G.R. No. L-25071. March 29, 1972.
GEORGE W. BATCHELDER, doing business under the name and style of Batchelder Equipment, plaintiff-appellant, vs. THE CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

FACTS

Plaintiff George W. Batchelder, an American contractor, entered into a construction contract with the U.S. Navy in March 1960. Pursuant to Central Bank Circulars and Monetary Board Resolutions implementing foreign exchange controls, he surrendered his dollar earnings to the Central Bank. A key policy, Monetary Board Resolution No. 857 dated June 17, 1960, provided that imports against proceeds of contracts entered into prior to April 25, 1960, would be governed by a “preferred” exchange rate of approximately P2.00 to $1.00. Batchelder applied to utilize 90% of his surrendered dollars to purchase construction equipment at this preferred rate. However, the Central Bank, through subsequent resolutions, reclassified such transactions and denied his applications for the preferred rate, effectively requiring him to purchase dollars at the higher free market rate.
Batchelder filed suit to compel the Central Bank to resell him $170,210.60 at the preferred rate or pay the peso difference, claiming the Bank’s resolutions created a binding contractual obligation in his favor. The lower court ruled for Batchelder, holding that the Central Bank’s issuance of the policy and his subsequent compliance constituted a perfected contract of sale of foreign exchange. The Central Bank appealed, arguing its resolutions were exercises of regulatory power, not offers to contract.

ISSUE

Whether the issuance by the Central Bank of a monetary policy or resolution, which sets a preferred foreign exchange rate and is subsequently acted upon by a citizen, creates a contractual obligation binding upon the Central Bank.

RULING

No. The Supreme Court reversed the lower court’s decision and dismissed the complaint. The Court held that the Central Bank’s circulars and resolutions were not contractual offers but unilateral exercises of its governmental and regulatory powers under Republic Act No. 265 (The Central Bank Act). The Court explained that for a contract to exist under Article 1305 of the Civil Code, there must be a meeting of minds between two parties where one binds himself to give something or render some service to the other. The Central Bank, in issuing these monetary policies, was performing a sovereign function to regulate the nation’s currency, stabilize the peso, and protect the international reserve position. It was not acting in a proprietary or commercial capacity with an intent to be bound as a party to a private contract.
The legal logic is clear: a government regulation, by its nature, does not constitute an offer to the public that can be accepted by performance to form a contract. The rights of individuals under such regulations are created by law and administrative rule, not by consensual agreement. Therefore, Batchelder’s compliance with the rules gave him only such rights as were granted by the valid regulations themselves, not a vested contractual right to a fixed exchange rate. Any claim must be pursued under the framework of administrative law, not contract law. The Court emphasized that to rule otherwise would improperly fetter the State’s essential police power to adapt its monetary policy to changing economic conditions.