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ROMUALDO A. MENZON JR 2012-0330

REPUBLIC OF THE PHILIPPINES

OFFICE OF THE OMBUDSMAN
Quezon City

JOSE TEODORICO V. MOLINA

Defendant-Petitioner,

-versus- Case:
No.______________________
For Violation of letter (e)
Banko Sentral ng Pilipinas (BSP) Sec. 3 RA 3019
BSP Governor
CARLOS G. DOMINGUEZ III,
FELIPE M. MEDALLA,
JUAN DE ZUNIGA, JR.,
PETER B. FAVILA,
ANTONIO S. ABACAN JR. and
V. BRUCE J. TOLINTINO
Plaintiff-Respondent.
X----------------------------------------------------x

MEMORANDUM

Plaintiff-Respondents, Banko Sentral ng Pilipinas (BSP), CARLOS G. DOMINGUEZ

III, FELIPE M. MEDALLA, JUAN DE ZUNIGA, JR., PETER B. FAVILA, ANTONIO S.
ABACAN JR., and V. BRUCE J. TOLINTINO through counsel, respectfully alleges:

STATEMENT OF FACTS

1. On May 30, 2018 Defendant MOLINA wrote BSP Governor a letter dated May 30,
2018 regarding the legality of 3.5%
2. In a letter dated August 10, 2018 respondent BSP Officer PIA BERNADETTE
ROMAN TAYAG replied that respondent BSP under sections x305 and x305-1
(MORB) lifted the interest rates imposed by financial institutions
3. In a letter dated September 10, 2018 MOLINA wrote BSP Governor a letter disputing
the position of BSP officer TAYAG
4. In a letter dated October 4, 2018 MOLINA wrote all the respondents requesting to
abrogate Sec. x305 of the Manual of Regulations for Banks for being contrary to
public interest.
5. In a letter dated November 23, 2018 BSP assistant Governor and General Counsel
ELMORE O. CAPULE reiterated respondents position for the lifting of the ceiling on
interest rates.
6. In a letter dated January 7, 2019 MOLINA affirmed his position that the lifting og the
ceiling on interest rates is prejudicial to public interest.
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ROMUALDO A. MENZON JR 2012-0330

LEGAL ISSUES

1. WHETHER OR NOT SECTION X305 OF THE MANUAL OF REGULATIONS

FOR BANKS IS LEGAL
2. WHETHER OR NOT PLAINTIFF-RESPONDENT IS GUILTY OF VIOLATING
LETTER (E) SEC. 3 OF RA 30191 FOR “CAUSING UNDUE INJURY TO
COUNTLESS NUMBERS OF CREDIT CARD HOLDERS AND FOR GIVING
FINANCIAL INSTITUTION UNWARRANTED BENEFITS, ADVANTAGE, AND
PREFERENCE” AS ALLEGED BY DEFENDANT-PETITIONER MOLINA.

ARGUMENTS

A. Section x305 is valid, legal, and is in line with the intent of ACT No. 2655 as
amended by Presidential decree 116.
B. BSP is not guilty of violating Letter (e) of RA 3019 simply because it is not giving
undue advantage, benfefit, and preference to any financial institution.

DISCUSSION

Section x305 is valid, legal, and is in line with the intent of ACT No. 2655 as amended by
Presidential decree 116.

The section is not and has not been declared illegal or unconstitutional as such
there is no basis for complainant’s desire to remove it, which became the basis for
this complaint.

Complainant believes that the existence of this section leads to unreasonable or

unconscionable interest rates and he has listed several cases to support this claim
in the Annexes attached in his complaint.

We however reiterate our stance in our response to complainant in Nov. 23, 2018
(Annex E) that pursuant to the Bank Circular No. 905 the Usury Law has been

1 (e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted
benefits, advantage or preference in the discharge of his official administrative or judicial functions through
manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and
employees of offices or government corporations charged with the grant of licenses or permits or other
concessions.
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ROMUALDO A. MENZON JR 2012-0330

suspended and currently the parties are allowed to stipulate their own interest
rates unregulated by BSP. However, there will be instances when the interest rates
agreed upon become truly unconscionable and for these instances “Jurisprudence
empowers courts to equitably reduce interest rates” when it is necessary and that
this is the current remedy to unconscionable interest rates.

What is important to remember is that in these instances there is no set rate or

percentage (%) which the court considers to be unconscionable. Each and every
case must be looked into because what is unconscionable in one set of
circumstances may not be in another.

In Trade & Investment Development Corporation of the Philippines v. Roblett

Industrial Construction Corporation2, the court said:

“While the Court recognizes the right of the parties to enter into contracts
and who are expected to comply with their terms and obligations, this rule
is not absolute. Stipulated interest rates are illegal if they are
unconscionable and the Court is allowed to temper interest rates when
necessary. In exercising this vested power to determine what is iniquitous
and unconscionable, the Court must consider the circumstances of each
case. What may be iniquitous and unconscionable in one case, may be just
in another.”

Likewise, in Poltan vs BPI3, the court said:

“The question of whether a penalty is reasonable or iniquitous is addressed

to the sound discretion of the courts. To be considered in fixing the
amount of penalty are factors such as but not limited to the type, extent
and purpose of the penalty; the nature of the obligation; the mode of the
breach and its consequences; the supervening realities; the standing and
relationship of the parties; and the like.”

There being an available remedy to unconscionable interest concern of

complainant we did not and cannot comply to the demand of complainant to
abrogate section 305 of the MORB.

BSP is not guilty of violating Letter (e) of RA 3019 simply because it is not giving undue
advantage, benfefit, and preference to any financial institution.

2 Prisma Construction & Development Corporation v. Menchavez, G.R. No. 160545, March 9, 2010, 614 SCRA 590,
599
3 SPS Poltan vs. BPI Family Savings Bank Inc, GR No 164307, March5, 2007
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ROMUALDO A. MENZON JR 2012-0330

Complainant’s allegation that BSP has violated RA 3019 Sec 3 (e) is unsupported.

“(e) Causing any undue injury to any party, including the Government, or
giving any private party any unwarranted benefits, advantage or
preference in the discharge of his official administrative or judicial
functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and
employees of offices or government corporations charged with the grant of
licenses or permits or other concessions.”

The complainant fails to provide sufficient proof that the existence of the section
305 of the Manual od Regulation for Banks (MORB) actually results in the
violation of the above section. He merely makes a general claim that it causes
“undue injury to countless numbers of credit card holders” and it gives
unwarranted benefits to financial institutions, however there is no actual evidence
presented to support this claim.

RELIEF

WHEREFORE, premise considered, it respectfully prayed for that this Honorable Court that
Defendant-Petitioner’s complaint be DENIED for having no cause of action and the petition
DISMISSED for being clearly unmeritorious.

Other just and equitable relief under the foregoing are likewise being prayed for.

Respectfully submitted.

Manila City, Philippines. May 12, 2019.

MENZON LAW OFFICES

Counsel for Defendant xxx
Unit xx, Star Arcade, xxxx Avenue
xxxxx Village, Las Pinas City 1740
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ROMUALDO A. MENZON JR 2012-0330

By:

ATTY. ROMUALDO A. MENZON JR.

PTR No. xxxxxxxxxx
IBP No. xxxxxxxx
Roll No. xxxxxxxxx
MCLE Compliance No. xxxxxxxxxx

Copy Furnished:

ATTY. JOSE TEODORICO V. MOLINA

Block 65 lot 01, Kudyapi St.,
Ascencion Avenue, Lagro Subd.,
Novaliches, Quezon City 1118