous. The Court applied the law according to its express terms. Costs were awarded against the plaintiff-appellee.