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  • Tayug Rural Bank v. Central Bank

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    This case involved a dispute over a 10% penalty imposed by the Central Bank of the Philippines on Tayug Rural Bank for past due loans. The Central Bank issued a memorandum in 1964 stating the penalty would apply from 1965 forward. However, the court ruled the Central Bank could not validly impose the penalty retroactively as the law authorizing its regulatory powers did not permit retroactive penalties. While administrative rules have the force of law, an agency cannot impose penalties beyond what is authorized in the underlying law. Therefore, the court affirmed the lower court's ruling that the Central Bank could not impose the 10% penalty retroactively on Tayug Rural Bank's past due loans.

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    Persons and family relations; digest

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    This case involved a dispute over a 10% penalty imposed by the Central Bank of the Philippines on Tayug Rural Bank for past due loans. The Central Bank issued a memorandum in 1964 stating the penalty would apply from 1965 forward. However, the court ruled the Central Bank could not validly impose the penalty retroactively as the law authorizing its regulatory powers did not permit retroactive penalties. While administrative rules have the force of law, an agency cannot impose penalties beyond what is authorized in the underlying law. Therefore, the court affirmed the lower court's ruling that the Central Bank could not impose the 10% penalty retroactively on Tayug Rural Bank's past due loans.

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    © All Rights Reserved
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    532 views2 pages

    Tayug Rural Bank v. Central Bank

    Uploaded by

    G S
    This case involved a dispute over a 10% penalty imposed by the Central Bank of the Philippines on Tayug Rural Bank for past due loans. The Central Bank issued a memorandum in 1964 stating the penalty would apply from 1965 forward. However, the court ruled the Central Bank could not validly impose the penalty retroactively as the law authorizing its regulatory powers did not permit retroactive penalties. While administrative rules have the force of law, an agency cannot impose penalties beyond what is authorized in the underlying law. Therefore, the court affirmed the lower court's ruling that the Central Bank could not impose the 10% penalty retroactively on Tayug Rural Bank's past due loans.

    Copyright:

    © All Rights Reserved
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    of 2

    TAYUG RURAL BANK, plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

    G.R. No. L-46158 November 28, 1986

    Facts: Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During
    the period from December 28, 1962 to July 30, 1963, it obtained 13 loans from Defendant Appellant,
    Central Bank of the Philippines, by way of rediscounting, at the rate of 1/2 of 1% per annum from 1962
    to March 28, 1963 and thereafter at the rate of 2-1/2% per anum. The loans, amounting to P813,000.00
    as of July 30, 1963, were all covered by corresponding promissory notes prescribing the terms and
    conditions of the aforesaid loans. As of July 15, 1969, the outstanding balance was P 444,809.45.

    On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued
    Memorandum Circular No. DLC-8, informing all rural banks that an additional penalty interest rate of
    10% per annum would be assessed on all past due loans beginning January 4, 1965. Said Memorandum
    Circular was actually enforced on all rural banks effective July 4, 1965.

    On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila, Branch III,
    to recover the 10% penalty imposed by Appellant amounting to P16,874.97, as of September 27, 1968
    and to restrain Appellant from continuing the imposition of the penalty.

    The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been raised in
    the pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in its favor. Hence, this
    petition.

    Issue: Whether the Central Bank can validly impose the 10% penalty on Appellee's past overdue loans
    beginning July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964.

    Ruling: No, the Central Bank CANNOT validly impose the 10% penalty on Appellee's past overdue loans
    beginning July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964.

    Nowhere in the provisions of R.A. 720 that states that the monetary Board authorized to mete out on
    rural banks an additional penalty rate on their past due accounts with Appellant. As correctly stated by
    the trial court, while the Monetary Board possesses broad supervisory powers, nonetheless, the
    retroactive imposition of administrative penalties cannot be taken as a measure supervisory in
    character. Indeed, administrative rules and regulations have the force and effect of law. There are,
    however, limitations to the rule-making power of administrative agencies. "Administrative
    interpretation of the law is at best merely advisory, for it is the courts that finally determine what the
    law means."

    In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the
    basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the
    basic law. Hence, an administrative agency cannot impose a penalty not so provided in the law
    authorizing the promulgation of the rules and regulations, much less one that is applied retroactively.
    Fallo: PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with modification
    that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its
    past overdue accounts, but not in any case less than P500.00 as attorney's fees and costs of suit and
    collection.

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