Ollada vs. Central Bank of the Philippines

An action for declaratory relief will not prosper if filed after a contract, statute, or right has already been breached or violated. Where the petitioner’s allegations themselves demonstrate that the right has been invaded and actionable injury has been sustained, the proper remedy is an ordinary civil action, not a petition for declaratory relief under Rule 66.

Felipe B. Ollada was a duly licensed certified public accountant whose name had been on the rolls of CPAs accredited to practice before the Central Bank. In December 1955, the Import-Export Department of the Central Bank introduced a new accreditation requirement under which CPAs had to apply under oath to certify the financial statements of clients seeking import dollar allocations. The requirement effectively nullified Ollada’s prior accreditation and prompted him to attack the system as an excess of the Central Bank’s authority and an unlawful restraint on his profession.

• Nature of the action: Ollada, a CPA, brought suit in his own behalf and allegedly on behalf of numerous other CPAs for declaratory relief, seeking to nullify the Central Bank’s accreditation requirement for CPAs certifying financial statements of import-dollar applicants.

• The accreditation requirement: In December 1955 the Import-Export Department of the Central Bank required CPAs to accomplish under oath CB-IED Form No. 5 (Application for Accreditation of Certified Public Accountants) and CB-IED Form No. 6 (Accreditation Card for Certified Public Accountants). Compliance was a prerequisite for CPAs to certify their clients’ financial statements for import dollar allocations. The requirement superseded Ollada’s earlier accreditation.

• Central Bank’s voluntary modifications: In opposing the application for a preliminary injunction, the Central Bank agreed to delete paragraph 13 of Form No. 5—which asked whether the applicant agreed to follow the rules of the Philippine Institute of Accountants—and to modify paragraph 14 to bind the CPA to follow Central Bank rules that are not inconsistent with Board of Accountancy regulations. The modified Form No. 5 was submitted to the trial court. Later, the bank further modified Form No. 6 to eliminate the under-oath requirement and the reference to the Philippine Institute of Accountants, substituting a commitment to be governed solely by Central Bank rules and regulations.

• Petitioner’s position in the trial court: Despite the modifications, Ollada maintained that the accreditation system remained an unlawful invasion of the Board of Accountancy’s exclusive jurisdiction, an unconstitutional restraint on the practice of his profession, and a violation of his rights that had already caused him serious injury. He applied for accreditation “under protest” and argued that the petition stated a cause of action because the requirement invaded his right and inflicted actionable wrong.

• Dismissal: The trial court dismissed the petition on the ground that the objectionable parts of the forms had been deleted, rendering the petition for declaratory relief groundless.

• Exclusive Jurisdiction of the Board of Accountancy: Petitioner argued that the accreditation requirement constituted an unlawful invasion of the Board of Accountancy’s exclusive statutory jurisdiction to regulate the practice of public accountancy in the Philippines, and was therefore void as an ultra vires act.

• Unconstitutional Restraint of Profession: Petitioner maintained that requiring CPAs to secure accreditation before they could certify financial statements for the Central Bank operated as an unconstitutional restraint on the legitimate pursuit of one’s trade or profession.

• Violation of Rights Already Occasioned: Petitioner emphatically asserted that the Central Bank’s acts had already violated his right to freely practice his profession and had already caused him serious injury; he argued that these allegations sufficiently stated a cause of action that should not have been dismissed.

• Authority under the Central Bank Charter: Respondent contended that under Section 1(a) and Section 74 of Republic Act No. 265, the Monetary Board had the power and responsibility to issue rules and regulations necessary to administer the monetary and banking system, including authority to subject foreign exchange transactions to licensing. The accreditation system, it argued, was a measure internal to the Central Bank’s import-licensing functions and did not regulate the practice of accountancy generally.

• Purpose of the Requirement: Respondent maintained that the accreditation requirement was designed to correct irregularities committed by some CPAs in certifying financial statements for dollar allocations, not to encroach upon the Board of Accountancy’s prerogatives.

• Voluntary Modifications: Respondent repeatedly manifested willingness to alter the forms, ultimately eliminating the references to the Philippine Institute of Accountants and the under-oath requirement, thereby removing the features petitioner found objectionable.

• Propriety of Declaratory Relief: Whether the trial court properly dismissed the petition for declaratory relief where petitioner’s own allegations asserted that the questioned accreditation requirement had already violated his right and caused him actionable injury.

• Propriety of Declaratory Relief: The dismissal was affirmed, but on a ground different from that relied upon by the trial court. Petitioner’s pleadings himself alleged that respondent had already invaded his right, caused him injury, and committed an actionable wrong. Under Rule 66 of the Rules of Court, an action for declaratory relief is proper only where adequate relief is not available through other existing forms of action and must be brought before a breach of a contract, statute, or right has occurred. Because petitioner insisted that a breach had already taken place, he thereby stated a cause of action cognizable in an ordinary civil action, not in a special civil action for declaratory relief. The petition was correctly dismissed, without prejudice to seeking relief in an appropriate ordinary action.

• Doctrine of Declaratory Relief Before Breach — An action for declaratory relief is an anticipatory remedy available only before a breach or violation of a statute, contract, or right has occurred. Where the pleading itself shows that the breach has already been committed and injury has resulted, declaratory relief does not lie; the plaintiff’s remedy is an ordinary civil action. (Applied: Petitioner’s claim that his right was “violated” and he “suffered serious injury” placed the case outside the scope of Rule 66.)

• “An action for declaratory relief should be filed before there has been a breach of a contract, statutes or right, and that it is sufficient to bar such action, that there had been a breach — which would constitute actionable violation.”

• “The rule is that an action for Declaratory Relief is proper only if adequate relief is not available through the means of other existing forms of action or proceeding.”

• De Borja vs. Villadolid, 47 O.G. (5) p. 2315 — Followed; declaratory relief will not prosper if filed after a breach has occurred.
• Samson vs. Andal, G.R. No. L-3439, July 31, 1951 — Followed; reiterating the same rule that a prior breach bars declaratory relief.

• Rule 66, Rules of Court — Governs actions for declaratory relief; interpreted to require that no breach of the contract, statute, or right has yet occurred at the time of filing.
• Section 1(a), Republic Act No. 265 — Empowers the Monetary Board to prepare and issue rules and regulations necessary for the effective discharge of its responsibilities.
• Section 17(d), Republic Act No. 265 — Authorizes the Governor of the Central Bank to delegate representational authority to other officers.
• Section 74, Republic Act No. 265 — Authorizes the Central Bank to temporarily suspend or restrict sales of exchange and to subject all transactions in gold and foreign exchange to licensing.

Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, and Paredes, JJ., concur.