GR L 23642; (August, 1979) (Digest)
G.R. No. L-23642 August 31, 1979
REPUBLIC FLOUR MILLS, INC., plaintiff-appellant, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellee.
FACTS
Republic Flour Mills, Inc. (RFM) sought to expand its flour milling capacity. The Monetary Board of the Central Bank approved the expansion in principle on April 22, 1959, subject to conditions, including that payment for imported machinery be sourced exclusively from RFM’s export proceeds of mill feed. Subsequently, on May 11 and June 12, 1959, RFM entered into contracts with foreign suppliers for machinery and equipment. These contracts contained a suspensive condition stating they would become effective and binding only upon the Central Bank’s confirmation of its approval and its commitment to make foreign exchange available from RFM’s export earnings. RFM submitted these contracts to the Central Bank. On July 16, 1959, Republic Act No. 2609 (the Margin Law) took effect, authorizing the Central Bank to impose a margin fee on foreign exchange sales. The Central Bank issued Circular No. 95, fixing the fee at 25%. The Central Bank later confirmed its commitment and approved the contracts on October 27, 1959. When RFM made remittances to pay for the machinery, the Central Bank collected margin fees totaling P341,945.37. RFM applied for exemption and a refund, which was denied, prompting it to file a recovery suit.
ISSUE
Whether RFM is entitled to exemption from the payment of margin fees on its foreign exchange remittances for the machinery under Section 3 of Republic Act No. 2609 .
RULING
No, RFM is not entitled to the exemption. The Supreme Court affirmed the dismissal of the complaint. The legal logic rests on two independent grounds. First, the exemption under Section 3 of the Margin Law applies only to letters of credit or contractual obligations for foreign exchange payment that were “issued, approved and outstanding” as of July 16, 1959, the law’s effectivity date. RFM’s contracts with its foreign suppliers contained an express suspensive condition—they were to become binding only upon the Central Bank’s confirmation of approval and commitment of foreign exchange. This confirmation was given only on October 27, 1959, after the Margin Law took effect. Therefore, the contractual obligations were not “outstanding” as of the critical date, disqualifying RFM from the statutory exemption.
Second, the Court applied the doctrine of promissory estoppel. Prior to the law’s enactment, in a letter dated July 3, 1959, RFM expressly committed to the Central Bank that it would pay the proposed 40% margin fee “if and when Congress finally enacts said bill which may affect us.” The Central Bank relied on this promise in its dealings with RFM. Having induced such reliance, RFM is estopped from reneging on its representation to avoid injustice. Thus, even assuming a potential statutory exemption could be argued, RFM is barred by its own prior commitment from claiming it. The judgment of the lower court was affirmed.