Sy vs. Central Bank of the Philippines

A license or permit is not a contract between the sovereignty and the licensee but a mere special privilege, revocable by the State, and its duration is governed by the life of the basic authority under which it was issued; where the permitee itself furnished the lifespan of the permit through its own representations, the permit expires according to that representation notwithstanding the absence of an express expiry date.

Gonzalo Sy Trading is a trading company engaged in the importation of fresh fruits — oranges, grapes, apples, and lemons — from various parts of the world for nineteen years. The Central Bank of the Philippines, through its Monetary Board, regulates foreign exchange and import transactions pursuant to Republic Act No. 265 (the Central Bank Act), including the authority to grant or deny "no-dollar" import permits. At the time of the dispute, Central Bank Circular No. 247 (July 21, 1967) enumerated specific items exempt from release certificate requirements for "no-dollar" imports; fresh fruits were not among them. Existing stringent policies against "no-dollar" importation of "non-essential consumer" goods like fresh fruits formed the regulatory backdrop against which petitioner sought a special concession.

Gonzalo Sy Trading is a trading company that had been engaged in the importation of fresh fruits — oranges, grapes, apples, and lemons — from various parts of the world for nineteen years. On September 28, 1968, petitioner wrote to Deputy Governor Amado R. Briñas of the Central Bank requesting authority to import fresh fruits from Japan on a "no-dollar" basis in the total amount of US$715,000.00. Petitioner explained that the regular 175% Special Time Deposit requirement for 120 days imposed on importers of fresh fruits was burdensome, and that with the fast approaching Christmas season it could not cope with buyer demand under that requirement. Petitioner emphasized that its suppliers in Japan trusted it sufficiently to allow payment even after the season, around April of the following year, if its dollar position was favorable. The request was denied on October 2, 1968, on the ground that only transactions specifically enumerated in Central Bank Circular No. 247 were allowed as "no-dollar" importations.

Petitioner sought reconsideration on October 22, 1968, characterizing its case as "very special" and stressing that fresh apples were "very much needed in the coming Christmas season." A further letter on November 6, 1968 to the Monetary Board reiterated the request, this time for US$715,000.00, emphasizing that the items were perishable and that "the main purpose of this importation is to serve the requirements during the Christmas Season." On November 19, 1968, the Monetary Board issued Resolution No. 2038, unanimously authorizing Gonzalo Sy Trading to import on a no-dollar basis, without letters of credit, fresh fruits from Japan valued at US$350,000.00, subject to a 100% special time deposit for 120 days, normal customs duties and taxes, and with no Central Bank commitment to provide foreign exchange. Deputy Governor Briñas communicated this approval on November 21, 1968. Petitioner then wrote to Monetary Board Chairman Eduardo Romualdez on November 27, 1968, thanking him for the approval but requesting that the special time deposit be reduced from 100% to 20%, again stating that "this particular importation is only for the Christmas season." This request for reduction was denied on December 9, 1968.

Petitioner made its first importation from Japan on February 25, 1969. Subsequent importations from August through November 1969 came from San Francisco, California, and Australia. Importations in January 1970 came from Taipei, Taiwan, and in March 1970 from Israel. By the beginning of June 1970, the total amount used out of the US$350,000.00 permit was US$314,142.51, leaving a balance of US$35,857.49. As early as October 30, 1969, petitioner had requested an amendment of the country of origin to include other countries besides Japan, explaining that Japanese shippers could not fully fill its requirements. On November 19, 1969, Deputy Governor Briñas replied that the authority granted under MB Resolution No. 2038 "was intended only for the Christmas season of 1968 and does not extend through 1969," and that under existing regulations, importations of fruits were covered by a moratorium on the opening of letters of credit. Two days later, on November 21, 1969, Director A. V. Antiporda of the Foreign Exchange Department wrote to the Prudential Bank and Trust Company — the agent bank issuing release certificates — stating that, based on the report that only US$144,306.15 had been utilized, the bank "may continue to issue release certificates" subject to the same terms and conditions imposed by the Monetary Board. On April 17, 1970, however, the Assistant to the Governor, Cesar Lomotan, informed the Prudential Bank that the authority was intended only for the Christmas season of 1968 and does not extend through 1969, enclosing Briñas's November 19, 1969 letter.

On June 5 and 16, 1970, the Collector of Customs issued warrants of seizure and detention against several shipments of fresh oranges, lemons, and apples consigned to petitioner, with a total FOB value of US$17,568.49, "for having been imported in violation of Central Bank Circular No. 289, in relation to Section 2530(f) of the Tariff and Customs Code." On July 17, 1970, Deputy Governor Briñas wrote to the Commissioner of Customs requesting that the shipments and all other fresh fruit importations under Customs custody be subjected to seizure proceedings, noting that fresh fruits were classified as non-essential consumer goods banned under Circular No. 289. On July 30, 1970, the Collector of Customs issued a notice for auction sale of the confiscated June 1970 shipment. Petitioner, together with another importer, filed an injunction suit (Civil Case No. 80655) before the CFI of Manila, and on August 26, 1970, Judge Alikpala ordered the release of the seized goods under bonds totalling P513,865.46. The Commissioner and Collector of Customs elevated the matter to the Supreme Court, which on November 26, 1970 sustained the release order in Commissioner of Customs vs. Alikpala. The June 1970 shipment was released to petitioner on bond in December 1970.

A second shipment consigned to petitioner arrived on September 6 and 15, 1970, consisting of fresh sunkist oranges, grapes, and lemons valued at P71,549.49, and was likewise seized. On September 21, 1970, petitioner filed the subject petition for mandamus with damages (Civil Case No. 81051), which was consolidated with Civil Case No. 80655. On November 27, 1971, Judge Alikpala dismissed the mandamus complaint, ordered the Collector of Customs to proceed with seizure proceedings against the June 1970 importation and enforce any favorable result against the surety bonds, and condemned the September 1970 shipment. Petitioner appealed to the Court of Appeals, which certified the case to the Supreme Court as involving only pure questions of law.

• Continuous Validity of Permit: Petitioner maintained that the Special Import Permit remained valid because it contained no express expiry date, and that the absence of such a date meant the permit was impressed with continuous validity beyond the Christmas season of 1968.
• Prior Adjudication (Res Judicata): Petitioner asserted that the continuous validity of the permit had already been passed upon by the Supreme Court in Commissioner of Customs vs. Alikpala, citing the Court's reference to Director Antiporda's November 21, 1969 letter authorizing the Prudential Bank to continue issuing release certificates.
• Promissory Estoppel: Petitioner invoked the doctrine of promissory estoppel based on Director Antiporda's November 21, 1969 letter, arguing that the Central Bank had made a promise upon which petitioner justifiably relied in making subsequent importations.
• Applicability of Precedents: Petitioner relied on Ramos vs. Central Bank and Commissioner of Customs vs. Auyong Hian to support its position that the permit could not be invalidated and that the government was estopped from contesting the legality of the importations.
• Surety Bonds: Petitioner disputed the trial court's disposition directing the Collector of Customs to proceed against the surety bonds posted for the release of the June 1970 importation, arguing that the bonds were posted in a separate and already terminated case (Civil Case No. 80655).

• Limited Duration of Permit: Respondent maintained that the Special Import Permit was intended only for the Christmas season of 1968, as established by petitioner's own representations in its correspondence with the Central Bank, and did not extend through 1969 or 1970.
• Receipt of Notice: Respondent contended that it was surprising for petitioner to disclaim receipt of Deputy Governor Briñas's November 19, 1969 letter informing it that the permit was limited to the 1968 Christmas season, when all prior and subsequent letters from the Central Bank had been satisfactorily received.
• Estoppel Inapplicable: Respondent argued that estoppel does not operate against the government in the exercise of its sovereign functions, and that Director Antiporda's letter could not modify the permit's terms since he lacked authority to do so.

• Duration of the Permit: Whether the Special Import Permit granted on November 19, 1968 remained valid when the questioned importations of June and September 1970 were made.
• Effect of Absence of Expiry Date: Whether the omission of an express expiry date in the permit rendered it continuously valid beyond the Christmas season of 1968.
• Estoppel by Representation: Whether petitioner was estopped from claiming the permit extended beyond the Christmas season of 1968, given its own representations that the importation was solely for that season.
• Promissory Estoppel: Whether the doctrine of promissory estoppel applied based on Director Antiporda's November 21, 1969 letter, such that the Central Bank was precluded from contesting the legality of the importations.
• Estoppel Against the Government: Whether estoppel could operate against the Central Bank as an instrumentality of the government.
• Applicability of Precedents: Whether Ramos vs. Central Bank and Commissioner of Customs vs. Auyong Hian were applicable to support petitioner's position.
• Violation of Central Bank Circulars: Whether the June and September 1970 importations violated Central Bank Circulars Nos. 269, 294, and 295, rendering the goods subject to seizure under Section 2530(f) of the Tariff and Customs Code.
• Enforceability of Surety Bonds: Whether the surety bonds posted in Civil Case No. 80655 could be proceeded against in Civil Case No. 81051 for the release of the June 1970 importation.

• Duration of the Permit: No. The Special Import Permit had already lost its validity when the June and September 1970 importations were made, as it was limited to the Christmas season of 1968 by virtue of petitioner's own representations.
• Effect of Absence of Expiry Date: No. The absence of an expiry date does not make a license perpetual; it cannot last beyond the life of the basic authority under which it was issued, and here the permit's lifespan was furnished by petitioner's own representations.
• Estoppel by Representation: Yes. Petitioner was estopped from claiming the permit extended beyond the Christmas season of 1968, having itself consistently represented that the importation was solely for that season, upon which representation the Monetary Board granted the permit.
• Promissory Estoppel: No. Director Antiporda's November 21, 1969 letter did not constitute a promise upon which petitioner could justifiably rely, as it expressly subjected the issuance of release certificates to the same terms and conditions of the original permit, including its resolutory period.
• Estoppel Against the Government: No. The doctrine of estoppel does not operate against the government in its sovereign capacity; the government is never estopped by the mistakes or errors of its agents.
• Applicability of Precedents: No. Ramos vs. Central Bank involved contractual obligations assumed by the Central Bank, which are absent here since a permit is not a contract; Commissioner of Customs vs. Auyong Hian involved cancellation of a license on the sole ground of absence of an expiry date after importation had been accomplished, which is not the situation here.
• Violation of Central Bank Circulars: Yes. The June and September 1970 importations violated Central Bank Circulars Nos. 269, 294, and 295, which banned or restricted "no-dollar" imports of non-essential consumer goods including fresh fruits, rendering the goods subject to forfeiture under Section 2530(f) of the Tariff and Customs Code.
• Enforceability of Surety Bonds: Yes. The surety bonds posted in Civil Case No. 80655, which secured the release of the June 1970 shipment, were answerable in Civil Case No. 81051 where the propriety of that release was resolved, since the undertaking attached to the event secured rather than to the case in which the bonds were filed.

• Duration of the Permit: A license or permit is not a contract between the sovereignty and the licensee but a mere special privilege, revocable by the State. The absence of an expiry date does not make a license perpetual; it cannot last beyond the life of the basic authority under which it was issued. The series of correspondence between petitioner and the Central Bank plainly revealed that the permit covered only the Christmas season of 1968. Petitioner's September 28, 1968 letter stated it could not cope with demand "with the fast approaching Christmas season"; its October 22, 1968 letter called the case "very special" and stressed the fruit was "very much needed in the coming Christmas season"; its November 6, 1968 letter stated "the main purpose of this importation is to serve the requirements during the Christmas Season." After the permit was granted, petitioner's November 27, 1968 letter again stated "this particular importation is only for the Christmas season." It was upon all these representations that the Monetary Board finally issued the permit, and the conclusion was inevitable that the permit lasted only until the Christmas season of 1968. The Monetary Board, which was opposed to granting the permit from the start due to stringent policies against "no-dollar" importation of non-essential consumer goods, would not have granted more than what was asked. The 100% special time deposit requirement, maintained even after petitioner sought reconsideration, bore all the marks of a mere special concession from which no extensive privileges could be inferred.

• Effect of Absence of Expiry Date: The omission of an expiry date afforded no legal basis for petitioner to conclude the permit was continuously valid. The totality of petitioner's representations, which led to the issuance of the permit, could not be lightly glossed over. It was petitioner itself which furnished the lifespan of the permit, consistently pointing out that the main purpose was to serve Christmas 1968 requirements. In the logical sequence of things, no imperative reason arose for the Monetary Board to specify an expiry date, since the permit's duration was already defined by the very request it granted.

• Estoppel by Representation: The equitable principle of estoppel forbids petitioner from taking an inconsistent position and claiming the permit extends beyond the period it itself asked for. Where conduct or representation has induced another to change its position in good faith, or the same is such that a reasonable man would rely thereon, the consequences of such conduct or representation cannot later be disowned. The preliminary representations and assurances of petitioner, most important of which is the lifespan of the permit, are deemed incorporated into the Special Import Permit subsequently issued. At most, Deputy Governor Briñas's November 19, 1969 letter served only to remind petitioner of the resolutory period of its permit. Whether or not that letter was received, the time limit proffered by petitioner and approved by the Central Bank controls.

• Promissory Estoppel: The doctrine of promissory estoppel requires that a promise was made, intended to be relied upon, and in fact relied upon, such that refusal to enforce it would sanction fraud or result in injustice. Justifiable reliance and irreparable detriment are requisite factors. Director Antiporda's November 21, 1969 letter did not constitute the making of a promise upon which petitioner could justifiably rely. While the letter advised the agent bank it may continue issuing release certificates, it simultaneously subjected the issuance "to the same terms and conditions imposed by the Monetary Board," one of which was the resolutory term of 1968. Director Antiporda could not have modified the permit by creating a longer period, as no such authority resided in him; an administrative officer has only such powers as are expressly granted and those necessarily implied in the exercise thereof. Only the Monetary Board, which issued the permit, possessed the power to modify it.

• Estoppel Against the Government: Even on the gratuitous assumption that Antiporda's letter purported to impress that further importations could be made beyond Christmas 1968, it produces no estoppel against the issuing authority. Long-settled jurisprudence states that the doctrine of estoppel does not operate against the government, of which the Central Bank is an instrumentality, in its capacity as sovereign or when asserting governmental rights. The government is never estopped by the mistakes or errors of its agents. Estoppel cannot give validity to an act prohibited by law or against public policy. Erroneous application or enforcement of the law does not block subsequent correct application or bar a future action in accordance with law. To hold that Antiporda's letter alone could be the basis for estoppel would amount to suspending and repealing the conditions of the permit without any action by the Monetary Board.

• Applicability of Precedents: In Ramos vs. Central Bank, the Central Bank had made express contractual commitments to support the Overseas Bank of Manila in exchange for specific undertakings by petitioners, which the Central Bank could not unilaterally disregard without violating Articles 1159 and 1315 of the Civil Code. No such contractual obligation existed between the Central Bank and Gonzalo Sy Trading, because a permit is not by its nature a contract but a mere special privilege; for a permit to be impressed with contractual character, it must be categorically demonstrated that the administrative agency placed such a burden on itself. In Commissioner of Customs vs. Auyong Hian, the license was cancelled on the sole ground that it bore no expiry date even though the importation had already been accomplished, which the Court found inequitable. In the present case, no cancellation of the permit was at issue; what was being sought was enforcement of the permit's terms and conditions, including the resolutory period of 1968.

• Violation of Central Bank Circulars: The Central Bank's authority to regulate "no-dollar" imports emanates from its broad powers to maintain monetary stability and preserve the international value of the currency, as well as its corollary power to issue rules and regulations. Circular No. 269 (February 21, 1970) prohibited importation of non-essential consumer goods including fresh fruits. Circular No. 294 (March 10, 1970) provided that "no-dollar" imports not covered by Circular No. 247 shall not be issued release certificates and shall be referred to the Central Bank for transmittal to the Bureau of Customs for seizure proceedings. Circular No. 295 (March 20, 1970) reiterated the exemption of items under Circular No. 247 but imposed an express ban on all other "no-dollar" imports, including fresh fruits. Petitioner's June and September 1970 importations thus violated these circulars. While the goods may not be considered "merchandise of prohibited importation," they fall within the category of merchandise imported "contrary to law," because regulations issued pursuant to customs law form part thereof and have the force and effect of law. Violation of these circulars comes within Section 2530(f) of the Tariff and Customs Code, authorizing forfeiture of any article the importation or exportation of which is effected or attempted contrary to law.

• Enforceability of Surety Bonds: The surety bonds were posted by petitioner in Civil Case No. 80655 to secure the release of the June 1970 importation. The statutory undertaking of a bond is to answer for all damages resulting from an injunction should the court finally decide the injunction was not proper. Although the bonds were filed in Civil Case No. 80655, the undertaking to answer for damages in case the release was found improper attaches to Civil Case No. 81051, where the propriety of the release is resolved. The case where the bonds were posted is incidental; the controlling factor is the event or judicial action secured by the bonds. Since the bonds were intended to secure liabilities petitioner may incur for the release of the June 1970 importation, they can be proceeded against in any case where the propriety of that release is determined. Requiring a separate suit to enforce the undertaking would be a useless expenditure of judicial time and effort, especially since the sufficiency of the bonds had already been passed upon by the same trial judge, and Civil Case No. 80655 had been terminated by mutual agreement.

• Nature of a License or Permit — A license or permit is not a contract between the sovereignty and the licensee or permitee, and is not property in any constitutional sense to which the constitutional prescription against impairment of the obligation of contracts may extend. It is in the nature of a special privilege, a permission or authority to do what is within its terms. It is not vested, permanent, or absolute. A license granted by the State is always revocable, and the correlative power to revoke or recall can only be restrained by an explicit contract upon good consideration. The absence of an expiry date does not make a license perpetual; it cannot last beyond the life of the basic authority under which it was issued. Applied: The Special Import Permit was a mere special concession, not a contract, and its duration was limited to the Christmas season of 1968 as established by petitioner's own representations.

• Estoppel by Representation (Equitable Estoppel) — Where conduct or representation has induced another to change its position in good faith, or the same is such that a reasonable man would rely thereon, the consequences of such conduct or representation cannot later be disowned. Applied: Petitioner was estopped from claiming the permit extended beyond Christmas 1968 because it was petitioner itself which furnished the lifespan of the permit through its representations, upon which the Monetary Board granted the concession.

• Promissory Estoppel — An estoppel may arise from the making of a promise even without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if refusal to enforce it would virtually sanction the perpetration of fraud or result in other injustice. Requisite factors include justifiable reliance and irreparable detriment to the promisee. A promise cannot be the basis of estoppel if any essential element is lacking. Applied: Director Antiporda's letter did not constitute a promise upon which petitioner could justifiably rely, as it expressly subjected release certificates to the same terms and conditions of the original permit, including the resolutory period of 1968.

• Estoppel Does Not Operate Against the Government — The doctrine of estoppel does not operate against the government, of which the Central Bank is an instrumentality, in its capacity as sovereign or when asserting governmental rights. The government is never estopped by the mistakes or errors of its agents. Estoppel cannot give validity to an act prohibited by law or against public policy. Erroneous application or enforcement of the law does not block subsequent correct application or bar a future action in accordance with law. Applied: Even if Antiporda's letter erroneously suggested further importations were permissible, it produced no estoppel against the Central Bank.

• Delegation and Limits of Administrative Authority — An administrative officer has only such powers as are expressly granted to him and those necessarily implied in the exercise thereof. Applied: Director Antiporda could not modify the Special Import Permit by creating a longer period, as no such authority resided in him; only the Monetary Board, which issued the permit, possessed the power to modify it.

• "It is one of the first principles in the field of administrative law that a license or a permit is not a contract between the sovereignty and the licensee or permitee, and is not a property in any constitutional sense, as to which the constitutional prescription against impairment of the obligation of contracts may extend." — This passage articulates the foundational principle distinguishing a permit from a contract, establishing that permits are mere special privileges revocable by the State, which is central to the Court's resolution.

• "The absence of an expiry date in, a license does not make it perpetual. Notwithstanding that absence, the license cannot last beyond the life of the basic authority — under which it was issued." — This formulation defines the rule governing the duration of licenses lacking express expiry dates, tying validity to the scope of the underlying authority rather than to the face of the permit itself.

• "The equitable principle of estoppel forbids petitioner-appellant from taking an inconsistent position now and claims that the permit extends beyond the period it itself asked for. Where conduct or representation has induced another to change its position in good faith or the same is such that reasonable man would rely thereon, the consequences of such conduct or representation cannot later on be disowned." — This passage states the ratio decidendi for applying estoppel against the petitioner, grounded in its own representations that defined the permit's lifespan.

• "the 'doctrine of estoppel' does not operate against the Government, of which the Central Bank is an instrumentality, in its capacity as sovereign or asserting governmental rights; the Government is never estopped by the mistake or errors on the part of its agents." — This is the canonical formulation of the principle that estoppel does not bind the government, frequently cited in Philippine administrative law jurisprudence.

• Commissioner of Customs vs. Alikpala, L-32542, November 26, 1970, 36 SCRA 213 — Distinguished. Petitioner contended this case had already ruled on the continuous validity of the permit. The Court clarified that the case only addressed due process in seizure proceedings and the legality of the cash-bond requirement for release; the Court's reference to Antiporda's letter was merely part of its factual recital and did not constitute a ruling on the permit's duration.

• Ramos vs. Central Bank, L-29352, October 4, 1971, 41 SCRA 565 — Distinguished. Petitioner relied on this case for promissory estoppel. The Court distinguished it on the ground that in Ramos, the Central Bank had assumed contractual obligations toward the Overseas Bank of Manila, whereas in the present case, the permit was a mere special privilege, not a contract, and no contractual obligation was assumed by the Central Bank.

• Commissioner of Customs vs. Auyong Hian, 105 Phil. 561 (1959) — Distinguished. Petitioner relied on this case to argue against invalidation of the permit. The Court distinguished it because Auyong Hian involved cancellation of a license on the sole ground of absence of an expiry date after importation had been accomplished, which was inequitable; the present case involved enforcement of the permit's terms, not its cancellation, and the legality of its issuance was not in question.

• Climaco vs. Barcelona, L-19597, July 31, 1962, 5 SCRA 852 — Followed. Cited for the proposition that the absence of an expiry date in a license does not make it perpetual and that the license cannot last beyond the life of the basic authority under which it was issued.

• Makati Stock Exchange, Inc. vs. SEC, L-23004, June 30, 1965, 14 SCRA 623 — Followed. Cited for the principle that an administrative officer has only such powers as are expressly granted and those necessarily implied in the exercise thereof, supporting the conclusion that Director Antiporda could not modify the permit.

• Balmaceda vs. Corominas, L-21971, September 5, 1975 — Followed. Cited for the proposition that the entry of non-essential commodities was halted under Central Bank Circular No. 269.

• Geotina vs. Court of Tax Appeals, L-33500, August 30, 1971 — Followed. Cited for the proposition that Central Bank circulars have the force and effect of law and that regulations issued pursuant to customs law form part thereof.

• Batchelder vs. Central Bank, L-25071, July 29, 1972, 46 SCRA 104 — Followed. Cited for the principle that for a permit to be impressed with contractual character, it must be categorically demonstrated that the administrative agency placed such a burden on itself.

• Section 2, Republic Act No. 265 (Central Bank Act) — Grants the Central Bank authority to maintain monetary stability and preserve the international value of the currency, from which its power to regulate "no-dollar" imports emanates.

• Section 14, Republic Act No. 265 — Grants the Central Bank corollary power to issue rules and regulations for the effective discharge of its responsibilities and exercise of powers.

• Section 2530(f), Tariff and Customs Code — Authorizes forfeiture of any article the importation or exportation of which is effected or attempted contrary to law. Applied to the June and September 1970 importations, which violated Central Bank Circulars Nos. 269, 294, and 295, regulations issued pursuant to customs law and having the force and effect of law.

• Article 1159, Civil Code of the Philippines — Provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Cited in distinguishing Ramos vs. Central Bank, where contractual obligations existed; held inapplicable here since the permit was not a contract.

• Article 1315, Civil Code of the Philippines — Provides that contracts are perfected by mere consent and parties are bound to fulfillment of what has been expressly stipulated and all consequences according to their nature, good faith, usage, and law. Cited in the same context as Article 1159.

• Section 3, Rule 131, Revised Rules of Court — Cited in connection with the equitable principle of estoppel arising from conduct or representation inducing reliance.

Makasiar, Esguerra, and Muñoz Palma, JJ., concurred. Teehankee, J., concurred in the result.