LAND BANK OF THE PHILIPPINES Vs COA, G.R. Nos. 8967981 September 28, 1990 ~ Mister Criminology

LAND BANK OF THE PHILIPPINES Vs COA

G.R. Nos. 8967981 September 28, 1990

FACTS:

On 22 July 1980, the Board of Directors of the LBP Issued Resolution fixing the new rates for penalty charges on past due loans/amortization and other credit accommodations.
The Resolution also provided that "in cases of defaults in loan payment and other credit accommodations due to unforeseen, highly justifiable reasons/circumstances beyond the control of the borrower such as damages due to natural calamities, sickness, adverse government rulings or court judgments, duly processed and verified by the lending units, penalty charges may be condoned / reduced by the Loan Executive Committee upon recommendation of the appropriate lending units"
Pursuant to this Resolution, LBP, through its Loan Executive Committee, waived the penalty charges in the amount of P9,636.36 on the loan of HSBTC.
LBP requested its Corporate Auditor to pass in audit its waiver of the penalty charges.
Said official questioned the waiver and opined that the power to condone interests or penalties is vested exclusively in the COA but, in the absence of a categorical ruling on the matter applicable to a government banking institution, referred the LBP request to the COA.
In COA Decision, it held that the waiver is unauthorized and should out rightly be disallowed in audit.

ISSUE:

Whether or not LBP is authorized to compromise claims or liabilities in whole or in part

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RULING:

LBP was created as a body corporate and government instrumentality to provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform. Section 75 of its Charter vests in LBP specific powers normally exercised by banking institutions, such as the authority to grant short, medium and long-term loans and advances against security of real estate and/or other acceptable assets; to guarantee acceptance(s), credits, loans, transactions or obligations; And to borrow from, or rediscount notes, bills of exchange and other commercial papers with the Central Bank.

In addition to the enumeration of specific powers granted to LBP, Section 75 of its Charter also authorizes it to exercise the general powers mentioned in the Corporation Law and the General Banking Act, as amended, insofar as they are not inconsistent or incompatible with this Decree.

One of the general powers mentioned in the General Banking Act is that - Writing off loans and advances with an outstanding amount of 100,000 or more shall require the prior approval of the Monetary Board.

It will thus be seen that LBP is a unique and specialized banking institution, not an ordinary "government agency" within the scope of Section 36 of Pres. Decree No. 1445. As a bank, it is specifically placed under the supervision and regulation of the Central Bank of the Philippines pursuant to its Charter. In so far as loans and advances are concerned, therefore, it should be deemed primarily governed by Central Bank Circular No. 958, Series of 1983, which vests the determination of the frequency of writing off loans in the Board of Directors of a bank provided that the loans written off do not exceed a certain aggregate amount - The frequency for writing off loans and advances shall be left to the discretion of the Board of Directors of the bank concerned.

The authority to write-off loans and advances should be construed to include within its scope the waiver of penalty charges on past due loans, which are of a lesser category.

Concededly, the power to write-off is not expressly granted in the LBP Charter. It can be logically implied however, from LBP's authority to exercise the general powers vested in banking institutions as provided in the

General Banking Act. The clear intendment of its Charter is for LBP to be clothed not only with the express powers granted to it, but also with those implied, incidental and necessary for the exercise of those express powers. "The test to be applied is whether the act of the corporation is in direct and immediate furtherance of its business, fairly incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the power to do it; Otherwise, not"