Bank of Commerce vs. Planters Development Bank

A Bangko Sentral ng Pilipinas circular that limits the BSP’s response to an allegedly fraudulent assignment of its certificates of indebtedness to issuing a stop order and withholding action—without any adjudicative function—operates as an implied repeal of an earlier circular that granted the BSP authority to determine which claimant stands as a holder in due course. The BSP’s organic laws do not vest it with quasi-judicial jurisdiction to resolve competing claims of ownership over the proceeds of its own negotiable securities; that determination is a judicial function falling within the exclusive original jurisdiction of courts of general jurisdiction.

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central Bank (CB) bills with a total face value of ₱70 million. Through successive “Detached Assignments,” RCBC sold the bills to Bank of Commerce (BOC), which then sold them to PDB. PDB later transferred the same bills back to BOC as substitute for undelivered treasury bills, but PDB retained the Detached Assignments. A second set of two CB bills worth ₱20 million was sold by RCBC to PDB; PDB delivered those bills to Bancapital Development Corporation without issuing a detached assignment in Bancap’s favor. PDB alleged the transfers were not sales but warehousing arrangements or lacked transfer-of-title intent and requested the BSP to record its claim and, upon maturity, to determine the rightful holder. The BSP refused, invoking CB Circular No. 28 and noting that the assignments were never recorded on its books. PDB then sought judicial intervention.

• First Set of CB Bills: RCBC owned seven CB bills (total face value ₱70 million, issued January 2, 1994, maturing January 2, 1995). RCBC sold them to BOC via a Detached Assignment dated April 8, 1994. On the same date, BOC sold the same bills to PDB by another Detached Assignment; PDB took possession of the assignments. On April 15, 1994, PDB sold ₱70 million Treasury Bills (maturing June 29, 1994) to BOC but, instead of delivering the Treasury Bills, delivered the first set of CB bills as a substitute, evidenced by a Security Delivery Receipt with a notation “substitution in lieu of 06-29-94.” PDB never issued a detached assignment for this transfer and retained the earlier Detached Assignments. BOC subsequently sold three of the bills back to PDB, which transferred them to Bancap; BOC then reacquired them. The remaining four bills were sold by BOC to Capital One Equities Corporation and eventually reacquired by BOC after a series of transfers. Ultimately, BOC acquired all seven bills of the first set.

• Second Set of CB Bills: On April 19, 1994, RCBC sold two CB bills (total face value ₱20 million, identical maturity) to PDB and delivered the corresponding Detached Assignment. On the same day, PDB delivered the two bills to Bancap without issuing a detached assignment. Bancap later sold them to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold them to BOC. Thus, BOC also acquired the second set.

• PDB’s Requests to BSP: On June 30, 1994, PDB informed the BSP’s Government Securities Department of its claim over all nine CB bills based on the Detached Assignments in its possession, requesting that the BSP record the claim and not pay whoever presented the bills on maturity. The BSP Officer-in-Charge denied the request, citing Section 8 of CB Circular No. 28, which required presentation of the bond for transfer on the BSP’s books. PDB insisted it was merely putting BSP on notice that the possessor was not a holder in due course and invoked Section 10(d)(4) of CB Circular No. 28, arguing the BSP must call upon the owner and the person presenting the bond to substantiate their claims. The BSP reiterated it was not in a position to determine the holder in due course and that its actions were governed by CB Circular No. 28. PDB also wrote to the BSP Deputy Governor seeking a notation against transfer or payment and requiring the presenter to submit proof as a holder in due course; the request was again denied.

• Filing of Petitions and Escrow Agreements: PDB filed two petitions for mandamus, prohibition, and injunction before the RTC, urging the court to compel BSP to apply Section 10(d)(4) and determine the legitimate holder. The RTC temporarily enjoined payment. BOC answered, asserting valid sales and ownership; BSP answered that PDB could not invoke the circular because it was neither the recorded owner nor presenting the bonds. BSP alternatively prayed for an interpleader to compel the conflicting claimants to litigate among themselves. PDB concurred in the interpleader, and PDB and BOC entered into two Escrow Agreements whereby the BSP released half of the maturity proceeds to each bank’s account in escrow, “pending final determination by Court judgment, or amicable settlement as to who shall be eventually entitled thereto.”

• The RTC’s Dismissal: After BOC acquired all nine CB bills, All Asia and RCBC were dropped as parties. On September 28, 2000, the RTC granted BSP’s motion to interplead and required BOC to amend its Answer. BOC did so, asserting ownership and, alternatively, demanding delivery of the original subjects of the sales or their value plus income. PDB then moved to dismiss the counterclaims, asserting that the BSP retained jurisdiction under CB Circular No. 28 and that the RTC lacked jurisdiction over ownership issues. The RTC dismissed the entire case on the ground that it had no jurisdiction, ruling that Section 10(d)(4) of CB Circular No. 28 vested the BSP with authority to resolve the conflicting claims. Motions for reconsideration were denied.

• Inapplicability of Section 10(d)(4) of CB Circular No. 28: BOC and BSP maintained that the provision applied only to conflicts between a registered owner who notifies BSP of a fraudulent assignment and a person presenting the bond, which did not describe PDB—it never recorded any assignment on BSP’s books and was no longer in possession of the bills. Consequently, the dispute fell under a third situation within the circular that left resolution to ordinary court action.

• Implied Repeal by CB Circular No. 769-80: BOC argued that CB Circular No. 769-80, the later and more specific regulation governing certificates of indebtedness, superseded CB Circular No. 28. Under the new circular, the BSP’s only duty upon sworn notice of fraud is to issue a “stop order” and withhold action until the controversy is settled by amicable settlement or judicial order; it removed any adjudicative function. Petitioners invoked the irreconcilable inconsistency between the two circulars as effecting an implied repeal.

• Abolition of the Government Securities Department: BOC noted that Nuqui’s office—the unit supposedly tasked to adjudicate under the old circular—had been abolished pursuant to the New Central Bank Act, reinforcing that no administrative machinery remained to exercise the claimed jurisdiction.

• RTC’s Error in Dismissing the Interpleader: BSP underscored that its alternative prayer for interpleader was a proper procedural device to bring all claimants before the trial court; once interpleader was granted, the RTC acquired full authority to adjudicate ownership. Dismissal for lack of jurisdiction therefore contravened the non-waivable nature of jurisdiction and ignored the court’s own earlier order.

• Jurisdiction Determined by Allegations: PDB argued that jurisdiction over subject matter is governed by the allegations in the petition, which expressly sought to compel the BSP to exercise its quasi-judicial authority under Section 10(d)(4) of CB Circular No. 28; defenses in the answer cannot expand or alter the court’s jurisdiction.

• Doctrine of Primary Jurisdiction: PDB contended that courts should defer to the BSP’s specialized expertise and knowledge in matters of government securities trading, as the resolution of conflicting claims requires the exercise of sound administrative discretion that the circular vested in the BSP.

• Section 10(d)(4) Protects Any Defrauded Owner: PDB rejected BOC’s interpretation restricting “owner” to the registered owner, asserting the circular’s purpose is to deter fraud in secondary trading by protecting anyone deprived of a bond through fraudulent representation.

• No Repeal of BSP’s Adjudicative Authority: PDB pointed out that CB Circular No. 769-80 itself provides for the suppletory application of CB Circular No. 28, and the BSP could simply designate a new office to discharge the adjudicative function; thus BSP’s jurisdiction remained intact.

• Non-Payment of Docket Fees: PDB argued that BOC’s so-called compulsory counterclaim was actually permissive because it would require the presence of third parties over whom the court had not acquired jurisdiction, and BOC’s failure to pay the appropriate docket fees deprived the RTC of jurisdiction over the counterclaim.

• Jurisdiction Over Ownership Claims: Whether the Regional Trial Court has jurisdiction to adjudicate the conflicting claims of ownership over the proceeds of the CB bills, or whether the BSP possesses exclusive quasi-judicial authority to make that determination under its governing circulars and enabling statutes.

• Implied Repeal: Whether CB Circular No. 769-80 impliedly repealed Section 10(d)(4) of CB Circular No. 28, thereby removing whatever adjudicative power the earlier circular may have conferred on the BSP.

• Primary Jurisdiction: Whether the doctrine of primary jurisdiction requires the courts to defer to the BSP’s resolution of the competing claims.

• Propriety of Interpleader: Whether BSP’s counter-complaint/cross-claim for interpleader, filed as part of its answer, properly vested the RTC with jurisdiction to hear and determine the ownership dispute.

• Docket Fees: Whether BOC’s failure to pay docket fees on its “compulsory counterclaim” deprives the trial court of jurisdiction over the claim or warrants dismissal of the claim.

• Jurisdiction Over Ownership Claims: The RTC possesses general jurisdiction over the conflicting ownership claims; the BSP’s enabling laws do not confer upon it the quasi-judicial power to adjudicate competing claims to the proceeds of its own issued certificates of indebtedness. The authority of an administrative agency to hear and decide cases must be expressly granted or necessarily implied by statute. R.A. No. 7653 (The New Central Bank Act) entrusts the BSP with monetary policy, bank supervision, and open market operations, but nothing in the law authorizes it to resolve disputes over ownership of securities arising from subsequent transfers among private entities. The determination of who is entitled to the proceeds of the CB bills is a judicial function that falls within the exclusive province of courts of general jurisdiction. The RTC thus gravely erred in disclaiming jurisdiction.

• Implied Repeal: CB Circular No. 769-80 impliedly repealed Section 10(d)(4) of CB Circular No. 28. The later circular, which governs Central Bank certificates of indebtedness with specificity, contains a repealing clause revoking or modifying all inconsistent prior issuances. Under the earlier circular, the BSP was to call upon the owner and the presenter to substantiate their claims and effectively determine the holder in due course. Under CB Circular No. 769-80, the BSP’s sole duty upon sworn notice of a fraudulent assignment is to issue and circularize a “stop order” and withhold action until the conflicting claims are settled by amicable agreement or court order. These provisions are irreconcilably contradictory, and the later issuance covers the whole subject matter of the earlier one as it applies to Central Bank-issued certificates of indebtedness. The suppletory clause in CB Circular No. 769-80 applies only to matters not specially covered by it; because both circulars specifically address fraudulent assignments, the later specific provision prevails.

• Primary Jurisdiction: The doctrine of primary jurisdiction does not apply. The doctrine requires that a claim originally cognizable in courts be first submitted to an administrative agency when the resolution of issues demands the special competence, expertise, and technical knowledge of that agency. In this case, however, no statute grants the BSP quasi-judicial authority to determine ownership of its own negotiable securities, and the dispute involves ordinary contractual and property issues—the nature of the April 15 and April 19 transactions, the intent to transfer title, and the respective rights of the parties—that courts are fully equipped to resolve. The BSP’s own interpretation of its regulations, consistent with its limited role under CB Circular No. 769-80, is entitled to respect.

• Propriety of Interpleader: BSP’s counterclaim/cross-claim for interpleader, although captioned and filed as part of an answer, was properly treated as a motion and correctly granted. The Rules of Court do not prohibit initiating an interpleader through a motion when the stakeholder is already a party defendant. Once the RTC granted the motion to interplead, it effectively dismissed PDB’s original petition for mandamus and established a framework for the conflicting claimants—PDB and BOC—to litigate their claims before the court. The RTC’s subsequent about-face, dismissing the entire case for lack of jurisdiction, constituted reversible error, because the court which has jurisdiction cannot divest itself of it on a non-jurisdictional ground once properly vested.

• Docket Fees: The non-payment of docket fees at the time BOC asserted its claim does not warrant dismissal. In an interpleader suit, the stakeholder (BSP) is the nominal plaintiff, but the real claimants are the defendants-in-interpleader. Both BOC and PDB, as competing claimants, must each pay the appropriate docket fees based on the amount of their respective claims under Rule 141. The characterization of BOC’s pleading as a “compulsory counterclaim” is not controlling; its assertion of ownership is in substance a claim in the interpleader proceedings. Moreover, even BOC’s alternative prayer for damages is a compulsory counterclaim that did not require separate docket fees at the time of filing under the applicable rule. The RTC is directed to assess and collect the correct docket fees from both claimants, after which it shall proceed to resolve the ownership dispute with deliberate dispatch.

• Implied Repeal by Irreconcilable Inconsistency — An implied repeal occurs when the provisions of a later law or regulation are so irreconcilably contradictory with those of an earlier one that both cannot stand together, or when the later enactment covers the entire subject of the earlier and is clearly intended as a substitute. In such a case, the later law repeals the earlier to the extent of the conflict. Here, CB Circular No. 769-80’s mandate that the BSP merely issue a stop order and withhold action, contrasted with CB Circular No. 28’s directive to call upon parties and determine the holder in due course, presented an irreconcilable conflict that operated to repeal the earlier adjudicative provision.

• Limited Jurisdiction of Administrative Agencies — Administrative agencies exercising quasi-judicial functions are tribunals of limited jurisdiction and may wield only such powers as are expressly granted or necessarily implied by their enabling statutes. The BSP’s organic law, R.A. No. 7653, nowhere vests it with authority to adjudicate competing ownership claims over the proceeds of its own issued securities; its administrative adjudicatory powers are confined to matters involving bank supervision and regulation. The mere fact that the parties are banking institutions does not ipso facto confer jurisdiction on the BSP.

• Doctrine of Primary Jurisdiction — Requisites — Courts will defer to an administrative agency’s specialized competence only when (1) the claim is originally cognizable in the courts, and (2) the determination of the issues demands the exercise of sound administrative discretion requiring special knowledge, experience, and services of the agency to resolve technical and intricate questions of fact. The doctrine does not apply where no statutory grant of adjudicatory power over the specific class of cases exists and where the dispute involves ordinary questions of contract and ownership.

• Interpleader — Purpose and Procedure — Interpleader is a special civil action designed to protect a stakeholder who holds property or owes an obligation without claiming an interest, or whose interest is not wholly disputed, against double vexation in respect of a single liability. Once the court orders the claimants to interplead, a new action arises in which the claimants litigate their respective claims; the stakeholder’s role is reduced to initiating the suit. The remedy may be invoked through a motion in an existing proceeding. In such a suit, the defendants-in-interpleader are the real claimants and must each pay the prescribed docket fees based on the amounts they claim.

• Jurisdiction Over Subject Matter — Determined by Allegations and by Law — Jurisdiction over the subject matter is conferred only by the Constitution and by law, not by the consent or acquiescence of the parties, and is determined by the allegations of the complaint or initiatory pleading, irrespective of the defenses raised. A court that has acquired jurisdiction over the subject matter cannot divest itself of it on a ground not amounting to a jurisdictional defect.

• “What the law grants the BSP is a continuing role to shape and carry out the country’s monetary policy – not the authority to adjudicate competing claims of ownership over the securities it has issued – since this authority would not fall under the BSP’s purposes under its charter.”

• “In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old laws. … The other [instance of implied repeal] occurs when the later act covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate to repeal the earlier law.”

• “The remedy of an action of interpleader is designed to protect a person against double vexation in respect of a single liability. … Through this remedy, the stakeholder can join all competing claimants in a single proceeding to determine conflicting claims without exposing the stakeholder to the possibility of having to pay more than once on a single liability.”

• United Coconut Planters Bank v. E. Ganzon, Inc., G.R. No. 168859, June 30, 2009 — Cited for the proposition that the BSP Monetary Board is an administrative agency exercising quasi-judicial functions, the scope of which must be defined by its enabling statute.

• Industrial Enterprises, Inc. v. Court of Appeals, 263 Phil. 352 (1990) — Applied the doctrine of primary jurisdiction; discussed to illustrate that the doctrine requires a showing that the administrative body possesses specialized expertise essential to resolving the controversy.

• Sun Insurance Office, Ltd. v. Asuncion, 252 Phil. 280 (1989) — Laid down guidelines on the payment of docket fees for initiatory pleadings and permissive counterclaims; the Court relied on this precedent in ruling that docket fees must be assessed from both claimants in the interpleader suit.

• Mecano v. Commission on Audit, G.R. No. 103982, December 11, 1992 — Defined the two instances of implied repeal and the requirement of irreconcilable inconsistency; applied in determining that CB Circular No. 769-80 impliedly repealed CB Circular No. 28.

• Section 10(d)(4), CB Circular No. 28 — Provided that in cases of fraudulent assignment, the Central Bank shall call upon the owner and the person presenting the bond to substantiate their respective claims and determine who stands as a bona fide holder for value. Impliedly repealed.

• Section 5, Article V, CB Circular No. 769-80 — Limits the BSP’s response to a sworn notice of fraudulent assignment to the issuance and circularization of a “stop order” and the withholding of action on the certificate until the conflicting claims are settled by amicable settlement or court order.

• Article XI, CB Circular No. 769-80 — Contains the suppletory application clause for CB Circular No. 28 and the general repealing clause. Held not to preserve the adjudicative function because the later circular specifically covered the same subject.

• Sections 3, 5, 36, 37, 90, 92, Republic Act No. 7653 (The New Central Bank Act) — Define the BSP’s objectives, corporate powers, supervisory authority, and power to issue and negotiate certificates of indebtedness. Construed as not conferring quasi-judicial jurisdiction to adjudicate private ownership disputes over the securities it issues.

• Rule 62, Sections 1, 2, 5 and 7, Rules of Court — Govern interpleader actions. Section 1 prescribes the requisites; Section 2 authorizes the court to order claimants to interplead. The Court read these provisions flexibly to allow the stakeholder to pray for interpleader through an answer/motion. Section 7 makes docket fees a lien on the subject matter only for the complainant-stakeholder; the competing claimants must pay their own filing fees.

• Rule 141, Section 7, Rules of Court (as amended) — Prescribes the schedule of docket fees for permissive counterclaims and money claims; interpreted together with Sun Insurance to require assessment of fees from defendants-in-interpleader.

Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Lucas P. Bersamin (designated additional member in lieu of Associate Justice Mariano C. Del Castillo), Associate Justice Jose Portugal Perez, and Associate Justice Estela M. Perlas-Bernabe. Chief Justice Maria Lourdes P. A. Sereno certified that the conclusions were reached in consultation.