REPUBLIC OF THE PHILIPPINES

OFFICE OF THE OMBUDSMAN

Quezon City

ATTY. JOSE Plaintiff,

-versus- CIVIL CASE NO. ____

For: Violation of letter (e)
Sec. 3 RA 3019

BANGKO SENTRAL NG PILIPINAS (BSP)

BSP Governor
CARLOS G. DOMINGUEZ III,
FELIPE M. MEDALLA,
JUAN DE ZUNIGA, JR.,
PETER B. FAVILA,
ANTONIO S. ABACAN JR., and
BRUCE J. TOLENTINO
Defendant.
X-------------------------------X

MEMORANDUM

COME NOW PLAINTIFF, through the undersigned counsel, unto this Honorable
Supreme Court most respectfully submit and present this Memorandum in the above-
titled case and aver that:

I. STATEMENT OF FACTS
1. On May 30, 2018 complainant MOLINA wrote BSP Governor a letter dated May
30, 2018 regarding the legality of monthly interest 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 interest rates imposed by financial institutions.
3. In a letter 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.

II. LEGAL ISSUES

1. Whether or not BSP is authorized to lift interest rate ceiling.
2. Whether or not BSP Monetary Board is liable under (e) Sec. 3 RA 3019.

III. DISCUSSION
1. Whether or not BSP is authorized to lift interest rate ceiling.

“While C.B. Circular No. 90582, which took effect on January 1, 1983,
effectively removed the ceiling on interest rate for both secured and
unsecured loans, regardless of maturity, nothing in the said circular
could possibly be read as granting carte blanche authority to lenders to
raise interest rate to levels which would either enslave their borrowers
or lead to a hemorrhaging of their assets.

According to SECTION 5, Policy Direction; Ratios, Ceilings and

Limitations of REPUBLIC ACT NO. 8791, AN ACT PROVIDING FOR THE
REGULATION OF THE ORGANIZATION AND OPERATIONS OF
BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER
PURPOSES,

BSP Monetary Board may prescribe ratios, ceilings, limitations, or other

forms of regulation on the different types of accounts and practices of
banks and quasi-banks which shall, to the extent feasible, conform to
internationally accepted standards, including those of the Bank for
International Settlements (BIS).

While it is clear on the provision as earlier stated that BSP Monetary

Board is authorized to prescribe ceilings, limitations or other forms of
regulation on practices of banks, still it is not an absolute power. Such
authority can be invalidated if it will result to public injury due to
imposition of higher and excessive, iniquitous, unconscionable and
exorbitant interest rates. Such actions of BSP Monetary Board are void for
being contrary to morals, if not against the law, ROLANDO C. DE LA PAZ
vs. L & J DEVELOPMENT COMPANY, G.R. No. 183360 September 8,
2014.

In the case of LETICIA Y. MEDEL, DR. RAFAEL MEDEL and

SERVANDO FRANCO vs. COURT OF APPEALS, SPOUSES
VERONICA R. GONZALES and DANILO G. GONZALES, JR. doing
lending business under the trade name and style “GONZALES
CREDIT ENTERPRISES”, G.R. No. 131622 November 27, 1998. The
Court found the interest at 5.5% per month, or 66% per annum, stipulated
upon by the parties in the promissory note iniquitous or unconscionable,
 and, hence, contrary to morals (“contra bonos mores”), if not against the
law. The stipulation was void. The courts may reduce equitably liquidated
damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable.

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.

The BSP mission and vision of continuing and unending quest to become
an excellent monetary authority committed to improve the quality of
life of Filipinos.
The BSP aims to be recognized globally as the monetary authority and
primary financial system supervisor that supports a strong economy and
promotes a high quality of life for all Filipinos.
BSP Values of Patriotism is selfless commitment to the service of the
Filipino people and the country.

For public interest of Filipino people, lifting of the ceiling on interest rates
is prejudicial to public interest. It is contrary to the mission and vision of
BSP to improve the quality of life of Filipinos.

2. Whether or not BSP Monetary Board is liable under (e) Sec. 3 RA 3019.

BSP Monetary Board was charged with the crime of violation of Section
3(e) of R.A. No. 3019, which states that:

(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.

Section 3(e) of R.A. No. 3019 which has the following essential elements:

(a) the accused must be a public officer discharging administrative, judicial

or official functions; (b) he must have acted with manifest partiality,
evident bad faith or gross inexcusable negligence; and (c) his action
caused any undue injury to any party, including the government, or
gave any private party unwarranted benefits, advantage or preference
in the discharge of his functions.

As observed, all these elements exist in this case.

It is irrefutable that the first element is present. The accused are the
members of the Monetary Board that comprise of the following:
 Nestor Espenilla Jr., Governor of the Bangko Sentral ng Pilipinas -
Chariman, Carlos Dominguez III, Secretary of the Department of Finance -
Member, Felipe M. Medalla - Member, Juan D. De Zuñiga, Jr. - Member,
Peter B. Favila - Member, Antonio S. Abacan, Jr. - Member, and Bruce J.
Tolentino - Member.

Being a member of the Monetary Board of BSP they are considered as a

public officer who exercises the powers and functions of the BSP, such as
the conduct of monetary policy and supervision of the financial system.
The said functions are administrative and official.

As to the second element, the accused clearly showed that they have
acted with manifest partiality, since the suspension of the Usury Law by
Central Bank Circular No. 905 s. 1982; BSP allowed banks to set their
own rates and deliberately ignore to regulate the interest rates charged by
banks, giving financial institutions unwarranted benefits, advantage and
preference.

"Partiality" is synonymous with "bias" which "excites a disposition to see

and report matters as they are wished for rather than as they are.

The accused also manifested an act of evident bad faith and gross
inexcusable negligence, their mere act of not abrogating Sec. X305 of
MORB, despite awareness of the undue injury that such regulation may
cause to a countless numbers of credit card holders.

"Bad faith does not simply connote bad judgment or negligence; it imputes
a dishonest purpose or some moral obliquity and conscious doing of a
wrong; a breach of sworn duty through some motive or intent or ill will; it
partakes of the nature of fraud.

"Gross negligence has been so defined as negligence characterized by

the want of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and intentionally with a
conscious indifference to consequences in so far as other persons may be
affected. It is the omission of that care which even in attentive and
thoughtless men never fail to take on their own property.

IV. RELIEF
WHEREFORE, for reasons stated, it is respectfully prayed for this Honorable
Court that judgment be rendered finding the Accused Nestor Espenilla Jr.,
Governor of the Bangko Sentral ng Pilipinas - Chariman, Carlos Dominguez III,
Secretary of the Department of Finance - Member, Felipe M. Medalla - Member,
Juan D. De Zuñiga, Jr. - Member, Peter B. Favila - Member, Antonio S. Abacan,
Jr. - Member, and Bruce J. Tolentino – Member guilty beyond reasonable doubt
for the crime of violation of Section 3(e) of R.A. No. 3019.

Plaintiff likewise prays for costs and for such other and further relief as this
honorable court may deem just and equitable in the premises.
Respectfully Submitted

Pasay City, Philippines, May 5, 2019.

EVER E. ALCAZAR
Counsel for the Plaintiff
Unit 903 Liberty Center Building, H.V. Dela Costa St., Makati City
IBP No. 000000/05-05-19/MAKATI
PTR No. 000000/5-05-13/Makati City
Roll of Atty.’s No.
00000 April 12, 2000