DOJ Opinion No. 109, s. 1986

DOJ OPINION NO. 109 , s. 1986 October 9, 1986 The Officer-in-Charge Bureau of Cooperatives Development 111 E. Rodriguez, Sr. Avenue Quezon City M a d a m : This has reference to your "request for clarification" of Section 4 of P.D. No. 175, as amended by P.D. No. 2008, which reads: "Sec. 4. Powers of Cooperatives . Cooperatives shall have the following powers: xxx xxx xxx "(c) To establish rural banks under the Rural Bank Act and/or to purchase government held preferred shares of rural banks which may be converted to voting common stocks, under the rules and regulations to be promulgated by the Monetary Board of the Central Bank and the Agrarian Reform Fund Commission: Provided, however, that registration with the Bureau of Cooperatives Development of Cooperative Rural Banks and other cooperative banks organized under this Decree shall be sufficient for said banks to acquire legal personality to apply and qualify for licensing by the Central Bank of the Philippines without need for registration as corporations with the Securities and Exchange Commission, notwithstanding the provisions of R.A. 337, as amended and/or R.A. 720 as amended; provided, further, that said banks shall be subject to the supervision of the Bureau of Cooperatives Development so far as the provisions of this Decree are concerned and to the Central Bank of the Philippines on banking transactions." (Emphasis supplied) xxx xxx xxx You state that there are three kinds of rural banks, namely, rural banks composed of individuals, rural banks established by cooperatives and cooperative rural banks established by cooperatives; that while the first two kinds are registered with the Securities and Exchange Commission (SEC); the third is registered with the Bureau of Cooperatives Development (BCD); that there are "diverse opinions" as to which of the existing pertinent laws shall govern rural banks; that in Opinion No. 24, series of 1983, then Presidential Assistant on Legal Affairs Manuel Lazaro ruled "that Batas Pambansa Blg. 65 applies to cooperative rural banks because Regulation No. 33 of LOI No. 23 does not govern the qualifications of directors of rural banks (including those established by cooperatives)"; that said opinion was "not well accepted by the cooperative sector" since it in effect classified cooperative rural banks as ordinary rural banks; that since cooperative rural banks are now supervised by the BCD as "cooperative organizations," the provisions of B.P. Blg. 65 governing the qualifications of directors of ordinary rural banks do not apply to cooperative rural banks; and that it is "very essential" to categorize cooperative rural banks differently from ordinary rural banks "because the nature, philosophy, character and purposes of cooperative rural banks are far different from that of other banks." prcd We understand that you want to be clarified in particular as to which of these two laws P.D. No. 175 (Strengthening the Cooperatives Movement) as amended by P.D. No. 2008 and as implemented by LOI No. 23, or R.A. No. 720 (The Rural Bank's Act) as amended by B.P. Blg. 65 governs the qualifications for board directors of cooperative rural banks. We think there is sufficient legal basis to support your view that P.D. No. 175, as amended, is the applicable law on the matter. Prior to its amendment by P.D. No. 2008, Section 4, par. c of P.D. No. 175 authorized cooperatives to establish rural banks under the Rural Bank's Act without any qualification. The rural banks thus established were not considered cooperatives but ordinary rural banks governed by the Rural Bank's Act. The amendment introduced by P.D. No. 2008 implicitly authorized cooperatives to organize cooperative rural banks under P.D. No. 175 which shall acquire legal personality upon their registration with the Bureau of Cooperatives Development and which shall be subject to the supervision of the said Bureau insofar as the provisions of P.D. No. 175 are concerned. Being cooperatives as they are, such banks are subject to the provisions of P.D. No. 175, including those governing the qualifications of members of the board of directors of cooperatives, except with respect to banking transactions which shall be governed by existing banking laws. (See two provisos of par. c, Sec. 4). Further, it is noted that there are more privileges conferred upon cooperatives under P.D. No. 175, as last amended by P.D. No. 2008, than these granted to ordinary rural banks under R.A. No. 720. There is thus an apparent intention on the part of the lawmaking authority to consider cooperative rural banks as cooperatives within the meaning of P.D. No. 175 and thus accord them differential treatment from other rural banks; otherwise, the provisions of P.D. No. 175 specifically the two provisos of paragraph (c), Section 4, relative to the former would become superfluous and meaningless. The intention should be read into the seemingly discordant provisions of the existing laws on the matter in accordance with the rule that "in case of any doubt or ambiguity, a statute is to be construed as not only to be consistent with itself throughout its whole extent, but also to harmonize with the other laws relating to the same or kindred matters forming a complete, consistent and intelligible system" (Black, cited in Gonzaga, Statutory Construction, p. 218). prcd Wherefore, it is our opinion that the qualifications for board directors of cooperative rural banks, are governed by the provisions of P.D. No. 175, as amended by P.D. No. 2008, and as implemented by LOI No. 23. Very truly yours, (SGD.) MINERVA P.G. REYES Acting Minister of Justice